Eliminate waste. Increase workflow efficiency. Strive for continuous improvement. These are just a few of the phrases manufacturers have come across regarding Lean Manufacturing and its benefits. Lean has become a proven method for improving operational performance, product quality, customer relationships and the financial bottom line.

In this paper, we will take a closer look at Lean Manufacturing — how it began and why, its underlying principles and practices, where it has been and, most importantly, how today's manufacturers can undertake lean initiatives to drive significant improvements in virtually every aspect of their operational and business performance.

A Brief History of Lean

The basic principles of Lean Manufacturing dates back 50 years to a complete re-thinking of processes at Toyota. This led to that company's development of the Just-In-Time (JIT) philosophy and the Toyota Production Systems (TPS) — all steps taken to enable Toyota to compete in both domestic and foreign markets with limited resources and capacity. The company's overwhelming success in the ensuing decades became a case study and model for manufacturers all over the world, and still sets the standard today.

In past years, repetitive manufacturers have experienced the most success with Lean practices because remapping the value stream was straightforward, the implementation process was often limited to the factory and customer demand was somewhat more predictable. As time went on, however, competitive pressures on all manufacturers continued to grow and magnify weaknesses in the organization. Today, shorter product life cycles, increases in customer expectations and foreign competition are forcing companies to further reduce costs and improve supply chain flexibility and agility.

Since the introduction of Lean Manufacturing half a century ago, numerous companies have been exposed to the Lean philosophy and impressed by its success stories. Unfortunately, many businesses sought quick answers by implementing piecemeal approaches, not fully realizing or understanding the methodology and commitment of resources required for success.

Other companies have been able to leverage Lean principles to realize substantial positive results. As a result, the concept of Lean has enjoyed steady growth and is again being discussed in executive meetings and IT departments. Much of this renewed interest is due to the changes that have occurred in both the application of Lean and competition in the marketplace.

Defining Lean Principles

To better understand the changes in the application of Lean and competition in the marketplace, we need to revisit the basic fundamentals of Lean and its critical success factors.

For a business to be called "Lean," management needs to adopt a philosophical strategy that is relentless in its efforts to create value for the customer through the elimination and prevention of waste, such as excess inventory, needless motion and other time and resource-consuming activities. Essentially, Lean aims to create a value stream comprised only of processes that add perceived customer value.

As more value is created with fewer resources, lean operations can increasingly focus on allowing customer demand to "pull" products and services through production and the supply chain, rather than "push" products out to customers based on plant capacity, forecast assumptions or other factors. However, unless there is stability and optimal flow, the Lean value stream cannot meet the demand that is pulled through the system without using a considerable buffer inventory.

Flow, which is created through communication and synchronization, will minimize delays within the system and allow for collaboration. This customer-focused value stream ultimately improves productivity, decreases waste, creates flexibility and responsiveness and increases customer satisfaction, while reducing inventory and adding to the bottom line.

5 Steps Toward Implementing Lean

From a 'big picture' point of view, there are five key steps an organization needs to take to begin implement Lean thinking, principles and practices. These include:

• Specify – Since the most dominant underlying principle of Lean is the creation of value for the customer, the first step calls for breaking down and analyzing the entire value chain to calculate the perceived customer value delivered by each process area.
• Map – Once the value chain is broken down, the various steps are valued and mapped in their respective places according to value delivered. Those areas that do not contribute to customer value are considered as wasteful and either minimized or eliminated. The remaining elements form the foundation for developing a true customer-focused value chain.
• Flow – The purpose of this step is to create a smooth and efficient process flow between the value-added steps identified in order to transform the chain into a value stream for the company. The increase in flow will ultimately improve lead times and eliminate "bull whip" effects, creating maximum efficiency and productivity.
• Pull – Pull and flow are two of the most important elements of Lean Manufacturing and its implementation. Once the true value stream is established, products can be manufactured in alignment with actual customer demand and not by assumptions or arbitrary forecasts.
• Perfect – The final and very important step is bringing the principle of continuous improvement to the Lean Manufacturing initiative. We have all seen how complacency and stagnation can plague an organization – whether it is a championship sports team, a small to midsize business, or a Fortune 500 company. It is essential that an organization not allow the initial taste of Lean success to get in the way of their continual pursuit of perfection. Ongoing process improvement is absolutely key to sustaining a competitive edge.

