Leaning in the Right
Using lean tools a company was effective in improving productivity and efficiency
The world today is an interesting place. There are huge transitions happening in communications, information technology and innovation. Without being as obvious, the early signs of tectonic shifts are appearing in manufacturing as well. New manufacturing technologies are giving rise to new capabilities. Companies are making products that even a decade ago would have been considered uneconomical to manufacture.
Take today’s consumer electronics for example, where form factors and complexity are complemented by unprecedented ruggedness or automobiles, where complexity, sophistication and safety are rapidly improving but price points have been held relatively flat. The developed countries are seeing signs of the reversal of off-shoring to a combination of near-shoring and on-shoring. As intelligence is built into equipment, there is a small but steady stream of relocation from relatively low-cost, low-productivity manufacturing countries back to high-cost locations. Does this scenario then spell the end of a competitive advantage in cost?
Answering the question, Alagu Balaraman, partner and MD, Indian operations, CGN & Associates said, “Indian manufacturers will need to drive up quality and productivity to maintain global competitiveness. The Government has been pulling all stops to support manufacturing. The Prime Minister’s ‘make in India’ program supported by initiatives to ease doing business in the country are making news. They have the potential to drive an increase in demand for manufacturing units and upstream producers. Unfortunately, this is not a done deal and the government facilitation alone cannot drive a growth in the sector. Therefore, there is an urgent need to focus on competitiveness in the manufacturing sector.”
Manufacturers can do this by adopting an underutilised tool that of lean manufacturing. This is a well known concept in manufacturing but like many concepts that are well known is poorly and not widely applied in practice. With its origins in the Toyota Production System (TPS), lean manufacturing has rapidly evolved in manufacturing. Its principles have been applied outside manufacturing, in the service sector, in new product development and even in the government sector.
The question that then begs an answer is that if it is so mature, why has lean not been utilised to its fullest extent in its industry of origin or on the shop floor? To which, Balaraman averred, “There are broadly two approaches that are taken when a unit decides to adopt lean principles. In the first, lean tools like 5S, Andon and Kaizen are taught to a wide group of people in a manufacturing unit. Then, they start undertaking exercises to apply these tools to specific problem areas, demonstrating tangible benefits in each area. This is the easier approach to adopting lean. It yields benefits, but there is no guarantee that this will drive overall competitiveness, even as it generates localised benefit and an overall feel good factor.”
The other approach, according to him, is to look at the entire “production system”, rather than a single operation or activity, and also apply harder tools like pull, heijunka (to level workload) and continuously come up with problems to be solved.
This method was adopted in a leading auto component manufacturer of plastic injection moulded components that were assembled and matched into shippable sets. The unit, based in the NCR region, had an excellent on-time delivery performance, but this was at a high internal cost of quality, both in terms of inspection, rework and inventory.
“Essentially, the customer was being served well, but not in a profitable manner. The TPS model has a strong focus on profit maximisation (Profit = Price – Cost). The cost of this level customer service was not affordable. There were various cost reduction initiatives underway across the plant. As is usually done in such exercises, the team was working on multiple work streams. Some focused on OEE, some on headcount reduction and others on inventory management. This was in the context of a very crowded shopfloor, where space was at a premium. In one assembly line, it was decided to take a holistic approach and apply lean principles from end to end,” elucidated Balaraman.
The assembly line was studied with a Value Stream Mapping exercise to identify each workstation and how they worked with each other. The line was redesigned from a batch processing model to single-piece flow model. The new design reworked machine placement and incorporated fixtures to facilitate both single piece flow and to allow a single operator to manage more than one machine.
After the design was done, it was tested by conducting a simulation exercise. “The line was modelled in its current state and with the new design. Jobs were sent through the model, in a manner that reflected the pattern of loading in the shop floor. The simulation model showed how the inventory buildup and the cycle time were both reduced in the new model. The actual performance of the line was only 6% off from what the model predicted,” stated Balaraman.
With both the design and the modelling in place, the actual implementation was done on the shop floor. Machines were relocated, changes made to fixtures and the operators were trained in the new work practices. The new line was operated as predicted by the model. “With this the cycle time and inventory were reduced by 30% and 60% respectively. In addition, the total headcount was reduced by 30% as moving was eliminated and the skilled workers were also reduced because of the multitasking. All in all, the holistic approach gave dramatic improvements. The entire exercise was completed in six weeks,” informed Balaraman.
The thinking and approach to manufacturing improvement has to move away from a model where we believe that delivering low cost will mean that low productivity will be tolerated. There are well proven tools, like lean methodologies that can be coupled with more contemporary tools that can speed up and de-risk implementation. “However, in the end, the change has to be a cultural one and the principles of lean need to be applied repeatedly and consistently. Given that, the pathway to a high-productivity manufacturing base can be achieved in any company,” pointed out Balaraman.
The author is Partner & Managing Director – Indian Operations, CGN & Associates India Pvt Ltd