The Management of Lean and Agile Organisations - Assignment Example

Lean Manufacturing 0 Executive Summary Modern business organisations are striving to attain competitive advantage in whatever they do. It is betterto say business environment does not allow them to keep themselves away from the hurriedness of the present day competitive market. One of such areas where the organisation can accomplish competitive edge is the production system. In fact, production is the crucial operations of a firm as it determines the quality of product and eventually the existence of the firm. Lean is a nascent technological development; which aims at full resource utilisation and minimisation of wastages. In this context, the present paper discusses the various features of lean production system and its related literature. The paper takes a descriptive approach where in the present lean manufacturing system is discussed in detail. Also an effort is made to compare the lean and mass manufacturing system. 2.0Introduction Mass manufacturing and distribution were considered ideal business strategies in the past. In those days, business organisations produced large amount of products with standard quality fixed by them. The products in large quantity were also supplied through the mass distribution system. These strategies were found practical and economical in times when production oriented business operations and economies of scale is the barometer of business success. However, these seem to be inefficient and unsuccessful in the modern business environment where products are being produced and distributed keeping in view the interests of ultimate customers. In the modern philosophy of marketing management and the era of customer relationship management (CRM), business operations are carried out more in conformity to the needs and tastes of customers than the economics of business operations. The main argument brought about by the advocates of lean manufacturing system is that mass production results in huge wastage of resources, mainly material and equipments and it needs huge investment in inventory, which is 3.0 The Rationale, Evolution, and Future of Lean Manufacturing Mass manufacturing and distribution were considered ideal business strategies in the past. In those days, business organisations produced large amount of products with standard quality fixed by them. The products in large quantity were also supplied through the mass distribution system. These strategies were found practical and economical in times when production oriented business operations and economies of scale is the barometer of business success. However, these seem to be inefficient and unsuccessful in the modern business environment where products are being produced and distributed keeping in view the interests of ultimate customers. In the modern philosophy of marketing management and the era of customer relationship management (CRM), business operations are carried out more in conformity to the needs and tastes of customers than the economics of business operations. The main argument brought about by the advocates of lean manufacturing system is that mass production results in huge wastage of resources, mainly material and equipments and it needs huge investment in inventory, which is always prone to the risk of obsolescence. The idea of an alternative manufacturing system was seriously thought about in times of resource shortage which became acute immediately after the World War II. The countries across the world were confronted with the problem of resource shortage in general and Japan in particular. This inspired the Japanese manufacturers to contemplate about the concept of ‘lean manufacturing’. The idea was first originated from the production plant of Toyota Motor Company when the then company’s president Toyoda along with other two, namely Shigeo Shingo and Taiichi Ohno contemplated about a unique production alternative to come up with a solution to the ever increasing problem of resource shortage. Therefore, the system was later come to be known as Toyota Production System. The system developed during the period between 1945 and 1970 became popular across countries later on and now used as the most sought after and improved production system across industries and countries all over the world (Shingo 1997). The system is now known under the nomenclature ‘lean manufacturing’. The concept of Lean Manufacturing was seriously applied in the manufacturing sectors of the United States of America after a significant study in this respect undertaken at Massachusetts Institute of Technology as documented in a book entitled ‘The Machine That Changed the World’ (Womack et al., 1990). Lean manufacturing is a production system by which the entire manufacturing operations of a business organisation are to be aligned in such a way that wastages of all kinds are at minimum, operations are fast, more dependable, higher quality products and services and above all operations at a lower cost. It is the result of a new way of thinking in manufacturing operations and not just a method of operations. Lean thinking or lean philosophy of marketing answers an array of introspecting questions that many of the big organisations