Lean manufacturing’s oversized claims

After the consultants leave, savings quickly evaporate. Are you just putting your business on a fad diet?

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Photo: Monty Rakusen/Getty

Is lean manufacturing a crock? A snapshot of companies using various process improvement schemes to claw their way out of the recession raises that possibility.

In September, New York–based management consultancy AlixPartners LLP released a survey of executives at more than 100 manufacturers that had started lean-manufacturing initiatives over the previous two years. The results were disappointing, to say the least. Nearly 70% said they’d failed to cut costs by 5%, the researchers’ minimum benchmark for productivity improvements to be deemed successful. Moreover, most of those polled admitted that any savings were temporary. Just 13% managed to sustain three-quarters or more of the previous year’s savings.

And yet the respondents to the survey still sounded drunk on the Kool-Aid: 91% considered their re-engineering efforts to be effective.

That wasn’t the only hint of a disconnect between perceptions and reality. The Shingo Prize for Operational Excellence—named after Shigeo Shingo, the architect of the vaunted Toyota Production System—is awarded annually to companies that successfully implement supposedly universal quality, productivity or other management standards, from Six Sigma to Total Quality Management. AlixPartners determined that, three years after receiving the prize, the recipients posted revenue growth and gross profits on par with or weaker than their corporate peers.

“Most continuous-improvement initiatives focus too much on implementing a particular ‘checklist’ of program tools and processes, rather than on basic execution,” concluded Steve Maurer, managing director and leader of AlixPartners’ manufacturing practice. Traditional lean and Six Sigma programs may inspire a company to improve one step in the process, he says, but the momentum is seldom sustained.

That will come as a surprise to a lot of devotees. Lean manufacturing became popular over the past decade as companies sought to replicate the Toyota model that helped make the Japanese automaker the world’s largest. Like that prototype, lean adherents strove to maximize efficiency and minimize waste in the manufacturing process so that quality went up even as costs went down.

In the United States, Motorola developed its own system known as Six Sigma, referring to an efficiency goal achieved when the number of defects sinks to 3.4 for every million finished products. Like Toyota’s, the program borrows martial-arts terminology; people trained in Six Sigma earn such credentials as “green belts” or “black belts” that make them sought after as in-house managers or outside consultants. The tao of lean has even spread from goods production to service industries such as insurance and public administration, and a parade of management systems with names like Kaizen, 5S and Value Stream Mapping embrace and refine its tenets. The lean principle of continuous improvement, meanwhile, helps fuel an ongoing demand for lean expertise.

“Coming out of the recession, those [manufacturers] that didn’t get on the bandwagon are getting on the bandwagon,” says Henry Zupanc, a management consultant based in London, Ont. “Companies are finding out all their competitors are using this.”

There’s a growing backlash against such one-size-fits-all management systems, however. Critics characterize them as the fad diets of the corporate world. Too often, employees fail to buy in to new programs thrust upon them by zealous managers and consultants who seldom stick around long enough to see the results.

The criticism has been especially fierce against newer iterations of “lean service” and “lean health care,” said to be stress-inducing, dehumanizing and vulnerable to catastrophic breakdowns. Commentators such as BNet’s Matthew DeBord blamed lean thinking for the automotive industry’s supply-chain disruptions in the wake of Japan’s earthquake and tsunami last March. The AlixPartners survey has just added statistical credibility to these complaints, casting doubt on lean’s upside.

Jason Fleming is a believer in lean. That’s a prerequisite in his job as manager of innovation and continuous improvement at Edmonton-based All Weather Windows. Nonetheless, he can see where some of the criticisms are coming from, as well as how companies can go wrong implementing the lean mindset.

