Lean around the World

1. Lean around the World What better way to stay ahead of the global competition? lean Manufacturing in World

2. Lean around the World In developed and developing countries around the world, lean principles have secured beachheads in local auto industries and are gaining footholds in other manufacturing industries as well as some service sectors, but progress varies greatly from country to country, according to reports from 11 regional affiliates of the Lean Enterprise Institute (LEI). lean Manufacturing in World

3. Lean Manufacturing in Brazil Toyota introduced lean principles to Brazil in the late 1950s when it established its first plant outside Japan near São Paulo. The site was used by Taiichi Ohno to develop his initial ideas for setup reduction. Ohno is the Toyota executive credited as the chief architect of the Toyota Production System.. Gradually, local auto assemblers and parts makers introduced lean concepts as isolated tools along with improvement techniques such as quality circles and, later, ISO certification. In the last few years, companies are realizing the tools must be deployed as part of an integrated lean business system. However, very few companies have total lean management systems in place. lean Manufacturing in World

4. Lean Manufacturing in UK During the last three years (2003-2007) in the UK, lean principles have spread very rapidly beyond their roots in manufacturing to utilities, financial services, construction, healthcare, local and national government, according to Daniel Jones, founder and chairman of the UK-based Lean Enterprise Academy. • In the last decade UK manufacturing underwent fundamental change. • Jet engine maker Rolls Royce • Aircraft maker BAE Systems • Auto parts company GKN lean Manufacturing in World

5. Lean Manufacturing in UK Automakers like Toyota, Nissan, and Honda have all grown in the UK, as has BMW with its very successful Mini. Multinationals. A government initiative called the Regional Manufacturing Advisory Service is spreading lean concepts to many smaller manufacturers that are carving out new niches by producing high variety products quickly for local markets. Firms are just beginning to spread lean across their supply chains and into new product development.” The leaders in doing so have not come from manufacturing but from firms like the distribution specialist Unipart and the very successful retailer Tesco. lean Manufacturing in World

6. Lean Manufacturing in UK Tesco’s lean supply chain Tesco can provide all the things one needs to run a household, literally from soup to nuts and everything in between. lean Manufacturing in World

7. Lean Manufacturing in Turkey • The pace of lean implementations in Turkey has gathered momentum in recent years, after a slow start in the mid-1990s, according to Yalcin Ipbuken, president, Lean Institute Turkey. • Turkish companies, led by the large automotive and textile sectors, began implementing lean principles to become globally competitive in quality, delivery, and cost. • Lean efforts are under way in automotive supply chains. • Local units of Fiat, Ford, Mercedes, Renault, Goodyear, and Pirelli have active trans formation efforts. Turkish managers, engineers, and its young workforce (50% of the population is under 24 years old) are very enthusiastic to participate in lean activities and practice kaizen in their plants. lean Manufacturing in World

8. Lean Manufacturing in Spain • “Lean implementation in Spain is scarce and uneven,” says Victor Conde, executive director of the Lean Management Institute in Spain. • It is primarily located around the big automakers such as Ford, GM, Citroen, Nissan, Renault and some of their Tier One suppliers such as Denso, Donnelly, Johnson Controls, Valeo, Visteon, and • signs have been seen that the lean movement is broadening, led by the fashion industry, especially global player lnditex and its Zara retail stores. The way it moves material, controls stocks, and replenishes stores is based on lean applications. • Multinational giants GE and Airbus also have launched lean efforts at their Spanish units. • Small and medium-sized companies led by entrepreneurs and visionaries have embraced lean. • Overall, lean awareness in the country is quite low. lean Manufacturing in World

9. Lean Manufacturing in Poland • Industrial Companies across Poland are pursuing lean transformations, including automotive, chemical, medical device, and low-volume/high-variety manufacturers, according to Tomasz Koch and Tomasz Sobczyk at the Lean Enterprise Institute Poland. • The service industry is starting to show interest in how lean systems could boost competitiveness, especially the banking, telecommunication, financial, and information technology sectors. • The best practices may come from the automotive industry as some car manufacturers and their vendors work hard on implementing lean principles. lean Manufacturing in World