have been confronted with for decades. These questions include how fast can we deliver the best? Are the systems productive? Which procedures are `unwanted? Can we eliminate non-value adding steps? What actions require improvement? Did we attain `zero-waste, zero-defect everywhere? How efficient are our human resources? Are we reinventing cycles? Is the inventory idle? When an organisation finds answers to all these questions with commitment, the organisation could be successful in its efforts to invent a new productive enterprise. This kind of inward tendency that leads a firm to be productive and keep away from wastages of all kinds is commonly referred to as lean or lean thinking. Lean manufacturing is known by different names such as Zero inventory production, stockless production (Hewlett Packard), material-as-needed (Harley-Davidson), continuous flow manufacturing (IBM), and management by sight (GE), and Toyota Production System (TPS), which is the most admired lean manufacturing system. Lean manufacturing is no longer confined to the shop floor. The scope of this philosophy will go beyond the manufacturing spheres such as new product development, purchase, financial accounting and management, people management, logistic and supply chain management etc. It has now become improved in such a way that finds place in areas and developed concepts such as lean product development, lean accounting, lean distribution, lean supply chain, etc. This essentially implies that we are now in a position to completely transform an enterprise from traditional enterprise to lean enterprise. The development in information and communication technologies and improvements in production techniques such as six-sigma will accelerate the pace of development of the system in the coming days. 4.0 Discussion 4.1The differences, using examples, between Lean and Mass Production strategies The distinction between the two production systems can better be understood from the discussion of the areas where lean system concentrates and mass system lags behind. Lean manufacturing system emphasis on the following: Overproduction; Inventory; and Defects; 4.1.1 Overproduction This constitutes the largest of all waste under the mass system of production. Mass system produces more products than actually required at a particular point of time. This is eliminated by the lean system wherein the quantity required at any time point is well estimated and communicated to the production department so that production process can be aligned in response to the customers’ requirements. For example, producing items for which there are not orders, which generates such wastes as overstaffing and storage and transportation cost because of excess of inventory. 4.1.2 Inventory Inventory can be in different forms such as raw materials, work-in-progress and finished goods. Any inventory in excess of the required limit is a waste of money, time and place. Moreover, human efforts are also spent for maintaining and preserving inventory, particularly when they are in finished form. Excess raw material, WIP, finish goods causing: longer lead times, obsolescence, damaged goods, transportation and storage cost. It also hides problems such as prod imbalances, late deliveries, defects, equipment downtime & long set-up times. 4.1.3 Defects This includes pproduction of defective parts, rework, and scrap. This also forms a major element in the total waste. The reasons attributable to such defects are training inadequacy, lack of strong process control, poor maintenance and preservation of machineries and equipments. 4.2 The organisational, operational and human barriers that may need to be overcome in order to ensure a successful implementation of the Lean manufacturing strategy(Please note Appendix 1) 4.2.1 Operational Adjustment It is an exceptionally challenging and quite difficult task for a firm that has traditionally been following a mass production system to convert itself into a lean organisation. It becomes more difficult especially when the reward from such a transformation is greater than the risk involved. The main areas to be taken care of in the process of transformation of the production system include operational barriers and human interventions. The organization needs to change itself in creating a platform for implementing the system and most importantly organization’s climate and changing peoples mindset and culture is an area of utmost care. The most dangerous thing for the implementers is that they mostly confuse at what is to be aimed, where it is to be started and how it is to go about. One can have a clear and exact picture of the lean principles and it implementation procedures only when he is blessed with sheer vision and foresight. In addition, the most important thing is the firms to develop a learning culture. The key personnel need to spend a lot of their time in learning and training lean principles and practices. Organisation that aims at transformation of production system from mass system to lean system cannot achieve the result overnight. Rather it is a continuous journey that requires the efforts and help of many in and out of the organization. Not all people in the organization may support the system