Author and researcher Richard J. Schonberger, Ph.D. analyses why lean fails at a supply level and how organisations can change this expensive and time-wasting cycle by embracing the third line of lean.
The effective implementation of lean progresses along three major pathways. One, the lean core, is widely employed. The second, lean in supply and distribution, is treated separately and, in comparison, employed weakly. The third, de-proliferation (DP), has scarcely been recognised at all as a route to lean. Yet DP can achieve much of the lean agenda all by itself though large-scale reduction of what the lean core and lean supply/distribution have difficulty in dealing with: diverse system elements: parts, stock-keeping units (SKUs), operations, tools and machines, suppliers and customers. Separately, the three lean pathways receive only flurries of executive-level interest, resulting in a lack of impetus and staying power. Corrective action calls for treating DP as a key route to lean, and promoting the three pathways jointly as a competitive force, centring on lean’s primary mission: quicker, more flexible, higher quality response all along the value chains to customers.
Lean’s primary purpose is customer-centred. It aims to deliver the customer a quick response with high quality, and flexibility in synch with changing demand patterns. Lean does its work by reducing lead times and throughput times, while exposing issues for timely correction. Lean harnesses the pull of demand from the final user such that it ripples back along the chain. That backflow embraces three major contributory stages: design, operations, and supply and distribution.
Trouble is, lean in operations gets more attention than lean in design and lean in supply/distribution. Research shows that, globally, supply is loaded with inventory, and distribution is loaded even more: logistics channels are fat, not lean. And lean in design – primarily a matter of de-proliferation as applied to products and productive resources – is scarcely recognised as a lean fundamental; if it were avidly pursued as such, main effects would be showing up as reduced channel inventories.
We should be treating all three stages of the value chain as primary, interwoven lean pathways. Without such well-linked inclusiveness, lean seems sure to continue as an initiative whose methods and competitive importance are seen by executives as worthy of only sporadic attention and involvement.
Three dominant lean pathways
Lean core: Centred on operations and related support, is made up of human and physical methodologies. Lean in human resources includes cross-training, job rotation, few job classifications, and operator-centred quality and maintenance. Lean as applied to physical resources includes, most prominently, cells, kanban, quick setup, small lots and containers, dock-to-line delivery, downsized/right-sized equipment, and point-of-use tools and materials. Being physical, the latter can be captured in before-and-after photos or film.
Lean supply and distribution: Lean in the external logistics channels features supplier certification, quality at the source, small lots, bar-code/RFID hand-offs and accounting, exact-count containers, and “milk runs.” In addition, advanced practices in supply-chain management (SCM) have emerged largely in the retail sector interfaced with manufacturers. Included are supplier-managed inventory, cross-docking, quick response, fast fashion, and intensive collaboration.
De-proliferation: DP is about reducing variety, as applied to part numbers, end-product SKUs, brands and models of machines and tools, suppliers, and customers. A well-developed aspect of de-proliferation is design for manufacture and assembly (DFMA). Following discussion, on the role of DP as a critical lean methodology and key to unlocking the potential of lean-driven competitive strategy, includes DFMA’s contributions.
De-proliferation doing lean’s work
Presume what we usually consider as basic lean methodologies (quick setup, cells and frequent small-lot deliveries) are unknown. Key results of those lean practices, however, may still be realised, because DP can, by itself, do much of lean’s work. DP does so through large-scale simplification and reduction of what quick setup are obliged to deal with: proliferating mixes of everything from component parts to product portfolios to customers.
Many companies never seem to seriously face up to growing complexity arising from proliferation. Others, for example, Nestlé USA do so, but irregularly; after years of inattention to multiplying options and models, suppliers and customers, someone in authority notices the resulting erosion of customer service and growth of costs, and charters a DP effort.
Instead of allowing proliferation to run free-rein for years before reacting, why not clamp down on it systematically and continually? One of the few companies that makes de-proliferation a continuous effort is Illinois Tool Works (ITW). ITW does so via its long-standing 80-20 strategy aimed at mitigating the variety of complexity factors plaguing nearly all organisations. So whether via 80-20, DFMA, or other means, DP disentangles convoluted flows that confound lean’s best intentions.
In general, the failure to see DP as basic lean stems from limited vision, both from the lean community and from the stalwarts of system/product/process design. While ITW takes a broad brush to DP through its 80-20 strategy, DFMA offers a well-established systematic methodology that, through communisation of component parts, bears directly on the lean core.
De-proliferation/DFMA and the lean core
It should be obvious why large reductions in parts and suppliers, with resulting quicker, simpler manufacture and assembly, should be seen as lean-elemental. A google search of lean and DFMA, however, brings up only a few linkages, none convincingly stated. Wikipedia says, “applying DFMA is to identify, quantify and eliminate waste or inefficiency in a product design. DFMA is therefore a component of lean manufacturing.”
The logic is weak. In focusing on wastes and inefficiencies, that kind of statement would apply to many management initiatives, dating back to the works of Frederick W. Taylor a century ago. To clarify why DP/DFMA, deserves a central place in the lean agenda, we need to probe lean’s core practices.
