Expert Insight: Guest Contribution
  January 30, 2009  

Supply Chain News: Perspectives on Lean Manufacturing are Changing


Lean has Trouble Scaling or Dealing with Complex Manufacturing Environments; Is Role of Technology Growing?

Supply Chain Digest’s Dan Gilmore recently spoke with Aamer Rehman, Vice President of Manufacturing Solutions at i2, to discuss several issues related to Lean Manufacturing and technology enablement of Lean.

Gilmore: What, in your view, is the essence of Lean Manufacturing?

Rehman: In my view, Lean manufacturing principles can be categorized in three areas, all focused on improving agility and waste reduction.

First, there is a transformational aspect. The core idea is to simplify material flow, and streamline and eliminate all non-value added activities which contribute to decreased lead-time by institutionalizing standard work and reducing lot sizes.

Second, there is an operational aspect. The core idea is to achieve mix and volume leveling and a repeatable schedule at pacemaker operations, and to tie inventory and production to the rate of demand through intelligent inventory management, and signaling and visibility techniques.

Third, there is a continuous improvement or kaizen aspect. The core idea is to use the actual shop floor information to carry out improvements, which contribute to step-wise process improvement.

However, my belief is that among those three, the real essence of Lean is in the operational principles, especially the concept of Level Plan and “Heijunka," which acts as a shock absorber between the order assignment and supply process.  If done right, this can help manage supply chain risk and reduce lead-time, critical for today’s volatile supply chains.

Rehman Says:
The manual methods of the past have proved to be inconsistent and inadequate, and companies are looking for sophisticated, but not complex, solutions to support key operational aspects of Lean.

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Gilmore: Are there any important misconceptions that exist in terms of how companies or individuals think about Lean?

Rehman: In my opinion, Lean manufacturing principles have wide applicability across different manufacturing environments. However, the traditional practitioners have often over simplified Lean application to a point where it seems that the principles are impractical for today’s high-mix and volatile demand environment. For example, a common misconception is that Lean manufacturing doesn’t require sophisticated technology. This is based on the assumption that there is generally 10-15% variation in demand and 10-15% variability in supply operations. However, today’s environment is characterized by volatility in demand, product mix and supply, and without the help of appropriate technology, it is practically impossible to apply the Lean operational principles effectively. 

The second limitation of the common Lean practice is driven by the transition of the shop floor, where production has extended beyond the four-walls to external value chain partners. In this environment, achieving visibility using paper and spreadsheet is not possible, and using material as a “proxy” for intelligent information is impractical. 

The third example is that most of the companies have spent significant effort on the transformational phase of Lean, where an army of practitioners and consultants have developed hundreds of value stream maps, but have done very little in deploying Lean operational principles to run production and supply chains.

The final example is that Lean manufacturing programs have always operated in isolation and very few companies have used Lean manufacturing as the underlying approach for supply chain improvement initiatives. The alignment between the corporate Lean program and supply chain transformation program is missing in most of the companies.

Gilmore: Are you seeing any trends in terms of how companies are considering the role of technology in a Lean environment?

Rehman: There has been a growing awareness that Lean manufacturing is probably the only proven methodology to promote event or demand-driven operations through visibility and streamlined material flow. We are also observing that companies are interested in creating leveled plans with the given demand and mix volatility. 

However, manual methods of the past have proved to be inconsistent and inadequate, and they are looking for sophisticated, but not complex, solutions to support key operational aspects of Lean. 

The second trend is towards improving visibility and collaboration with the supply partners, which has been a challenge without the use of technology.  So, the net-net is that a comprehensive solution which can enable repeatable planning/scheduling processes using the concepts of level/Heijunka, inventory management through intelligent kanban sizing and signaling, and material visibility throughout the value chain are increasingly being adopted across the discrete manufacturing world.

Gilmore: What is i2's approach to supporting Lean manufacturing?

Our approach is to put a disciplined and repeatable process to deploy Lean operational principles, including level planning and Heijunka, visibility of information across the value chain, the ability to look ahead and predict trends, quick, what-if analysis to make the right decisions, and use shop floor information to enable focused Kaizen. 

All these components of our approach are critical to enable planning process consistency, accountability and continuous improvement.  We have successfully packaged key principles of lean into a comprehensive solution and service offering, which can accelerate lean deployments and sustain lean principles in an organization.

Gilmore: Is it possible to approach this - Lean and supporting technology – in phases?

My viewpoint is that technology solutions should be used as an enabler for implementing Lean.  Lean programs have always resulted in project overload, and by the time key material flow transformational activities are completed, there is little energy left to focus on the operational side of Lean. This is one of the reasons why the majority of the Lean programs fail to stick and provide less than satisfactory operational benefits. By combining process and supporting technology, one can achieve tangible benefits.

Gilmore: Are you able to discuss the level of benefits that Lean technology support can bring to companies?

Rehman: The technology to support Lean manufacturing principles can accelerate an organization’s ability to address supply chain risks and issues, such as inventory liability, order fulfillment performance, manufacturing overhead, and schedule stability. It can also synchronize material and information flow across a multi-tiered supply chain and help achieve improved operational and financial performance.

I would say tangible benefits generally include reduction in finished goods, WIP and procured material inventories; lead time reduction and, thus, improved agility; a reduction in expedited freight costs; increased planner/scheduler productivity; reduction in the cost of quality; reduction in the cost of obsolescence; and increased labor productivity.

There are also a number of more intangible benefits that include better integration of planning and execution throughout the supply chain;achieving more forward-looking analytic capabilities and, therefore, becoming more proactive; developing exception-based notification and resolution capabilities; and extending more robust inventory awareness and analysis across the supply chain.

Agree or disgree with our guest expert's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the web site. Upon request, comments will be posted with the respondent's name or company withheld.

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