uk - road to world class manufacturing(1)

THE ROAD TO WORLD CLASS MANUFACTURING 2002

LEAN MANUFACTURING SURVEY REPORT

sponsored by

in association with

part of the Industry White Paper programme from The Manufacturer

CONTENTS

StrategyThe future belongs to those that start from a position of lean

Page 6

Global learningA who’s who of the fattiesand skinnies in themanufacturing world

6

BenchmarkingComparisons show what ispossible and stimulate us todo better

Page 32

Reports

Strategy - The era of the virtual customerThe search is on for new sources of competitive advantage 6

Lean manufacturing survey reportReport and analysis of the state of lean manufacturing in the UK 10

Lean manufacturing - The lean routeThe development and future of lean manufacturing 22

Global leaning - The lean leagueRichard Schonberger reports on lean trends around the world 26

Value stream mappingThe first step in the journey to lean is obtaining a map 30

Benchmarking - Seeing the lightBenchmarking your route to excellence 32

Maintenance - Lean maintenanceKeeping the operations running 36

Supply chain - The vital linkSupply chain challenges in collaborative manufacturing 40

HR - People at the centreThe role of human resources in world-class manufacturing 44

Sponsors’ contributions

MCP - Gaining through good maintenance 48

Oliver Wight - The journey to excellence 50

Papilio - Aiming high 52

Productivity Europe - Overcoming learning barriers 54

The road to world class manufacturing 2002 1

A LEADING EDGE VIEWManufacturing has always been a competitive and diverse industry - perhaps never more so than right now. Today,

the rate of change is increasing at a rapid pace and uncertainty is a constant. An organisation’s success is dependent

upon its ability to stay ahead of trends and to respond dynamically to market opportunities and fluctuations.

Manufacturers need to increase productivity, optimise their profits and cash flow, lead industry trends, and drive

competitive advantage to be successful.

Our Manufacturing Industry Group is helping our manufacturing clients respond to these challenges by going beyond

the theoretical, improving performance at all levels, and enhancing shareholder value. We have a network of practitioners

in the manufacturing sector around the world who can be called upon to assist your business no matter where it

is operating.

The Deloitte & Touche Manufacturing Group in the UK is part of this global network of industry specialists within Deloitte

Touche Tohmatsu. The expertise and experience of our group members combines to form a Centre of Excellence here in

the UK acting in an advisory capacity to all manufacturing clients.

Our experience in the manufacturing sector runs deep. Our focused group of practitioners are dedicated to helping clients

evaluate complex issues, develop fresh approaches to problems, and implement practical solutions. Working with

manufacturers from planning and design to implementation and beyond, we help clients leverage their unique

competitive strengths.

Our practitioners facilitate the development and execution of manufacturing strategies that show tangible results,

whether it be a reduction of cycle times, inventory and indirect costs, improvements in operational processes, supply

chain, technology and organisational structures, or e-security around their information and reporting systems.

Our services maintain a leading edge view of the manufacturing industry. We help companies cope successfully with

dramatic change, identify the new and existing indicators of manufacturing excellence around the world, and understand

how they can position themselves for the future.

Success in manufacturing is dependent on making the right connections to improve business performance and value for

all stakeholders - shareholders, customers, suppliers, business partners and employees. Deloitte & Touche

understands the critical issues facing the industry and can be the catalyst to making the right connections for our

manufacturing clients.

Deloitte & Touche is the UK’s fastest growing major professional services firm in 23 locations, with over 10,000 staff

nationwide. It is the UK practice of Deloitte Touche Tohmatsu, a global leader in professional services with over 100,000

people in 140 countries.

www.deloitte.co.uk

REPORT SPONSOR


Oliver Wight is a worldwide consultancy with offices throughout Europe, in North and South America and the

Asia-Pacific region.

At the leading edge of management thinking and practice, our unique ‘integrated business management’ model (IBM) lies

at the heart of client journies to business excellence. The IBM model addresses all aspects of company planning and

execution from the boardroom to working levels in manufacturing and service sectors. It provides one common agenda for

your company with one set of figures and one set of priorities. It links diverse processes in managing the extended supply

chain, product and customer portfolios, customer demand, and strategic planning into one seamless management process.

The renowned ‘Proven Path’ process for change management lies at the heart of our approach to ‘integrated change

management’. This integrates your strategic journey to excellence through major project management to everyday

improvement programmes ensuring they are visible and contribute to company goals. This process promotes rapid change

through line ownership for successful ongoing management, accelerating management processes and controlling waste

and variability.

Your implementation is supported by our practical experience and knowledge through facilitation, coaching and education,

backed by our unique ABCD checklist, the longest established business excellence assessment tool.

www.oliverwight.com

REPORT SPONSOR


JOURNEY TO EXCELLENCE

The road to world class manufacturing 20026

Only a decade ago, manufacturing executives were preoccupied with eliminating

direct labour through automation, integrating manufacturing systems with other

business functions and pursuing competitive advantage through economies of scale.

Quality was eclipsed by time-based competition. The global landscape was also

radically different. The Toyota Production System dominated world-class manu-

facturing and Japanese manufacturers were the envy of the world.

Times have changed. Globalisation and rapid technological change are rewriting the

rules of competition. Manufacturing is poised for a renaissance - but only for those

companies that have already embraced and instilled lean manufacturing into the fabric

of their organisations. The future UK manufacturing sector will be populated by those

organisations that follow the road to world-class manufacturing starting from a position

of being a lean organisation.

In contrast to the recent past, technology is now affordable and abundant, while skilled

technical workers are in short supply. The ubiquitous availability of information and

internet technology is enabling niche players, as well as those in emerging markets, to

leap traditionally cost-prohibitive infrastructure barriers and assert themselves.

Advances in information technology and telecommunications are accelerating

productivity and supply chain integration - distribution bottlenecks are as feared today

as bottlenecks in production were just 10 years ago. The rising sophistication and

expectations of customers have given an unfamiliar primacy to co-ordinating marketing

and sales with manufacturing. The centre of gravity of the global economy is irrefutably

shifting to emerging markets.

Since the start of the 20th century, manufacturing has passed through two key phases.

THE ERA OF THE VIRTUAL CUSTOMERAs manufacturers move out of the post-industrial era, the search is on for new sources of competitive advantage. Julian Thomas explains

The first phase - the mass assembly era - was based on the production logic of

economies of scale. This gave way to the quality era in the 1980s, which funda-

mentally reoriented business toward continuous process improvements and the

elimination of waste.

The quality era is now evolving into what we call the era of the virtual customer.

Customers are deciding what, when, where and how they will purchase goods and

services. Customers have virtual access through cyberspace to more products and

services than ever before and they are using smart systems to help them make more

informed, personalised choices. Customers are also beginning to exert their bargaining

leverage to influence price and are demanding products and services in ‘zero time’. To

satisfy customers, manufacturers will require a fundamental shift in executive mind-

sets and organisational cultures. Manufacturers must eliminate traditional boundaries

between customers and integrate more closely with them. This means partnering with

customers and emphasising the co-ordination of research and development (R&D),

marketing and manufacturing. Successful manufacturers will integrate the customer

into the fabric of their organisation. Leading manufacturers anticipate change and

possess the flexibility to quickly adjust their strategies. As they expand into new

markets and confront new competitors, the leaders recognise that they must be able

to react to changes in a highly uncertain environment.

Even more so, top performers are proactively changing the rules of competition to their

advantage, and to their rivals’ disadvantage. New wealth from manufacturing is being

created more by adaptability, value-added services and speed of execution than by

sheer quantity of capital or technology. This new state of manufacturing means that

STRATEGY


Customers are also

beginning to exert their

bargaining leverage to

influence price and are

demanding products and

services in ‘zero time’.

To satisfy customers,

manufacturers will require

a fundamental shift in

executive mind-sets and

organisational cultures

incumbency does not guarantee long-term success. Fierce competition and increasing

demand for customised products and services, coupled with shortened product life

cycles in most manufacturing industries, suggest that many of today’s leaders will not

necessarily be tomorrow’s.

Traditional recipes for success are not adequate to compete in the new millennium. How

are market leaders meeting the challenges of the 21st century?

They are now racing to build flexibility and rapid-response capabilities into their

organisations, re-designing their business processes, re-aligning their organisations

and leveraging technology to develop innovative, integrated solutions. Top performers

are changing corporate cultures that impede fast response and harnessing their

knowledge assets to do it.

According to a recent Deloitte & Touche global survey involving over 3000 executives, the

world’s manufacturing leaders are taking aggressive steps in five strategic areas to:

Confront the realities of globalisation: The study reveals that early entry into emerging

markets is preferable to a wait and see approach.

Craft a new agenda for product innovation: On average, executives expect the share of

revenues attributed to new products and product enhancements to increase by 50 per

cent over the next three years. Many are trying to pull ideas from their customers rather

than merely push products into the market and reinventing their new product

development (NPD) strategies to utilise new technologies and increase co-ordination

between R&D, manufacturing and marketing.

Resolve the customer paradox: There exists a paradox in manufacturing: the emphasis

on quality is going up and customer satisfaction is going down. Manufacturers that are

focused on customers are most likely to resolve the paradox. Differentiation in the era

of the virtual customer will require superior marketing and customer service. Most

manufacturers do not yet possess these capabilities. The study reveals that most

continue to focus on product quality and neglect integrating manufacturing with

marketing and sales.

Integrating the global supply chain: The speed at which a company anticipates and

adapts to market forces is a critical source of competitive advantage for manufacturers.

A company’s ability to seamlessly integrate all of its supply chain elements - from

departments and business units to suppliers and customers - will determine success

in the 21st century.

Market leaders have already squeezed excess costs out of their supply chains by

replacing legacy systems with enterprise-wide resource planning (ERP) system.

Growth-minded executives are now shifting their focus to tightening the links with

suppliers and customers. They are also leveraging internet technologies and adding


functionality to ERP applications to capture and integrate key customer information into

strategic planning. Forging alliances with domestic and overseas partners, as well as

outsourcing, are also strategies to improve supply chain integration. More and more,

manufacturers are outsourcing logistics and support services, such as information

services management and software development, in order to focus on their core

competencies.

Align the organisation to compete in the 21st century: The imperatives for the 21st

century - globalisation, product innovation and supply chain integration - all require a

fundamental shift in executive mind-sets. Operating successfully on a global scale

requires companies to re-evaluate their traditional strategies, from sourcing and

production to distribution and marketing and customer service. It requires continuous

change - change that encompasses the entire organisation, from business process

capabilities to people. More than two-thirds of all manufacturers in our study have

undertaken major organisational initiatives in the recent past. Past efforts to

restructure, streamline and downsize are now giving way to a focus on changing

corporate culture that impedes fast response. In short, the name of the game is speed

and flexibility.

