10 Myths About Lean

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Top 10 Lean Myths, Misunderstandings, and Mistakes

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White PaperTop 10 Lean Myths, Misunderstandings and Mistakes

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www.invistics.com i© Invistics, Inc. 2011

Table of Contents

Executive Summary

Introduction

Top 10 Myths About Lean

Conclusion

About Invistics

References

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www.invistics.com 1© Invistics, Inc. 2011

Executive SummaryIt’s an undertaking many manufacturers are pursuing yet too few have attained: utilizing Lean to improve profitability, competitiveness, and operational excellence. One reason for the lack of success is due to several inaccuracies that exist around implementing Lean. Written for manufacturing executives and plant managers, this paper examines ten of the top myths, misunderstandings, and mistakes surrounding Lean, particularly in high-mix, complex manufacturing environments.

The intention is to explore these widely-held—and incorrect—views of Lean in high-mix environments and dispel them with the realities and truths behind Lean.

TOP 10 LEAN MYTHS

MYTH #1: The goal of lean is a workforce reducTion. MYTH #2: lean makes cerTain employees and managers look bad.

MYTH #3: lean is a huge iniTiaTive ThaT drains financial and human resources.

MYTH #4: implemenTing lean will be very disrupTive and will Take Tremendous efforT.

myTh #5: lean only works in high-volume, low-mix manufacTuring.

myTh #6: lean Techniques will work in all indusTries wiThouT adapTaTion.

myTh #7: applying The TradiTional Techniques ThaT ToyoTa has made popular will work in a high-mix environmenT.

myTh #8: ouTside perspecTive or experience is noT needed if in-house employees know all abouT lean.

myTh #9: lean processes don’T require Technology.

myTh #10: a company ThaT has an enTerprise resource planning (erp) sysTem will sTruggle To implemenT lean.






Introduction

To succeed in the global economy - rampant with fierce offshore competition, shortened product life cycles, complex global supply networks and heightened regulatory compliance guidelines - manufacturers understand they must adopt a culture of continuous improvement. Continuous improvement is a series of actions taken to identify, analyze, and improve existing processes within an organization to meet new goals and objectives.1 This quest for continuous improvement is the foundation of Lean manufacturing.

The origins of Lean date to efforts at Toyota in the 1950s when the company was developing its now famous Toyota Production System (TPS). In 1990, after conducting a five-year study of the automotive industry, James Womack, Daniel Jones and Daniel Roos coined the phrase, “Lean Manufacturing” to describe TPS in their bestselling book, The Machine That Changed the World. In the book, the authors state “Lean principles are not about following a formula as much as they are about eliminating waste and finding ways specific to your operation to produce products faster and better.”2

The National Institute of Standards and Technology’s (NIST) Manufacturing Extension Partnership defines Lean as:

“A systematic approach to identifying and eliminating waste (non-value-added activities) through continuous improvement by flowing the product at the pull of the customer in pursuit of perfection.”3

In the ‘90s, companies in a wide variety of manufacturing industries began to pursue lean benefits. Businesses are more receptive to the techniques and tools that need to be adapted, and the five principles of Lean: specify value, identify value stream, make value flow, let customers pull and pursue perfection.4 Manufacturers across the globe are achieving exceptional results with Lean. Increasingly, these manufacturers can point to compelling bottom-line results thanks to their lean efforts.






Examples include:

Company: Bristol-Myers SquibbResults: Cut working capital 80% while increasing throughput, productivity, and customer service. Plant went from risk of shutdown to leading plant in company, and won “Team of the Year” award within overall pharmaceuticals industry.

Company: CP KelcoResults: Cut working capital 35% in 3 months at initial site in Europe. Now expanding pull worldwide to plants and distribution centers in Europe, North America, and Asia.

Company: DupontResults: Cut working capital 50%, while increasing throughout and asset utilization and maintaining perfect customer service levels.5

Lean results generally include reducing inventory by 50-75%, reducing cycle times by 50-80%, and improving customer service by 10-20% points.

Unfortunately, not all companies achieve these great results. Why have Lean results remained elusive and unattainable for many manufacturers? The answer is largely due to negative and incorrect impressions around implementing Lean.

