automotive

Lean more important then ever.

Value Stream

Since Henry Ford integrated an entire production process in 1913 and Kiichiro Toyoda right after WOII introduced the Toyota Production system, Lean has found his way in many industries. This system in essence shifted the focus of the manufacturing engineer from individual machines and their utilization, to the flow of the product through the total process. Or to put it in the Toyota way: “We get brilliant results from average people operating and improving brilliant processes. Our competitors get mediocre results from brilliant people working around broken processes.When they get in trouble, they try to hire even more brilliant people.We are going to win.”

Learning from history.
As we look now how supply chain reacts to the economic crisis, most of us didn’t listen carefully to Toyota or to Eliyahu Goldratt. Recently Goldratt warned on his Site that the current revival of the world economy is not more then replenishment of the supply chain. Even though the crisis gave every reason to companies to act carefully and revise there supply chain, many companies fell into the wellknown pitt. With the backfall of demand, companies quickly sold there stock and decreased there production volumes. As now demand slowly picks up, companies fill up there stock points again and production cannot coop with the increasing stock demand. Instead of taking lesson from Toyota and Goldratt and move forward to increase the Lean level of there supply chain, companies failed again by restoring there expensive warehouses again with obsolete stock. As long as the end customer did not pay, the entire supply chain only made cost.[Goldratt]

The perfect process
Within a Lean process or supply chain, each step creates exactly the right value for the customer. When the value of a process can not be determined it is Muda! But it is hard to create the perfect process. Supply Chain managers look horizontal, other more functional manager mostly look vertical up to the Board. On Board level it frequently misses out the required support to connect and direct both perceptions. The need and urgency for a Lean organization or supply chain is too often not fully supported from the highest levels.

The nature of Profit and Loss sheets plays a major role in this perception. P&L are monthly based and the evaluation of results is therefore vertical driven. Managers are held accountable for there monthly results and lack the correct drivers for a longterm, horizontal vision on there part of the organization. The short term perspective hinders companies to invest across there supply chain and to develop performance drivers to link the longterm vision with the day to day business.

Business Intelligence.
In order to meet the ever challenging financial targets combined with the high demands by customers, companies tend to flee forward into new technological solutions. Another ERP, webbased applications, fully automated dashboards. All designed and programmed by brilliant people. But those companies forget about Toyota. Brilliant people around broken processes only get you into more trouble. Start fixing your processes first, before you start investing in brilliant technology.

Value Stream mapping.
How many companies actually have mapped out there entire supply chain? As well in company as across your supply chain? If you don’t know the answer for your own company or Supply Chain, it is more then advisable to hold down you expensive investments. You should only hire one brilliant person. A business analyst. Value stream mapping is one of the first and one of the most important steps towards structural improvement. A well executed value stream mapping will show you on each step whether it is:

  • Capable – every time right [6 sigma approach]
  • Available – always able to run [TPM]
  • Adequate – with just the right capacity
  • Flexible – to respond to demand w/o inventories
  • Flowing – from one step to the next
  • Pulled – by the next downstream step
  • Leveled – to avoid transmitting noise upstream

Mapping your processes does not only tells you the current state of your processes, but also gives you a deeper understanding of it. What are doing, why are doing it, How are you doing it and what delivers it to you customers and thus to your own company.

Advantages.
Todays business is dominated by cost reduction and loss of trust between partners. Companies suffer from quality loss and a increasing variability in supply to there customers. Each company is mainly concerned about it’s own margin instead of the margin throughout the supply chain. As a result companies within the same supply chain try to squeeze eachother margins.

But by intensifying partnership and develop a common language about optimizing the entire supply chain a common and sustainable profit situation can be achieved by companies. The companies that do become Lean, show remarkable results in there operational and financial performance. A quarter of the processes steps appeared to be waste. Throughput times can be reduced up tot 35%. There is no effect on quality of product or supply. The Total Landed cost of companies decrease significantly due to improved cooperation between partners.

It requires a new approach of thinking within the companies and supply chain partners. It is difficult to share figures about performance and cost between supply chain partners.However, it is unavoidable in order to achieve supply chain wide results from which all participants benefit. Such change can only be achieved through visionary support from Board level.

Lean stream Management is only recently adapted by some companies. In between Boards the will to deepen there strategic allianceship need to be embedded with there organizations. Especially now, when money is too tight to mention for investments, Lean Management has excellent opportunities to improve your margins and the quality of your organization. We have already done experiments with hyper margin squeezing in previous recessions and we all know it leads to lose-lose outcomes. It is time companies start to become Lean.

Recommended links:
www.lean.org

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