One of the most common mistakes that companies make when embarking on a lean program is trying to do too much at once. These “boil-the-ocean” initiatives are long, costly and often end up stalling under the weight of their own ambition.
The fact is, smaller and faster can be better when it comes to lean. One thing we’ve consistently seen in our work with manufacturers is what a huge impact a quick plant “health check” and a few focused changes can have on cost and performance. Companies can see major savings in specific areas in just a few weeks. The key is to pick the right improvement levers by taking the time to quantify the value they could deliver, weigh the trade-offs, and choose only the top three or four priorities to tackle immediately.
Sounds simple, right? The problem is that many companies either don’t take the time or don’t have the analytical skills needed to look cross-functionally, dig deep, find the underlying cost drivers, quantify the improvement opportunities and evaluate the trade-offs. Once they bring these diagnostic skills to the table, they can see the potential big wins.
Clarity on the payoff is a critical first step, but sometimes even when the source of problems and the financial upside of addressing them are clear, no action is taken. There may be too many competing priorities, not enough manpower, limited access to the capital needed to get the ball rolling, or just plain inertia. Other times companies think they’ve already done all they can to reduce waste, cut costs, and improve efficiency, so they don’t bother to look any further. For example, one manufacturer we worked with cut costs so deeply that it assumed its people had to be more productive. But by simply observing the crew and their activities on the production line, we saw just the opposite — too much downtime, wasted effort and inefficient work habits. The company’s lean efforts simply hadn’t gone far enough.
In addition to the above, there are often “hidden” costs that — by definition — aren’t immediately visible, especially in complex global production networks. One company had a continuous improvement program underway and thought it was quite lean. But a cost comparison across its network of plants revealed a multi-million dollar cost gap between the top and bottom performers. By doing a deeper analysis of underlying cost drivers such as scale, efficiency, overhead, and logistics, the company gained new insights into why some plants and geographies performed so much better than others — and what high-impact areas to tackle for greater savings.
Based on our experience, the best opportunities for quick improvements in manufacturing costs and performance typically lie in five key areas:
- Equipment — By reducing machine downtime, improving maintenance and boosting overall equipment effectiveness (OEE) and output
- Processes — By standardizing work, cutting out low-value steps, optimizing work flow and improving line staffing
- Material yield — By reducing loss from scrap and obsolescence
- Logistics — By boosting warehouse productivity and minimizing freight costs
- Inventory — By right-sizing, rethinking levels of buffer stock, streamlining material flows and improving demand forecasts
Although these categories are quite broad, the key is to focus sharply on a small number of specific levers in a few high-impact areas of the plant. Interestingly, at virtually every company we work with, the biggest opportunities for quick wins are in overall equipment effectiveness (OEE), line staffing, and scrap reduction — probably because these areas are easy to analyze, can be changed without a major capital investment, and almost always have room for improvement no matter how much attention has been paid to them in the past.
Just observing a plant’s operations can deliver “aha” moments that lead to real insight and simple fixes. For instance, at an industrial products manufacturer with a one-operator-per-line set up, we noticed that the line operators were walking around a lot and doing things that seemed to add little value. This excessive movement was a clear red flag. By reorganizing the work flows and slightly modifying the production lines so the work area was more concentrated, the manufacturer was able to assign each operator two lines instead of one —reducing labor costs by about 40 percent.
Another quick, simple fix with a big payoff was at the factory of an automotive company. The tip-off there was seeing parts and materials sitting on the floor, where they often ended up getting damaged by forklifts or workers before they could be used. The manufacturer saved millions of dollars per year simply by designating a section on the shop floor for this inventory, creating racks to move it off of the floor and putting guardrails around it to protect it from damage.
But sometimes the problems aren’t so obvious. In these cases, a deep analysis often reveals a very counterintuitive solution. For instance, we were looking into a manufacturer’s warehouse operations. The warehouse had slotted its SKUs in a way that seemed to make sense — the high-volume movers were closest to the main doors. Unfortunately, this layout actually resulted in congestion, interference and delays. By creating a “heat map” showing relative areas of activity throughout the warehouse in a typical week, we were able to reorganize the layout and traffic patterns to make better use of the space. These changes shortened movement and transit times by 20 – 25 percent overall.
If new best practices such as these are shared among all of a company’s factories, a multiplier effect often takes hold and costs can drop substantially across the whole production network. The right metrics and incentives can ensure that this sharing happens. Again, small changes and big results.
Done right, a “fast lean” approach can generate major savings and be a catalyst for a larger lean transformation, even funding it. To get started, we would suggest companies keep in mind four simple guidelines:
- Prioritize opportunities based on time to results, relative effort and financial impact
- Focus scarce resources on top priorities to generate quick wins
- Develop a coordinated effort within and across plants to rapidly surface and adopt best practices
- Create an environment that rewards speed and an acceptable level of risk taking
If a broader lean program is already underway, this approach can turbo-charge it and increase momentum. There’s nothing more invigorating to an organization than fast, visible performance improvements that people can see and touch — and that hit the bottom line.
To know more about how The Idea Smith lean principles and PDCA methodology can help your company improve profitability by reducing lead times, costs and wastes while increasing throughput and customer satisfaction , get in touch .