This paper examines ten of the top myths, misunderstandings, and misconceptions surrounding Lean.






Top 10 Commonly Held Myths About Lean

TRUTH: A few companies have inappropriately used Lean as an excuse to cut staff, leading some to associate Lean with headcount reduction. The reality is, Lean does not equate with less employees are needed.6 Lean is all about eliminating waste, and that waste can come from anywhere, not just the cost of labor and people. Table 1 identifies the eight wastes of Lean manufacturing.7

The idea behind Lean is to use resources wisely, and to engage employees in better, more productive work. In short: manufacturers should focus on cutting waste and inventory, not paychecks. As consultant Rick Bohan correctly sums up,

“… any company that seeks to implement Lean methods only to reduce costs, or, heaven forbid, reduce payroll, is bound for disappointment and probably failure.”8

MYTH 1: THE GOAL OF LEAN IS A WORKFORCE REDUCTION.

Table 1: The 8 Wastes of Lean Manufacturing

1. Overproduction 5. Unncessary Motion

2. Waiting (for parts or resources)

6. Excess Inventory

3. Unnecessary Transportation

7. Defects

4. Non-Value Added Processing

8. Unused Employee Creativity






TRUTH: A general misconception about Lean is that it will uncover inefficiencies and shine a negative light on an employee, manager, or executive. In reality, Lean implementation doesn’t mean that operations have been done incorrectly; it’s about continuous improvement and making operations even better.

Developing a world-class system doesn’t mean setting aside what companies and their employees have learned, nor does it negate previous efforts.9 Lean companies take previous investments and leverage them to make results go farther, faster.

MYTH 2: LEAN MAKES CERTAIN EMPLOYEES AND MANAGERS LOOK BAD.

TRUTH: Resources in any economic climate are always tight. Although implementing Lean does take resources, correct implementation shows meaningful results within a few months. For example, typical return on investment (ROI) for pull inventory replenishment is often greater than 300% with payback in less than one year.10

To conserve resources and still move forward with a Lean implementation, the best method is to start with a fast, low-effort pilot that will very quickly pay for the resources put into the project. The benefits and cost savings realized within a few months will pay for the future expansion of Lean.

MYTH 3: LEAN IS A HUGE INITIATIVE THAT DRAINS FINANCIAL AND HUMAN RESOURCES.






TRUTH: The perception is that undertaking Lean means changing everything. In reality, this is not the case. Implementing Lean does not mean completely overhauling operations all at once. It means identifying individual wasteful processes and changing them in pieces. Small changes can be applied to substantially improve process and work flow. Significant results and progress will be realized very quickly, even when Lean is applied in incremental phases.

In today’s global marketplace, manufacturers can’t afford to sit still. All industries have competitive pressure and need constant improvements to stay one step ahead. Lean is about being more agile than competitors and achieving results in your space where others can’t.11 Jerry Wright, Senior Vice President of Lean enterprise for DJO Incorporated, said,

“If you are not currently pursuing Lean principles or a similar continuous improvement strategy in your business, you’d better get started immediately, or be prepared to lose market share in the coming years to those companies that are doing it.”12

In short: success with Lean means making frequent, incremental improvements to stay a step ahead of competitors.

MYTH 4: IMPLEMENTING LEAN WILL BE VERY DISRUPTIVE AND WILL TAKE TREMENDOUS EFFORT.






TRUTH: While Lean was first practiced in high-volume automotive companies like Toyota, experience shows it can be just as successful in other industries that are low volume and/or high mix. For examples and case studies regarding the difference in manufacturing environments, see Table 2.

The truth is, Lean is just as beneficial, if not more so, in high-mix environments. It can be applied to

any industry or organization: from high-volume manufacturers to high-mix manufacturers, to industries outside manufacturing such as health care.

Lean practices offer numerous benefits in any manufacturing environment, regardless of the product mix and volume.13 What should differ are the approach, interpretation, and application of Lean from organization to organization.14

MYTH 5: LEAN ONLY WORKS IN HIGH-VOLUME, LOW-MIX MANUFACTURING.

