Expert Insight: The S&OP Report
  By Tom Wallace  
     
  Nov. 30, 2007  
 

S&OP and Lean Manufacturing – Can They Work Together?

 
     
 

Lean Strategies are Great – but Sometimes They Need Help

 
     
 
Wallace Says:
So what’s wrong with that? After all, isn’t Toyota one of the best manufacturing companies in the world? Yes, it is. But – and forgive me if this sounds sacrilegious – Toyota is not totally Lean.

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Lean Manufacturing is a superb tool, and many companies use it to great advantage. The power within Lean leads many people to become very enthusiastic about it; they become zealous in promoting its benefits. They’re sometimes referred to as “lean zealots.”

However, some of the zealots go a bit too far; they can’t see the benefits in anything else. The mindset: “You don’t need to do any of that other stuff; all you need is Lean.” And therein lies the problem.

Many companies using Lean have made great progress. But they could be even better – in some cases much better – if they were to couple the power of Lean with the power of Sales & Operations Planning.

How so? Well, it gets back to the basis for Lean Manufacturing: the Toyota Production System. Many Lean users got their training and their consulting support from people who either worked at Toyota or who were trained by ex-Toyota employees. As a result, the Lean processes in those companies are very similar to how Toyota does it.

So what’s wrong with that? After all, isn’t Toyota one of the best manufacturing companies in the world? Yes, it is. But – and forgive me if this sounds sacrilegious – Toyota is not totally Lean.

They’re extremely Lean up to the point where the cars and trucks roll off the assembly line. However, at that point, pull starts to give way to push. Toyota pushes vehicles into a finished good inventory estimated conservatively to be over $4 billion. This inventory – on the dealers’ lots – serves as a huge shock absorber, insulating Toyota manufacturing from the ups and down of demand in the marketplace. Most companies are not as fortunate as Toyota, who ships their products to a group of happy, contented Toyota dealers. Many companies sell to the likes of Boeing, Home Depot, GM, and the like. They want exactly what they ordered and they want it now. Thus these producers need the very best process they can get to identify shifts in demand quickly and to realign production volumes with those shifts. That “very best process” is called Sales & Operations Planning and, specifically its top management component: Executive S&OP.

Lean Manufacturing thrives on linearity of demand. When demand is not linear, Lean needs help. For that reason, more and more Lean users are turning to Executive S&OP – even though it was not invented at Toyota.

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