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Lean Processing   … by James Womack

 To become "Lean", Womack advises, companies should concentrate on the whole rather than the parts. “The fundamental objective is to shift the focus of management from the existing organization, technologies and assets to the product itself,” Womack says. “This will allow companies to differentiate value from waste.

“Instead of manufacturing products in a disconnected and geographically dispersed process, companies should recreate their process by working backward from the end product at the point of delivery to the customer. This permits the product to respond to the needs of the customer rather than being pushed ahead to keep existing assets and machinery fully occupied.”

In Lean Thinking, Womack highlights five principles to guide managers in the fight against waste:  

According to Womack, by following these principles and implementing a Lean production system, the amount of effort needed to produce a product can be reduced by 50 percent to 75 percent; time elapsed from order to delivery can be reduced by 90 percent; and inventories of work-in-process and finished goods can be reduced by 90 percent.

Unless a product can flow continuously from start to finish, or demand is perfectly consistent, there will be points where inventory must be present to supply customers effectively. While a certain amount of inventory is acceptable to cover potential delays, Womack warns against stockpiling massive amounts of parts or products.

“Extra stocks should be kept aside – out of the path of the value stream but not in some remote warehouse – and their presence does not in any way effect the logic of Just-In-Time parts supply,” Womack says. Each downstream process needing parts should still signal directly to the upstream supplying process when more parts are needed and these should be supplied frequently in small lots. The one adjustment necessary over time, if bottlenecks persist at border points, may be longer reorder times. Otherwise Lean production can proceed as in the past.

“However, if you think border crossings will be a problem for you in the future, why not move all value-creating steps in one place?” adds Womack. “Why not compress your value streams for each product family to put all of the value creating steps in one area – as at Toyota City – or even in one facility? Depending on factor costs and customer expectations, the appropriate location may be in a high labor-cost area – close to end users – or in a low-cost area for price sensitive products where customers are willing to wait. In either case, you will be better off if as many steps as possible are co-located.”

Based on his study of the previous two recessions, Womack has outlined the following steps companies should follow to implement Lean production during the current downturn:

• Assign value-stream managers: Their responsibility should be to map the stream and quickly implement a future state with lower costs, less inventory and better customer response. “Do not settle for ‘point interventions’ that improve only one small part of the stream without benefit for the end customer or your bottom line.”

• Empower value-stream managers: Give these managers full support by removing obstacles to smoother flow, including outdated facilities, balky internal functions and inefficient relationships with suppliers. “If the future state looks only a little better than the current state, your firm may not have a future.”

• Compress value streams: “Consider pulling activities for each value stream back from suppliers to compress throughput time and take out even more cost while defending your people.”

• Remove waste: Take out all of the excess inventories, space, machines and people from each value stream as quickly as possible. “Then, when growth resumes, figure out how to increase output without more inventories, space, machines or people. This is how permanent gains are secured.”

• Cash or profits: Decide which of these is your priority. “If you need cash, eliminate inventory and sell assets immediately. If you need to improve your profitability, remove the inventory and assets from the value stream to reduce costs but defer disposition until later.”

• Be honest: Tell your people the truth about what needs to be done and do it quickly. “People can stand the truth. What they hate are lies, drip torture and managers with no believable plan for the future.”

Womack is optimistic that further advances in Lean production will occur during this recession, as they have in the past. “I’m bullish, I think there’s going to be a big leap in Lean consciousness and implementation in the near future,” he says. “Let’s hope I’m right, and some good will come out of the bad.”