Article image

Lean in Industrial Goods

Driving to Breakthrough Performance
September 22, 2011 by Dave Ryeson, Michael Zinser, and Pierre Derieux
LIKE. FOLLOW. SHARE.

By now practically everyone in industrial-goods manufacturing has “done” lean in some form or other, having adopted 5S programs, kaizen events, standardized work, and numerous other techniques. Many have seen significant benefits, including lower costs, improved quality, better customer response, and a more engaged workforce.

Only a few such manufacturers, however, have been able to create sustainable world-class operations. Some companies manage to get only limited benefits from lean because their programs are overly broad and lack sufficient penetration. Some lack the necessary capital, manpower, or analytical tools. Others improve dramatically for a while but then lose momentum. They earn some real wins but can’t quite land the big prize: implementing standard processes across facilities or integrating all business units—not just production—under a coherent lean strategy.

For example, five years into a lean transformation effort, one industrial-goods company that BCG worked with hit a plateau. After making very respectable improvements in uptime and quality, results began to dwindle. The efforts up to that point, largely isolated within individual plants, had been opportunistic in nature and lacked top-down coordination across the network. However, by taking a hard look at its situation and assessing its opportunities more holistically, the company was able to reinvigorate the program through a “fast lean” approach, ultimately achieving cost reductions of 10 to 15 percent. The effort consisted of the following measures:

  • Conducting data-driven fast-lean assessments at high-priority plants that refocused scarce resources on those improvement opportunities that could bring the most value in the shortest period

  • Improving cross-plant coordination through internal benchmarking to identify performance anomalies such as machine/line rate and yield variances that could be corrected and subsequently exploited as quick wins

  • Instituting a robust best-practices process linked to benchmarking that quickly identified and deployed best practices throughout the network

  • Coordinating improvement efforts from the top down to allow opportunities to be prioritized at the network level and resources to be allocated effectively

The current macroeconomic picture makes accelerating and sustaining operational improvement an urgent priority. Manufacturers’ margins are under pressure. Commodity prices have been rising dramatically, which means that supply chain risks from factors such as fuel costs are increasing. (See the exhibit below.) Meanwhile, the earthquake and tsunami in Japan have underscored the constant threat to supply chains from natural disasters.

exhibit

Manufacturers need to manage their costs more efficiently, protect their supply chains more vigilantly, and innovate more rapidly. That means jump-starting lean programs that have generated only modest results and turbocharging those that have yielded big wins but have not yet achieved their full potential. Manufacturers need to find ways to migrate to the more mature levels of lean.