change as their comfort may also get affected on account of such a cost reduction procedure. This calls for a fundamental adaptability by the organization itself in its social system before any stage/step is improved. In this respect, it may also be treated as a strategic move which needs a thorough change. Therefore, extraordinary leadership qualities with proven expertise, vision and persistence is critical and forms one of the pillars of successful lean implementation. It has been observed that only a few leaders could manage the lean program successfully. Toyoda was committed and consistently emphasized on lean principles to transform Toyota into lean enterprise. Though the principles of lean seem simpler to comprehend, it is very difficult for the managers to integrate the lean operations into their daily managerial activities. In fact, a true lean system change is started with learning and understanding the lean tools, which often are quite difficult for many to adjust with. 4.2.2 HR and Culture It is undoubtedly say that the entire organization has to adapt itself to the changing needs of the organization that demands lean system. However, the role of human resource is crucial. The participation of human resource and their commitment are vital to sustain the momentum and accelerate lean implementation efforts. Thus, HR department has a crucial role to play in transforming and making the entire human resources to get their support and full potential. The department is responsible to undertake the process of using the human potential for the successful transformation efforts. This necessitates a better organizational climate that can ensure a steady flow of activities. As mentioned already, a strong organizational culture, better team work, long term persistence, continuous learning, effective communication and measurement are indispensable elements among the members of the organization. All these necessitate the presence of a strong belief among the organizational members in lean principles. It is known that if the firm gets immediate result in transformation, the people lose their faith in the principles and as a result they may abandon their efforts. This calls for the attention of the key players like CEO to monitor and keep them confident of the fruitful results of the lean system. The key personnel should try to apply `bottom-up lean ideas instead of `top-down initiatives because it is more convenient and effective for lean opportunities to exploit. In addition, the first group who is exposed to operational difficulties, delayed performance, idle resources and unnecessary steps, is the bottom-line people. 4.3 Discussion section expressing your personal opinion of the approach and the practicality of its implementation in your company, or another company of your choice (Please note Appendix 2) The following sections discuss the procedures and actions that an Electronic Manufacturing company should undertake to implement lean system successfully. (Please name an electronic manufacturing company of your choice). As the first move towards the lean transformation, the company is proposed to incorporate the following features in the existing production system: Reduction in suppliers base; Proximity to Suppliers; Inventory reduction (including raw material); and Frequent delivery in small quantity 4.3.1 Reduction in Suppliers Base Already the company had a total of 25 suppliers to supply around 46 components/raw materials. This has to be reduced first to attain the target suppliers in the lean system. Lean philosophy proposes to reduce the supplier’s base as the initial move to the direction of lean system implementation (Wafa et al., 1996; Swanson and Lankford, 1998; Dong et al., 2001). It is recommended that the reduction can go up to a level which the firm finds comfortable and thinks fit to ensure uninterrupted supply of materials/ components. The reduction in the number of suppliers will improve the quality of relationship between the firm and the suppliers. Moreover, effective communication about work order information, or any changes can also take place more frequently and successfully when there are manageable number of raw material sources. It is also possible to reduce the paper work as a result of eliminating the unwanted suppliers (Swanson and Lankford, 1998). 4.3.2 Proximity to Suppliers As remarked by L. R. Khan and Sarker R. A. in their work ‘An Optimal Batch Size for a JIT Manufacturing System’ the firms ant should be located near to the suppliers (Khan and Sarker 2002). It is possible in this context that the firm has to select and maintain suppliers who are in proximity to the firm’s plant to ensure immediately delivery at convenient lots. The lean system needs the timely availability of material at convenient lots so as to ensure that no too much of inventory is blocked in the warehouse. Therefore, it is proposed that each firm in the lean system will have its supplier distribution centers close to its production plants (Jina, 1996). 