The Lean Journey/Part II: Putting lean to work
Our exclusive research found that organizations are starting to implement and practice lean concepts—and are becoming greener and more responsive in the process. This month our research team illustrates how shippers are actually walking the lean talk.
By Karl B. Manrodt, Ph.D, associate professor logistics, Georgia Southern University; Kate Vitasek, managing director for Supply Chain Visions; Rich Thompson, senior vice president, supply chain consulting, Jones Lang LaSalle -- Logistics Management, 8/1/2008
The impact the concept of “lean” is having in the manufacturing area simply can't be ignored. Many manufacturing businesses have studied lean and have found ways to apply the theory beyond the manufacturing floor and roll it into overall supply chain operations.
In our first article that dissected the findings of our 2008 Lean Benchmarking Study (LM, April, 2008) that was done in partnership with Logistics Management, APICS, and The Staubach Company, we revealed that building and maintaining a lean supply chain revolves around mastering these six key attributes: demand management; cost and waste reduction; process standardization; industry standardization; cultural change; and cross-enterprise collaboration. We then illustrated how companies can implement those lean practices across their overall supply chain operations by putting these attributes to work.
And while we shared insightful concepts and data, an important question remained: How do you actually do it? How do you walk the talk? In addition to our number crunching for the lean benchmarking study (the effort landed 476 respondents), we conducted interviews with respondents to gain a better understanding of the lean journey that so many companies have started.
Over the next few pages, we will dive into the details of a few interviews we did during our data compilation and show how these companies are putting lean to work. But first, let's quickly review some of the vital numbers we pulled out of the 2008 study.
What the numbers say
From our perspective, the biggest takeaway from this year's study is the overwhelming fact that organizations are actually starting to implement and practice lean concepts across the supply chain.
Comparisons were made between the 2008 and the 2005 respondents for each of our 11 detailed questions that correspond with each of the 6 key lean attributes. We were very pleased to see that in 10 of the 11 survey questions we saw growth rates in the percentages of companies that were “moving up the curve” to apply more advanced lean practices in their supply chains.
For our research purposes, we call the companies that are demonstrating lean attributes at the highest levels in their supply chain processes “Lean Adopters.” Lean adopters have the most mature levels of lean in their supply chain. As a matter of fact, for two of the questions, survey data showed improvements among Lean Adopters in the 50 percent range.
The areas that had the highest rates of change had to do with adopting standardization across supply chain partners. The adoption of “data standards” exceeded 50 percent while “production process standardization across supply chain partners” fell close behind at almost 48 percent growth in the adoption rate.
We believe that the need for data standards has clearly been recognized as a business imperative, not just for those implementing lean strategies but for businesses of all types. It surely helps the lean cause since having a solid basis in data, and the ability to convey and contrast it between organizations, is fairly basic to collaboration and management of processes.
While we are glad to see significant growth in the Lean Adopters, we are equally encouraged that the non-adopters are moving into the mid-tier and are starting to adopt some of less mature lean practices.
Walking the talk
While the numbers are showing solid gains, the research team wanted to take a peek behind the numbers to see what companies are doing in their efforts to drive these changes. As part of our study, the researchers conducted a series of interviews with selected participants to gain further insight into how companies are approaching the implementation of lean within their organizations.
Across the board, we found that the common goal among most companies was to ingrain lean concepts in the same way that companies ingrain practices in all areas of business operations. Leading supply chain practitioners told us that they weren't simply extending their lean thinking outside of manufacturing, but they felt that they were building a cultural revolution to fundamentally change the way their company approaches business. One respondent said, “While some businesses that think of [lean] as an enabler, we think of it as a strategy.”
At Turtle Wax, Andy Taylor, the company's chief operating officer, recommends that people must be true believers in the process if it's to be successful. “They must believe that they work for a great company, and with great people who are trying to do great things,” says Taylor. “When you get a critical mass of true believers, then you can use tools such as Lean or Six Sigma that ultimately give people the ability to get to where they want to be.”
One common theme during our interviews was that leaders in lean supply chain adoption emphasized creative and innovative ways to institute a cultural revolution that embraced lean. During our interview with John Naso, VP of logistics at OfficeMax, he indicated that in an effort to maintain workforce awareness, the company created a periodic newsletter for employees called “The Tim Woods Times” that focuses on the “Seven Deadly Wastes.” Tim Wood is a popular acro-name associated with wastes in Transportation, Inventory, Motions, Waiting, Overproduction, Overprocessing, and Defects. According to Naso, the key is “getting the message out—and it's not just on the manufacturing floor anymore.”
Lean is hard enough on the manufacturing floor, but most of our interviewees found that it's even harder to communicate the concepts to the white-collar, supply-chain related roles as well as their extended network of supply chain partners.
Naso says that the OfficeMax lean strategy is becoming an “operational part of their culture,” and the company is even starting to offer general lean guidance to the community at large. For example, to build on the Tim Woods concept, OfficeMax has developed an educational tool they call the “Tim Woods Tennis Game” where they invite local high school vocational education students to their corporate campus to better understand their lean journey.
Some have made a conscious effort to make the learning process fun. But just how can you make lean concepts and tools fun? Hytrol Conveyor Co. is giving it a shot with a comic book that explores the adventures of “Captain Hytrol,” as well as his friends “Power Lean” and “Safety Lady.” The company created a 56-page book to help its organization understand the “remarkable journey of lean manufacturing.” Hytrol stresses that it is not an implementation guide, but a companion to lean education.
