Achieving a Lean Transformation

Steve Hudgik, Graphic Products

A company that is moving from an old way of doing things to applying lean principles is said to be going through a lean transformation.

A lean transformation is more than just eliminating waste. It involves changing a culture. It requires changing your thinking. It means changing your relationships with your customers and suppliers. A lean transformation is a complete transformation of your business, and it is going to be difficult to accomplish.

In the book Becoming Lean: Inside Stories of U.S. Manufacturers, Jeffrey K. Liker writes this about a lean transformation:

"When it works, it is a frighteningly powerful competitive advantage, but to accomplish it and keep it going is very difficult."

In the forward to the same book, James Womack writes:

"Why is lean thinking and lean manufacturing so challenging to implement? It is not — as many early commentators believed — a set of isolated techniques, but a complete business system, a way of designing, selling and manufacturing complex products that requires the cooperation of thousands of people and hundreds of independent organizations. A successful 'lean leap' (lean transformation) requires 'change agent' leadership, a sensei (teacher) to demonstrate the techniques, a long-term commitment to the workforce to inspire their best efforts, proactive development of the supply base, aggressive management of distribution and sales system to smooth demand, and a score-keeping system (accounting methods plus individual compensation) that motivates managers to do the right thing every time."

A lean transformation is really about people, and people changing how they do their jobs. The way to get started is to start small, let employees become comfortable with and confident in the changes a lean transformation brings, and build support for future changes. This usually means starting with the low hanging fruit, the easiest things to do that also bring the largest benefits.

A Lean Transformation Example

Let's say you own a company that makes widgets. These widgets are usually black and come with two buttons. Lately, customers have been ordering widgets in other colors such as red and blue. So once a month, your company does a special production run to produce the red and blue widgets. Of course, you charge more for these special orders.

One day the sales manager comes into your office. One of your largest customers has just switched to buying widgets from your competitor, ABC Widgets. The competitor can supply any color widget, put the customer's logo on it and deliver them in two days. Their price is also 10 percent less than your price.

"That's impossible!" you say. "They'll soon go out of business."

But over the next few months, more and more of your customers switch to buying from your competitor. Not only is ABC Widgets delivering custom widgets at a lower cost, they are guaranteeing better than a 99-percent on-time delivery, have higher quality and have just come out with a new lightweight three-button widget. What happened?

ABC Widgets has undergone a lean transformation.

Elements of a Lean Transformation

What changed? How is ABC Widgets able to produce high-quality custom widgets, sell them at a lower price, deliver them quickly and still be able to innovate and develop new widget designs?

There are a variety of lean principles that combine to produce a lean transformation. They have names such as kanban, kaizen, 5S and total productive maintenance. However, a lean transformation does not start by picking a lean principle and implementing it. It starts with your customers.

What Does the Customer Value?

The first question to ask is, "What is the customer willing to pay for?" If there is a step in your manufacturing process that is not adding value for the customer, that step should be eliminated.

For example, widgets have always been produced with rounded corners. Everyone has forgotten why, but that's the way they've always been made. But ABC Widgets learned that customers don't need widgets with rounded corners. So their widgets have square corners, which eliminated three steps in the production process.

On the other hand, growing numbers of customers wanted widgets of various colors. Custom colors added value to widgets that customers were willing to pay for. As a result, ABC Widgets designed an automated painting machine that had multiple paint nozzles instead of one. The new machine could paint individual widgets in any color with no change-over time required and at no more cost than painting them all black.

Introducing Kanban

As ABC Widgets improved its understanding of its customer's needs, the company implemented a "pull" type of manufacturing system. This lean principle uses customer demand to "pull" products through the manufacturing process. For ABC Widgets, this meant that widgets were not manufactured until they had been ordered. With waste in the production process eliminated, the entire process tightened up to include just those things that added value to the customer. Custom widgets could be produced in less time and with higher quality. Instead of waiting up to a month to get widgets in the colors they wanted, ABC Widget customers could get their custom-colored widgets in just a few days.

The "pull" approach to manufacturing is a lean technique called kanban. A kanban is a signal that a customer order has been received and a product needs to be produced. With Kanban, inventories are reduced (freeing additional space), and products are produced based on customer demand.

Not a Smooth Process

Things did not go smoothly as ABC Widgets moved ahead with its lean transformation. There was confusion, and people tended to go back to their old way of doing things. Problems such as machine breakdowns, long change-over times to reconfigure machines to make different styles of widgets and not having the right tooling available when it was needed were all serious stumbling blocks that looked like they would derail the lean transformation.

Introducing 5S

The 5S lean technique involves getting cleaned up and organized. With 5S, unused tools, equipment and supplies are eliminated or stored in a remote location. Regularly used tools and supplies are stored close to where they are needed in a way that makes it easy to quickly and correctly return them to their proper storage location when they are not in use.

Once ABC Widgets had implemented 5S, some of the problems were cleared up. Clean work areas and machines made it easy to spot oil and fluid leaks. The sources of the leaks could then be fixed long before they became major maintenance problems. Tools and dies could be easily found when they were needed. Employees took more pride in their work and became more supportive of the lean transformation, including contributing their ideas for further improvements.

Kaizen Continues the Improvements

Kaizen is an on-going process of continual improvement. It is based on suggestions from those closest to production, the employees who make the products. However, at times suggestions come from other employees or even from customers. The objective is to continually make small improvements, and it does not matter where the ideas for improvement come from.

Even when everything was going well, ABC Widgets continued to encourage employees to make suggestions, and they acted quickly on those suggestions. Employees could quickly see the positive impact of their suggestions, and when managers thought a suggestion would not work, they quickly followed up with the employee. By talking with those making the suggestions, the ABC Widgets managers learned about the problems and issues that were causing waste or quality problems, and in some cases solutions not envisioned in the original suggestion were developed.

Other Lean Principles

As ABC Widgets continued its lean transformation, other lean principles were applied. Total productive maintenance was used to put preventative maintenance into the hands of the machine operators. Value stream mapping helped identify activities that added value customers wanted and eliminated waste. Poka-yoke was used to reduce the possibility of errors and improve quality.

Visual Communication

Many lean techniques and principles rely on visual communication to keep employees informed about production status and customer needs. ABC Widgets used DuraLabel printers to make custom labels and signs that supported the changes being made. Reminders about the changes were posted where they were most needed. Employees were able to make and sustain the needed changes with minimum disruptions to the on-going production. The signs and labels also provided warnings about new hazards, changes in production configuration and modifications to the facility. With the ability to make custom signs that specifically addressed each situation, ABC Widgets kept its employees informed and safe.

The Lean Transformation Continues

It took ABC Widgets nearly two years to reach the point where it began to take away significant numbers of customers from its competitors. But that was not the end of its lean transformation. As the former industry leader tried to begin its own lean transformation, ABC Widgets continued to apply lean principles and improve further. New widget designs continued to expand the market, and powered by its ever-improving efficiency, quality and innovation, ABC Widgets moved into making related products and serving new markets. It was not easy. The lean transformation never eliminated the need for hard work, but it multiplied those efforts so that the results were much greater than had ever been experienced in the past.

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About the Author

Steve Hudgik works at Graphic Products Inc. He attended the University of Massachusetts-Amherst and currently lives in Beaverton, Oregon.