This Week in SCDigest:
Lean Manufacturing 2.0?
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On Target e-Magazine
New Video Interview - ToolsGroup CEO Joe Shamir
Gilmore's Daily Jab
SCDigest Introduces "Distribution Digest"
Your Supply Chain Questions Answered! This Week's Question - Difference Between Supply Chain Software Terms?
Trivia, Supply Chain Stock Index
Can't View this E-mail?  
Become a sponsor
February 5, 2009 - Supply Chain Digest Newsletter

FEATURED SPONSOR: Compliance Networks


Lean Manufacturing 2.0?

Is Lean a salvation for manufacturers, or a set of tools that can be useful but is often overhyped?

A little of both?

Lean manufacturing and Lean supply chain thinking have been incredibly powerful forces, and radically transformed hundreds of companies and the thinking of a broad swath of the manufacturing and supply chain industries.

Yet, at the same time, there has been some doubt and disappointment. Many have questioned whether Lean has been taken too far in many cases, and left companies vulnerable to supply chain disruptions and customer service issues.

Gilmore Says:  

I think a fewer of the larger consultants have put a toe into the Lean practice water, but I don’t think most of them have gotten much more than their feet wet – not sure why that is."

What do you say?

Send us your Feedback here


I bring this up, in part, as we usually do, to summarize what we’ve done in the latest Supply Chain Digest Letter on Lean Manufacturing. Many thousands of you should have received a copy in the mail, but if you didn’t and would like an electronic copy, or you would like to access a wealth of other resources, you can find them at our Lean Manufacturing Resources page.

Consider a company like Danaher, a growing industrial giant, which has made its custom version of Lean a science and an incredibly powerful driver of profits.

A couple of years ago, I happened to sit right next to a gentleman named Jim Britt, at the time a McKinsey Lean consultant who I believe has subsequently gone elsewhere. (Be forewarned, if you sit next to me on a plane, you are likely to receive a friendly interrogation.)

Before coming to McKinsey, Britt (a very knowledgeable person) had been one of the chief architects of Danaher’s Lean strategy, of which Business Week had this to say in 2007:

“Danaher is a prolific acquirer, averaging about a deal per month. These “conglomerateurs” have built their portfolio not by buying undervalued companies and holding them but by imposing on them the "Danaher Business System." DBS, as it's called, is a set of management tools borrowed liberally from the famed Toyota Production System. Before a deal, Danaher executives tour plants and search for ways to improve performance. They estimate how wide an acquisition target's profit margins could get, given the Danaher treatment.”

Think about it – Danaher executives can tour a plant, and make a quick, but apparently very accurate, assumption about the improvements that could be achieved from going Lean. That smells like opportunity for most other companies right now, especially right now, trapped within their own factories and supply chains.

Britt, in fact, told me that he often did the same, walking around a factory and seeing dozens of things that could be quickly addressed with a little Lean treatment.

But Lean isn’t a panacea. Just the fact that we now have Lean Six Sigma, as companies such as 3M have vigorously pursued, says Lean alone may not be enough. Now it appears we even have something called “TLS,” which adds in Eli Goldratt’s Theory of Constraints (TOC) methodology as another tool, usually front-ending TOC before both Lean and Six Sigma (TOC, Lean, Six Sigma).

And the reality is that Lean programs often don’t deliver results, or get implemented a bit, but then not really carried forward. As a recent AMR Research report observed, “Most manufacturers we interviewed confine their Lean projects to a single plant, often right down to a production line or product area.”

Then there is the issue of technology and Lean. Clearly, some Lean consultants don’t want any part of it, but I think that is not right, or certainly not always right.

I don’t disagree with i2’s Aamer Rehman, who says that “manual Lean methods of the past have proven to be inconsistent and inadequate, and companies are looking for sophisticated, but not complex, solutions to support key operational aspects of Lean.”

This seems to me to be true for two reasons: First, the growing complexity of most factories in terms of product mix, routings, etc., that make it hard/impossible for the traditional tools of Lean to really well handle unaided.

Second, I don’t think (though some may dispute) that traditional Lean tools well handles the increasing outsourced/virtual world most manufacturers live in. A Kanban card is hard to see from across the street or across the ocean. Collaborative and visibility tools are essential to make a manufacturing operation dependent on partners run in a Lean-like fashion. In fact, the original source of Lean thinking itself, Toyota and its Toyota Production System, has recently announced several plans to improve partner connectivity and collaboration.

Certainly, I think you also need the foundation of a strong data collection capability to ensure accurate and timely information flow on the shop floor.

The Lean consulting environment is also interesting to me. It seems to me it is still almost totally dominated by boutique or smaller firms. I think a few of the larger consultants have put a toe into the Lean practice water, but I don’t think most of them have gotten much more than their feet wet – not sure why that is.

My personal belief is that Lean is a great thing, but that, for a variety of reasons (which we discuss in the Letter), it fails to reach its potential in far too many companies.

But the examples of Danaher, 3M and many others where Lean has provided outsized benefits can’t be ignored. We are entering into a “new world order,” and how companies themselves will shake out and how Western manufacturers will fare against those in China and other low-cost countries could go in several directions, I think.

To prosper, it will take something like Lean 2.0. Maybe we’re already on Lean 3.0 or something and I don’t know it. While the results aren’t always what’s expected and can often be taken too far (risk), if there has been a better time to get Lean right, I am not sure when that has been.

