A New View on Lean

With spending down and credit and operating budgets tightening, manufacturers are faced with the challenge of reducing costs, re-aligning offerings to meet changing consumer preferences and looking for new areas of growth.

Compounding factors, such as fluctuating materials, and logistics costs, increased supply chain security and quality control requirements and dramatic changes in demand patterns only add to the complexity of managing a global supply chain. To overcome these challenges, progressive companies are seeking supply chain solutions that offer a new view on the traditional concept of lean manufacturing. Pioneered decades ago by Toyota, lean manufacturing was designed to help the carmaker compete in domestic and foreign markets with limited resources and capacity by driving out production inefficiencies and waste and focusing on quality initiatives with value-focused workflows. Toyota's success story became a model for manufacturers all over the world, and the company has grown to become a worldwide automotive leader.

Times have changed, however, and today's concept of lean has expanded far beyond the original focus and methods of discrete industrial manufacturing.

Next-generation lean manufacturing represents a leap beyond Toyota's model. Applied intelligently and systematically across the enterprise, lean thinking today can have a transformative effect on the ability to compete in both good and challenging economic times. Here are five strategies to help guide manufacturers in applying next-generation lean thinking to improve operations and overall business performance and ultimately drive profits.

1. Commit to lean on an enterprise-wide basis.

   The primary goals of traditional lean manufacturing — to drive out inefficiencies, reduce costs and waste, increase value and decrease variability — remain the same today. Only now, these goals need to be embraced across the extended enterprise — both internally and externally with supply chain partners. In today's dynamic business environment, virtually all operational processes are interrelated, and disruptions along the extended supply chain need to be responded to quickly and in real time.

   Confining lean to a single facility or production area is not sufficient. Lean initiatives cannot work if done in isolation because changes made in siloed functional areas, such as manufacturing, distribution or transportation — or even at the local, regional or country level — can have unintended consequences that can lead to problems or increased costs in other areas.

   The most effective lean initiatives focus on the extended supply chain. For this reason, companies are deploying advanced modeling tools that consider all costs and provide optimized strategies across a comprehensive supply chain network of distribution centers, plants, contract manufacturing partners, sourcing options and logistical lanes.

2. Understand what drives your supply chain.

   Understanding demand and, just as importantly, understanding the variability of demand, is essential for the removal of waste, or Muda — a Japanese term for wasteful and unproductive activity and a key concept in the Toyota production system. Today's variability is different. It is often powered by economic and market forces outside one's own control. These include consumers opting for more value-priced products, a need for more product innovation, competition on a global scale, seasonal variations and increased promotional activity.

   In difficult times, it is critically important to reexamine your enterprise's forecasting and demand planning processes and challenge historical assumptions to better understand what is driving demand.

   Lean manufacturing initiatives have a much better chance of delivering the expected benefits in enterprises that quickly and profitably respond to changing demand patterns. This requires a demand management and shaping process that is statistically sound and collaborative across the planning, sales, marketing, product management and financial area.