Consider a lean-manufacturing methodology, quick setup, and its relationship to DP/DFMA. Lean adherents see quick setup/quick changeover as lean’s primary method of delivering quick responses. That is because the typically outsized array of component parts and finished goods models resulting from conventional product design requires many time-consuming setup and changeover steps. Bruce Hamilton, former general manager, of United Electric Controls, implemented JIT/lean and explained why no amount of quick changeover was enough: “Through our use of SMED (single-minute exchange of dies) we reduced many lot sizes to one – but even for that one piece, we had to activate our entire production system.”
DP/DFMA to the rescue: design for manufacture (DFM), by standardising parts, reduces setups and related system activities. Design for assembly (DFA), by reducing a multi-part design to a single part, eliminates all changeover-related activities. Both reduce numbers of suppliers, deliveries, and transactions that accompany purchased materials.
DFM may result in libraries of standard features, readily usable in new applications. Such is the case at Gloucestershire-based Renishaw Plc: formerly hundreds of different tool assemblies were required to set up and produce its commonly ordered components; today, working out of its parts library, it only has about 70 different tool sets. Renishaw says it employs DFM not for cost but for lead-time reduction.
In another example, robotics manufacturer GE Fanuc applied DFM to more than 300 variously sized circuit boards, leading to 98% of them fitting into a standard length and width form. That and other DFM applications reduced setup times by more than 80%. Affected purchasing activities for the boards themselves would have been similarly reduced.
At the ultimate, DFM reduces a multi-part design to a single part, requiring no setup adjustments at all. In some cases a no-setup part may get its own production equipment – perhaps a fully-depreciated conventional machine that had been collecting dust or rust in off-site storage. Or, where the part is purchased, a single supplier with similar dedicated production facilities may realise the benefits. Whether made or bought, in re-rigging the facility to produce but one part – with zero setup and zero defects – no one cares if it operates but two hours a week.
Design for assembly takes a further step: changing the product’s design so it altogether eliminates certain parts. In cases where lean-though-DFMA eliminates the part, it far outperforms lean’s quick-changeover mode. Aside from that, DFA yields components common to multiple models, such that the need for changeovers in assembly reduces to products requiring special components.
Quick setup and changeover, however, is but one element of the lean core to which PD/DFMA does journeyman’s service. Others include cells and one-piece flow, kanban, and space reduction.
Cellular manufacturing – the factory-layout component of lean – takes a long step toward lean’s ideal of one-piece-flow. DFMA, in shrinking part counts, simplifies cell formation. At the same time it shrinks space to store, hold, and handle parts, simplifies circuitous transit routes, and does away with space-consuming storage, handling, and transport gear. Moreover, the low part counts favour kanban as an efficient way to deliver parts to the cells – from stores or directly from outside suppliers. In kanban’s role as a queue limiter, queues may sometimes go as low as one piece, that piece residing on single “kanban squares” within compact cells. In the ideal, enabled through DP/DFMA, there is room for multiple cells, each devoted to its own one-piece-flow component part or end product, each of which does the work of multiple part numbers prior to DP/DFMA.
DP/DFMA even has facilitating effects on an important aspect of lean accounting: reliably determining product costs. The explanation: It becomes simple to allocate costs to products when made from small numbers of component parts contained within short, simple flow paths; difficult and dubious when many parts and flow paths are involved.
De-proliferation and the external value chain
De-proliferation of parts/SKUs contributes as well, to the following SCM-related aims of lean: supplier reduction, local sourcing, and frequent, small-lot deliveries. DFMA attacks large varieties of purchased direct materials, and, even larger arrays of service parts, which tend to proliferate as product portfolios evolve. Both require sourcing from numerous suppliers, whereas small arrays, achieved through commonising, permit reduction of the supplier base. As the number of suppliers shrinks to a few essential, order volumes from each increase, sometimes to the point that a key supplier may elect to relocate next door. With shortened transport distances, suppliers no longer have reason to ship infrequently in full truckloads. That mode gives way to small-lot material-handling, and perhaps delivery daily or more often, just in time.
Lean/DP/SCM > competitive strategy > executive attention
An overriding problem with regard to lean is that executives tend to view its key elements divisively. That is, the three lean-value-chain components are treated as three separate initiatives, with responsibilities residing at lower levels of different functions. Compounding the problem, lean has long been burdened by being promoted in terms of eliminating the seven deadly wastes—which has a decidedly low-level ring to it. Waste elimination has a worthy role in lean, and is easily taught and applied at low levels. However, it is not lean’s essence.
Senior executives’ lives revolve around what they see as large-sized strategic issues. So it is natural for them to devote themselves to those and to delegate other matters: DFMA to design engineering, lean to operations, production portfolio to marketing, supplier development to procurement, and so on. This state of affairs is not the fault of the executives. Rather, it stems from narrow thinking in the greater lean/DP/value-chain community itself – such silo-thinking becoming ingrained upward and into the executive suite.
Correction centres on repositioning lean and its three major pathways to where they are, rightfully, seen as basics of competitive strategy; competitive because their primary purpose and positive impact flows through marketing and sales to customers; strategic because that impact is wide (three pathways leading in the same direction), and, if high-level support is there, enduring. We are persistently told that initiatives such as lean, DFMA, and SCM must be consistent with company strategy. Sometimes, however, strategic wisdom needs to swim in the other direction – from the improvement initiatives up the hierarchy to the top. Getting that wisdom moving upward requires all of us to modify all our materials accordingly.