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History of Lean

Henry Ford built the first continuous moving assembly line in the manufacturing of
automobiles (Simons & Zokaei, 2005) after the First World War which revolutionised
not only the automobile industry but also the manufacturing industry as a whole by
shifting from craft production into an era of mass production (Womack et al., 2007).
The interchangeability of components along with the ease of assembling the parts
made it possible to increase the product quality while cutting down costs significantly
(Womack et al., 2007).

After World War II, Japanese manufacturers found it difficult to make huge
investments required in rebuilding the facilities (Bhamu and Singh Sangwan, 2014)
and realised that the mass production method was not efficient as it would make
them inflexible to consumer demands due to the high inventory levels required, high
capital costs and over standardisation of the products (D Souza and Goud, 2014).
After years of research, Japanese engineers Taiichi Ohno and Shigeo Shingo
developed a concept called Toyota Production System (TPS) (Ohno, 1988) at Toyota
Motor Company which saw the small domestic automobile company rise to be one of
the top automobile companies in the world in a short period of time (Simons and
Zokaei, 2005). The term lean was popularised by James Womack et al. (1990) who
used the word to describe the TPS concept in comparison to the Western practice of
mass production (Samuel et al., 2015).

Lean Manufacturing / Management (LM)

Due to the evolution of LM over time and the disagreement of the characteristics
associated to lean, there is no clear definition of the concept (Bhamu and Singh
Sangwan, 2014). Lean can be an approach, a practice, a philosophy, a model, a
concept, etc (Bhamu and Singh Sangwan, 2014). In relation to mass production,
Womack et al. (1990) define lean as using less of everything half the human effort
in the factory, half the manufacturing space, half the investment in tools, half the
engineering hours to develop a new product in half the time. The driving principle
behind the concept of LM is the eradication of waste (Muda), which is defined by
Ohno (1988) as any human action that uses resources but produces no value
(Simons and Zokaei, 2005). The waste can be from overproduction; waste from
waiting inventories; waste from unnecessary transport; waste from waiting times;
waste from unnecessary motion; waste from unnecessary processes; and waste
from defected products (Simons and Zokaei, 2005).

The aim of using LM is to provide the customer with high quality products in a short
period of time efficiently by reducing waste (D Souza and Goud, 2014). LM has a
wide scope which ranges from operations management and total supply chain to
product development and market demand (Bhamu and Singh Sangwan, 2014). LM
has played a vital role in improving the business performances in United States since
the late 1970s (Emiliani, 2006). LM is critical for businesses in achieving long term
success as it aids in lowering costs, improving efficiency, increasing market share,
developing new services and products, etc (Emiliani, 2006). However, LM could
take time in implementing and lead to failure just like any other strategy despite the
obvious benefits (Fullerton & McWatters, 2002) therefore a careful and correct
approach is necessary in order to prevent having undesirable trade-offs and adverse
effects on the stakeholders (Emiliani, 2006). In spite of these issues LM has grown to
become one of the most widely known process improvement methodologies that is
continuously being mastered (Samuel et al., 2015).

Principles of LM

In order to become a lean enterprise, businesses should accept certain lean


principles and integrate them to their processes in a sequential manner (Simons &
Zokaei, 2005). This requires the use of various tools and techniques that may help
the company achieve LM (Simons & Zokaei, 2005). Unfortunately there are more
than a hundred lean tools with no methodical approach to relate the organisations
problems and the available lean tools (Pavnaskaret al., 2003). However, due to our
expertise in this area, we have identified the key principles of LM. The first principle
involves identification of customer value and the second is value stream which
comprises of mapping products from raw material to the end product and identifying
duplicate processes (Perez et al., 2010). The third principle deals with the removal of
waste to maintain a smooth production flow and the next one is synchronisation of
production according to the pull of customer demand while the final principle is the
continuous improvement of processes in order to achieve perfection (Perez et al.,
2010). The success of LM is achieved through a combination of practices and
processes such as Just-in-Time, Takt-time, Kanban, Jodoka and 5S with policies
such as total productive maintenance, Poka-Yoke, long-tem customer relationship
and transparency across the supply chain to name a few (Simons & Zokaei, 2005).

