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Lean manufacturing processes lead to a stronger, more efficient business

LEAN PRODUCTION is an important feature of modem manufacturing, but it can apply to any business process. Programs such as lean, kaizen and Six Sigma are frequently used in manufacturing, but what do they mean and how do they apply to distribution?

One of the biggest issues today for distributors is taking costs out of the supply chain. In the language of lean production, removing muda, or waste and inefficiencies from business processes is one of the best ways to do this.

Lean production is based on the Toyota Production System developed by Toyota executive Taiichi Ohno to address post WWII production demands. Done properly, it can lead to improvements in efficiency, quality and customer service and drive down the costs of doing business.

Just-in-time philosophy is one of the developments of lean production. Lean focuses on the customer, involves collection and interpretation of data, creates improved processes and tests to confirm improvement.

Kaizen translates from Japanese as continual improvement. It is a philosophy of continual, ordered and gradual improvement. It also concentrates on removing waste, providing customer service and improving the business processes by involving everyone in the company.

Six Sigma is a simple and sophisticated method for analyzing complex cause-and-effect relationships as a way to discover improvements, eliminate waste, and improve customer value.

Originally developed by Motorola, Inc. and Allied Signal and adopted by General Electric Co. in 1995, thousands of firms now use Six Sigma methodologies. Six Sigma is simply a data-driven approach for eliminating defects from any process. Sigma [[SIGMA]] is a Greek character that mathematicians use to represent deviation. In this case, a deviation is anything that is outside of customer specifications.

This analysis can be used to identify the root cause of problems by determining the inputs which lead to the end result of a process. This is accomplished through one of two methods: DMAIC or DMADV. DMAIC is the acronym for define, measure, analyze, improve and control and is the method for improving existing processes. For cases where a new process must be developed, the method involves define, measure, analyze, design and verify or DMADV.

The goal of Six Sigma is to reduce deviation to 3.4 defects per million opportunities. There are many consultants that offer training and certification in Six Sigma processes.

Charged with improvement

Robert Weiner has run lean manufacturing programs for 20 years at companies including General Electric and Pratt & Whitney. When he joined Exide Technologies as senior vice president of product delivery a little more than a year ago, he knew that without process improvements, the company was headed for trouble. In fact, Exide filed for Chapter 11 bankruptcy protection in April.

"From a lean perspective, it was like walking into the dark ages," says Weiner.

The company initiated Exide Customer-focused Excellence Lean Leadership. EXCELL is an extensive program involving lean production, kaizen and Six Sigma processes, says Weiner. The company trained lean leaders at each location to implement the system and maintain continuous improvements.

"We are still in the beginning phases, but the results have been incredible," he says. "In just nine months, we have seen cost reductions of nearly 20 percent."

The company reduced internal inefficiencies using six Sigma processes to find root causes of waste. For example, Exide produces its own lead. The amount of lead kept on hand in plants went from 25-30 days to 24 clays, says Weiner.

"Our largest customers require confidence in our ability to supply the right product to them on time," says Weiner. "Anything below 100 percent fulfillment means that there are dissatisfied customers and lost sales."

Since September 2001, Exide's fill rates for on time delivery have markedly improved. By consequence, sales have increased, adds Weiner.

"We have exceeded our planned improvements and expect to come out of Chapter 11 stronger than ever," says Weiner. "Without adopting lean programs, we wouldn't be here now."

This was accomplished while reducing raw material, work in progress and finished goods inventories each by nearly one-third.

Thinning the supply chain

Exide's vice president of supply chain management Heidi Skillman said the company is implementing a strategic sourcing initiative to assess and consolidate the suppliers to those that could support a lean manufacturing environment. The first wave looked at purchases from 736 suppliers and consolidated these to 75 suppliers.

"We have already seen significant savings in administrative costs," she says. "Going forward, as we improve our quality and reduce costs, we want to see our suppliers doing the same."

Skillman says Exide looks for the best mix of cost, quality and reliable delivery in rationalizing its suppliers. It involves communicating and getting everyone involved in the process both within the company and with business partners, she adds.

"One of the most important yet overlooked and undervalued aspects of implementing a program is the execution stage," says Skillman. "That is when the results of including everyone from the beginning pays off."

Frequently such planning is done on a management level, but implementation is as important as the plan itself, she says. Therefore, inclusion is integral to Exide's program.