Leading executives are preparing their organisation to rapidly respond to increasingly

unpredictable changes in customer demands and market dynamics. Although the

processes targeted for re-engineering vary by region - North America (information

systems), Europe (business planning and logistics management), Asia-Pacific (finance

and accounting and customer service) and Latin America (logistics) - the focus is clearly

on improving flexibility and customer responsiveness. The study provides strong

evidence that investment in knowledge assets underlies the superior performance of

the market leaders. Market leaders have re-engineered their human resource functions

and are now investing in workforce management programmes that promote high-

performance work teams, improve cross-functional training and facilitate worker

empowerment - ultimately creating a culture that thrives on learning and change.

Market leaders are seeking competitive advantage on multiple levels. They are

establishing early-mover advantage and putting their stake in the ground in target

markets around the world. They are shoring up their arsenal of capabilities and

investing in technology, best practices and people. The leaders are recasting their

enterprises to improve new product development, create a customer-centric

orientation, tighten supply chain links and harness the knowledge assets of their

organisations.

Julian Thomas is Partner at Deloitte & Touche

STRATEGY


The study provides strong

evidence that investment

in knowledge assets

underlies the superior

performance of the

market leaders

LEAN MANUFACTURING SURVEYINTRODUCTION

Conquest Business Media’s Industry White Paper programme, produced under the auspices of its

flagship magazine The Manufacturer, is a series of high level publications targeted at decision-makers

throughout UK industry. They are a compilation of original research findings and editorial analysis of key

developments in manufacturing processes, information technology and communications. Each

publication aims to inform and assist senior management; helping them to make the most appropriate

decisions for their companies and so maximise the benefits of emerging technology, services and

applications.

As an extension to the White Paper Programme, Conquest has already launched the Annual

Manufacturing Report (AMR). This initiative is designed to measure and monitor changes in key issues

and factors affecting UK manufacturing industry across a very broad range of subject matter, including

the economy and general economic conditions, the role of the Government and its various support

agencies, and overseas influence and threats. The AMR identifies key areas of capital expenditure, and

measures change in major capital investment categories. It measures the extent of focus on change and

improvement in key business processes and techniques, and identifies the extent to which initiatives

such as customer relationship management (CRM), supply chain management (SCM), and change

management is being embraced and planned for the future, and the degree of focus on new product

development (NPD).

Now, in late summer 2002, The Manufacturer commissioned Coleman Parkes Research to carry out its

first Lean Manufacturing Survey. This delivers a unique insight into the extent to which lean

manufacturing has been embraced in the UK, how its principles and tools are perceived, and exposes

the key issues that inhibit its uptake. Its findings are accompanied by expert analysis, opinion and

discussion about the UK’s progress on the road to world class manufacturing.


EXECUTIVE SUMMARY• The survey shows that the awareness level of lean is very high. Although 26 per cent are partially in

the dark, these are mostly small companies, and awareness is universal in larger organisations.

However, this result is an overestimate of the general situation, as companies that were completely

unaware of lean were dropped from the study.

• Those aware of lean have an adequate view of what its focus should be, but too many focus on cost

reduction rather than the other issues involved.

• Manufacturing companies are focusing on a wide range of key issues some of which are not easy to

achieve. Customer focus is a universal aim, and just-in-time, reducing time to market and supply

chain management are perceived to be much harder to attain for many companies.

• There is evidence of a change starting. Many companies are focusing on process re-engineering,

material flow management and time to market. But when questioned open-ended, they summarise

this as cost reduction.

• The level of collaboration with suppliers and customers is remarkably high, and this reflects the drive

to focus on customer activity and reduce costs down the supply chain. But knowledge and information

flow down the supply chain is not as extensive as these findings would lead us to be believe. Too few

companies know how far their suppliers and customers have advanced with lean manufacturing,

which indicates that collaboration is not truly transparent.

• When looking at the advantages of lean, far more respondents focus on the cost reduction benefits

than on improvements in the process and material. This reflects a clear financial focus, and perhaps

that cost reduction is easier to report than improvement in other activities.

• Company culture is a big issue when considering implementing lean manufacturing, and people -

related problems such as attitude of the staff and opposition to anything new, all feature as barriers

to be overcome.

• Many companies feel that lean is achievable in the short term - a strong statement for manufacturing

industry.

LEAN 2002 RESULTS


METHODOLOGYThe lean manufacturing survey is based on 100 interviews with production directors and managers in

UK-based manufacturing companies, undertaken in September 2002. All interviewees were screened

to ensure that they were in a position to comment on the core issues in the questionnaire. Where it

became clear that the respondent did not know enough about lean techniques, the interview was

terminated. These interviews do not form part of the project. On average each interview lasted 12

minutes, and a response rate of 83 per cent was achieved.

The breakdown of the completed interviews by company size (as determined by number of employees) is:

A cross section of industries has been included in the survey covering:

26%1 - 99

33%100 - 249

30%250 - 499

11%500+

Pharmaceutical

Electronics

White goods

Engineering

Packaging

Food and drink

Printing equipment

Chemicals

Automotive

Telecommunications

Other

8%

14%

34%

4%

5%

6%

4%

5%

6%

6%

8%

0% 5% 10% 15% 20% 25% 30% 35% 40%


LEAN MANUFACTURING SURVEY - DETAILED FINDINGSBased on interviews with 100 production directors and managers

Awareness“Have you heard of the term lean manufacturing?”

The majority of respondents had heard of lean manufacturing. Those who answered ‘no’ here, were later

found to be aware of the processes and concepts of lean manufacturing, and therefore continued with

the interview. Smaller companies are slightly less likely to have heard of the term than their larger

counterparts. Companies in the pharmaceutical and white goods sectors are more likely not to have

heard of the term.

“What do you understand by the term lean manufacturing?”The 74 per cent aware of lean manufacturing responded:

LEAN 2002 RESULTS

No26%

Yes definitely66%

Yes possibly8%

Removal of waste

Reduced costs

Improved efficiency and processes

Other (all lower than 10 per cent)

45%

24%

19%

29%

0% 10% 20% 30% 40% 50%


Only five respondents, all in the ‘possibly heard of the term’ category, could not provide a description of

what lean meant to them, but they were still insistent that they had heard of the term.

The level of understanding is good, companies associating lean manufacturing with the removal of

waste and reduction in cost of manufacture. Larger companies were able to provide a better definition

of lean than smaller companies.

Respondents were asked to rate the importance of key lean manufacturing principles andhow difficult they would be to achieve within their own companies Mean score is out of five

The most important attributes to the success of the company include total quality management, efficient

materials flows, reduced product cost and a policy of continuous improvement. From these results it

would appear that manufacturers are focusing on the core issues in the sector at present, producing

high quality product at lowest cost, with a focus on continuous improvement.

Although total quality management is highly rated as a core attribute, 40 per cent of respondents feel

that it will be at least quite difficult to achieve. 50 per cent feel that JIT will be at least quiet difficult to

achieve with 25 per cent reporting it will be very difficult. Almost one third of companies feel they have

already achieved efficient information flows and a further third feel that it will be easy to get there in the

Criterion Importance Ability to Achieve (%)Rating (Mean)

Achieved Easy Quite Difficult Very Difficult

Total quality management 4.34 28 29 30 10JIT 3.58 12 31 25 25Efficient information flows 4.09 28 36 20 12Low stock levels 4.07 28 22 25 20Optimum staff levels 4.21 28 28 25 15A focus on cost control 4.46 38 25 19 13A focus on the customer 4.74 45 23 14 12A focus on new product introduction 3.97 27 30 20 18A policy of continuous improvement 4.46 32 31 17 16Achieving real improvements in supply chain management 4.21 17 33 27 18Optimising IT investment 3.67 21 30 31 15Efficient materials flows 4.46 21 40 18 16Reduced time to market 4.10 18 31 32 15Reduced product cost 4.35 30 31 21 15

Note: figures will not total 100% as some respondents declined to comment on some criteria.


short term, while nearly half of all companies feel that low stock levels will be harder to achieve.

38 per cent of companies are already focusing on cost control and a further 25 per cent feel it will be

easy to achieve. Customer focus is an issue that manufacturing feels it has managed well in the past,

with 45 per cent claiming to be customer focused and a further 21 per cent saying it will be easy to

achieve. However, one third still feel that it will be hard to manage and these are typically smaller and

medium sized businesses.

A policy of continuous improvement was rated as a key issue for manufacturing in general and only one

third of companies feel that they have achieved the appropriate level of control in this area. 33 per cent

of organisations still feel it will be at least quite difficult to achieve.

45 per cent of companies feel it will be quite or very difficult to achieve real improvements in supply chain

activity, a surprising figure given the focus on supply chain activity over the past couple of years.

Two in five companies feel that it will be easy for them to achieve efficient material flows and

approaching half of those sampled feel that reduced time to market will be at least quite difficult to

achieve. This may mean that they have already taken time out of the product development process and

that saving even more time will be very hard indeed. However, only 18 per cent of companies feel they

have actually reduced product time to market as far as they can.

Interestingly, 31 per cent of companies feel that it will be easy to reduce product cost, but they have

not yet done it! 15 per cent stated it would be very hard, perhaps because they have cut costs to the

bone already.

PLANS FOR LEAN MANUFACTURING“Within your company at the present time, are you focusing attention on changes orimprovements in any of the following areas”“And are you planning to look at any of these areas within the next 12 months?”

LEAN 2002 RESULTS

Pharmaceutical

Material flowmanagement

Lean purchasing andsupply chain management

Time to market

None

62%

23%

23%

23%

60%

67%

62%

19%

68%

0% 10% 20% 30% 40% 50% 60% 70%

Yes, Current Yes, Planned


Note that the current and planned activities are not mutually exclusive. A company could be focusing

attention on an issue now and also in the future as it feels that it has further to go or other areas in which

to improve.

Again, material flow management is a key issue with 68 per cent of companies focusing on this

compared to 62 per cent focusing on process re-engineering. Encouragingly 60 per cent of companies

are focusing on lean purchasing and supply chain management. Time to market is still a focus for two

thirds of those sampled.

As for future activity, the focus will again be on material flow management and process re-engineering,

as companies presumably continue to find improvements and reduce cost in their businesses. There will

be a marginal shift away from focusing on time to market.

SUPPLIERS AND CUSTOMERS“Do you already have well developed strategic collaboration with customers and/orsuppliers, are you planning to develop strategic relationships within the next 12 months orare such relationships of little or no importance to your company?”

Little/no importanceDon't know

CUSTOMERS

79%Already developed

11%Planned within next 12 months

2% 6%

Little/no importanceDon't know

69%Already developed

17%Planned within next 12 months

2% 8% SUPPLIERS


Nearly 80 per cent of those questioned claim to have well developed strategic collaboration in place with

customers, while almost all of the rest will have them in place within 12 months. This emphasises the

current focus on customer retention and development throughout manufacturing in the UK. As

expected, strategic collaboration is seen as very important by the majority of those questioned, with only

a very small minority saying they are of no importance.

Strategic collaboration with suppliers is also significant with two thirds of companies claiming to have

well developed collaborative relationships, and a further 17 per cent see them as a short term focus.

Again, all companies except a very few, feel that the relationships are of great importance.

“To your knowledge, to what extent are your customers actively pursuing leanmanufacturing principles?”