Eliminating the 7 Areas of Waste

Preventing or at least minimizing waste is another key principle of Lean Manufacturing. Seven areas of waste that can plague a manufacturing enterprise include:

• Overproduction – Inaccurate demand forecasting and faulty communication are a few reasons why manufacturers tend to produce more than their customers need or want. Simply put, a business that persists in producing more products than the market demands is simply wasting time, money, energy and labor resources.
• Excess Inventory – A direct result of overproduction and long cycle times is excess inventory, whether in raw materials, work-in-process or finished goods. This type of waste can be especially burdensome when it begins to take up space, requires maintenance/ record keeping, and freezes up a good portion of liquid assets.
• Transportation and Logistics – When creating shorter cycle times, a good place to start is the transportation segments of the value stream. Any time you have materials, parts or finished goods in transit, there is potential for enormous waste because the parts and goods are sitting in a container creating no value.
• Excess Motion – Similar to transportation, motion creates waste when materials, products, equipment and people are used inefficiently. Excessive movement should be automated where applicable or eliminated altogether so that product cycle times may be reduced.
• Design/Engineering – Products should only carry the value that is perceived, needed or appreciated by the customer. If customers cannot see the value in a particular product feature or understand its purpose, then there is no reason to include it in the first place. This kind of waste is often present in product development areas, such as design and engineering.
• Excessive Waiting – A byproduct of poor process design, waiting time creates lags in the system and interrupts efficient flow, which not only affects that particular phase of the operation, but also the ones that come before and after as well. This "bullwhip" effect is a common occurrence that creates many capital and risk issues.
• Errors – As is commonly known, the expense and effort involved in repairing damage or defects, and handling scrap, is typically more than the cost and labor required to prevent them. Taking preventive measures and focusing on creating an error-free production process will lead to higher productivity and a smoother experience for everyone involved, including the customer.

10 Technical Elements of Lean Manufacturing

In its Lean initiative, Toyota instituted five s-words — Seiri, seiton, seiso, seiketsu and shisuke — which can be roughly translated as: Sort, Simplify, Shine, Standardize and Sustain. The purpose of these directives is to create a clean and organized work environment that is consistently productive. Here are nine additional ways in which Lean principles are put into action:

• Visual Control – An important aspect of Lean, visual controls promote the importance of communication and visibility. This is a key element in any process because the signals invoke almost immediate responses from the target.
• Standardized Work – It was only a matter of time before factory automation and the Industrial Revolution decimated the cottage industry. Standardization is the clear path to efficiency when producing quality products on a consistent basis.
• Total Predictive Maintenance (TPM) – An adaptation of Toyota's maintenance philosophy, TPM stresses the importance of utilizing, updating and maintaining equipment to create a production line that is flexible and flows at an optimal level.
• Cellular Production – A type of "division of labor," cellular production organizes the manufacturing process into sub-processes and enables the company to produce smaller lot sizes, increase flow and improve product quality.
• Error Proofing – Referred to as "poka-yoka" in Japanese, the idea is to identify the sources of mistakes and create measures that will cause them to either be eliminated or spotted easily for correction.
• Takt Time – The basic rate of production, Takt time uses customer demand and production time to create a steady flow in operations, eliminating many areas of waste such as inventory, overproduction and waiting.
• Continuous Flow – Using a timed execution schedule and some of the aforementioned techniques, optimal flow is created and maintained to allow operations to keep inventories to a minimum and shortened cycle times.
• Leveled Production – Utilizing tools such as Takt time, leveled production aims to remove bottlenecks and allows work to flow through the production process by coordinating with customer demand.
• Pull System – In order to decrease cycle times and keep inventories low, pull systems will only consume materials required because they are based on demand, instead of forecasting tools. This principle led to the practice of Just-in-Time delivery in which materials and supplies needed for production are scheduled for delivery on a just-in-time basis, eliminating the need for additional labor expense and storage.

