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BUILDING A LEAN, WORLD-CLASS
ENTERPRISE - A QUESTION OF LEADERSHIP
By David Dixon (as printed in Fabricating and Metalworking)
Last month we advanced the notion that lean techniques offer the
same benefits to a small shop owner that they do to a larger OEM
company with more repetitive product lines. (The first article in
this series is archived under the February issue at www.fandmmag.com.)
We hope you are convinced. Now let's look at the key requirement
for mounting a successful lean implementation.
As companies contemplate the lean journey, they usually have to
come to grips with the following questions:
* What is a World Class company?
* What is considered World Class performance?
* What are the most important factors in achieving World Class
* Why do World Class Manufacturing programs fail?
This article outlines answers, based on observations and experience
over the past two decades.
The World Class Company—a Definition
World Class companies are elite competitors in their respective
industries—manufacturers judged to be the best of the best
by their customers, employees, suppliers and communities. And they
are globally competitive, capable of defending their markets against
foreign competitors while successfully penetrating foreign markets.
John Boyer, a colleague and a keen student of lean manufacturing,
has reduced this general definition to four fundamental criteria.
World-Class Manufacturers are: (1) the preferred suppliers in world
markets; (2) capital magnets, able to attract either equity or debt
financing with ease; (3) sought-after places of employment; (4)
the business of choice by the community.
Closely related to these criteria is a set of measurements that
shape the perceptions of customers and stakeholders. It is performance
compared against these benchmarks that ultimately defines the world-class
Elite competitors deliver extraordinary value, as perceived by
their customers. Value is a function of service and quality received
at a given price. That price can be relatively high as long as customer
expectations are exceeded more consistently than by competitors
offering a lower price. However, the best companies rarely run the
risk of being the high-priced competitor. To give the greatest value
at equal or even lower prices, the manufacturing function must achieve
very high levels of effectiveness and productivity. This means that
processes, facilities, systems and the organization are configured
* 95+percent on-time delivery to promised date
* Total order throughput time 50 percent or less than industry
* Superb quality at a cost 50 percent below industry average
* Productivity in dollars per employee per year 30-50 percent
above industry average
* Inventory turnover 20-50 times a year
* Operating profits 50-100 percent above industry average
* Employee turnover rates less than 10 percent
* An accident-free workplace
* Engaging every employee in cost-improvement activities every
Other metrics drive the improvement necessary to achieve these
levels, such as setup time, lot size, shop lead time, distance traveled,
number of hand-offs, housekeeping scores, yield rates and production
linearity. The lean, world-class company focuses on measuring and
improving these indicators through proven techniques. Success is
reflected in the top-level results above.
After describing the characteristics and performance capabilities
of an elite competitor, the question becomes: "How do we get
there?" The answer is straightforward.
Making It Happen
In every successful world-class manufacturing implementation we
know of, the person positioned to make decisions and allocate resources
is determined to have a world-class operation. This determination
is, without exception, backed by a clear understanding of the technical
and cultural aspects of world-class manufacturing. These leaders
catch a vision of what their companies can become and constantly
share that vision with their people—formally and informally.
Detailed implementation activities are delegated to staff members.
Sequencing of events and timing are negotiable, but whether or not
the implementation will go forward is not up for debate! In other
words, becoming a world-class competitor is not optional.
In a real sense, the physical environment, the culture, and the
company's performance become an expression of the leader's personality.
In the same way a painter, a musician or a writer is invested in
their work, those who lead a world-class manufacturing implementation
seek to create a lasting legacy. We often see this in the unique
characteristics of each successful implementation; they are never
quite the same. When the program becomes the leader's passion, nothing
stands in the way.
Connected with this mindset is an acceptance of the long view.
Like timber company executives who spend millions to reforest logged-out
areas with trees they will never see grow to maturity, these leaders
invest their company's resources in improvement programs that are
never really finished. The journey to excellence often extends beyond
their tenure. Short-term thinkers and opportunists are not likely
to make the commitment to such an effort, which is why some companies
(too many, perhaps) will never become world-class performers.
And even the most determined leader and management team will be
challenged as they attempt to drive fundamental change in the manufacturing
Causes of Failure
It has been said there can be no failure if you never quit. This
is certainly true of a lean implementation. The most common cause
of failure is lack of persistence, or unwillingness to work through
the inevitable stumbling blocks. A period of work and investment
precedes the promised benefits, and some can't abide the waiting
or associated problem solving. They simply quit too soon.
Another cause of failure, though not as common, is the absence
of a reasonably stable, educable work force. If turnover is too
high, and the caliber of employees is too low, it's very difficult
to develop the knowledge and skill necessary to be a world-class
performer. Some remedial steps may be required to upgrade the work
force before going forward. This problem can apply to administrative
personnel as well as hourly people.
A third threat to successful implementation is the phenomenon we
call resistance to change. People often have difficulty adapting
to the concepts, principles and practices of lean manufacturing.
Although lean is fundamentally different, most people will embrace
the new techniques when they know what is expected and have the
required new skill sets. Where someone cannot—or will not—accept
the change, management has to make tough decisions. You can't afford
to sacrifice the program to placate the naysayers. "It is better
that one man perish than to have a whole nation dwindle in unbelief."
Finally, we see some lean programs fall victim to an endless array
of distractions. Business is up, or business is down … someone
quits … new software is being installed … there's a
quality problem, or a new product. Years slip away, and virtually
no real improvements materialize. Avoiding this trap requires true
commitment. It ultimately comes back to the leader's determination
to keep moving forward.