Hig

h Vo

lum

eLo

w V

olum

e

Low Mix High Mix

Lean Case Study: Northrup Grumman Ship Systems17

Ship Building

Automotive Components

Lean Case Study: Haldex15

Consumer Products, Specialty Chemicals, and other High-Mix Make-to-Stock Manufacturers

Lean Case Study: Electronics Factory16

Lean Case Study: Medrad18

Industrial Equipment, Contract Manufacturing, and other High-

Mix Make-To-Order Manufacturers






TRUTH: The first part of this sentence is correct: Lean techniques do work in all industries. The last part of the sentence, “without adaptation,” is incorrect. In the 1990s, as Lean spread beyond automotive industry, debates ensued about whether there was one right way to apply Lean; many Lean purists argued that the only right way was the Toyota way. This led to a few fantastic failures when automotive techniques like Kanban were inappropriately applied in high-mix, make-to-order manufacturing companies.

Fortunately, few now dispute the notion that it is appropriate—and critical—to adapt Toyota approaches

of Lean in non-automotive environments.

The correct way to implement Lean is to pursue Lean principles using techniques that are appropriate for the product mix. For example, when implementing the Lean principle of Pull, companies can utilize Kanban for high-volume make-to-stock parts, while utilizing other pull methods like CONWIP for high-mix and/or make-to-order parts.19 A cookie-cutter approach to Lean will not work in high-mix environments.20 Companies should instead customize Lean tools that fit their unique business models and strategies.21

MYTH 6: LEAN TECHNIQUES WILL WORK IN ALL INDUSTRIES WITHOUT ADAPTATION.

TRUTH: If an environment looks like Toyota with high volume, repetition, and a small product mix, then a cookie-cutter implementation of Toyota’s techniques is best. If not, Lean must be customized and adapted to the environment. As one manufacturing white paper points out:

“…the techniques employed by Toyota have proven elusive or even unattainable to many manufacturers because Lean is not well suited to complex environments. These environments have thousands of products, dozens of work centers, and display significantly more process and demand

variability than the traditional high-volume environment seen at Toyota.”22

Because most companies don’t look like Toyota if they’re on the high-mix side, it’s necessary to adapt the techniques.

MYTH 7: APPLYING THE TRADITIONAL TECHNIQUES THAT TOYOTA HAS MADE

POPULAR WILL ALSO WORK IN A HIGH-MIX ENVIRONMENT.






TRUTH: Most manufacturers could benefit from a fresh set of eyes. A new perspective is particularly helpful for high-mix manufacturers who do not look like “textbook” Toyota plants.

Consultants specializing in high-mix Lean manufacturing have worked with dozens of companies, not just one or two others, and have seen how to adapt Lean principles to a wide variety of environments. External consultants can help internal Lean champions master these adaptations and gain the ability to scale and sustain initial successes on their own.

MYTH 8: OUTSIDE PERSPECTIVE OR EXPERIENCE IS NOT NEEDED IF IN-HOUSE EMPLOYEES

TRUTH: A simple manufacturing business that is only making one or a handful of products on dedicated equipment with limited variability can run operations without technology. Paper cards or visual systems are sufficient. However, when a manufacturer has dozens, hundreds, or thousands of products running on shared equipment, technology is essential - for managing the complexities of the ever-changing product mix.

Even at Toyota, a relatively low-mix manufacturer, information technology (IT) systems are as critical to the corporate DNA as is the culture of

TPS.23 Toyota has made significant investments in IT that have resulted in numerous competitive advantages.

Not only is technology important to Lean implementation in high-mix manufacturing, it must be coordinated with people and processes to ensure a seamless flow.

MYTH 9: LEAN PROCESSES DON’T REQUIRE TECHNOLOGY.

KNOW ALL ABOUT LEAN.






TRUTH: In the early adoption of Lean, debates waged about ERP systems, and if they help or hurt Lean efforts. The central issue was whether ERP’s traditional forecast-driven “push” scheduling methods conflicted with the Lean principle of pull. The resolution to the debate has come from numerous cases in which companies have utilized the inventory and order-tracking data within ERP to implement pull.24 This approach means ERP is necessary because it gives a single source of data for the business transactions that drive pull.