10. Lean Manufacturing in Poland • Lean concepts are being widely spread through training, university courses, articles, professional papers, conferences, and translated books. • Still, Polish lean thinkers report struggling with the same obstacles faced by the lean community globally, including: • Lack of management involvement. • Expectation of quick financial gains, primarily from reduced labor costs. • Emphasis on implementing tools instead of a complete lean business system. • Pushing inventory back to suppliers. • Use of traditional accounting and performance measurement systems. lean Manufacturing in World

11. Lean Manufacturing in Germany The Lean Management Institute Germany estimates that just 10~15% of all German companies are pursuing lean transformations. “This is mainly due to a bad translation of the English word “lean” a decade ago that led to a public misunderstanding of lean methods as targeting headcount reductions and putting more pressure on employees,” says Bodo Wiegand, institute president. The misunderstanding is changing as more and more examples of successful lean transformations are presented at conferences, in training programs, and in the German media. lean Manufacturing in World

12. Lean Manufacturing in Germany • Manufacturers are applying lean to improve efficiency, quality, and the stability of processes, not only in production but in administration and maintenance. • Service companies are starting to apply lean concepts, particularly in insurance and facility management providers. • Some hospitals are taking their first lean steps, notes Wiegand. A key obstacle to lean transformations in Germany: The traditional organization of companies, which tend to have very strong vertical organizations. Top-level managers, with their typically strong technical or engineering backgrounds, often get deep into details of products and production issues. “To become successful lean leaders, German managers might have to adopt new forms of closer cooperation with their employees to create true lean organizations,” says Wiegand. lean Manufacturing in World

13. Lean Manufacturing in Mexico M. Bednarek and L.F.N.Luna had surveyed 24 small and medium manufacturing enterprises in Mexico. The Selected Problems of Lean Manufacturing Implementation in Mexican SMEs, International Federation for Information Processing, 2008, V257, pp.239-247. The findings of their research are: a)The Lean Manufacturing is the concept developed in Toyota and it seems difficult to implement it in Mexican SMIEs because of different organizational and social culture of Mexican enterprises and labor. b)The concepts related to lean manufacturing have been frequently misunderstood in Mexican enterprises because of poor employees training and educational program. lean Manufacturing in World

14. Lean Manufacturing in China In our opinion, manufacturing in China is at a crucial crossroads. If the wrong path is chosen, Chinese manufacturing will find that they no longer have a competitive advantage in attracting foreign investment and continuing to build a base for global manufacturing. Jeffrey K. Liker, Principal of Optiprise, Holland, Ml. Also, he is author of The Toyota Way (2004). David P. Meier, President of Lean Associates Inc. Lexington, KY. He is co-authors of The Toyota Way Fieldbook (2005) and Toyota Talent (2007). Globalization and international capital flow have spawned manufacturing opportunities in many competing countries. Countries such as China which have benefited from low labor rates in the past will find it more difficult to retain and entice new companies. lean Manufacturing in World

15. Lean Manufacturing in China We have seen a similar trend in the past, as manufacturers sought low labor rates in Mexico and other countries. The US-based companies would typically move a poor process across the border, and then have an operation with lower cost, but not better performance. It appears that the same trend is occurring in China. The labor hour content in the Chinese factories we have visited seems to he about 2-3 times that of similar companies in the US, but even with the additional labor content, the total labor cost is lower than in the US. If we add on other costs such as poor quality, costs of transportation, and difficulties in the supply chain, we would see that the cost advantage is further diminished. lean Manufacturing in World

16. Lean Manufacturing in China If China is to remain competitive, it must learn to provide benefits greater than just low-cost labor. Mexico has never learned to be globally competitive, and long ago lost its labor cost advantage to China and a host of other countries. Chinese manufacturers would he wise to review the situation in Mexico as a case study. Chinese manufacturers must decide either to compete only on labor rate, which is a sure road to nowhere, or to improve process capability and make sustained efforts to adopt Toyota Production System (TPS) lean manufacturing principles. lean Manufacturing in World

17. Lean Manufacturing in China A colleague noted that at a recent lean conference there were no companies presenting case studies that had been on the lean journey for more than two years. lean Manufacturing in World