Even though Lean started in the automobile industry and mainly focused on
manufacturing companies in the early stages, it has spread to several other areas
such as services, trade and food processing (Leite and Vieira, 2015). Lean is
applicable to all aspects of a business and has improved business processes such
as production operations, design, product development and sales to name a few.
(Chappell, 2002). LM has also been influential in improving companies operational
performance regarding quality, cost and delivery (Dora and Gellynck, 2015). It is
argued that LM principles are difficult to implement in industries where production
happens in large batches (Kennedy et al., 2013) and only product chains that have
high volume, regularity and standardised demand can succeed (Perez et al., 2010).
However, LM has been found to impact the food processing industry in a positive
manner (Perez et al., 2010).

The key factors that food processing companies should be focusing on are customer
requirements, value addition, improving relationship with suppliers and customers
through strategic collaboration and using various methods in order to keep improving
(Pickernell and Hermyt, 1999). Without a clear consideration of the exact
characteristics of the food processing industry, the implementation of lean practices
may not deliver the expected results and may be a waste of time (Dora & Gellynck,
2015).

Implications and Challenges in Implementing Lean

Identification and elimination of waste from the entire supply chain with the
application of suitable tools and techniques is important during the implementation
level (Bhamu and Singh Sangwan, 2014). Also, Lean should bring about combined
improvement in all activities related to supply chain such as supplier, customer and
organisation (Bhamu and Singh Sangwan, 2014). Effective customer-supplier
relationships are significant in order to maintain a highly effective and efficient
system while on-time delivery by suppliers is crucial in maintaining low inventories
and ensuring quick responses to customers (Bhamu and Singh Sangwan, 2014).
However, implementing lean increases the vulnerability of the supply chain to risk
therefore it is crucial to manage and alleviate the risk by forming more resilient
supply chains (Christopher and Peck, 2004). Natural disasters, war and terrorism
could cause severe disruption to supply chain activities therefore the resilience of
supply chains is important for business continuity (Christopher and Peck, 2004).
Another risk involved in supply chains is the lack of shared information within the
supply chain network which could incur additional cost to the firm (Christopher and
Peck, 2004).

Not only are structure and power relationships important in understanding supply
chain dynamics, but the degree of integrated management of supply chain strategy
and operations are also very important (Taylor, 2006). Furthermore, building lean
and resilient supply chains require long term co-operative associations among the
suppliers, customers and organisation and this needs all stakeholders to spend time
and resources towards the cause (Perez et al., 2010). The stakeholders should also
consent to potential opportunities, expenses and risks that may arise due to the
mutual dependence (Perez et al., 2010). In order to minimise the risk and uncertainty
involved, vertical coordination along the supply chain is important which promotes
innovation and value creation (Perez et al., 2010). If supply chains are built with the
focus on customer values and forming lean manufacturing and logistics techniques,
the lean approach could provide a competitive advantage to the firm (Cox et al.,
2007).

Implementing Lean in Food Processing Industry

Our organisation has successfully implemented lean principles in a


ready meal frozen food manufacturing company which is similar to Absolute Foods
and we also have expertise in helping build resilient supply chains. Due to our
proficiency and capabilities in the subject, we have recognised that lean tools such
as Value Stream Mapping, 5S, quick changeover, Total Productive Maintenance
(TPM), cellular flow, Kaizen, work standardization, and visual management
(Kennedy et al., 2013) are applicable in the food processing industry. Significant
accomplishments such as production efficiency, product quality, employee
involvement, team spirit, co-ordination between production and maintenance, and
reduction in waste, production cost, batch size, changeover time, and lead time
(Kennedy et al., 2013) have been realised with implementation of LM.