Critical Factors to Lean Success

Today, tremendous opportunity exists not only for companies that have had initial success with Lean, but also for those who are starting or have not yet begun the journey. Despite some initial misconceptions, Lean can support a wide range of manufacturing styles from Repetitive and Make-to-Stock to Build-to-Order and Engineer-to-Order – in addition to entire enterprises and supply chains. Success in these environments is highly contingent on the design and application of the appropriate Lean solution. When it comes to Lean, one size does not fit all.

Critical success factors for any Lean Manufacturing initiative include:

• Top management desire, commitment and leadership, and active daily support from all levels of management
• Consistent goals, objectives and performance measures throughout the company
• A thorough understanding of "as-is" customer needs, business requirements and processes
• A clear and consolidated company purpose, lean vision and strategy
• Formulation of new operating philosophies, "to-be" methods and processes
• Fully engaged and knowledgeable people at all levels of the business
• Ownership by team members directly involved in the value stream
• A company-wide focus on daily problem solving for continuous improvement
• The intelligent application of proven technologies to enable the transformation by supporting people and processes, accompanied by experienced Lean consultation to help ensure success

Commonly Held Misconceptions About Lean

Clearly, Lean Manufacturing provides real opportunities to leapfrog the competition and drive significant performance improvements by incorporating the benefits and implications of demand-driven supply networks and build-to-order supply chains. However, prior to creating a Lean strategy, vision and "to-be" value stream process models, it is important to clear up some misconceptions about MRP, ERP, appropriate Lean applications and the Internet.

1. Lean Cannot Coexist with MRP and MPS

   One of the dominant principles of Lean is that production should be based on demand pulled through the system, and that anything in excess of that demand is considered waste and hence should be avoided. In the past, however, manufacturers used material requirements planning (MRP) and master production scheduling (MPS) to help them push their work through production. At first glance, it would seem that Lean's "pull" and MPS's "push" could never coexist because the purpose for one is a polar opposite of the other.

   Despite the perceived line between the two, a company that adopts lean practices does not have to part with the components of their "push" system. In fact, MRP and MPS can be used with Lean to create a balanced attack towards keeping inventories low and cycle times short. MRP and MPS can actually help automate wasted areas of motion, increase visibility and create avenues of heightened communication. If forecasts can be frequently updated and demand history is broken down into small homogeneous streams, MRP and MPS will be able to assist in the receiving and relaying of signals for procurement and production.

2. Lean Cannot Coexist with ERP

   As a product of MRP and MPS, enterprise resource planning (ERP) is also a target of many lean enthusiasts because of the centralized techno-bureaucracy that exists. They feel the concept of sending information back and forth, as well as the mass amount of reporting, would end up clogging a system that is intended to eliminate waste.

   In the end, as technology becomes better and faster with each passing day, the reasoning behind their logic becomes poorly grounded. Accurate data can be transferred in real time, giving everyone in the organization an up-to-date status report, regardless of time or place. Despite the fact that ERP, in its relation to Lean, was met with great skepticism ten years ago, advances in technology have now made it an essential tool for successful implementation.

3. Lean is Only for Large Corporations

   Smaller and midsized businesses (SMBs) feel pressure to implement cost cutting strategies as well, but think the strategies applied by large corporations are inapplicable to them. They believe the price tag for implementing Lean and the accompanying technology would be far too much for an organization that is more reactive and concerned with the total cost of ownership. This expectation and their need for short-term results often keeps them from evaluating the ROI or long-term benefits of Lean.

   As long as a company focuses on mission-critical areas and improves its core competencies, there should be no reason why Lean Manufacturing and technology cannot benefit SMBs. Lean is a scalable solution that requires a great deal of personnel commitment; however, the technology can be worked in so it is cost effective and manageable.

4. Lean and the Internet Do Not Mix

   Another dichotomy that exists within common understanding of Lean is its apparent conflict with the natural capabilities of the Internet. While Lean tries to create efficient manufacturing by keeping the variety and flexibility of a product limited, the Internet and technology enable companies to provide the variety and flexibility customers desire.