In 2005, All Weather decided to adopt a lean manufacturing system. The private company brought in two consultants, both alumni of IBM (an early convert to lean) and developed an in-house “lean team” (which, with 30 members, “was not so lean,” Fleming chuckles). Days often started with so-called gemba walks (after the Japanese word for “real place”) around the production floor, during which staff involved in health and safety, maintenance, purchasing, shipping and quality assurance could get an update on back orders and machine downtime, all the while looking for ways their departments could add value to the core activity of the business. The production process itself was mapped, re-mapped and relentlessly measured. Instead of sending pieces out of sequence down a production line, workers now focused on single products in batches. The shop floor became cleaner­—no more piles of window frames and doors lying around.

“There were efficiencies in quality and output” from the outset, Fleming says. But the company owners were not satisfied. The improvements were limited to a single line at a single plant, and not all employees were on board. An improvement on the factory floor might get cancelled out by the way shipping worked. “If you just work on efficiencies in an already efficient system, you’re just moving the bottlenecks around,” Fleming says. All Weather would soon acquire a second plant in Mississauga. It also wanted to integrate lean with its distribution system—indeed, throughout the company.

So the company went back to the drawing board. It rebranded and reorganized its multi-disciplinary lean team into a dedicated “smart operations” department. It spent time soliciting ideas from line employees and supervisors. It brought in outside consultants only occasionally, to solve specific problems, and sent its own managers to the University of Kentucky to train with people who had worked at Toyota.

But at the same time, the company was learning that it had to come up with its own definition of lean. Instead of producing huge volumes of standardized products like Toyota does, All Weather was a made-to-order manufacturer serving builders, each with different demands. Further, the Japanese production models were designed for a monocultural environment, Fleming says, whereas his company boasts some 40 different native tongues and 60 nations of origin among its workforce.

“It’s been a lot of trial and error,” he says. “We’ve taken pieces here and there and put together what works for All Weather Windows.” The firm tries to avoid using lean jargon like kanban (referring to the ubiquitous signage that tells employees how fast their core operations are running). It adheres to the spirit of lean, along with a few widely used tools such as the gemba walks, rather than any trademarked system like Kaizen or Six Sigma. “That’s the only way to do it, honestly,” says Fleming.

His advice to other companies considering getting lean is, first, don’t simply implement it top down. “[Employee] engagement is a huge piece,” he says. That doesn’t just mean training and getting input from line staff. It includes having the CEO, president and vice-presidents turn out for gemba walks to show supervisors this isn’t just something dropped in their laps.

Second, adapt lean thinking to the kind of work you do; don’t just copy Toyota or IBM. Finally—and this either discredits or willfully ignores studies like that by AlixPartners—don’t make it about targets. Technology, markets and competition constantly change, and higher output on one line is nothing to celebrate when worker turnover is soaring. “There’s no end goal. It should be continuous improvement,” Fleming says.

Dwayne Mathers, who heads up Deloitte Canada’s lean practice from an office in Kitchener, Ont., came to the discipline from the quality movement and feels a sense of déjà vu with the backlash against lean. “All the things we’re hearing about lean today we heard about ISO 9000 years and years ago,” he says. “But I sense what’s making quality programs successful will be the same things that make lean programs successful over the long run.” Those factors include putting a person or people in charge of the initiative within the organization, making it a “significant management function” reporting to the CEO or COO, making the managers accountable, and giving them the capital and people needed to undertake myriad small improvement projects.

It’s also important that companies determine beforehand what they want to get out of a lean program. Mathers and his team focus on four performance indicators: lead time (from order to delivery), productivity (person-hours per product or service rendered), quality (incidence of defects or variations) and human development (how committed employees are to improving the process). “It’s all those factors together” that should be the measure of whether a lean program works, he says. “If you start from the position that this is all about cost reduction, that’s almost always where lean programs fall down.”

Lean’s critics will call that a dodge, of course. Because, for all its emphasis on measuring efficiency, lean is more a philosophy—some might say a religion—than a method for achieving certain results. You either believe in it or you don’t. “Companies that are doing it well believe in it,” says Zupanc, who comes down on the side of the faithful. “It’s part of the culture.”

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