Before implementing lean principles, it is important to review the products, process


flows and technical facilities (Kennedy et al., 2013). We identified that elimination of
waste, 5S, overall equipment effectiveness (OEE) and single minute exchanges of
dies (SMED) among others were the lean tools that brought tangible benefits in the
food processing industry. Processes such as forming, frying and mixing produced
high wastage which can be minimised by good practices and subtle changes to the
production line (Kennedy et al., 2013). Using LED lighting and motion sensors help
lower electricity consumption while changes in production area layout eliminates
waste in motion and leads to higher production efficiency (Kennedy et al., 2013).
Cleanliness and order, which are essential in this industry can be achieved by
implementation of 5S in daily routines (Kennedy et al., 2013). Furthermore, 5S
activities is known to increase the motivation of the employees and generate
standard operating routines (Kennedy et al., 2013). The SMED tool helps reduce
changeover or set-up time specifically in the packaging and forming areas and high
production efficiency and capability can be realised (Kennedy et al., 2013).
Implementing lean tools can not only eliminate wastage, reduce cost and increase
yield but it can also help reduce the carbon footprint (Kennedy et al., 2013).
Resistance to change is a major challenge faced when implementing lean therefore
time and support by top management is essential in order to achieve long term
stability and growth in the industry (Kennedy et al., 2013).

Creating a Resilient Supply Chain

It could be dangerous to only implement lean practices without thinking about


building a resilient supply chain. It is crucial in the industry to have a resilient supply
chain and due to our familiarisation with the subject, we have figured out that
resilience can be designed into the supply chain by the means of mapping tools that
help in detecting critical paths along the supply chain (Christopher and Peck, 2004).
The vulnerabilities of these critical paths can be assessed and subsequently
modified in order to minimise the risk (Christopher and Peck, 2004). Also, single
sourcing, even though advantageous in terms of cost and quality, is risky in terms of
resilience and alternative options should be available (Christopher and Peck, 2004).
It is advisable to partner with the main suppliers in order to help them develop supply
chain risk management practices and construct a supply chain with a greater
visibility of upstream and downstream risk profiles (Christopher and Peck, 2004).

The ability to respond swiftly to unpredictable events gives a firm a competitive


advantage in such a volatile environment (Christopher and Peck, 2004). The key to
this is the existence of agile partners along the supply chain, both upstream and
downstream (Christopher and Peck, 2004). It is important to be aware of the trends
and emerging issues that could cause problems to the supply chain continuity at
some point later. Inco-operating streamlined processes, reduced in-bound lead-times
and non-value added time reduction in the processes would make the firm flexible
help create a resilient supply chain (Christopher and Peck, 2004). Finally, the
company should aim to establish a risk management culture as most of the threats to
business continuity comes from the wider supply chain rather than from within and
this cannot be done without the leadership of the top management.

Recommendations

We recommend Absolute Foods to look deeper into demand management. Instead


of forecasting demand, Absolute Foods should use the data gathered from points of
sale and gain valuable information in order to programme production (Perez et al.,
2010). By implementing pull systems overproduction can be minimised (Perez et al.,
2010). Also collaboration within the supply chain needs to be harnessed to align
consumer demand and product specifications with the capabilities of all the parties in
the chain (Perez et al., 2010). Improving the value chain efficiency by collaborating
with other companies in order to pursue the systematic elimination of waste and
introducing flow systems within and between companies could help Absolute Foods
reduce costs and allow the chain to be more competitive which in turn would
minimise price fluctuations (Taylor, 2006). We also recommend that Absolute Foods
use the Takt-time tool which would help synchronise the rate of production process
to the customer demand thereby eliminating overproduction (Simons & Zokaei,
2005).

Part B

Introduction

Regnis Lanka PLC is Sri Lankas leading manufacturer of white goods primarily
dealing with the manufacturing of refrigerators (Annual Report, 2014). The company
caters to over 100,000 customers annually and combine innovation and research
and development to produce goods that meet the needs of the customers (Annual
Report, 2014). Regnis Lanka PLC is also the industry leader in Green Innovation and
uses their capabilities in order to manufacture energy-efficient products whilst
placing high importance in reducing environmental impacts in its production process
(Annual Report, 2014). At Regnis, there are separate assemblies for cabinet
thermoforming, door thermoforming and foaming injection. They are later assembled
in a pre-assembly line along with the electrical components and later reach the main
assembly line where the refrigerant and other minor processes are done. The
cabinet forming, painting, foaming and electrical equipment assembly are in separate
areas of the production floor and once the final product is made, it is transferred to a
warehouse where it is stationed until it is transported out to distribution centres. The
demand for the products are forecasted and production targets are set according to
the forecast. Production occurs in batches in order to make it cost-effective but
queuing of products at machines is a major drawback (Greasley, 2007).

