A
Th e
Component Manufacturing dverti$er
December 2016 #09209 Page #66
Don’t Forget! You Saw it in the
Adverti$er
Establishing Your Lean Establishing Your Strategy
Lean Strategy
By Ben Hershey, Coach, 4Ward Consulting Group, LLC Many of today’s Component Manufacturers are considering some measure of Lean implementations. Most are based on a series of what are essentially isolated Kaizen-based waste reductions projects. In selecting areas in their operations, a CM will look at the perceived waste (savings) available; those areas with more waste reduction potential get a higher priority. While such a project selection approach may actually lead to reduced local waste, this approach is almost always a strategic dead-end. Let’s look at an example.
So why is this important to know if a project has shortened overall lead-times? Because only when those lead-times go down will Lean projects positively impact big hitter financial exhibits such as prebuilt/pre-positioned WIP/ Finished Goods Inventory; safety-stock Raw Material Inventory; Warehousing, Transportation and Material Handling; etc., etc., etc. If you are considering a Lean project, or believe you should in 2017, develop a strategy on how leadtime reduction can benefit you. It is important for component manufacturers to prioritize work based on lead-time that ties together Lean impacts so they build upon each other and thus become more recognizable and not a set of isolated local operational impacts. Lean should be seen as strategically impacting Revenue. Reductions in lead-time directly impact the following company metrics:
This past year I toured an operation outside our industry that had just undergone successful Kaizen-based set-up reduction. After hearing about its impact on selected process operational metrics, I asked how the work had improved overall final assembly throughput, i.e., “Had the project shortened lead-times?” After a bit of discussion, they told me they saw specific reduction in the process/area but not on the overall product’s finished throughput. My thought was, “Then what did you really accomplish!” This showed me the heart of what is needed to have a successful Lean program-focused waste reduction strategy focused on the whole operation. The bottom line is: if a project won’t improve overall order/ product lead-times—don’t do it because it won’t have the financial impact needed to meet company objectives and ultimately improve profitability. Based on Lean’s roots—the Toyota Production System—however, this finding shouldn’t surprise anyone. Taiichi Ohno, founding father of the Toyota Production System, was once quoted as saying that in working on manufacturing improvement, “All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time by removing the non-value added wastes.” PHONE: 800-289-5627
•
Customer Fill Rates go up (the ability to take on additional work), which can easily be tied to reduced lead-times.
•
Sales go up—while, by the way, generating additional profits— when forecast volumes are exceeded. Why is this? Incremental Sales do not have Overheads allocated to their Cost-of-GoodsSold figure.
•
The need for pre-built/pre-positioned WIP/Finished Goods Inventory is lowered, reducing carrying costs.
•
Warehousing, Transportation, and Material Handling costs go down as less Finished Goods inventory is needed.
•
Damage and Rework go down, as Material Handling and product exposure-related quality defects are reduced.
•
The need for Raw Material can go down—if the Order Fulfillment waste reduction is expanded to the supply base— reducing safety-stock carrying charges to the CM.
All of these wastes exist in one form or another as standard financial metrics in most companies, giving them both high exposure and immediate validity. All are also related to an increased Order Fulfillment capability which ties the lead-time metric directly to the customer. Tying performance directly to the customer is good thing! After all, shouldn’t all business operational metrics—in the end—be somehow tied to the customer?
Read/Subscribe online at www.componentadvertiser.com
FAX: 800-524-4982