4.3.3 Inventory Reduction The new system also alerts the purchase manager to rethink about investment in inventory. It advocates that investment in inventory is found unnecessary when it is more than what is actually required. This requires a detailed analysis of the production system and estimation of the required quantity of material necessary at any point of time. According to C. O. Brien and Head M. (1995); and S. Wang and Sarker B. R. (2006) that lean system is designed to eliminate the need to hold items in inventory and the stock levels in each stage should run ideally to zero or as low as possible Brien and Head (1995); and Wang and Sarker (2006). It allows the operations more responsive to one another and interdependence among the operations is intensified (White and Pearson, 2001). As observe by C. Claycomb, Germain R and Droge C that lean manufacturing is inversely related to inventory levels, i.e., the higher is the extent of lean system the inventory levels necessary will be minimum (Claycomb et al., 1999). With this in mind, the firm has reduced the inventory level so that minimum investment is held in the form of inventory. 4.3.4 Frequent Delivery in Small Quantity Small-lot-size purchase enhances the firm’s productivity by virtue of low level inventory, scrap, and early detection of defects. This has been evidenced by research studies. In a recent study undertaken by a group of researchers, namely John B Kidd; C. O. Brien and Head M.; A. Das and Handfield R. B., the authors have extensively studied frequent delivery in small lot size as a means of implementing successful lean purchasing with the buyer-supplier coordination focusing on material flows, with an objective of minimizing the supply chain costs (Kidd, 1995; Brien and Head, 1995; Das and Handfield, 1997). In addition, in the repeated purchases and deliveries, the firm needs to invest too much in warehousing and receiving areas. This will further reduce the holding charges and improved efficiency in the entire production system. Conclusions On implementing the various lean purchasing plans mentioned above (i.e., reduction in suppliers base; suppliers proximity to manufacturers; raw material inventory reduction; and frequent delivery in small quantity, etc.) it has been observed that the company could achieve a lot of savings and a lot of savings not only in terms of money, but efforts and resources as well. Some of them are the controlling cost of the components/raw materials, manufacturing cost per unit, and total cost, etc. Recommendations The present study of the purchasing aspects of lean manufacturing in the electronic manufacturing firm focused mainly on the purchasing problems of the material and other components. However, the study has not taken into account factors such as price discount, etc., on bulk supply; which could have also an impact upon the selection of a particular supplier irrespective of proximity or any other favorable factor. Also, it is possible to incorporate financial and other intangible gains. Further, an attempt can also be made to better investigate into the web-based purchasing approach, which is increasingly becoming popular. Appendices 1. Product-Aligned, One-Piece Flow, Pull Production 2. Functionally-Aligned, Batch and Queue, Mass Production References and Bibliography Brien C O and Head M (1995), ‘Developing a Full Business Environment to Support Just-in-Time Logistics’, International Journal of Production Economics, 42, 41-50. Claycomb C, Germain R and Droge C (1999), ‘Total System JIT Outcomes: Inventory, Organization and Financial Effects’, International Journal of Physical Distribution & Logistics Management, 29: 10, 612-630. Das A and Handfield R B (1997), ‘Just-in-Time and Logistics in Global Sourcing: An Empirical Study’, International Journal of Physical Distribution & Logistics Management, 27: 34, 244-259. Dong Y, Carter C R and Dresner M E (2001), ‘JIT Purchasing and Performance: An Exploratory Analysis of Buyer and Supplier Perspectives’, Journal of Operations Management, 19, 471-483. Jina Jay (1996), ‘Automated JIT-based Materials Management for Lot Manufacture’, International Journal of Operations & Production Management, 16: 3, 62-75 Khan L R and Sarker R A (2002), ‘An Optimal Batch Size for a JIT Manufacturing System’, Computers & Industrial Engineering, 42, 127-136. Kidd John B (1995), ‘Subcontractors, JIT and Kanbans: A Brief Review of Spring Manufacturing in Japan and South Korea’, Integrated Manufacturing Systems, 6: 6, 15-22. Shingo, S. (1997) A study of the Toyota production System from an industrial viewpoint, Cambridge, Productivity Press Swanson C A and Lankford W M (1998), ‘Just-in-Time Manufacturing’, Business Process Management Journal, 4: 4, 333-341. Wafa M A, Yasin M M and Swinehart K (1996), ‘The Impact of Supplier Proximity on JIT Success: An Informational Perspective’, International Journal of Physical Distribution & Logistics Management, 26: 4, 23-34. Wang S and Sarker B R (2006), ‘Optimal Models for a Multi-stage Supply Chain System Controlled by Kanban Under Just-in-Time Philosophy’, European Journal of Operational Research, 172: 1, 179-200. White R E and Pearson J N (2001), ‘JIT, System Integration and Customer Service’, International Journal of Physical Distribution & Logistics Management, 31: 5, 313-333. Womack, J.P., D.T. Jones and D. Ross (1990), The Machine That Changed the World, Macmillan Publishing Company, Canada Read More