The questions on customer-based lean manufacturing have elicited split opinions. Worryingly, 25 per

cent do not know if any of their customers are focusing on lean activity (yet they claim close

collaboration) and 12 per cent feel it is not appropriate for them. Nearly one quarter feel their customers

are well on the road to following lean manufacturing principles, while a further 21 per cent say most are

down the road. But the level of awareness is poor overall, given that these companies have been

following customer focused activities and claim very close collaboration with their customers.

Among those known to be down the lean manufacturing road, there is common consensus that the

main areas of focus are cost reduction and supply chain management, the latter being focused on

reducing cost in the supply chain and improving collaboration. A minority are focusing on time to market.

21%Most are welldown the road

25%Unknown

12%Not appropriate

21%A few are welldown the road

6%8%7%

Most have startedto look into it

A few have startedto look into it

Most, if not all,have done nothing


LEAN 2002 RESULTS

Perceived value of lean manufacturing

“Thinking about all the various aspects of lean manufacturing we have discussed, howbeneficial do you think applying lean manufacturing principles in your company would be”

There is common acceptance that lean manufacturing can be highly beneficial. 77 per cent said that

such an approach would be at least quite beneficial, and among those who knew enough to have an

opinion, the view is almost universal.

“What advantages would you expect to achieve from applying lean manufacturingprinciples?”Based on the 77 companies seeing lean as beneficial (spontaneous responses)

Not very beneficial

57%Very beneficial

17%Not sure

20%Quite beneficial

5%

Not at all beneficial 1%

Reduction in costs

Better delivery times

Increased efficiency

Increased customer satisfaction

Increased profitability

Increased product quality

Reduced stock

Reduced waste

Competitive edge

Others

52%

16%

13%

12%

10%

9%

9%

8%

8%

16%

0% 10% 20% 30% 40% 50% 60%


As can be seen, the most common benefit of a lean approach is cost reduction. Other key benefits, but

ranked much lower than cost reduction, include better delivery times, increased efficiency, better

product quality and improved customer satisfaction. Generally, companies seek a number of key

advantages from a lean approach.

At the moment, how close is your company to being a lean manufacturing company?

As can be seen, only three per cent of companies feel they can be called truly lean-based manufacturing

businesses while 22 per cent feel that they are very close to achieving the standard. Nearly one third

have made good progress to date but have some way to go, while over one third (including those who

did not know as they are likely to fall into this category) have a long way to go to meet the standard.

3%

22%Very close

32%Quite close

4%

Not at all close

Never likely to be

We've achievedLean Manufacturing

2%12%

Do not know

25%Not very close


LEAN 2002 RESULTS

What barriers might prevent or delay the application of lean manufacturing principleswithin your company?Based on 97 companies that have not achieved lean manufacturing

The main barriers that were seen as preventing the adoption of lean principles were the investment

needed to go down the lean route and more importantly the culture of the company. Couple this with the

attitude of the staff, which we can take to be negative towards the approach, and it is clear that people

- based issues cannot be ignored when looking to apply lean manufacturing principles. Almost one third

of respondents claim that they do not really understand the approach or its potential benefits.

Company culture

Investment/cost

Attitude of the staff

Opposition to anything new

Lack of understanding of the approach

Lack of understanding of the benefits

Nature of manufacturing facility

Inertia

Being able to quantify the benefits

Multi national sites

Multiple location

Attitude of the board

Others

None

48%

41%

38%

33%

29%

29%

27%

23%

22%

22%

21%

19%

2%

7%

0% 10% 20% 30% 40% 50%


“Which of the following phrases best describes how you feel about lean manufacturing?”

It is interesting to note that only 14 per cent of companies feel that lean manufacturing is great in

principle but hard to achieve in practice, indicating a strong desire to create change in manufacturing.

24 per cent felt that lean is a short term goal while getting on for half feel that the goal is realistic but

will take up to two years to achieve. Generally, there is common acceptance that lean is a key issue that

must be embraced in the short term to remain efficient and competitive in a global marketplace.

However, there are many barriers to overcome before lean can be successful in all companies, the most

concerning is the cultural barrier.

It's just jargon - no real substance to it

Don't know enoughabout it to comment

14%

24%

45%

1% 16%

A realistic goal and we aim to getthere within 12 months to 2 years

A realistic goal to aim forbut not in the short term

Great in principle but verydifficult to achieve in practice


LEAN 2002 RESULTS


It is now 20 years since Richard Schonberger and Robert Hall wrote the two books

which effectively launched lean in the west. It is over 10 years since Womak, Jones

and Roos wrote their seminal book naming the approach ‘lean’. Huge changes have

taken place, yet for the majority of organisations the lean potential has hardly been

scratched much less mined.

A recent Engineering Employers Federation (EEF) report gave a good indication of the

status of lean in the UK. Interesting findings included:

• Around 30 per cent of organisations surveyed were undertaking lean in

the whole organisation, 10 per cent were just using lean in manufacturing, but

around 40 per cent had no plans for lean

• EU owned and in particular US owned companies have greater uptake of lean than

UK owned companies

• Large firms (500 employees plus) have a far greater uptake of lean

• The most popular of the lean tools and concepts is to do with suppliers and the

supply chain

• Companies that have started lean initiatives have almost invariably shown large gains

Although the EEF report gives an excellent overview, there is a danger that lean is

thought of as a box of tools to be implemented cherry-pick wise (this from the author

John Bicheno, director of the MSc programme in lean operations atCardiff Business School, looks at the development and future of lean, and

the merging of other theories to create a powerful manufacturing whole

THE LEAN ROUTE Dell has been pioneering mass customisation

of ‘The Lean Toolbox’!). No doubt some tools used individually have given good results.

The problem is that it is an end-to-end value stream that delivers competitiveness. A

great cell feeding into a morass of poorly controlled inventory is waste. A changeover

reduction programme in a high capacity area is waste. A 5S programme without follow

through into standard attainment is largely waste. Kanban working in a situation of

unlevelled demand can be waste. And so on. Even if all these were sorted out though

good value stream mapping and a well-directed kaizen programme, lean may still fail

to deliver its true potential.

One frequently hears that lean is about waste - it is, but it should be more about waste

prevention than waste elimination. This is just like the total quality concept of trading

the costs of prevention against the costs of inspection and internal and external failure.

Spend more on prevention, but far less on failure and inspection. Russell Ackoff talks

about resolving problems (by discussion), but better is solving problems (by fact-based

scientific study), but best of all is dissolving problems (by tackling root causes). Non-

lean practitioners resolve ‘inefficiencies’, beginning lean practitioners solve problems

to remove waste, but the experienced lean practitioner dissolves waste.

Lean beginners go after waste. This is appropriate given the high levels of waste in

most value streams. Although there will always be another layer of waste to

address, the more experienced need to return to value - to the first and second

lean principles of customer and value stream. Like the quality concept of quality of

design and quality of conformance, waste elimination or prevention is but one half of

the total picture. Rethinking the value side is at least as important. This leads to

seeking out new opportunities.....

Mechanical lean is the implementation of lean tools in a piecemeal fashion. Managerial

lean is the implementation of lean tools in an integrated manner. Innovative lean

means taking lean beyond the shopfloor, beyond the organisation to create new

opportunity, new value, and new customers. Lean often begins with the mechanical,

but since piecemeal benefits are small, executives may decide to abandon the lean

initiative, having burned their fingers - in time, if not money. Worse, they may even

claim to have “done lean - and it didn’t do us much good”. In the mid 1990s more

powerful tools were rediscovered - value stream mapping, policy deployment, and the

new type of improvement events - and there was increased recognition that lean must

be built on a sound foundation of 5S and standard operations. These enabled a more

systematic, more balanced, and more efficient approach.

But innovative lean is altogether another matter. Here the question is what business

and product opportunities does lean create - like Vision Express and the one-hour pair

of spectacles, like home breadmakers, like South West Airlines breaking the rules of

established carriers. In these examples the customer is primary. Waste reduction and

value enhancement is for the customer, not the producer. There may be no greater

waste than cutting waste for the producer while increasing it for the customer. Stand

back and look at the customer as the ‘object’ of one-piece flow. Line up the stages in

process order so that the customer can benefit - then use lean concepts of waste,

LEAN MANUFACTURING


Lean often begins with the

mechanical, but since

piecemeal benefits are

small, executives may

decide to abandon the

lean initiative, having

burned their fingers - in

time, if not money. Worse,

they may even claim to

have “done lean - and it

didn’t do us much good”

cells, changeover, pull, small machines, OEE and so on to contribute to customer value.

To understand lean, it is important to understand a whole series of different concepts.

Water, for example, is a liquid at normal temperatures. Its constituents, oxygen and

hydrogen, are gases. You can never understand the properties of water by studying

oxygen and hydrogen. Likewise with lean and lean tools. Lean is a system - more than

the sum of its components. Systems are in constant interplay with their environment -

where the boundary is not obvious. Systems adapt continuously but at a faster rate

when threatened, like ant colonies. Systems evolve - like bugs combating insecticides.

The Toyota Production System (TPS) grew through revolution and evolution. Revolution

rejected the concepts of mass production and economies of scale, and steered the

organisation. Evolution developed the details and the tools. When TPS began there

were few lean tools - most developed from first principles over several decades, but

fitting in with the top-level concept. Lean ideas developed from first principles; Taiichi

Ohno believed in developing managers by asking tough questions rather than providing

answers. This is in line with the practice of Hoshin or policy deployment, whereby top

management sets the strategic direction but evolves the detail, level by level, by a

process of consultation. In the reverse direction decisions are taken locally, only

migrating upwards in exceptional circumstances.

Today large ERP systems, with data warehouses are ‘in’. In lean we have learned about

the waste of centralised inventory warehouses as opposed to strategically located

supermarkets. The world has learned about the failure of over-centralised economies.

But during the late 1990s many manufacturers moved in the opposite direction by

implementing large centralised systems - at great cost and often with mixed results.

Today’s need is for fast reacting distributed decision-making. There is a case for

centralised strategic decisions, but for operational decisions, the lean way is to deal with

schedules, maintenance, quality, cell design and even some aspects of design and

supply at a localised level. This is not only more effective, but also more human.

Build to order was once the only way in which products were made. Then came mass

production that gave wide access to products but not to individual preferences. Mass

customisation held out the promise of both, but lean concepts are at last making mass

customisation a reality. Dell has been a pioneer, and the three-day car study has

worked through the barriers that are in the way. But no doubt lean thinking and

appropriate flow-based IT systems are about to make quick-response build to order

(BTO) a reality in whole new industries.

Finally, lean is core to all of this. Hopefully the days of arguing between “lean and agile”,

“lean and APS”, “lean and six sigma”, “lean and theory of constraints”, “lean and

manufacturing strategy”, and the practice of including a chapter on lean in operations

management textbooks, is passing. Lean principles are universal. It is merely a question

of the extent to which other concepts can add to the central developing core of lean.