But caution must be exercised to ensure the technology and software give a boost to the system; if a company already has an ERP or manufacturing execution system (MES), Pull-Based Replenishment Software will leverage these investments. Add-on software will take existing data in the ERP/MES to perform inventory optimization, what-if analyses, and pull execution - it’s the vitamin to an ERP.25

MYTH 10: A COMPANY THAT ALREADY HAS AN ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM WILL STRUGGLE TO IMPLEMENT LEAN.

Having the right tools and technology in place makes Lean implementation easier and more sustainable.






ConclusionTo achieve operational excellence, it’s important to understand and overcome the myths, misunderstandings, and misconceptions around Lean. Continuous improvement, the core idea behind Lean, is the way to compete against today’s agile competitors.

Knowing the first step to take when undergoing Lean can be challenging. Fortunately, resources exist to help businesses take the first step and beyond. Invistics, a consultancy and software provider specializing in Lean for high-mix manufacturers, is one of those resources.

Invistics has proven expertise and technology solutions that high-mix manufacturers need to start and sustain Lean programs. Invistics provides consulting services and supporting on-demand software solutions that help companies achieve the right inventory levels for their supply chain through advanced analytics and actionable insights. Invistics clients include Bristol Myers Squibb, The Coca-Cola Company, CP Kelco, ALCOA, DuPont, John Deere, Siemens and countless others.

Where are you in the Lean journey? Invistics can help you take the next step.

Building Consensus: Pull Design Workshop ‣ Ensure organizational readiness for pull ‣ Design pull methods for your supply

network (Kanban, CONWIP, DBR, etc.) ‣ Confirm the business case and expected

benefits of a pilot

Proving the Benefits: Pull Pilot ‣ Quick, low-risk pilot to fix inventory

problems using existing ERP data ‣ Most sites see large (20-40%) reductions

in working capital within 2-3 months

Scaling the Benefits and Long-Term Sustainability: Expanding Pull

‣ Rapid rollouts ensure best practices scale across the supply network

‣ Utilize existing ERP/MES software, along with lean add-ons such as MachSix, for sustainable success

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milesTones in your lean journey include:



http://invistics.com/solutions/machsix-overview/




About InvisticsInvistics provides consulting services and supporting software solutions that enable high-mix manufacturers to achieve the right inventory levels for their supply chain through advanced analytics and actionable insights. Based on Six Sigma and lean principles, Invistics solutions help manufacturing executives improve profitability by reducing cycle times and costs, while increasing throughput and customer satisfaction.

For more information, please visit www.invistics.com or call 800-601-3456.







References1. “Continuous Improvement.”

Manufacturing Extension Partnership. National Institute of Standards and Technology (NIST). n. d. Web. http://www.nist.gov/mep/manufacturers/process-improvements.cfm

2. Womack, James, Daniel Jones, and Daniel Roos, The Machine that Changed the World, HarperCollins, 1990

3. Manufacturing Extension Partnership. National Institute of Standards and Technology (NIST). n. d. Web. http://www.nist.gov/mep/

4. Womack, James, Daniel Jones, and Daniel Roos, The Machine that Changed the World, HarperCollins, 1990

5. Knight, Tom. “Lean Pull Design Seminar.” Invistics. Atlanta. March 10, 2011

6. Bohan, Rick. “Why Call It ‘Lean Manufacturing’?” IndustryWeek. July 27, 2010. Web. http://www.industryweek.com/articles/why_call_it_lean_manufacturing_22392.aspx

7. Lean Manufacturing and the Environment. Web. http://www.epa.gov/lean/thinking/types.htm

8. Bohan, Rick. “Why Call It ‘Lean Manufacturing’?” IndustryWeek. July 27, 2010. Web. http://www.industryweek.com/articles/why_call_it_lean_manufacturing_22392.aspx

9. Davis, John. Lean Manufacturing: Implementation Strategies that Work, Industrial Press, 2009

10. Knight, Tom. “Lean Pull Design Seminar.” Invistics. Atlanta. March 10, 2011

11. Bohan, Rick. “Why Call It ‘Lean Manufacturing’?” IndustryWeek.

July 27, 2010. Web. http://www.industryweek.com/articles/why_call_it_lean_manufacturing_22392.aspx

