Championing Lean in Small Manufacturing Enterprises

A literary guide

Published: Monday, January 15, 2007 - 23:00

Lean was initially started in manufacturing and production departments, and various efforts are being made to apply its principles in service industries. In a highly industrialized world spurred by high technological changes, businesses are forced to change their strategies to a more lean way of doing things to survive in the market. In the 1980s products were produced in batches and bulk, and overproduction or lack of market for the products became the biggest problem. In the book The Toyota Way (McGraw-Hill, 2006) Jeffrey Liker points out that Toyota considers overproduction to be the worst of the seven types of waste because it leads to other types of waste: inventory, movement, handling, hidden defects, etc.

Literature review
Fred E. Meyers has described lean as “a concept whereby all production people work together to eliminate waste.” Peter Brunn and Robert Mefford introduced their research article "Lean Production and the Internet" by stating that many manufacturing firms around the world have adopted lean production as a strategy to increase their global competitiveness. Some firms have made much progress in implementing lean production in their factories.

Small manufacturing enterprises (SMEs) include small manufacturing and production companies that are growing in their operations as well as increasing their profitability and expanding market opportunities. They may be owned by families or individuals and may employ only a few people.

High volume/low variety (HVLV) is a term that describes a particular manufacturing scenario common when companies produce in batches. Low volume/high variety (LVHV) describes a case in which large companies and conglomerates practice in-house production of a larger variety of products in low quantities, and other production such as high-volume/low-variety is outsourced to other companies.

Just in time (JIT) is a system for producing and delivering the right items at the right time in the right amounts.

Total productive lean for small companies
In an economy where product development is rapidly growing, manufacturing companies—big and small—are challenged to be responsive to customer needs while developing a stable production schedule. Many small companies assume they cannot effectively use lean principles to be quick, more flexible and responsive to market demands to gain competitiveness and a larger market share.

Total productive lean for small companies gives insight to small growing businesses into ways of applying lean principles to achieve their most important goal—customer responsiveness. It’s presumed that lean is most suitable for conglomerates and big corporations such as GE, Motorola, Cisco and others.

As a result, small companies don’t fully use lean principles. Total productive lean is a method that small, growing companies can adopt to connect all lean systems comprehensively to reduce waste.

Success in big companies
Toyota invented and has effectively used its Toyota production system (TPS) to shorten the time it takes to convert customer orders into vehicle deliveries. The entire sequence from order to delivery is a single, continuous flow with continuous efforts made to shorten the sequence and make it flow more smoothly. The result is a “far higher level of productivity, better quality and a major reduction in wasted time, money and effort…better products made more cost effectively,” According to David L. Taylor and David Brunt, authors of Manufacturing Operations and Supply Chain Management: The LEAN Approach (Int. Thomson Business Press, 2000).

Cisco Systems’ supply chains are becoming more closely linked, such that each participant can contribute to the efforts of other supply chain members to improve. Chrysler is another big achiever in lean systems. Through data sharing, Chrysler identifies bottlenecks in the chain and improves quality at the suppliers by decreasing inventories and making their supply chain more responsive.

Finding the balance
Small companies are growing from low volume/low variety (LVLV) manufacturing to high volume/low variety (HVLV) manufacturing and eventually match the conglomerates’ LVHV manufacturing. If, for instance, a small company manufactures one product in small quantities, then starts producing two products in large quantities, it uses mass production techniques. Further success in the company in terms of acquisitions, mergers and buy-offs could lead to production of a mix of low-volume products. Outsourcing is often used for high-volume production. A good example is GE, which plies its businesses in rail, health care, energy, aviation, media and money, among other areas. In this type of scenario, large companies outsource large-volume production and prefer in-house manufacturing of low volumes of a variety of rapidly developing products.

Small companies can achieve success if lean principles are applied. Large companies struggle to balance demands of employees, suppliers, customers and factories. “Clearly, the growing cost of health care and pensions for retirees and workers is one of the most significant challenges facing the domestic auto industry today,” CNNMoney.com recently reported.

Small manufacturing companies don’t have such big challenges. Their challenges arise when transforming practices as a result of growth. In this case, a labor-intensive manufacturing operation could be due to lack of capital.

What it takes to be a lean champion The Toyota Way describes certain strategies and tactics important when implementing lean systems. Using the 4P model, a leader can start implementation with philosophy, process, people or problem solving, which are all intertwined in various ways. For instance, if companies develop a philosophy and culture of establishing partnerships by understanding each other’s business, issues such as costs and competitiveness could be muted out. Process improvements such as kaizen events and other lean activities such as JIT and value stream mapping can save companies millions of dollars. Finally, investing in employee training usually leads to faster and better ways of solving problems.

How practical is it for small companies to implement and successfully use lean practices? An assumption would be that the 4P model is suitable for large companies that have a financial capability to hire lean experts and implement lean systems.

To further illustrate that lean practices are geared toward large companies, Harold Steudel and Paul Desruelle list in Manufacturing in the 90’s: How to Become a Mean, Lean, and World-Class Competitor (Van Nostrand Reinhold, 1992) characteristics needed in a world-class manufacturing setting. The table below summarizes these characteristics in three distinct areas: management and employee involvement, quality and production operations.