John Bicheno is director of the MSc programme in lean operations at Cardiff Business School,

and author of The Lean Toolbox, Cause and Effect Lean, and The Quality 75

LEAN MANUFACTURING


Lean principles are

universal. It is merely a

question of the extent to

which other concepts can

add to the central

developing core of lean


It’s a puzzle. Examining lean management trends among 604 of the world’s best

known publicly held companies, shows the UK on top by a large margin. And what

of Japan, lean’s birthplace? Dead last.

Lean is many things, of course, but the amount of stocks carried is a good, visible

measure of it. Hold lots of it and you’re fat, little and you’re lean. The leanness studies

which I have been collating since 1994, are based on companies’ financial statements.

(The actual calculation is turnover, or cost of sales if available, from the income

statement divided by value of inventory from the balance sheet; it’s what the

accountants call inventory turnover.) They examine many-year trends, not last year’s

Richard Schonberger (below) reports on lean trends around the world andreveals the promotion and regulation candidates in the global lean league table

THE LEAN LEAGUE

or last quarter’s results. The database

goes back to 1950 - subject to availability

of the company’s financial records and

whether it has been around that long

and remained in the public sector. Of

38 British companies studied, 22 have

been on a Jack Spratt diet for at least

10 years, six more were doing fine but

have faded in the last half dozen years,

and five have neither fattened up or

thinned down. That leaves five on the

heavy side.

Among the UK’s 22 fittest are BOC,

GKN, ICI, Johnson Matthey, Smiths,

and Pilkington. Boots, Courtaulds,

GlaxoSmithKline, House of Fraser,

Marks and Spencer, Northern Foods,

and Wolseley are the companies that

had fine slimming-down trends going,

only to fade in recent years. Those with

no trend one way or the other are

Cookson, FKI, Marley and Rolls Royce.

Finally, the five that are leaning the wrong way are Associated British Foods, Bowater,

Sainsbury’s, Smith & Nephew, and Tesco.

Lean’s origin is in the Japanese auto industry, and how has that country done lately?

Honda is fine: The company bottomed-out at 1.1 inventory turns in 1976 and has

steadily improved to 7.6 in 2001. The trend reverses itself for Isuzu, Mazda, Subaru

(Fuji Heavy Industries), and Toyota. The declines, spanning at least 10 years since a

high point, are: Isuzu 55 per cent; Mazda 31 per cent; Subaru 29 per cent. And for

Toyota, the globe’s most admired manufacturer? The decline is 74 per cent, having

fallen from 45.7 turns in 1971 to 12.1 in 2001.

Toyota’s factories are still paragons of lean, but the numbers don’t lie: the company

isn’t lean. Is it because of globalisation, inventory pathways stretched to the UK,

Australia, the Americas, Thailand, and so on? Perhaps. But Volkswagen, with similar

expansiveness, has nearly doubled its inventory turnover, from 4.8 in 1980 to its

current 8.9, in the period when Toyota’s plunged. The gains are even more impressive

at globally positioned General Motors, up from 4.2 turns in 1974 to a current 13.1, and

Ford Motor Company at 4.9 in 1974 rising to 20.8.

GLOBAL LEANING


Of 38 British companies

studied, 22 have been on a

Jack Spratt diet for at

least 10 years, six more

were doing fine but have

faded in the last half

dozen years, and five have

neither fattened up or

thinned down. That leaves

five on the heavy side.

The Quest factory in Ashford, Kent is

part of the ICI Group, one of the UK’s

leanest manufacturers

Does anybody care all that much about inventories, besides those with lean

aspirations? The City of London and Wall Street care. Because where inventories go,

so goes cash flow, and analysts scrutinise this even more carefully than earnings.

When inventory turns are heading the wrong way, it’s like throwing cash into a bonfire.

A caveat: For a given company, a trend opposite to lean may be explained by special

factors. A strategic move into developing countries, for example, usually requires

increased stock levels but stark differences in aggregate results for groups of

companies are not easily shrugged off.

When the leanness data are grouped by country, the UK and Japan make up the

extremes. No other nation or region stands out. The US, accounting for about 70 per

cent of the 604 companies, has a middling mix of improvers and laggards.

Continental Europe is represented in the study by 64 companies, not enough to yield

reliable findings for any one country. European industry in general shows up well

behind the UK and the US in leanness trends but much better than Japan. In such

developed countries as Australia, Ireland, and Canada, multinational companies

dominate. Hence, their leanness data are largely buried in aggregated financial

records of the parent, be it GlaxoSmithKline or Dell Computer.

For all companies in the study, about 36 per cent (217 companies) show a strong

positive trend in leanness. The other 64 per cent make up the bad news. They’ve

stalled or have been fattening up on inventories, some only recently following a long

period of improvement but most losing ground for at least 10 and up to 50 years.

Strikingly, one of the latter is what may be the world’s most esteemed company:

America’s General Electric. That maker of jet engines, electric power equipment,

locomotives, and major appliances had its leanest year in 1973 and has lost ground in

a valley-peak-valley pattern since.

Why, in the midst of lean, supply-chain-management, six sigma, and a host of other

potent improvement tools and techniques, are so many companies backsliding or

plateauing? An answer suggests itself for Japan. The 1990s were an economic

downer for that country. Worsening stock management in so many companies may

have something to do with Japan’s cherished, though fading, reluctance to reduce

labour. In the face of declining sales, what does an excess labour force do? It

produces. It fills warehouses with unsold goods.

Outside of Japan, plain old complacency may explain much of the wrong-way trend.

Companies and industries are like people; most of us lack the killer instinct. When

things are going well we tend to relax. And in the 1990s business and industry in many

countries did well. The bubble of enormous fortunes being made as share prices

soared, may have cast a wet blanket over the pursuit of best business practices.

The high standing of UK companies in the research is hard to fathom. The US should

be the Western leader in getting lean. With America’s mass market as the attraction,

its industry was the first to feel the brunt of Japan’s export tsunami. By the early


Outside of Japan, plain

old complacency may

explain much of the wrong-

way trend. Companies

and industries are like

people; most of us lack

the killer instinct

1980s US automotive and electronics industries had begun to react - first by learning

and applying the lean, total-quality management methods perfected in Japan, and

then restructuring to shed resources that could not cut the mustard. The next arena

was the UK which, well before the Continent, had lowered its trade barriers.

Straightaway, Japanese automakers set up shop in the Midlands, and Japanese and

American electronics companies did so in Scotland. The response of domestic

producers was the same as in the US: crash diets.

The leanness studies yield plentiful other overall findings, including a ranking of 34

sectors. Among the leaders are automotive components and electronics/electrical

products. No surprise, since these industries form the heart of Japan’s export

juggernaut, which set lean in motion. At the bottom are food retailers and distributors,

textile and apparel, food/beverage/tobacco producers, and petro-chemicals. In

petrochemicals, capital-intensive equipment spews forth day and night with low

regard for demand. At least that would be their excuse for not getting lean. The

grocers, 34 out of 34, have no such defence. This is the industry that pioneered bar-

code scanning, which captures item sales data that is nearly sharable in real time with

supply-chain partners. Their stock movements, one might think, would be as

synchronised as a ballet troop’s. So, Sainsbury’s and Tesco, and Associated British

Foods, what’s the problem?

This is not saying that the study findings are conclusive. While the vast majority of

companies are privately held, this research covers just publicly traded ones. The

companies studied, though, are among the largest and best known. They also must

be competitively strong. Otherwise, they cannot attract enough interest in the

investment community to issue shares in the first place, and cannot hang on in the

second place. The failure of such large numbers of these companies to sustain a lean

trend must be seen as looming competitive weakness. It used to be that weak

companies might survive for decades. No longer. The open global economy exposes

companies to surprise attacks from upstarts near or far.

To those exposed, the message here is brief: If your company claims to have lean well

in hand but has not maintained improving inventory numbers for at least five or

10 years, you probably don’t. The solutions are not so new, and not confined to

operations: Tear down the silos, elevate training, link up externally, involve everyone,

and make the measures of performance job-related so as to touch each employee’s

work life. Above all, install discipline to make sure that lean is not here and there, not

a flash in the pan. It is not very lean if it does not stick.

Dr Richard J Schonberger, president of Schonberger & Associates of Bellevue, Washington,

is author of Let’s Fix It! Overcoming the Crisis in Manufacturing (Simon & Schuster/Free

Press, 2001). He was awarded the British Institution of Production Engineers’ 1990 International

Award for an “Outstanding Contribution to the Advancement of Manufacturing Management”

and inducted into the 1995 Academy of the Shingo Prize for Excellence in Manufacturing.

GLOBAL LEANING



Value stream mapping - sometimes also referred to as ‘learning to see’ mapping

or ‘process cartoons’ - has been around for some time. It’s one of the most critical

components to successful lean manufacturing but is often overlooked because it can

sound boring and academic.

Based on Toyota’s material and information flow mapping, value stream mapping

produces an easy to understand visual map that shows you what your customer

values, and pinpoints the stream of processes that delivers that value. In other words,

how we produce exactly what the customer wants, when the customer wants it, and

achieve this with no waste - the essential characteristics of a truly lean organisation.

“In manufacturing, when we talk about value, what we really mean is doing something

that the customer is willing to pay for,” says Dr Julie Madigan, chief executive of The

Manufacturing Institute. “In other words, doing what is required ‘through the eyes of

the customer’ and not from the department, function or company’s point of view.

Waste is the reverse of value. So if you have components moving around, product

queuing or being inspected, or inventory in storage, then you’ve got waste.”

Kate Mackle, an associate of The Manufacturing Institute, former vice president and

partner of the Kaizen Institute Europe and founder of Thinkflow, agrees. She suggests

that manufacturers find the road to lean rocky or fail to achieve the big benefits

promised by continuous improvement blitzes because they miss out the first and most

important step in the lean implementation journey - value stream mapping. “To be

truly lean you need to engage other functions and see the whole picture,” Mackle says.

“In many cases companies launch into ‘kaizen blitzing’ in specific areas of production

PRODUCTION CONTROL

MRP

90 dayforecast

Dailyorder

Casting

C/T = 12secC/O = 2hrs

A/T = 420mOEE

= 38

% C/T = 5secC/O = 4hrs

OEE = 71%

C/T = 72hrsOEE = 82%

A/T=1200m

3 people10 part #

A/T=420m

40/pallet2 people

A/T=420m

C/T = 58secC/O = 2hrs

A/T = 420m

Plate Manf Cell Assy Formation Final Conf Packing

90 dayforecast

Dailyorder

Weekly schedule

COMPANY A100 Kg stacksBi weekly ship

COMPANY Z6000pcs/month6VF11 - 2500pcs4VF11 - 3500pcs

weekly ship

1st & 15thof month

Every friday

10000 Kg Pb14 days

80,000 +ve100,000 -ve

40,000 +ve50,000 -ve

900 pcs3 days

900 pcs3 days

300 pcs1 day

Looking to go lean but don’t know where to start? It’s simple. You start the same way as you would plan any important journey - by using a map.