12. Swain, Erik. “Lean for Low Volumes.” Orthopedic Design & Technology Magazine. January/February 2011. Web. http://www.odtmag.com/articles/2011/02/lean-for-low-volumes.php

13. Camelon, Kevin, Dr. Harper Gill and Mark Lopus. “Applying Lean Manufacturing Principles to Optimize the Supply Chain.” Supply & Demand chain Executive. n.d. Web

14. Dolcemascolo, Darren. “Lean works for any organization.” Reliable Plant. n.d. Web

15. “Case Study: Lean Manufacturing Leads to Growth.” On Windows. February 19, 2010. Web. May 2, 2011. http://www.onwindows.com/Articles/Lean-manufacturing-leads-to-growth/4566/Default.aspx

16. “The New Lean: From the Production Floor to the Supply Chain.” OliverWright Americas.n.d. Web. May 2, 2011. http://www.leanadvisors.com/kila-resources/lean_manufacturing_in_the_electronics_industry/

17. “The New Lean: From the Production Floor to the Supply Chain.” OliverWright Americas.n.d. Web. May 2, 2011. http://www.oliverwight-americas.com/business-management-articles/pdf/Lean%200302%20ManUSA%20Manu.pdf

18. Panchak, Patricia. “Medrad Plant Adapts Lean to a Low-Volume/High-Mix Environment.” Association for Manufacturing Excellence. Volume 25, Number 6. Sixth Issue 2008. Web. May 2,

2011. http://www.ame.org/sites/default/files/documents/08-24-6-National_Winner_Medrad.pdf

19. Invistics. Four Flavors of Pull Manufacturing for Getting and Staying Lean. Invistics white paper.

20. Agulla, Charlie. “From one extreme to another.” Invistics Blog. February 15, 2011, from http://invistics.com/from-one-extreme-to-the-other-2/

21. Hoff, Chris. “Why lean manufacturing won’t make you rich - Part II.” Thefabricator.com - A publication of the Fabricators & Manufacturers Association, Intl. March 1, 2010. Web. http://www.thefabricator.com/article/shopstrategies/why-lean-manufacturing-wont-make-you-rich---part-ii

22. Invistics. Processing Lean: Modifying Traditional Techniques for Complex Environments. Invistics white paper: Processing Lean: Modifying Traditional Techniques for Complex vEnvironments

23. Harrison, Vern and Dr. Tuan Nguyen. “Tools & Methods for Lean Production Management in EA.” Siemens Energy & Automation.

24. Invistics. Plant Defuses Exploding Cycle Times with MachSix ™Manufacturing Methodology and Software. Invistics white paper.

25. Agulla, Charlie. “MachSix is a Vitamin for Your ERP System.” Invistics blog. March 18, 2011, from http://invistics.com/machsix-is-a-vitamin-for-your-erp-system-3/



http://www.nist.gov/mep/manufacturers/process-improvements.cfm



http://www.nist.gov/mep/

http://www.nist.gov/mep/

http://www.industryweek.com/articles/why_call_it_lean_manufacturing_22392.aspx




http://www.epa.gov/lean/thinking/types.htm

http://www.epa.gov/lean/thinking/types.htm









http://www.odtmag.com/articles/2011/02/lean-for-low-volumes.php



http://www.onwindows.com/Articles/Lean-manufacturing-leads-to-growth/4566/Default.aspx




http://www.leanadvisors.com/kila-resources/lean_manufacturing_in_the_electronics_industry/



http://www.oliverwight-americas.com/business-management-articles/pdf/Lean%200302%20ManUSA%20Manu.pdf




http://www.ame.org/sites/default/files/documents/08-24-6-National_Winner_Medrad.pdf



http://invistics.com/from-one-extreme-to-the-other-2/

http://invistics.com/from-one-extreme-to-the-other-2/

http://www.thefabricator.com/article/shopstrategies/why-lean-manufacturing-wont-make-you-rich---part-ii





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10 Myths About Lean