Leaning the flow

One of the distributors that has worked with Exide throughout its lean implementation is Cleveland, Ill.-based Bearing Distributors, Inc.

"We are customer driven, so when they make changes, it impacts us," says Kansas City, Mo. branch manager Bill Holland. "In this case, the changes were positive."

The demand for improved quality required increased documentation and rationalization of part numbers and other changes on the part of BDI, says Holland. It has resulted in better communication and both Exide and BDI have a better understanding of each other's business.

"We have the infrastructure they require," says Holland. "We also have a relatively flat organization, so each of our branches is able to be flexible to meet our customer's needs."

He says he has served Exide's local plant for five years and the account has doubled in size while the activity base associated with the account has dropped.

"It is amazing the improvements they have made," he says. "I used to be called out there at night continually to deal with emergencies."

Exide and BDI surveyed the machines and are better aware of the plant's requirements, says Holland. Now both companies are better prepared to keep the machines running and deal with problems as they arise.

"As a result, they have realized our strengths and have been bringing more business to us," he says. "Our product width has grown and they have asked us to increase our capabilities as they reduce their supplier base."

BDI added machine shop capabilities and coordinates services and second tier sourcing, says Holland. Exide has also taken more advantage of the training services that BDI offers.

"It is a dynamic relationship and we have to continually work to improve the process," says Holland. "Effective communication is the basis that allows the relationship to grow."

Lean is powerful

Three years ago, Kaman Corp. adopted the Rockwell Automation Power Lean system to improve its manufacturing operations. Power Lean combines lean manufacturing philosophy with kaizen and Six Sigma tools.

The company's distribution arm, Kaman Industrial Technologies, saw the benefits being attained through its parent company. In February 2001, the distributor initiated its Reaching for Excellence program.

"What we focused on was removing waste and learning what adds value from a customer perspective," says Charles King, director of continuous process improvement for the Windsor, Conn. distributor. "One way of determining what adds value is to ask whether the customer would be willing to pay for it. Everything else is waste."

The goal of lean and Six Sigma is to reduce defects and waste. King says both processes complement each other.

"Six Sigma provides robust processes for continuous improvement," says King. "Anything can be measured, but you must understand what really matters and focus on that."

It involves a change to the entire culture of the organization, says King. It is important to provide information and training as well as leadership.

"One challenge is how to communicate this philosophy to the rank and file and assure that they buy into it," says King. "That is where we use the kaizen process. All employees become involved in identifying and improving everything we do."

The distributor had five kaizen events where the company developed major plans of attack to improve its core processes. Small group improvement activities identified specific issues and developed improved processes.
"The result is that we have reduced process steps by as much as 50 percent, improved throughput and cycle time, and reduced the use of resources," adds King.

RELATED ARTICLE: The power of six

"Six Sigma isn't only for manufacturing, it can be applied to any business type," says Ken Jacobs, president of Syracuse, N.Y.-based K.J. Electric. "Manufacturing or distribution are both really people and processes -- the only difference is how you collect the data."

Five years ago, the distributor implemented a six Sigma program and has a certified "Black Belt" on staff.
K.J. was lean and efficient before implementing Six Sigma, says Jacobs. Even so, mistakes happened repeatedly. The company adopted Six Sigma because it addresses the root cause of problems rather than only fixing them as they arise.

"Most big companies don't fix the root cause of their problems," he says. "I'm a perfectionist. I don't like inefficiencies."

K.J. develops a rapport with customers, assesses their needs and then monitors performance throughout the organization, says Jacobs. Using statistical software, the company tracks dimensions which measure what the customer feels is important.

It is displayed as a "dashboard" which shows graphic information on the company's performance. This gives customers hard data to use when comparing K.J. to its competitors, says Jacobs.

"You can't improve just one area," says Six Sigma Black Belt Mary Rodman. "Quality issues have ripple effects, so you have to take in the whole picture -- from the receptionist to shipping."

That includes K.J.'s vendors. The company monitors vendor performance and reports to them with dashboards of their own performance.

"The reports are based on what we require, not what they think is acceptable," says Rodman. "It was a challenge to get them to accept our standards."

When you compile the statistics, there is no avoiding the facts, says Rodman. They see what they do well and where they need attention.

"In the end, it's all common sense -- do what the customer wants," says Rodman. "Six Sigma just gives you a measure of your effectiveness."

COPYRIGHT 2002 Reed Business Information in association with The Gale Group and LookSmart.