The Manufacturing Institute explains value stream mapping

MAPPING THE PATH TO LEAN

before they’ve looked at their business from a value stream perspective. Inevitably

what happens is you end up putting a lot of energy and resource into improving parts

of a process that should not even be there in the first place. This has an adverse effect

on the sustainability of the lean approach in the business and a tendency to say you’ve

done lean rather than are lean.”

In short therefore, what value stream mapping allows you to do is continue to take waste

out of the business while simultaneously avoiding a lot of wasted effort on isolated

improvement activities that have little or no impact.

Those manufacturers that have used value stream mapping claim to have halved lead

times, doubled stock turns, made huge leaps in labour productivity and reduced

administration and co-ordination roles in weeks rather than months or years.

So what about the real evidence? The Manufacturing Institute has been assisting a

range of manufacturers - large and small and across a variety of industries - with the

value stream mapping approach.

Using the support of a master practitioner from the Institute, CHK Engineering, a

Cheshire based manufacturer of high-quality metal fabrications, used the Value Stream

Mapping technique to reduce lead times from six weeks to two days, reduce stock and

W-I-P by 70 per cent and to introduce cellular manufacturing, in less than six months.

Says Alan Pinkney, managing director at CHK: “Value stream mapping enabled us to

quickly analyse our operation and pinpoint what we needed to focus on for greatest

impact. Through value stream mapping it became clear that we were holding excess

stock due to overproduction and scheduling changes. We also previously thought that

lack of capacity was an issue for us but we quickly discovered that we did in fact have

sufficient capacity to manufacture to order and in a much shorter lead time than our

current one.”

CHK manufacturing director Greg Pointon adds: “The Value stream mapping project

also had a positive impact on the workforce. Through involving people from different

levels and across the organisation we have noticed that staff now feel more valued. The

approach has created a great team spirit within the company.”

A cross functional team comprising continuous improvement, planning and customer

service, production, and supply chain personnel from Akzo Nobels Akcros Chemicals

plant in Eccles, joined the Manufacturing Institute’s How 2 value stream map

programme - a practical and action-based programme that combines coaching,

‘learning by doing’ and practical application to the business situation. The programme

coach is also on hand to give advice and guidance. Says Terry Hill, site manager at

Akcros: “We had already introduced many changes at the site and a radical cost

reduction programme was underway. Value Stream Mapping has provided us with a

challenging new focus and will support and supplement our cost reduction activity. It

has re-focused our thinking and will enable further improvements in performance to be

achieved while at the same time improving our overall level of customer service.”

The Manufacturing Institute can be contacted on 0161 872 0393 or by email [email protected]

VALUE STREAM MAPPING


Those manufacturers that

have used value stream

mapping claim to have

halved lead times, doubled

stock turns, made huge

leaps in labour productivity

and reduced administration

and co-ordination roles in

weeks rather than months

or years


Being overtaken by a Smart car on the motorway the other day was an experience

that took me through a number of emotions. There was the sheer disbelief. I have

only just upgraded my own car. One might expect the odd Jag or Beemer to fly past

but a Smart car was not in my thinking. Then came the urge to do something, before

I had thought whether this was really sensible. So I chased after him and overtook him

back. My plan that I had set out with plenty of time and did not need to hurry was

ignored. Having reacted, I then could not slow down again. I was on a course

determined by events. I arrived 30 minutes early and, for my sins, waited in a lay-by

with time enough to think how silly this all was.

I had my own view of the order of things. The comparisons I was making came from

standards set within me. In our world we are used to advertisers using comparisons

to spur us on. We believe that if it is possible to have whiter clothes on the line then

we should. We target fresher food, and the latest technical bells and whistles, lower

costs, and faster, better service.

SEEING THE LIGHTLawrie Rumens shows how benchmarking can illuminate your

way on the journey to excellence

Caterpillar has reached world-class manufacturing status

Comparisons have a major impact for us too in building new visions of expectancy and

aspiration at all levels of the organisation. They add to our own picture of what is

possible and stimulate us to do better.

More importantly the reverse is also true. As much as our knowledge opens new

horizons for us, we are fundamentally constrained by what we do not know. Few of us

have the imagination and ability to come up with new ways of doing our business

without some sort of stimulus.

Sadly the stimulus is often the burning platform. It is a current crisis that gives the

imperative to achieve quickly. We usually do achieve, uniting for a brief interlude the

directors, managers and our people.

The burning platform may be the golden key to introduce rapid change, but it is a blob

of putty in unlocking lasting gains and long-term improvement. When we achieve the

goals to put out the fire we heave a sigh of relief and take the plaudits. But without

greater vision performance flattens out and eventually tails off.

Conversely most journeys to business excellence borne of vision do sustain them-

selves and companies do continue to improve and stay in front of the competition.

Comparison is at the heart of all this since, if we don’t quanitfy differences we won’t

understand why they exist. Without understanding, how will we create rational plans

and actions to achieve excellence? For comparison, substitute the word

benchmarking. I do not know of a top performing company that does not use some

form of benchmarking to understand its competitive position and continually build and

develop its vision and strategy. Such companies also use benchmarking to

demonstrate to their people at all levels what is possible, and to set goals and targets

with them.

So where do we start in using benchmarking as a catalyst for our journey to

excellence? First comes the voyage of discovery. As companies in the pursuit of

excellence, we have to actively seek out the possible. It will not come and seek us.

For a start, try reading. Magazines such as The Manufacturer are full of stories

and case studies. Add selected books and university papers and a different world

starts to unfold.

Then it helps to touch and feel. Look inside and outside your industry to those where

the fiercest competition is forcing the pace of change and improvement. Be prepared

to look outside manufacturing to understand what is the best. For instance the most

advanced financial practices are in the financial industries.

Thirdly know your market place. Talk and listen to your customers and your suppliers.

They will know what is happening in the sector and they will also know whether you

are in front or behind your competitors. Where are the customers’ priorities on their

journey to excellence, and who do they see as their long-term partner?

Now through intelligent conversation agree what is possible in all that you have found

and the opportunities this presents to your business. There is little sense in a new

vision that drives actions that do not tangibly improve the business. Especially manage

BENCHMARKING


Look inside and outside your

industry to those where the

fiercest competition is forcing

the pace of change and

improvement

any people above you not involved in the discovery. Some years ago a very senior

person in the glass industry would not accept a target for his operations of

12 stock turns, and the grounds for this were: “tell me someone in the glass

industry that has done it”. But there is no point in a vision that someone else has

already achieved.

With the vision set, we have to sell it and plan the action. If your people do not

understand where you are going they cannot contribute. We constantly underestimate

what our people can do if they understand our goals. You will need an active

programme to get them involved in their own discovery. Get them on best practice

visits (try the DTI Inside UK Enterprise service). Send them to conferences and user

groups (the Oliver Wight Proven Path is one of the best and longest running of these).

Confront them with figures from the many university databases (try Cranfield), and

with excellence checklists. Set clear objectives before people go on a visit and debrief

the real lessons afterwards.

Lastly from the vision set your own priorities from the maturity of your own company.

Set in place the foundations on which all other improvements rely. Try these questions:

• do your people own what they do and its continual improvement in all parts of

the business?

• do your people stick to the proper process working consistently whoever is doing

the task?

• does your top team have one clear agenda, with one set of figures and one clear set

of priorities?

• does your company plan work properly in all parts of the business and then un-

compromisingly work the plan?

If these are issues for you then look for experiences showing practices such as 5S and

TPM for ownership, ISO 9000 for consistency of work, and integrated business

management to get planning and integration right. Do not be bound by your factories.

Excellence is the business of the whole business and of the whole supply chain.

Next look to see successes in step changing performance in your targeted areas. Do

you know an excellent company that has not actioned lean and process acceleration,

driven quality to the highest levels and targeted agility?

These initiatives are all company wide and people oriented. The big gains we make in

business come mainly from behaviour change yet it is in this area that we invest the

least. Education is vital to improving understanding and without understanding there

is no real action. At the working level ask whether your people are properly educated

to do their jobs well. Can they tell you what is world-class for them in their role and

how companies exploit this? Don’t get deflected by the cost of the best education, ask

how much ignorance is costing you every day.

All of this is benchmarking. Benchmarking is finding out the possible, finding out how

to do the possible and stimulating action to get in front and stay in front of the

opposition. Benchmarking is not a one-off exercise but a constant way of life that

continuously extends knowledge, horizons and of course targets and goals.

Do not be bound by your

factories. Excellence is

the business of the whole

business and of the whole

supply chain

BENCHMARKING



Companies that do not consider maintenance or asset management as important

will not achieve the full benefits from lean manufacturing. To improve

maintenance and equipment performance requires a comprehensive strategy for

asset management. Such an approach will require the use of the various tools and

techniques available including total predictive maintenance (TPM), radar coded

messages (RCM), continuous improvement (CI), computerised maintenance

management systems (CMMS) - used in a way appropriate to the situation and to

meet the company’s objectives. What is a maintenance strategy? Quite simply it is the

rules, guidelines, methods and practices to be used to achieve a specific goal and/or

the manufacturing objectives.

An effective strategy will therefore set the ground rules for how maintenance is

managed and delivered in an organisation, this in turn will result in substantial

benefits which will directly impact on production output and profitability. Typical

benefits from organisations that have implemented a structured maintenance

strategy are:

1. technical strategy which defines how equipment should be maintained, repaired,

replaced

2. management strategy, which defines how the resources are managed.

These resources include labour, parts and materials, cost and work management

3. information systems, which define the performance measures, CMMS requirements,

plant history, etc

Successful lean manufacturing is built on a foundation of self-sufficient workteams, a high level of confidence, and a quick response to changes in demand

LEAN MAINTENANCE

Each of these elements must be considered in the context of the plant operating

conditions, performance and regulatory requirements. Implementing the strategy will

drive best practices while laying the groundwork for achieving excellence in equipment

and maintenance performance.

A typical strategy will include the following:

Generic maintenance strategy modelIn the last 10 years maintenance performance has improved in some areas, for

example: a reduction in fire-fighting, increased asset productivity and improved record

keeping, but there are still areas of concern including conflict between maintenance

and production, integration of CMMS with enterprise resource planning (ERP) systems,

focusing attention at high level changes in manufacturing strategy without considering

the need for improved equipment reliability.

Benefits• maintenance expenditure reduced • equipment life extended • capital expenditure

postponed • spare parts expenditure reduced • increase in utilisation of craft force

• reduced equipment failures • more production output • reduced energy costs

Typical industry benefitsPharmaceutical - maintenance costs reduced by 30 per cent

Healthcare - £2.4m from improved equipment efficiency

Food - savings of £50,000 per day

MAINTENANCE


BUSINESS OBJECTIVESCRITICAL SUCCESS FACTORS

MAINTENANCE OBJECTIVESROLES AND ACCOUNTABLES

• Asset register• Technical data• Computer system• Audit reports• etc

INFORMATION SERVICES

TECHNICAL WAYS OF WORKING

• Asset records• Maintenance approaches• Selection of tasks• Technical standards• Plant criticality• Modification control• Changeovers• New plant design• Safety standards• Legal requirements• Equipment performance• etc

MANAGEMENT WAYS OF WORKING

• Organisation and resource planning• Budgeting• Maintenance planning & control • Materials control• Contractor services• Performance management• Communication• Continuous improvement• TPM• etc

VALUESPOLICIES

An effective strategy will

set the ground rules for

how maintenance is

managed and delivered in

an organisation, this in

turn will result in

substantial benefits which

will directly impact on

production output and

profitability

Paper - production increased by two and a half times

Chemical - £300,000 in maintenance expenditure

With maintenance costs typically five to 15 per cent of operating costs the impact of

poor maintenance can be considerable. That is why it is important to develop a

maintenance strategy.