Management /employee involvement	Quality	Production operations
1. Visionary leadership	9. Customer-driven product development and marketing	15. Continuous flow processing/cellular manufacturing
2. New culture, goals and thinking	10. Cross-functional teams for product design/manufacturing	16. Demand-based, not capacity-based processing
3. Long-term strategic plan and direction	11. Individual responsibility and continuous quality improvement	17. Quick changeover procedures/small lot sizes
4. Employee involvement and human resources department	12. Statistical process control of key product characteristics	18.Standardizing/simplifying before automating to reduce complexity
5. Integrative and holistic objectives	13. Innovation and experimentation
6. Goal-consistent measurement/reward systems	14. Partnership relationships with quality-certified vendors
7. Product/customer-focused organization
8. Good communication and practice system

These characteristics complement the world-class manufacturing companies that have a big capital base to invest continually in new technologies that deliver a clear return on investment. Big companies also enlist the support of staff, and empower and mobilize them to achieve more through training and performance development plans.

Small companies, however, are quite different in ways of operation and even ownership. SMEs are mostly family businesses or an individual who owns a shop as part of a wider franchise. Some automobile companies allow a person to run a shop as part of the franchise. Others such as Sallas Automotive in Kansas City, Missouri, are family owned. Their operations and production aren’t as structured as in big manufacturing businesses. There are fewer staff, a small operating capital and little or no machinery.

Total productive lean—a tailor-made approach
SMEs can achieve fundamental manufacturing efficiencies by incorporating lean practices, even with their small capital base, little machinery, few employees and less automated operations.

Management and employee involvement can be achieved by setting a clear direction in a mission statement. Whereas big companies develop new cultural goals and ways of thinking for employee involvement through training, SMEs can set up a step-by-step approach to ensure productivity and 100-percent efficiency. Large companies use change management techniques to bring about lasting behavioral change among their workforces. Small companies don’t need an entire human resources department. Huge amounts of money can be saved through good leadership. George Shinkle, L.H. Gooding and Michael Smith state in Transforming Strategy Into Success: How to Implement a Lean Management System (Productivity Press, 2004) that just like any successful strategic implementation, lean implementation requires “a strong, capable leader in a position to drive and maintain progress.”

Big organizations are product/customer-focused, especially in LVHV production. SMEs require an agile environment where flexible, easily manageable and responsive employees can achieve competitiveness by being customer focused. Good communication favors small companies, where information flows fast and horizontally across the team, unlike in most big companies, where information flows horizontally across managers then cascades vertically.

Quality is as critical to SMEs as it is to big organizations. Quality starts with how a product is being made, packaged and delivered, and finally customer service. For SMEs emphasis should be on customer responsiveness rather than on developing a stable production schedule. It’s easier to attain quality in a small company than in big companies that rely more heavily on machines. Big corporations take a longer time to achieve quality in production due to the defects in their machines. Automation increases the chances for machines to be defective. As a result, these defects slow down or stop production, leading to overtime, expedited shipments, more people to run and maintain equipment and more capital to support these losses. The overall effect is low-quality production, waste generation and increased costs.

Benchmarking is another remedy for SMEs to improve their quality and reduce waste. Visiting other companies with comparable characteristics such as size and operations, and borrowing lean principles that are transferable, highlights the value of waste reduction and continuous improvements. Krzysztof Czarnecki, author of Generative Programming (Addison-Wesley Professional, 2000), suggests that measurements such as benchmarks focus attention on specific aspects of a business and allow “one to achieve goals within those aspects.” A study by Wm. Schiemann & Associates Inc. of New Jersey stated that measurement leads to a formidable strategy, clarity in communication, focus and alignment efforts and organizational culture. If such benchmarks are based on lean, that vision is shared by all employees. Practices such as benchmarking help in quality and eventually in gaining a competitive advantage.

Achieving lean in production operations should have an ultimate goal of eliminating waste in all operations. Lean practices don’t need an additional resource. They emphasize eliminating waste and improving efficiency with what one currently has. Waste is a valueless activity that a customer isn’t willing to pay for. Whereas big companies use lean experts for changeover processes, demand, continuous flow and automation, SMEs can tailor their operational needs to become lean by using the community. Rather than employing a full-time lean expert, colleges with industrial departments can be a starting point. Scholarly articles and projects carried out by professors and educators have proved invaluable to SMEs.

Lean systems such as value stream mapping, single-piece flow and total productive maintenance (TPM) are suitable for large companies with wide product variation and multiple process flows. SMEs with low volume/low variety production or high volume/low variety production could also use the 5S steps and JIT. Just in time technique may not be ideal for production purposes. In dealing with many orders, JIT could lead to pressure in fulfilling orders due to too few employees and little machinery. However, it could be achieved in training employees, that is, preparing them correctly before starting a new approach. Time and excess costs of retraining could be used elsewhere. The 5S approach—sort, straighten, shine, standardize and sustain—sums up how SMEs should carry out their tasks in production operations.

Conclusion
Lean is a journey that takes time to get results. Changing an organization’s culture, motivating and educating employees, and focusing on waste reduction through lean systems require a great effort. Making lean a consistent business practice applies to SMEs as well as big corporations. SMEs can gain tremendous advantages, including waste elimination, lower costs, improved quality, shorter throughput, high safety standards and flexibility. Also, implementing lean can help companies win valuable awards such as the Malcolm Baldridge National Quality Award, among others, which can increase SMEs’ competitiveness as well as help them gain a bigger market share.

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