18. Lean Manufacturing in China Chinese companies are not so much implementing a true lean process as they are chasing a quick victory and an easy path to success. What they end up with is a facade — the appearance of a strong process, but below the surface there is no substance. We see Chinese companies pushing to “get lean” and wanting to show off their workcells or single-piece flow, but beyond the initial effort there is no significant improvement or change. There seems to be quite a bit of misunderstanding—in China and elsewhere—about what it means to “be lean.” lean Manufacturing in World

19. Lean Manufacturing in China An organization that is pursuing lean is constantly improving the performance of the business in terms of safety, quality, productivity, cost, and delivery, in ongoing incremental steps, in such a way as to provide the greatest benefit overall to the customers, the company, the employees, and the community. lean Manufacturing in World

20. Lean Manufacturing in China As Toyota Chairman Fujio Cho explained in a speech in February 2006: “The soul of the Toyota Production System is a principle called Kaizen—its essence is the notion that engineers, managers, and line workers collaborate continually to systematize production tasks and identify incremental changes to make work go more smoothly.” lean Manufacturing in World

21. Lean Manufacturing in China • There is no such thing as “being lean.” All organizations, including Toyota, are simply attempting to become leaner by continually eliminating waste. • An organization is not considered to be lean if they have single-piece flow, if they are using kanban, if they do single-minute changeovers, or even if they have zero inventory. These items simply indicate use of a tool or performance on an internal metric, but the concept of continuous improvement mandates that any level of improvement is only one step on the path to the next improvement. • When we evaluate a company, we must consider whether the philosophy of waste reduction has reached the innermost circle—the individuals. If the lean effort is still directed by management, a key portion of a lean system is missing. • The organization must have a systematic method of driving continuous improvement. lean Manufacturing in World

22. Lean Manufacturing in China Chinese managers would be wise to adopt a different view of employees: they are the greatest strength in the organization not the cheap worker. On the lean journey, we must always consider whether people are increasing in their capabilities. Are they becoming more skilled at managing their operations? Are all members focused on improvement and the elimination of waste? We have to look around the organization and consider whether we see signs of employee growth. If an organization is having difficulty advancing the lean results or sustaining them, it is a good bet that the people are not capable of handling the new challenges. lean Manufacturing in World

23. Lean Manufacturing in China Toyota has a very clear understanding and fundamental belief in the value of people. They understand that only people and systems set any company apart from other com- panies. Toyota understands that the real power of people lies within their thinking ability. The ability to think effec- tively and to approach the process in a systematic (inten- tional and deliberate) way will ultimately produce desired results. Effective thinking produces understanding. Understanding and action produce correct results. Continuously producing correct results will, in the end, produce incredible capability. lean Manufacturing in World

24. Lean Manufacturing in China we define Toyota’s management systems in terms of four levels—referred to as the 4P model. These are philosophy, process, people, and problem solving. These levels are defined as follows: • Philosophy—Long term investment in people and systems to add value to customers and society. • Process Eliminating waste from the core technical work activity of the organization that adds value through methods like pull and flow and standardized work. • People—Respecting people by continually challenging and developing them. • Problem Solving—Continuous improvement through root-cause problem solving and organizational learning. lean Manufacturing in World

25. Lean Manufacturing in China Carrot Metaphor A colleague has defined TPS as being like a carrot. What we see on the surface is the leafy green stuff that looks nice and tempting, but what we really want is what is below the ground. This is where the good part is. It is not possible to get to the carrot unless we dig it up. It is dirty and messy work, but what truly good thing has ever come without effort? The lean tools and other things, like measurements and value stream maps, are all part of the attractive and tempting carrot greens. We are suggesting that Chinese companies pursue the real meat of the carrot rather than just the tempting surface greens. We advise digging deeper into the development of a lean system, and understanding the context of the lean tools within a system. lean Manufacturing in World

26. Lean Manufacturing in China Basic requirements to implement the lean • Equipment must run properly and produce quality products. • Workers must be trained precisely and must have multiple skills, so they can go to where they are needed. • Materials must arrive on time. • Suppliers must also be capable. • It is simply not possible to operate Toyota’s system with weakness in any area. This photos is from Caterpillar’s Asia Trak facility in Tianjin, China, where lean efforts are leading to operational improvements. lean Manufacturing in World