The starting point must be for manufacturing teams to define the goal of

maintenance, is it for example to reduce costs, or respond to breakdowns and fix them

as quickly as possible, or increase the equipment reliability or meet statutory

regulations? In most organisations it will be a combination of all of these.

Achieving maintenance excellence will provide the support for superior performance

in lean manufacturing while reducing maintenance costs and providing quick wins in

terms of equipment performance. So what are the steps required to achieve good

maintenance performance? This can easily be divided into 10 steps which will deliver

maintenance excellence driven by a maintenance strategy.

A key part of any maintenance strategy is likely to include the use of a CMMS, whether

this is a stand-alone system or a maintenance module, which is part of a business

wide ERP system. The CMMS should provide the glue which holds the strategy

together and makes fact-based decisions that much easier.

To gain the maximum benefits from the CMMS it is essential that the existing

processes are reviewed and revised in line with best practice. This is something a

CMMS supplier will not always include, after all they are software specialists not

maintenance specialists. Without this element there is high risk that the system will

not deliver and will be under utilised. Implementing an effective maintenance strategy

will take time and resource. Typically an implementation time frame will be one to two

years for all but the smallest organisations.

The starting point of implementation is to prepare a strategy roadmap, which sets out

the objectives, goals and milestones for each element of the developed strategy. For

many years maintenance has been recognised as a cost on production. By developing

and implementing an effective comprehensive maintenance strategy, maintenance

can become a value added function, which fully supports lean manufacturing.

Ten step approach to strategy development:Step 1 Recognise the need for change

Step 2 Assess current weaknesses through AMIS auditing and benchmarking

Step 3 Define the maintenance workload

Step 4 Map and revise maintenance processes

Step 5 Establish appropriate organisation structure

Step 6 Define work, cost parts and resource management systems

Step 7 Prepare standard operating procedures

Step 8 Establish key performance indicators and continuous improvement system

Step 9 Define people requirements in terms of number, skills training

Step 10 Select the appropriate tools and techniques and methodologies to drive

improvements in performance

MAINTENANCE


By developing and

implementing an effective

comprehensive maintenance

strategy, maintenance can

become a value added

function, which fully

supports lean manufacturing


In little over a decade, advances in supply chain management have transformed the

way that many manufacturing businesses operate. The impact has been huge. But

the period of greatest change may still be ahead of us.

The focus of supply chain management is changing from the effective movement of

goods, to a more challenging mission: redefining the whole manufacturing process.

Functions that were once routinely handled in-house are now routinely outsourced to

parts of the supply chain that are supposedly better equipped to perform them.

Why design parts and components in-house, runs the argument, when those parts

and components can be better and more cheaply designed by the companies that

manufacture them? Why shoulder the entire risk in a new product or project, when

effective supply chain management allows that risk to be shared collectively between

the businesses that make up the supply chain? And why - most radically - manufacture

in-house at all? Why not simply outsource the whole business to a third-party

contractor, leaving you free to concentrate on brand management and marketing?

It’s a compelling notion, in a world where exploiting a core competency, whether your

Stephen Proud looks at supply chain challenges in collaborative manufacturing

THE VITAL LINKCisco successfully manages outsourced manufacturing

own or that of a supply chain partner, can bring new products to market faster, more

cheaply and more reliably.

Accenture’s research(1) shows manufacturers are moving towards collaborative

working and outsourcing. In one study, over two-thirds of European manufacturers

surveyed had implemented a collaborative product development (CPD) initiative. A

separate study into the automotive industry continues the trend with suppliers and

original equipment manufacturers (OEMs) looking to outsource production and move

upstream into new areas of revenue creation.

Some leading companies such as Dell, Cisco and Sun have challenged the art

of the possible and prospered in this arena. But problems lie ahead for those that

seek to emulate them, particularly in businesses less attuned to the risks and

decisions involved.

Let’s look at some of the risks. The lead time for the capital infrastructure required for

such a project is often longer than the engineering design and prototyping that is

needed, so it’s the provision of capital infrastructure, and the investment that requires,

that often becomes the critical path constraint.

The trouble is that the investment decision has to be made and funding put in place,

before the product has completed its design stages, but most companies are loathe to

commit funds and resources until they see an order.

Another obstacle often surfaces at this early stage of a collaborative or supply chain

outsourcing project. The decision has been made; the investment capital sought, and

from the engineering and manufacturing perspective it’s all systems go. But beware:

in many cases, this additional capital will be far bigger than most capital investments

the company has made and will have strings attached.

Financiers and venture capitalists will want seats on the board or, at the very least,

strict financial controls and management information. Few companies have either the

experience in dealing with this kind of external scrutiny, or the collaborative project

management and financial systems that external investors want.

In such cases, a common pitfall is the estimate-to-complete calculation. With 50 per

cent of the budgeted hours or resources consumed, one might imagine that there’s

50 per cent of the task left to perform. In the real world life isn’t so simple: resource

estimates to complete a project are notoriously hard to get right. At the management

level, it’s possible to be relaxed about an over-run - but from an external investor’s

perspective, the viewpoint is less sanguine.

The next trap for the unwary is where a customer or supplier is experiencing trouble.

Instead of supplying widgets, they may be supplying whole assemblies, and finding it’s

trickier than it looks. Costs are high, delays and quality problems endemic. Most

purchasing functions, for example, are designed to place orders, not manage service

providers or project-manage arm’s length ventures, so you might never spot the

problem, until it’s too late.

The underlying point is this: in collaborative supply chain projects, the risk profile is

different. A chain is as strong as its weakest link. And that link can be hard to spot.

SUPPLY CHAIN


With 50 per cent of the

budgeted hours or

resources consumed, one

might imagine that there’s

50 per cent of the task left

to perform. In the real

world life isn’t so simple

(1) Pan-European Collaborative Product Development Survey 2001 Collaborating to Compete:A New Way Forward. Auto 2010 in the United Kingdom, Preparing for the Future Today


Despite the decline in the total number of people employed, the manufacturing

sector remains the foundation of our economic productivity, and much of what we

have learned about work organisation and employment practice comes directly from

manufacturing. It’s hard to believe that once work was organised around the Fordist

model where the focus was on mass production, rigid bureaucracy and hierarchy.

In today’s manufacturing world, the model, while still concerned with efficiency, is much

more about being versatile and flexible with work organised around smaller scale

operations. The best manufacturers have recognised that success is about offering

customers exactly what they want and in some cases going beyond expectations.

But we know that we have not come far enough. Manufacturing may still be the jewel,

People are the essential ingredient of success. John Philpott, looks at the role of HR in world-class manufacturing

PEOPLE AT THE CENTRE

but in many companies the shine has gone as they struggle to compete with the best

in the rest of the world. They may operate on post Fordist lines - but they have not yet

stepped up to the next stage: a radical rethink of work organisation.

The manufacturing workplace is greatly changing for the better - from an environment

of top down control and hierarchical organisation to one of teamworking and flat

structures. But the consensus within business and government is that these new

styles of working are not happening quickly enough.

People management is critical. It can apply strategies and practices that enhance the

value and contribution of employees. Here the move is from traditional disciplinary and

personnel administration to a model of strategic human resource management. But

above all this is a management challenge - the ability to exploit the knowledge and

creativity of people must become a mainstream capacity for anybody with a

responsibility for leading others.

The business model that has people at its centre has three central tenets: leadership,

employee engagement and continuous learning. At first sight these three strands

appear straightforward - but dig a little deeper and we can see why companies are

failing to grasp their importance. These people practices need to be understood, put in

place and managed in a systematic manner, but if unco-ordinated, they will fail to

make a significant impact on business results.

In the HR profession these practices fall under the collective term of ‘high performance

working’, and were designed to drive organisations toward higher performance, to lift

them out of the ‘me too’ world of supply-led, mass production. An approach that is

often underpinned by competing on cost alone - and one which is doomed to fail as

long as there are overseas manufacturers delivering at lower cost.

Leadership is often misunderstood to be a quality needed only by those at the top of the

organisation. In fact leadership means that everybody in an organisation takes

responsibility and makes a contribution to the success of the organisation. It is the

most single critical component in the high performance workplace.

Many companies fail to link management development with the organisation’s overall

objectives; whatever route an organisation looks to pursue, leadership and

management development must be in sync with its aims.

Effective leadership galvanises the creativity and enthusiasm of employees, leads to

new solutions, faster use of technology, more and superior applications and delights

customers. It must become a mainstream skill in our manufacturing sector - without

it, companies will find themselves without the capacity to deliver long-term success.

The second tenet, employee engagement, is perhaps the toughest nut to crack. Getting

employees on-side and contributing because they want to and are motivated to do so,

is a preoccupation of most HR departments. In the manufacturing sector, the

traditional ‘them and us’ culture, while no longer rooted in the conflict that

characterised earlier decades, is still an undercurrent for many employers.

The Chartered Institute of Personnel and Development (CIPD) has spent many years

examining the mutual expectations that employee and employer have of one

HUMAN RESOURCES


Effective leadership

galvanises the creativity and

enthusiasm of employees,

leads to new solutions,

faster use of technology,

more and superior

applications and delights

customers

another. It is based on trust. Many employers pay lip-service to this contract, by saying

the right things, some go further by doing the right things and some ignore it and just

get on with the business of production. The survival instinct is what drives them. But

they ignore it at their peril.

Many of the expectations, such as fair treatment, just reward for labour and a certain

level of job security, are informal. In an ideal world they would not be left to chance, but

in most organisations the psychological contract works by unplanned and intuitive

means. This is fine - as long as it is positive. But companies that damage the

psychological contract are doing irreparable damage.

People come to work to do a good job and contribute. In return they expect their bosses

to provide leadership, to help them grow and develop and treat them like adults.

Another critical aspect of employee engagement is consultation and communication.

When individuals are confident that their views are taken on board, they are much more

likely to contribute willingly.

The knowledge that companies have inadvertently encouraged employees to keep to

themselves is increasingly where critical value lies. Getting at this knowledge,

maximising it and putting it to work is the 21st century work challenge.

Of course, all organisations have formal and informal groups brought together

temporarily to complete a specific project or work together on a long-term basis. But

creating a knowledge sharing culture involves taking a systematic approach to the use

of such groups.

