Saturday, June 21, 2008

Ask The Expert: lean Manufacturing by David Alschuler

Meet the Lean Manufacturing Expert

David Alschuler

Principal, Industry Directions Inc.

David has been an industry analyst in the enterprise software sector for 10 years and was a software marketing executive for the prior 15 years. He currently follows manufacturing software solutions for Industry Directions. From 1998 to 2005 he directed the Enterprise Applications research teams at Aberdeen Group. Before joining Aberdeen, David held executive leadership positions including: VP of Sales and Marketing at Xchange, Inc., a leader in customer relationship management; SVP of Sales and Marketing for Work Management Solutions, a developer and marketer of project and program management software for Fortune 1000 IT organizations; VP of Marketing for leading PLM vendor Parametric Technology Corporation; and VP of Alternate Channel Distribution for Computer Corporation of America.
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Starting a Lean Education

Asked on May 21 2007 11:16:18:000AM


How do we sustain lean in a contract manufacturing environment? I know people are the key issue. How do we go about doing it? Please recommend some good books or videos on this topic. Thanks,

Laurence Yap, Ipoh, Perak, NA
AYou have already pretty much hit this nail on the head. You need to start from the top of your supply chain and work down. Once your own teams are educated and effectively functioning, you need to develop a strategy for disseminating/engendering a commitment to lean within the top management of your supply partners, and support those partners by sharing your own expertise in the form of key staff to act as Sensei(s). And you need to have developed lean processes that can be passed to your supply chain partners. Clearly, firms who have significant leverage with the suppliers in their supply chains are in a stronger position to effect lean in their supply base.

The discussions in the seminal books on lean by (a) Jim Womack and Daniel Jones, and (b) Jeffery Liker are still directly relevant and you should certainly start your self-education there. A more recent article by Eric Olsen and Mark Zetter offers a set of strategies to successfully implement lean across a contract manufacturing environment. They offer eight rules for companies seeking to implement lean supply chains, and I am hard-put to improve upon their advice:

    1. Know what your customers value. Every company is capable of identifying a current value proposition in its marketplace. Outsourcing may bring this into better alignment with what customers want, or executives may find it damages the company's value.

    2. Trade physical proximity for digital proximity. Lean manufacturers know good communication and contact with a supplier is critically important. Executives must plan for companies to increase investment in information technology and travel.

    3. Outsource to lean companies. Language and culture can be huge barriers. If possible, identify companies with lean implementation programs already in place. Lean can become the common language and culture between companies. If your company is only in its infancy with respect to lean, seek out a more mature lean company from which to learn. Where possible, seek out a few of the best companies to deal with.

    4. Avoid the quantity discount trap. Many otherwise lean companies seem to forget this lesson when they source in low-cost geographies. When procuring, or buying, in North America, they readily pay a premium to buy in small batches, just-in-time. If set-up or ordering costs are drivers for larger quantities, they seek to reduce them. The same applies in long distance sourcing.

    5. Involve your customers in outsourcing decisions. Truly lean companies believe in transparency. Do not do or say anything that you would not want printed on the front page of the Sunday New York Times. Customers can provide a wealth of information and experience with respect to outsourcing. This also represents an excellent opportunity for companies to test theories about their value proposition.

    6. Recognize risk. Every management strategy involves a degree of risk. In fact, customers pay a premium to suppliers who manage risk well. The mistake made by many companies when outsourcing is to not recognize risk as an explicit factor in the decision-making process. Lean companies identify risk in all forms of variability and work to reduce it.

    7. Lean processes are easier to outsource. Understand your current processes. Invest wisely in making them lean. With fewer non-value-add activities; fewer defects, and less waste in general, management has a much clearer picture of what is being outsourced. The knowledge gained makes managing such outsourced products and processes easier.

    8. Measure the right stuff. The big five lean measures still remain the same for lean outsourcing: first-time through quality; dock-to-dock cycle time, build-to-schedule on-time delivery, overall equipment effectiveness, and total cost. Translate these measures to the supply chain level to drive and monitor continuous improvement.


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