Think you will enjoy our excellent Lean Letter and other information. Find Resources page again here: Lean Manufacturing Resources. I’ll be honest that we are very proud of these SCDigest Letters and hope you will take a look.

What in your view has been the Lean track record in manufacturing? What are the key factors in success or mediocrity? Is it time for Lean 2.0? What about Lean and technology? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

Web Page/Printable Version of Column

*** On-Demand Videocasts ***


Mastering Lumpy Demand

Learn how to successfully manage your supply chain in a lumpy demand environment, improve your fore-
casting, inventory optimization and replenishment, and significantly improve both the top and bottom line

Featuring Lora Cecere
of AMR Research

This Week's Supply Chain News Bites Only from SCDigest

Supply Chain Graphic of the Week: Understanding Global R&D Spend

This Week's Supply Chain by the Numbers - China's GDP, 3PL Strategic Relationships, Oil Prices, RFID-Based Technology Growth


As Washington politicians struggled to agree on a way to fire up the economy, Wall Street investors suffered yet another disappointing week.  Our Supply Chain and Logistics stock index results for the week were erratic and without any decipherable trend.

In the software group, Ariba was up 10.2%, while JDA fell 8.6%.  In the hardware group, Intermec was up 6.5%, while Zebra fell 2.9%.  In the transportation and logistics group, Norfolk Southern was up 12.3%, while Yellow Roadway fell 18.4% despite completing the first phase of a financing transaction designed to improve its liquidity.  Overall, out of 22 stocks in the index, 20 were down for the month. 

See full stock report.

Each Week:

-Global Supply Chain
-Distribution/Material Handling
-Trends and Issues

Weekly On-Target Newsletter
February 3, 2009 Edition

ToolsGroup CEO Joe Shamir

New Planning Suite from ToolsGroup Uses Probabilistic Optimization

ToolsGroup CEO Joe Shamir Discusses Benefits of New Service Optimizer 99+ Solution for Supply Chain Planning and Inventory Optimization


SCDigest Editor Dan Gilmore

More Evidence that the Robots Really Are Coming

Researchers Working on Robots called Snakebots to Attend Wounded Soldiers on the Battlefield

THIS WEEK ON Distribution Digest


HolsteHolste's Blog: Labor Reduction and Automation can be a Very Touchy Subject

>> Top Story: Organization Provides Platform for Supply Chain and Logistics Professionals to Contribute Skills and Resources in Times of Crisis
>> Fralick: Successful Warehouse Management System (WMS) Integrations Require Left and Right Brained Thinking
>> Reader Question: Reducing Sort Lanes to Reduce DC Costs

What is the difference in labor costs as a percent of revenue for Less Than Truckload (LTL) carriers versus Truckload carriers?

A. Click to find the answer below


Have supply chain or logistics-related questions you need answered?
Ask our panel of experts. Share your insight!

Featured Question and Answer:

Difference Between Hosted, On-Demand, and SaaS Supply Chain Software?

Do you use an RSS reader? Do you have a MyYahoo! or personalized Google page? For these and more you can have SCDigest delivered right to your personal pages, all week long.
You can subscribe to our RSS feeds in two ways:
  1. Copy our RSS link into your RSS reader - it's easy!
  2. Click on a button below to quickly add it to your favorite readers.

Before it is too late, we wanted to publish a few of the several dozen responses we received to our Supply Chain Christmas Carol piece in late December, which obviously many of you enjoyed. Many asked for a follow-up piece that describes in more detail the “two paths” (you have to read it). Yes, sometime this year…

No Feedback of the Week, just some short, entertaining letters this week.

On a Supply Chain Christmas Carol:

Write the sequel about the two paths. Here is my nightmare scenario and it has little to do with systems and processes.

I see a time in the near future with $6.00 a gallon diesel, a lack of refining capacity, deteriorating roads in North America and pirates in the high seas capturing container ships full of sub-standard toys from China bound for the US.

Ed Camera
VP Warehousing
CoLinx, LLC

Dan, well done!!!! I'll take a ride in that sleigh any day!

Tom Dadmun
VP Supply Chain Services

Yes, I enjoyed your Supply Chain Christmas Carole.

Nice touch for the holiday season.

But…what does the future hold? Will Ebenezer share what he saw?

Brain Dearth
Making Memories

It was very entertaining! Thanks for the BeeGees shoutout!!

Kelly H. Knecht
Purchasing - Mopar/Chrysler
OEM Systems, LLC.

Dan, Merry Christmas and keep the Supply Chain education going...

To the SCD Staff: Happy Holidays to you too. Don't worry - Dan/Ebenezer will mellow with age!

Greg Stein

Very cute story to remind us of how far we've come, and how far we still can go.

I'm curious about the 2 paths, and which one most people would choose.

Paula Dotson
International Logistics Specialist
Hussmann Corporation
Ingersoll Rand Climate Control Technologies

Well done. I look forward to -- as Paul Harvey would say -- "the rest of the story"
Nice way to end my week.

Robert Hamber
US Navy


Q. What is the difference in labor costs as a percent of revenue for Less Than Truckload (LTL) carriers versus Truckload carriers?

A. For national LTL carriers, labor represents about 65% of revenue, versus about 40% for TL carriers.

Copyrights © SupplyChainDigestTM 2003-2009. All Rights Reserved.
To Unsubscribe: Click Here
PO Box 714
Springboro, Ohio 45066