28 November 2010

Lean, But Not Too Lean Goldilocks-ing Your Discrete Manufacturing Strategy


In his previous guest post, Bob Aronson, Industry Director – Microsoft Dynamics Manufacturing, compared discrete manufacturing growth to ‘pent-up puppy demand.’ In his latest post below, he warns manufacturers against going lean until all the necessary resources are invested to ensure this decision is made strategically, rather than haphazardly:

Goldilocks knew the final bed was ‘just right.’ It wasn’t until she was startled awake that she realized it was the property of an unforgiving family of bears.

Is the lean manufacturing strategy you envision just right, or will you soon be startled awake by an unforgiving industry?

In a article to Manufacturing Business Technology, Lean Manufacturing is Not Enough, author Mike Collins writes, “top line growth requires a different kind of plan that should be developed in parallel with any process improvement projects. If not, manufacturing companies arrive at the end of the lean journey with plenty of new capacity and no new sales.”

In other words, it takes more ‘go lean’ than simply to say ‘we’re going lean!’

Collins rightly states in his article that all new strategies cost money, and the simple fact that time and resources must be spent to develop a new strategy, makes the notion of overnight lean operations a faulty one.

Should manufacturing companies strive for leaner operations?  Of course.  But before fully committing, you first need to spend the necessary resources it will take to develop a lean strategy based on your company’s current situation and objective.

In his article, Collins offers fundamental questions that all manufacturing companies must ask themselves prior to revamping strategies.  In my mind, some of the most effective questions for companies considering going lean are:

  • What are your company’s current sales and profit forecasts?

  • Why do you currently lose orders?

  • Who are your best and worst customers?

  • How much sales growth do you want?

  • How are you financing that growth?

  • Are your costs and pricing accurate?

You’ll notice a pattern in the questions above.

The first three get to the heart of where you currently are as a company.  Once you answer the first three questions, you’ll be amazed at how accurately and quickly the second three questions – those that shape your objective – can be answered.

To offer a rather simplistic analogy, imagine your company manufactures parts for home appliances, including washing machines and dryers.  A quick overview of the numbers shows that washing machine parts always sell at a higher volume than dryer parts.

But a closer look at the numbers is revealing.  Washing machine parts typically sell to ‘come-and-go customers,’ and while the quantity sold may be high, the customers only return to make additional purchase 30-40% of the time.

Dryer parts, on the other hand, sell to return customers who pair their order with parts for a whole range of appliances – including ovens, stoves – and even washing machines.   If the dryer parts aren’t available, these customers simply buy from someone else – taking their entire high margin orders with them.

This information is critical to know before you make the potentially fatal error of forcing lean operations by cutting back on production of dryer parts in favor of washing machine parts.

Once you honestly evaluate your current situation (determining where high value sales are from, identifying ideal customers) you can develop a strategy that is ‘just lean enough’ – or – a plan that will not risk any negative impact on the production of your highest value products.

Make no mistake – going lean by streamlining operations, smoothing out processes and turning to automation – is almost always the right way to go.  But only by spending the resources necessary to evaluate your current operations, can lean become a strategic – and ultimately, successful, decision.

Just as Goldilocks learned, the bed you choose is the bed you must sleep in.

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Luciano Cunha
Luciano Cunha,
Luciano Cunha,
Chief Executive Officer (CEO)

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