27. Lean Manufacturing in China Carrot Metaphor A colleague has defined TPS as being like a carrot. What we see on the surface is the leafy green stuff that looks nice and tempting, but what we really want is what is below the ground. This is where the good part is. It is not possible to get to the carrot unless we dig it up. It is dirty and messy work, but what truly good thing has ever come without effort? The lean tools and other things, like measurements and value stream maps, are all part of the attractive and tempting carrot greens. We are suggesting that Chinese companies pursue the real meat of the carrot rather than just the tempting surface greens. We advise digging deeper into the development of a lean system, and understanding the context of the lean tools within a system. lean Manufacturing in World

28. Lean Manufacturing in China Jeffrey Liker and David Meier’s Comments to Chinese Companies: • Must learn to compete in areas other than labor cost. • Must be known for developing people who can design and produce superior products. • Must be known for servicing customers promptly and without mishap. • Must take a position on the world stage as being a clear choice for manufacturing operations over other countries. • Must not duplicate the mistakes passed on from US and European companies. • Must decide to pursue the development of a systematic method of driving continuous improvement in their operations. • Must pursue the challenge of becoming lean. • Chinese companies need to get it right to ensure long-term growth and strengthening of the competitive base. lean Manufacturing in World

29. Lean in United States Multiple companies beyond the automotive industry have tried to replicate the success of TPS. Some have achieved this, and even Toyota would say some have surpassed its success. Most companies have focused on lean manufacturing and the fundamental tools that are included in the lean toolbox, such as 5s, visual controls, standardized work, problem solving, and many more. They have conducted thousands of kaizen events in their facilities, which improved quality, productivity, and cost. However, many more have failed and spent a lot of money with little to no benefit. lean Manufacturing in World

30. Lean in United States The Detroit Three - Chrysler, Ford, and General Motors The Detroit Three have invested time and money to train both hourly and salary team members in lean concepts. Through these efforts, the companies have dramatically improved their initial quality to near parity with Toyota and, in some cases, surpass it. US automakers also have reduced labor inefficiency, achieving better productivity than some of their competitors through the implementation of lean manufacturing. lean Manufacturing in World

31. The Detroit Three - Chrysler, Ford, and General Motors • GM has made the most progress, driving a common, global implementation of lean while sharing best practices. The maturity of its plants’ lean execution rivals Toyota plants around the globe. • Chrysler has made significant development as well, given that many Chrysler leaders came from GM and were some of the early implementers of lean. Chrysler is moving quickly at all plants, and is achieving huge cost savings. • Ford, which launched the Ford Production System in the mid-1990s, struggled early with execution at the plant level, but has recently made progress in its facilities. lean Manufacturing in World

32. Arrogance, Culture Barriers Limit Detroit Three • Detroit Three are still significantly behind companies like Toyota in the most critical metric - profitability. In 2006, depending on which of the Detroit Three you look at, Toyota was $2000 to $4000 more profitable per vehicle. A significant portion • Discrepancy attributes: • The legacy issues including retiree health care, pension costs, and certain union-negotiated items such as the Jobs Bank and Supplemental Unemployment Benefits. • The culture of a company. • The culture of the Detroit Three and many suppliers has been one of arrogance. lean Manufacturing in World

33. Arrogance, Culture Barriers Limit Detroit Three The reward system of Detroit Three Traditionally, product engineers were rewarded for designing and developing unique components. This was how they achieved their next promotion and bonus. Over the years some great vehicles and features were developed, but at high costs. Additionally, people have been rewarded for success within their own business silos without regard to how that success impacts other areas of the organization. The reward system of Toyota in contrast, is based on teams. Each new program includes a cross-functional team of people. If any one area optimizes business at the expense of another, no one is rewarded. They are charged with solving the problem to the benefit of the cross-functional team. lean Manufacturing in World

34. References • Society of Manufacturing Engineers, Lean Manufacturing 2007, Supplement to Manufacturing Engineering, 2007. • Society of Manufacturing Engineers, Lean Manufacturing 2008, Supplement to Manufacturing Engineering, 2008. • Charles M. Parks (2003), The Bare Necessities of Lean, IE Industrial Engineer, 35(8), 39-42. • http://www.strategosinc.com/lean_manufacturing_history.htm lean Manufacturing in World