So, where do you begin?
So you've started to master lean on your manufacturing shop floor, and you realize it makes sense to extend the concepts throughout your manufacturing operation. Now, if you only have time or the resources to focus on one of the six attributes for improving your supply chain, we recommend you start with “demand management.”
Improvements in managing the demand signal across your organization—and the communication of it to your suppliers—will definitely generate improved supply chain performance. Lean is all about “pull,” and pull is simply the process of balancing supply with customer demand—the customer's pull or demand signal.
Fortunately, managing the demand signal is an area where there is a tremendous amount of resources available. To assist you in focusing on the demand signal we recommend the use of process maps, specifically the lean variation of a process map called a “Value Stream Map.” This map is the first step in understanding how the signal is communicated across the supply chain beginning with the ultimate consumer.
In order to understand the state of the lean supply chain, we looked at different facets of each of the attributes. In the case of demand management, four different facets were benchmarked: demand signal; demand collaboration; sales and operations planning; and inventory management practices.
We believe that managing the demand signal will, by far, provide the greatest opportunity for firms to be competitive. How well firms manage the demand signal is also reflected as to how they view collaboration through processes like sales and operations planning. We have found that collaboration must begin through an understanding and acceptance of the concept, followed by a clear conveyance of this approval and its need to the workforce—as well as to supply chain partners.
Being a “Best in Class” firm with regards to demand management can present an elevated degree of difficulty, but it is not difficult to be good at it, and it's well worth the effort. Furthermore, you will find it to be easier the more you do it, and soon you will question how you ever got along without it.
Does lean matter?
Our survey and the follow-up interviews revealed and/or confirmed the following:
1) Lean is seen as a cultural change agent, and it needs to be extended outside of manufacturing.
2) There is willingness on the part of participants to adopt industry standards.
3) Process standardization is early in its journey, but it is getting the most traction.
4) Real gains will only be made if demand signal is managed across the supply chain and there is more emphasis on cross-company collaboration.
Regardless of our opinion on where to start, our interviews highlighted a fact that we pretty much predicted would be the case: Organizations tend to begin implementation of lean with internal operations first. Why? We found that it's because companies can exercise a greater level of control over internal processes than those of customers or suppliers.
Yes, even though lean theory is focused on customer value and customer pull, most companies tend to begin implementation in manufacturing or supply related areas. Managing the lean supply chain, much like lean manufacturing, is not a destination you can easily reach, but is rather a journey to embark upon—a journey of awareness, introspection, and improvement.
With that in mind, you have to consider the biggest question that is always asked before any journey begins: Will it be worth it? We believe the answer is “Yes.” And the executives we interviewed say the same.
However, if theory can't convince you then maybe the bottom line impact will. Our study found that companies that were Lean Adopters statistically had significantly lower average days sales worth of inventory on hand as well as fewer days required to collect revenue from those sales. In fact, Lean Adopters reported 15.2 inventory turns compared to 10.3 turns for Non-Adopters.
These differences not only reduce the cost of goods sold, they also dramatically affect the firm's ability to be responsive to changes in the overall supply chain as they do not carry excessive levels of inventory or have cash tied up in unpaid customer invoices.
Our data—both qualitative and quantitative—indicates that firms can achieve significant improvements by applying the lean attributes noted in the study. This journey is based on facts, and not just faith. Working with others, we wish you the best on your journey toward a lean supply chain.
| Results and Comparison 2005-2008 | Adoption % Change | |||
| 2005 | 2008 | Chg % | Rank | |
| Table 11 – Data Standards | 17.90% | 27.50% | 53.63% | 1 |
| Table 8 – Planning & Production Process Standardization | 19.20% | 28.40% | 47.92% | 2 |
| Table 6 – Waste Reduction Efforts | 19.90% | 25.00% | 25.63% | 3 |
| Table 14 – View of Teams | 24.60% | 30.10% | 22.36% | 4 |
| Table 4 – Managing the Demand Signal | 33.30% | 39.50% | 18.62% | 5 |
| Table 5 – State of Demand Collaboration | 23.60% | 27.80% | 17.80% | 6 |
| Table 10 – Industry Product Standards | 26.80% | 31.30% | 16.79% | 7 |
| Table 7 – Value Added Activities | 25.10% | 27.70% | 10.36% | 8 |
| Table 13 – Continuous Improvement/Change Culture | 44.10% | 46.50% | 5.44% | 9 |
| Table 12 – People | 41.40% | 43.50% | 5.07% | 10 |
| Table 9 – Company Product Standards | 39.30% | 37.00% | -5.85% | 11 |
| Obstacle to Implementing Lean Initiatives | 2008 | 2005 |
| Lack of training | 24.80% | 25.70% |
| Lack of resources | 22.80% | 27.20% |
| Top management commitment | 19.60% | 21.20% |
| Hard to apply in my industry | 12.40% | 8.50% |
| No clear benefit of lean | 7.51% | 6.30% |
| “Involvement in other activities (Six Sigma, TQM)” | 8.60% | 11.00% |
Our lean survey says…
Our survey and the follow-up interviews revealed and/or confirmed the following:
-
Lean is seen as a cultural change agent, and it needs to be extended outside of manufacturing.
-
There is willingness on the part of participants to adopt industry standards.
-
Process standardization is early in its journey, but it is getting the most traction.
-
Real gains will only be made if demand signal is managed across the supply chain an there is more emphasis on cross-company collaboration.
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10/11/2009