Finally, the third tenet, continuous learning, is an essential characteristic of the high

performing workplace. It is the development of workplace learning in the context of

new competitive pressures. Research also shows that if companies want their people

to make the contribution that sets them apart from the competition, they must ensure

that individuals are given work which they find stimulating and satisfying as well as

being given the opportunity to develop the skills to do this work well.

Progressive companies are recognising that learning in the workplace should also

embrace many less-formal activities - team development, action learning, knowledge

sharing and knowledge management. These activities occur in the workplace day by

day, as people learn on the job, perfecting their skills, finding new ways of working

sharing knowledge and passing on skills to fellow workers.

We now have proof that a planned approach to people boosts performance in

manufacturing. The CIPD report, The Impact of People Management Practices on

Business Performance finds that 18 per cent of variations in productivity and 19 per

cent of variations in profitability are accounted for by people management practices.

Employees are no longer hired hands who leave their creativity at the factory gate. In

progressive companies they are highly skilled, flexible and fully contributing associates.

Good people management holds the key. It is not a silver bullet - but it’s the only way

to stand any chance of a sustainable, successful future.

John Philpott is chief economist at the Chartered Institute of Personnel and Development

LEAN MANUFACTURING


Employees are no longer

hired hands who leave their

creativity at the factory gate.

In progressive companies

they are highly skilled,

flexible and fully

contributing associates

MCP

Maintenance has always been a dirty word (with little attention

paid to it) in most organisations, except to use it to achieve

cost savings by reducing maintenance budgets. With the rush

towards a lean environment companies must now consider how to

manage their physical assets in a much more effective way. Good

asset management including maintenance will pay dividends, with

benefits to the business of 10-15 times the current mainten-

ance expenditure.

The MCP sponsored Boardroom Report of 2000 identified that

certain features of maintenance management had not significantly

changed since a previous survey in 1991. A comparative ranking of

‘causes of dissatisfaction’ within maintenance departments

identified ‘conflict with production departments’ as the main source

of concern in 1991 and 2000. If this is such an issue how can lean

manufacturing be successful?

Lean manufacturing seeks to use less of everything by eliminating

non-value-added waste in the production stream and driving down

batch sizes. Lean manufacturing is about making what customers

want to the quality and quantity they require. How can you deliver

these customer needs without a close look at maintenance and the

important part it plays? If the machine breaks down and there is no

spare part and few skills to repair it - what do you do? You have no

stock of finished goods to send to the customer so you have an

unhappy (and perhaps lost) customer. Lean manufacturing

requires a total business approach, which considers physical

assets and their management as a key element for its success.

Major organisations such as Glaxo SKB, Cadbury, Nestlé, and

Johnson & Johnson now recognise that maintenance is a key

element of their businesses and they have clearly defined strategies

in place that enable maintenance to support their manufacturing

operations. In terms of plant performance, machine efficiency has

risen from 79 per cent to 82 per cent while availability remained at

85 per cent and machine utilisation increased from 40 per cent to

54 per cent. The average value of overall equipment effectiveness

(OEE) of 40-50 per cent found in UK factories is a long way from

the best performers at 80-90 per cent. This latter figure highlights

the fact that most companies have spare capacity that they

probably don’t know exists within their plant.

MCP’s own data from organisations participating in the AMIS

programme also shows that while there has been a significant

increase in tools and techniques and the use of computer systems,

overall equipment performance and efficiency have not substantially

changed.

Before rushing out to buy a CMMS or embrace lean manufacturing

it is important to get the basics right. The basics in this context are:

• A clear purpose and objectives for maintenance

• Effective technical strategies for equipment reliability

• A strong work planning system

• Good spare parts management

• Accurate cost information

• Use of key performance indicators and continuous improvement.

The development of an effective approach to maintenance follows

a three-stage methodology: assessment, development and

implementation - shown in figure 1.

The assessment step involves understanding the current status of

maintenance and equipment performance. This can be achieved

through the use of the DTI recognised AMIS audit service. From

this evaluation an action plan can be developed, this plan will

include all or most of the activities identified in the develop-

ment/planning stage, that is, work planning, equipment strategy

etc. This will require the development of methods, procedures and

ways of working. These are best developed with the people who

Gaining through goodmaintenanceRichard Jones, managing director of MCP Management Consultants shows how establishing amaintenance improvement process can deliver real benefits in support of lean manufacturing


will be using them, so a team approach is recommended. Finally,

there is implementation. It is at this point that the benefits will be

generated. By adopting a total approach looking at both main-

tenance systems as well as equipment and production methods, the

benefits stream will be much greater.

For example, by improving work planning an increase in craft

utilisation will be achieved. But how do you turn this into hard cash?

By looking at equipment changeovers, running speeds, packing

methods and machinery design, the savings can be obtained

virtually immediately with little additional cost. Improving

maintenance systems will produce benefits in the medium term.

Improving machine and equipment management will produce

benefits in the short term. How do you measure these benefits?

Perhaps the easiest way is through the use of OEE (overall

equipment effectiveness). If a business with a turnover of say

£50 million working three shifts has an OEE of 50 per cent, by

raising the OEE value to 75 per cent it would be able to produce an

additional £25 million worth of sales or reduce by one shift. Whilst

such values may seem unbelievable they are readily available within

a matter of months. Improving maintenance can generate increased

profitability, but taking a total approach will provide benefits and

savings which will cover the initial investment many times over.

MCP Management Consultants Ltd2 Holt Court North Aston Science Park Birmingham B7 4AX

Tel: 0121 693 9313 Email: [email protected] Web: www.mcpeurope.com

BEFORE RUSHING OUT TO BUY A CMMS OR EMBRACE LEAN MANUFACTURING IT IS IMPORTANT TO GET THE BASICS RIGHT


Group manufacturing& maintenance

strategy

Evaluate current state

Action plan

Equipment technical strategy

Maintenanceplans

Standardisedprocesses & procedures

LEAN

MAN

UFAC

TURI

NG

MAN

UFAC

TURI

NG E

XCEL

LENC

E

Cost savingsrealised

Quick wins

Manufacturingimprovement

Cost avoidance

Consistent ways of working

Continuousimprovementtechniques

Organisationstructure

Work planning

Cost management

Spare partsmanagement

Operator assetcare/TPM

Skills, training analysis

Continuousimprovementtechniques

CMMS implementationimprovements

Develop site road map

Site approval

Assessment

Business casevalidity

Execution/implementationDevelopment/planning

Figure 1

OLIVER WIGHT

So how much did your new system cost? I had a boss once who

spelt the dreaded word as ‘Komputers’ because everyone quoted

him prices in £K to make it seem cheaper. As time has moved on so

has the alphabet and now all too often the letter after the figures is

£M. Whatever this figure, move the decimal point one place to the

left to see the amount companies spend on designing new processes

to take advantage of the new systems. They then move the decimal

point a further place for the training and education budget to support

change and implementation.

What about the other side of the equation? There are huge gains to

be made in most companies by aggressively pursuing change from

the boardroom through the organisation. The Board ultimately

decides what it wants the company to be in the future and its per-

formance. It is they who set the goals and ambitions and therefore

determine the pace of change and the business gains.

Where do the gains come from? In our opening example the

system tool will bring its own gains in cheaper faster computing, in

support IT costs, and in replacing simple admin tasks. Move the

decimal point to the right for the gains in companies prepared to

engineer new processes to take advantage of the new investment.

Move it to the right again for companies prepared to drive change in

behaviours and in company culture to take real advantage of new

systems and processes.

The biggest differentiator in business is people. Indeed as we get

more sophisticated with better and faster tools at our disposal, the

impact of our people getting it right or getting it wrong gets greater

and greater. Equally in change management programmes, the largest

contributor to gains is our people, yet it is in this area that we invest

the least in time and money.

The greatest success for all stakeholders through a journey to

excellence comes from the integration of investment in tools,

processes and people. With these three factors operating in

harmony, businesses can reach new heights of performance.

However this integration alone is not enough. For instance, what did

TQM do for your company? It probably provided focus. It started a

culture change. It was a platform to involve people and tap their

knowledge, and it stimulated improvement projects throughout the

business. All of this is good stuff yet did it really step change the

performance of the company in the eyes of its stakeholders?

For TQM read any of the more current themes such as lean, six

sigma etc. Senior management spends vast sums on initiatives like

these, which promise and offer so much. But without joined up

thinking from the top through to every team involved, they yield little

reward for the effort. For effectiveness in change management we

need the new process of integrated change management.

At Oliver Wight we see three main elements of this process.

First, those at the very top of the company and business unit set

out a clear vision of the future and plot the journey to it, from the

current real world. This process sets clear projects and initiatives,

prioritised to ensure focus of activity and the best chance of success

and reward. Do not underestimate the complexity of this process nor

its demand on people and their behaviours. Most companies defeat

the process by being too impatient for the action. For the strong

minded and powerful people at the top of our organisations the

exercise sets new standards in listening skills, in trust and openness,

and in plain speaking without the politics. It makes clear that in

the pursuit of change, everything must change including the person

at the top. Independent facilitation can help to make this painless

and very rewarding.

Second is implementing each of the identified projects in priority

order, such as an ERP implementation, installing integrated business

management or gaining IIP. For success in each project you will

The journey to excellenceLawrie Rumens of Oliver Wight EAME maps out the route to enterprise-wide excellence though integratedchange management


need an established management process. The longest standing of

these is the Oliver Wight Proven Path.

This is a process proven over hundreds of cases, all over the world,

taking you on a specified journey from discovery, through design, and

into implementation. Applying the right support, education and

knowledge at the right time fast tracks companies to radical new

ways of working.

Thirdly, within each project there is tremendous opportunity to step

change performance of a team or a business process with lean and

agile thinking. We need to stimulate people to design their own

practical new ways of working which fit with the gains and plans

elsewhere in the business. The familiar path goes from brainstorming

to designing and implementing a new value streamed process.

All three elements of integrated change management have things in

common. They contain their own journeys from discovery to action

at different levels of the business. They revolve around the use of

people’s knowledge and understanding. They require clear ownership

and engagement by line managers from top to bottom of the

organisation. They are better for independent knowledge-based

facilitation and coaching.

So what are the lessons for companies embarking upon change?

1. Understand the role and value of people in change management.

Ensure that you give full weight to the people issues in the

integration of tools, processes and people.

2. Support line people with education as well as training. Education

extends their understanding of what is possible and what you

intend and want to happen. Education is the most undervalued

factor in change management.

3. Use an integrated change management process to bridge

between the company goals and the actions taking place

throughout the organisation.

4. Enlist expert support in coaching and facilitating at all levels. You

should not pay for armies of bright young consultants to redesign

your business for you. Help your people at all levels to help

themselves. Planned education and facilitation changes the per-

ceived boundaries, shortens the time for success and substantially

changes people’s views of what is possible.

Integrated change management is the surest and fastest route to

success, driving change from the top. With the overall direction and

goals firmly in place it provides co-ordinated action throughout the

organisation, and full line ownership.