Principles of Lean

The first principle of lean production is identifying the value from the final customers
point of view, which means understanding the specific requirements of the specific
end-consumer (Womack and Jones, 1996). Regnis Lanka PLC has already identified
that the customers are the key driving force behind its success and have taken steps
to understand the requirements of the end user through customer feedback forms,
surveys, communication through field staff and refrigerator clinics (Annual Report,
2014). Regnis has recognised that there is a need for energy efficient products and
superior after sales service and have acted accordingly to provide its customers with
what they value (Annual Report, 2014).

The second principle involves identifying the value stream and mapping the products
from raw material until consumption while the third principle is to get the single
product flow continuously through value creating process steps (Womack and Jones,
1996). This means the product parts should be moving constantly with no buffers or
wasted capacity which are a result of unreliable flow (Howell and Ballard, 1998).
Regnis could benefit in implementing value stream mapping (VSM) by drawing the
current layout of the production floor and using the Ishikawa (fishbone) diagram in
order to identify the wastes in defects, transport, waiting, motion, overproduction and
inventory (Bradley and Matope, 2015). An alternative layout for the production
process could be suggested by improving the value-adding steps and eliminating the
non-value adding steps (waste) such as bottlenecks, in order to reduce lead time
and increase production rate (Bradley and Matope, 2015). Waste in motion, which is
a critical source of waste at Regnis, could be significantly reduced with a carefully
designed future state map. (Rahani and al-Ashraf, 2012). However, VSM fails to take
into account the delays due to queuing, transportation and changes in batch sizes
when calculating performance and also fails in factoring queuing and capacity
constraints in the mapping process which could affect production results (Irani and
Zhou, 2011).

The fourth principle of lean thinking according to Womack and Hones (1996) is value
flowing at the pull of customer which means to make only what is sold (Howell and
Ballard, 1998). This principle is opposed to batch and queue system which is in
place at Regnis where demand is forecasted and product components are produced
without a request from the next machine (Bonney et al., 1999). In pull systems, a
machine will carry out its task only after receiving a signal from the next machine in
line and the control information flow is in the opposite direction to the material flow
unlike push systems where control information flow is in the same direction as the
material flow (Bonney et al., 1999). The responsiveness of the pull system to
changes and issues that occur in upstream processes allows downstream practices
to be shut off thereby avoiding build-up of inventory on the production floor (Hopp
and Spearman, 2004). In order for pull systems to work, there has to be stand work
methods and level production but lacks a definite description on how to apply it in
real situations (Hopp and Spearman, 2004). Pull systems could assist in better
material delivery and resource availability but pure pull systems do not exist in the
real world and such systems could face certain obstacles such as training and
reliance on co-workers in practice (Brown and Mitchell, 1991).

The final principle of lean thinking is pursuing perfection continuously (Womack and
Jones, 1996). This involves continuously finding out new forms of waste and finding
new methods to tackle it (Womack and Jones, 1996). This step is vital in order to
sustain the lean program as lean is a long term process and continuous
improvement is essential (Kennedy et al., 2013). Care should be taken not to
oversimplify processes as some processes such as customised orders from
customers could reduce efficiency and increase buffers but it is not necessarily
waste (Hopp and Spearman, 2004).

Recommendations

Regnis Lanka PLC utilises some lean tools such as 5S which has led them to have a
clean, safe and organised production floor (Kennedy et al., 2013) but the company
does not use other lean tools which could benefit them especially in the
manufacturing processes. They should look into implementing lean practices in order
to streamline individual functions within the company and make considerations
regarding job descriptions, motivation systems, supervision, training and evaluation
of performance (Greasley, 2007). Also, the radical redesign of business processes
can support the firm improve their quality service and speed while reducing their cost
(Greasley, 2007). However, Regnis should try to overcome the resistance to change
from the operating staff and make sure the top management are committed to the
project in order to bring about the change required to gain long term stability and
competitiveness which is essential in the business world today.