   Because of this, the Internet and IT are sometimes labeled as inhibitors of Lean – but nothing could be farther from the truth. The two are actually great facilitators in helping to reduce and eliminate a large amount of waste, whether on the shop floor or in customer/supplier management processes. The Internet and IT allow Lean principles to be implemented, both directly and indirectly, throughout the supply chain, as communication and visibility are created on a real-time basis. With suppliers on board, the role that the Internet plays for Lean and its "pull" principle is clear. Demand driven manufacturing is triggered through customers on the Internet on a real-time basis, allowing everyone one involved in the supply chain, even the outsourced suppliers, to receive updated information on the materials and parts required.

Lean Manufacturing Today

Many of the misconceptions around Lean Manufacturing were formed and promulgated by traditionalists who made observations during a time when the Internet was in its infancy and IT was still trying to justify its existence to a corporate board.

Today, however, both technology and the Internet continue to amaze us as they shrink the world and improve efficiency, communication and connectivity in virtually every facet of our life. In fact, their influence on globalization is so deep and widespread that it is hard to defend a lot of traditional business processes and practices.

The rise of demand driven supply networks (DDSN), development of the Internet and growth of globalization have created a level of competition that forces companies to seek out Lean strategies to help them compete and grow.

Demand Driven Supply Networks, the Internet and globalization are interconnected and all play integral roles in shaping the market environment that exists today. Through globalization and Lean objectives, companies are able to offer more to their customers for less, and in effect, lay the groundwork for DDSNs as well as foster the development of the Internet. DDSNs need a system that can respond to demand in real time, across a network of suppliers and employees. This network of suppliers, a product of globalization, can only develop the superior responsiveness required through the use of the Internet.

Because real-time information is so critical, the Internet is regarded as an essential tool to actualize the full potential of globalization and DDSNs. By recognizing and utilizing these three forces correctly, a company can achieve the ultimate goal of every manufacturer: To deliver the right products to the right customers, at the right place and at the right time.

Conclusion

Faced with the competitive challenges of globalization, manufacturers must now look past their own organization and adopt a wider perspective, analyzing competitive advantages and identifying opportunities on a supply chain level. Progressive manufacturers today need to create new models capable of performing optimally in today's demand driven supply chains. Lean has gone way beyond the factory walls and now encompasses all aspects of business, in effect extending itself across the entire enterprise. The market now requires leaner processes that focus on full collaboration externally, among suppliers and customers, as well as internally, among the various functions of operations. This outward focus is propelled by the objectives of customer management instead of waste prevention/reduction. Improvements are employee driven, not by project teams, which creates a much more dynamic environment that is flexible and responsive.

To be sure, implementing Lean calls for a degree of discipline, adherence to Lean principles and practices in a way that is properly tailored to the manufacturer's business model, business processes and corporate goals and objectives. However, when planned and implemented properly, using a value-based approach, Lean can have a real, lasting and positive impact on the entire enterprise – its people, its processes, its competitive position and its overall business performance.

Glovia Services, Inc. is a wholly owned subsidiary of Glovia International, Inc., a subsidiary of Fujitsu Limited (Tokyo Stock Exchange: 6702), one of the world's most experienced and solidly backed providers of extended ERP solutions for businesses of any size-from small and midsized companies to global enterprises. Glovia Services offers GSInnovate web-based manufacturing software from pluggable point solutions to a comprehensive on-demand ERP suite that provides for the unique needs of engineer-to-order, make-to-order, high volume and mixed-mode manufacturing environments through comprehensive, end-to-end functionality for the entire product life-cycle. Headquartered in El Segundo, California, Glovia Services has helped manufacturers to cut costs, improve productivity, and meet customer demands for over 30 years. For more information please visit www.gsinnovate.com, or call 310-563-8700 or 877-474-8896 (toll free).

Fujitsu is a leading provider of IT-based business solutions for the global marketplace. With approximately 160,000 employees supporting customers in 70 countries, Fujitsu combines a worldwide corps of systems and services experts with highly reliable computing and communications products and advanced microelectronics to deliver added value to customers. Headquartered in Tokyo, Fujitsu Limited (TSE:6702) reported consolidated revenues of 5.3 trillion yen (US$53 billion) for the fiscal year ended March 31, 2008. For more information, please see: www.fujitsu.com.

Glovia Services strives to equip manufacturers with the expert knowledge and best practices gained from our own manufacturing and technology experience. The GSInnovate Industry Insight Series provides manufacturers with the latest resources to effectively manage their business on demand.