AS WE GET MORE SOPHISTICATED WITH BETTER ANDFASTER TOOLS AT OUR DISPOSAL, THE IMPACT OF OURPEOPLE GETTING IT RIGHT OR GETTING IT WRONG GETSGREATER AND GREATER


Oliver Wight EAME LLPThe Willows The Steadings Business Centre MaisemoreGloucester GL2 8EY

Tel: 01452 397200 Fax: 01452 397230Email: [email protected] www.oliverwight.com

INVESTMENT IN SKILLDEVELOPMENT &

BEHAVIOUR CHANGE

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AWARNESS &UNDERSTANDING

REDESIGN REALISATION

CREATE EXPERTS &'AGENTS OF CHANGE'

LEARN BY DOING EARLY BENEFITS

IMPLEMENTATION

When it comes to lean manufacturing, there is a big difference

between those who walk the walk and others who just talk

the talk. In recent years the term lean has been on everyone’s lips

and all are claiming to be implementing a new way of working. But

scratch the surface and another picture emerges. A great deal of

what is being done in the name of lean manufacturing is little short

of superficial. Sure, savings are being made but the root and

branch changes needed to really drive things forward are simply

not there. One company not afraid to tell

it like it is, is Papilio, one of the fastest

growing training and implementation

organisations in the country.

The big problem with introducing a

strategy of lean manufacturing does not

stem from the idea itself. It is generally

accepted that producing more with less

is a good way of strengthening a bus-

iness. The largest obstacle comes from

the way people approach the task. Surely,

the argument goes, we know our

business best therefore we should be

well placed to identify areas needing

treatment. The two faults with this

argument are first it often needs an independent eye to see the big

picture and second, it is easy to slip back into the old ways. Not

only will the team from Papilio identify potential changes, they aim

to ensure the full benefits are achieved in the long-term. “As far as

we are concerned, it is a three stage process,” said Papilio director,

Colin Janes. “Training is easy, deployment is more difficult but to

get the full benefit one needs to put a mentoring scheme in place.

Then its begins to solidify.”

There is no doubt that the Papilio team has a powerful pedigree

behind it when it comes to lean and six sigma. All the company

directors attained their skills in some of the most challenging and

leading companies, namely Ford Motor Company, AlliedSignal and

Honeywell. This pedigree is not just in the technical knowledge and

application skills required for lean and six sigma, but also in the

industrial and academic experiences, where theoretical advances

combine with practical application.

Papilio has been operating for nearly two

years now and word of mouth has proved

to be a brilliant catalyst for growth. “Our

clients tell us the reason why they like us

is because we do not stop at the iden-

tification and training stage,” explained

Janes. “All of us are hands on practi-

tioners and we help the clients with the

roll out of the new lean environment. Our

approach is often characterised by a

down to earth attitude and a willingness

to get our hands dirty.”

The Papilio grapevine has now spread far

and wide. Helped by the business brought

in via the company website, turnover has

now reached £500,000 a year and is still growing. When the four

directors struck out on their own they saw their target market as

being mainly in Europe. While the EU accounts for much of what

Papilio does, it has also found itself active much further afield. The

company has activities in some of fastest growing and developing

regions such as Egypt, Saudi Arabia and Asia as well as some more

developed, but equally aggressive and demanding territories

including USA. The expansion of the company is all the more

Aiming highPapilio sets its initial sights on the senior managers. Colin Janes explained to Colin Browning the ideabehind the thinking


remarkable when one considers, as Janes does, that: “We are

selling a product people do not think they need until it is too late. By

the time they call us it can be a matter of survival.”

When a company calls on the services of Papilio the key factor is

making sure the top team are fully on board: management buy in is

crucial. One way to do this is for Papilio to identify an area of

immediate return. Having demonstrated the practical benefits of

lean manufacturing Papilio has won half the battle. But these

changes do not take place on their own, they will need to be driven.

Once the boardroom is sold on the idea, the enthusiasm can

cascade down an organisation. However, there are things which

Papilio is particularly wary of.

“Part of the outcome of introducing lean techniques is that you can

do the same with fewer people,” said Janes. “This is great if a

business is expanding and can redeploy people to other profitable

activities. It can be bad, though, if some end up being laid off. What

is certain however is that if lean manufacturing is introduced simply

to get rid of people, it is doomed to fail.” The reasons for this are

self-evident. Lean manufacturing is a cultural change and that

requires workforce co-operation. That co-operation is unlikely to be

forthcoming if the staff feel themselves under threat.

But while much of the day to day Papilio work is concerned with

lean manufacturing, one should not ignore the other side of the

service it offers. Alongside lean techniques, Papilio is also able to

bring six sigma philosophies to its clients. So while lean

manufacturing concentrates on doing more with less, six sigma

aims at improving quality by reducing process variations. As far as

Papilio is concerned, the two go hand in hand.

By offering this combination of lean manufacturing philosophies

alongside six sigma thinking, Papilio is able to provide its clients

with a powerful new business tool. From this strong baseline, it is

then able to add further value to the client’s business by blending its

people skills with training and implementation programmes. The

whole package is further enhanced by the strategic partnerships the

company has formed. It works closely with a software developer

and a networking/recruitment company specialising in lean and six

sigma such that it can offer the client a differentiated and enhanced

value proposition beyond training and consultancy.

So whether Papilio is with a company for six months or two years,

it can depart safe in the knowledge that it leaves behind a business

much better placed to face the demands of the modern world. The

business is better able to cope with competition from emerging

nations and other demands in the global economy. Buying into the

Papilio business model adds value. All one has to do is change the

way one thinks about manufacturing.

Papilio LimitedRainbird House Warescot RoadBrentwood CM15 9HD

www.papiliolimited.com

A GREAT DEAL OF WHAT IS BEING DONE IN THENAME OF LEAN MANUFACTURING IS LITTLE SHORT OF SUPERFICIAL. OUR CLIENTS TELL US THE REASONWHY THEY LIKE US IS BECAUSE WE DO NOT STOP ATTHE IDENTIFICATION AND TRAINING STAGE


PRODUCTIVITY EUROPE

In the huge literature on World Class Manufacturing - some of it

excellent, some mind-numbingly tedious - one book by a Japanese

researcher has inspired me in recent years. Takahiro Fujimoto’s book

The Evolution of a Manufacturing System at Toyota is different not

only because it is based on interviews with the people who developed

the Toyota Production System, but also because of the evolutionary

framework which actually makes sense of how TPS happened.

Fujimoto’s theory explains how TPS evolved out of the vision

of Kiichiro Toyoda, coupled with

the drive and experimentation of

Taiichi Ohno, and how it is

still evolving today. It is able to do

this, not because Toyoda and

Ohno had a fully fledged system of

lean manufacturing which they

implemented, but because they

had ideas and concepts which

they experimented with, and some

of which proved to have

competitive advantage in their

particular situation.

So when people, particularly consultants, propose to ‘implement a

world class manufacturing system’, I tend to get a little twitchy.

From my perspective, Toyota became pre-eminent in the manu-

facturing sector not because it had lean manufacturing, but because

it was able to learn. Fujimoto in fact identifies three capabilities:

Routinised Manufacturing is simply the fact that it had a culture

based on process standards. I have literally lost count of the

number of times problem solving teams have reported that the root

cause of problem x was traced back to the lack of a process

standard. One major UK plant reported that a ‘standards’ problem

lay at the root of 95 per cent of their production issues. It has been

noted that the fundamental difference between craft and mass

production is the existence of process standards in the latter.

Unfortunately, this often passes us by, with the result outlined above.

Routinised Learning is the existence of standardised problem

solving methods which were consistently applied as part of the

production process. This was the basic QC story approach. If

we want to give routinised manufacturing combined with

routinised learning a name, then

we can just call it kaizen, contin-

uous improvement (Ohno told

Fujimoto that he told workers

that if they did not improve the

process, then they were stealing

money from the company!).

Opportunistic Learning, on the

other hand, is the capacity to

learn through experimentation,

which is much of what Ohno did

in the 50s and 60s. Protected by

the Toyoda family, whose vision he was enacting, Ohno was able to

almost literally ‘see what works’, and because of the routinised

culture at Toyota, he was then able to spread successful

innovations more quickly and consistently throughout the

organisation. Opportunistic learning created the innovation, but

routinised learning helped maintain it.

Ed Schein, another famous organisational psychologist, notes that

change happens when learning anxiety (our fear of trying

something new) is less than our survival anxiety (our fear of the

consequences of staying the same). Others have noted that

learning ability is the only sustainable competitive advantage (I

Overcoming learningbarriers Malcolm Jones, director of Productivity Europe, examines the pivotal role of learning in the road to worldclass manufacturing


have read economists who have even proved this using

econometric models). What, then, stands in the way of learning?

Daniel Kim, an affiliate of the Society for Organisational Learning

who has also worked with large manufacturing concerns such as

Ford and Harley Davidson, identifies three barriers. Firstly there is

the situational learning barrier. This stops us generalising from our

experience so that we can apply the learning elsewhere. We have all

come across the excuse ‘but we are different’ when talking about

implementing new concepts. This is the situational learning barrier,

the inability to take generalised learning from specific situations.

Then there is the fragmented learning barrier. This is when

individuals learn and organisations don’t. This is perhaps the

greatest challenge for believers in the ‘learning organisation’ of

which I am one.

Finally there is the opportunistic learning barrier, our inability to

capitalise on opportunistic learning. 3M is held up as an exemplar

of opportunistic learning capability, particularly in product

development and the famous example of the Post-It note. But we

need opportunistic learning capability at all levels, in process as well

as product development.

In helping companies on the Road to World Class Manufacturing,

I see our task as a simple one (I didn’t say it was easy) - helping

people develop a vision of how different they want to be to how they

are now (a positive form of survival anxiety) and then helping them

develop learning infrastructures for the journey. The function of the

infrastructures is to overcome the barriers identified above.

By a manufacturing vision, I mean what kind of company we want

to be - a high price, high quality integrated supplier to a specialist

market with superior design capability on the one hand, or a hyper-

efficient, low cost, short leadtime producer on the other. Both, or

any combination in between, are plausible, but there must be a

vision to determine what capabilities you need to develop. The only

option which no longer exists is the proverbial ‘Jack of all trades’ -

we must be masters of at least one.

The Toyota approach to situational and fragmented learning barriers

lies in the routinised manufacturing and problem solving systems.

Our approach is therefore to help companies develop reliable

standards and reliable improvement approaches. The most

powerful tool in breaking down these barriers is visual management

out on the shopfloor, hence the emphasis on activity boards as well

as performance boards and the use of small groups for all

improvement activities, together with presentations to

management, and indeed to customers and suppliers.

The body of knowledge which exists on lean manufacturing, total

quality and total productive maintenance techniques is vast; the

issue is not finding out about world class techniques (it would

probably be harder to hide from them), it is developing your own

vision of where you want your company to be, and then developing

the learning infrastructure to get there.

Productivity EuropeSaturn Facilities Manton Lane Bedford MK41 7PH

email: [email protected]


THE ABILITY TO LEARN IS THE ONLY SUSTAINABLECOMPETITIVE ADVANTAGE

uk - road to world class manufacturing(1)

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