Lean, not mean, fighting machine

The word 'lean' was associated with 'mean' long before the arrival of Mr Foreman's fat reducing machine, but the 'mean' in business normally refers to the miserly, swingeing and unsympathetic cuts intended merely to improve the bottom line, rather than optimise processes and underpin competitive advantage. Not until Jack Welch coined the expression 'lean and agile' with respect to the re-organisation of GE did western manufacturing really catch on to what the Japanese had been doing since the 1950s. Now almost everyone seems to recognise the virtues of Lean irrespective of where they are in their own implementation cycle. A problem that often arises with SMEs, however, is the sheer amount of effort required in applying Lean principles. Techniques and methodologies include: cellular manufacturing, kaizen, 5S/cando, kanban, pokayoke, SMED (single minute exchange of dies), TPS (Toyota production system) and a raft of TQM (total quality management) initiatives based around the works of Feigenbaum, Deming, Juran, Shingo, Taguchi, Ishikawa, Imai, Peters and others. Quite a lot to get your head around. In many cases management is too 'lean' to make the necessary investment in people and training; in others the basic techniques don't extend far enough. That's where companies like Oracle come in. Lean now has a virtual as well as a visual reality: it can be cemented into companies and extend way beyond their shop floors and their 'four walls' out into the partner, supplier and customer communities through appropriate enterprise IT. It's no longer just about reducing changeover times, tracking one-piece flows and the rest, important though these are: it's about stripping waste out of business processes across your supply chains, even finance, HR and sales and marketing. The point is traditional processes do tend to include what we now see as significant waste. Simon Bragg, European research director at analyst ARC, refers to the supply chain bullwhip phenomenon, which exacerbates the situation. "If a retailer with small fluctuations in demand is ordering an economic order quantity, based on average consumption over a period and 'padded' for safety to take account of the lead time of the supplier, the fluctuations in demand on the manufacturer get amplified. If the manufacturer has access to the retailer's daily consumption, and merely replenishes the retailer, it sees a much more stable and predictable level of demand because the amplification has been taken out." This is where centralised data and open systems can make a sizeable impact. "A supplier, for example, only needs a browser and access to a URL to get into its customer's system via a password-protected portal," explains David Tudor, senior principal for supply chain systems within the industrial sector at Oracle. "The portal runs on the host company's system, and gives customers and suppliers appropriate access to their [ERP] system." With this level of extended enterprise integration a supplier can be notified of a purchase order by e-mail: he logs onto the portal to pick up the PO where he can make changes to delivery dates etc. If changed, the PO is sent back to the originator for approval and the rest so everyone knows what's going on. Where necessary, customers can also view the process, posting forecasts, call-offs and orders, and tracking exceptions or whatever makes sense automatically. Now, for example, a supplier can know when something has been rejected even before quality control finishes its report. And within the enterprise, similar access and automation can apply across departments, not just manufacturing: again, HR, finance, sales, marketing etc. The enabling technologies are the web and the database, which can allow as many sites as necessary to share data, independent of geography or language. The caveat: for it to work, robustness, availability and security are critical. So far so good, but these systems cost several arms and legs and take an age to implement, don't they? Not so, according to Mark Gould-Coates, head of e-business at Unite, a manufacturer of modular dwelling units. "We implemented Oracle manufacturing using the Oracle Fast Forward methodology, which has a 60 day time window," he says. "It was virtually out of the box. We actually did it in 70 days, but the extra two weeks was us wanting to retest before it went live." Virtually out of the box Oracle delivers standard business processes as software templates. "That's how we keep down the cost and the time," says Tudor. "The popular model these days – rather than look at the company's business processes and see how they map onto the software – is to take standard processes, pilot these and modify them for any area that is divergent… You don't need to spend 12 months making sure it's 150% right, and in terms of implementation costs, the daily rate is similar to other approaches but the number of days is much less." Which is looking affordable for SMEs. It's also supporting and automating Lean business. Unite, for example, uses the system to identify the different product options that a customer order throws up, and to match its suppliers and manufacturing to accommodate them, thus maintaining short lead times. The system streamlines everything from the point when a customer order is taken, right through to purchasing management, production and delivery, and is thus supporting growth without adding cost. "We haven't lost overhead as a result, but the business has grown by30% with the same overhead," says Gould-Coates. Why Oracle Discrete Manufacturing? "We were opening a new factory and we needed something to manage the inventory and resource planning," says Gould-Coates. "We also wanted a system to manage 'top end' business process flows and to encompass functionality in our legacy systems that we wanted to phase out… It now provides us with a seamless flow of information around the corporation, rather than having to write interfaces between dissimilar systems. Looking back if we hadn't decided on Oracle I don't think the current level of integration would have been achieved." And now the company is taking its Lean manufacturing business system further, with the approach described. "We are investigating opening our systems to some of our larger raw material suppliers through portals. They will have real-time access to our systems, and be able to view demand and production cycles, and streamline their deliveries accordingly. The idea is to achieve balanced material flow throughout the supply and production chains. Suppliers will effectively become seamless partners in our business. Several of our major suppliers and very enthusiastic about this approach." His view: "All this is driven from a Lean philosophy to contain the group overhead, while at the same time getting the most out of the systems and maximising the ROI [return on investment] of the modules we already have. Maximising the Lean benefits of the system is very much at the front of our minds." All of which sounds good. The remaining issues are how far and how fast to go for Lean thinking, who to involve and how rigidly to stick to Lean principles. Baby products manufacturer Cannon Avent, for example, isn't wedded to Lean, but does harness it. Adrian Conway, operations director: "We use the Toyota tool change system for changing mould tools – we've got changeover down from four hours to about 30 minutes." And he adds: "We use Lean methodologies to optimise our processes, with kanbans, kaizen, MRP in various guises." His view: "There's no single way of [improving]. It's more an underlying attitude that continually aims to do things better." And a brief word of caution: "A problem with trying to impose a Lean philosophy is that a lot of people can spend a lot of time and have lots of meetings to achieve very little," says George Kessler, managing director of Kesslers International. "The shop floor is not a democracy and there are too many democratic elements to Lean." On the other hand, he agrees: "We are a better manufacturer because of Lean and our general awareness of Lean principles." There's no doubting that Lean methodologies make a significant positive contribution to businesses that have embraced them: how far you take it depends on how enlightened you're prepared to be about your extended enterprise systems.