Leading Lean to Higher Profitability

Why do so many UK companies find it so hard to sustain lean ways of working? Annie Gregory asks if they need to change their mindset as well as their mode of working?

The tenets of the lean business modelUK manufacturers aren’t doing themselves any favors. Despite clear links between lean principles and higher productivity and profitability, the majority is still adopting lean only in a half-hearted or spasmodic fashion. In fact, according to EEF in its report Catching up with Uncle Sam, US-owned companies win because they tend to pursue lean across the whole organization with higher intensity.

The reasons are obvious. They can draw upon the experience and knowledge of their parent corporation before changing their operations. The problem for UK companies, particularly SMEs, is they start from cold. The first step is usually a visit to a showcase site. Even when the fact-finder returns as a convert, replicating what he’s seen can be extremely difficult. Many initiatives begin with the highest expectations but peter out within months as work patterns revert to type under daily pressures.

Why is this? According to John Drew, lean expert, and operations specialist at McKinsey’s Production System Design Center, benchmark visits show you what is happening ‘on stage’ but not what lies behind the scenes. They give a proper appreciation of the technical side, i.e. the tools, processes, and techniques and also some aspects of the infrastructure like the training programmes and appraisal systems. But they don’t show the thinking and behavior that made it happen. “There is a frame of mind that goes with lean and managers are generally more uncomfortable in dealing with it than they are with the process, systems, and structures.”

So what is different about the lean mindset? Drew draws a few distinctions between traditional operational thinking.

Economies of Scale vs. Flexibility

“Visitors are always shown the new, bigger machine. But in lean, flexibility is more important than scale and often the two are in conflict.”

Managers justify their investment in bigger and better equipment by using it as much as possible, thereby often creating a bottleneck. “The lean way is to dedicate equipment to a product stream. It’s a mind shift. It may mean that three smaller pieces of equipment are worth more to you than one big one in terms of flow and lead time reduction, even if it costs you more.” Similarly, companies that cost a product by amortizing over a batch are asking for trouble. Restricting changeovers inhibits lean operation. Drew also points out that traditional accounting systems are counterproductive since inventory and WIP count as assets. He recalls an aftermarket automotive company burdened with decades of unsaleable finished goods. “It would have taken a brave person to write off this level of an asset.”

The Role of the Frontline

“The traditional way to regard people is as a cost to be minimized,” says Drew. Lean adherents, however, believe the front line is where you can add value. One of Toyota’s greatest achievements is its alignment of shop floor and management interests. By hunting for waste and trying to improve the productivity of the process, workers know they are not going to do themselves out of a job. “If initiatives start costing jobs, you can kiss goodbye to genuine participation. People are pretty skillful at doing just enough to make it look as if they are on board without really being so. You can’t make the promise unless you can keep it but you can make it your declared aim to grow the business, not cut the workforce.”

Responding to Problems

In a traditional mindset, managers work out what to do, and the shop floor does it. So, when things go wrong, managers jump on the person raising the problem. “Do that, and they won’t tell you when the next one comes up,” says Drew. In the lean mindset, you welcome the information and start eliminating the cause of the problem instead of just reacting to it. “We tend to underestimate the capabilities of people in the front line.”

Drew says lean programs heading for sustained success can be distinguished from potential failures at an early stage. Firstly, look at the behavior of managers. “They don’t just need to be committed but visibly committed. You can tell from the amount of time they spend on the shop floor.”

Secondly, you need to see people working on HR as well as the technical aspects of lean. The effort has to be directed as much at managing behaviors as at physical change. “You can encourage people to work how you want while you stand over them but the moment you walk away, it’s down to them whether they believe it or not.”

The enthusiasm – or otherwise – of the front line is a good indicator. “People are not going to put their weight behind it unless they can see what’s in it for them,” maintains Drew. Rewards are not always financial. He recalls a metal rolling firm whose systems were so inefficient that product made to order was still lying around weeks later. “By addressing the causes, the floor was clear within weeks. It transformed the working environment where, after all, people spend most of their waking hours. If your surroundings are making you fed-up, tackling that has to have a big impact.”

Focusing on simplifying business operationsHow does this all work in practice?

GAI-Tronics, which designs and manufactures specialized rugged communications products and systems, brought in the help of TBM Consulting. Within six months, lean had transformed its Burton-on-Trent facility. Productivity per head had increased by over 30, and the value of inventory had dropped below 20 percent. Even more importantly, the space used to house the original processes had reduced by half. Manufacturing director Mark Bradford started the process when the company faced a possible transfer of production as the parent company, Hubbell Corporation, looked at consolidating its UK manufacturing. Instead, the changes convinced Hubbell to move new processes to the site, securing employment prospects and leaving another 25 percent of the factory ready for future expansion.

Bradford was initially unconvinced lean would apply to his low-volume environment. A trip to a similar US operation was the turning point; he now describes himself as ‘on a change mission.’ Echoing Drew, Bradford offers one overriding piece of advice to other manufacturers: “You need a reason to go lean. Make sure you know why you are doing it.” Clearly, in this case, it safeguarded GAI-Tronic’s future. Bradford, however, insists that no-one should underestimate the effort involved. And he is equally adamant that different mindsets and behaviors are as crucial to success as changed production layouts. “It’s difficult for people to lose the habits and thought processes of a lifetime. So it’s easy to take your eye off the ball and find that two trolleys of WIP have accumulated.” One of the hardest things is to make people, brought up on maximum utilization of equipment, leave a job alone if it can’t be completed.

Framework to Lean Initiatives

Bradford recognized that lean initiatives fail without a framework to underpin the new way of thinking. The communications program was therefore aimed not just at the shop floor, who would see the majority of the physical changes, but also at all the support functions. “Once people are involved, it’s much easier to sustain the programme,” Bradford maintains. He openly admits he made ‘people’ mistakes. For example, he held a team workshop while the supervisor was on holiday. As a result, it took longer to establish full ownership of the changes made, but “you have to make mistakes to go forward.” He also believes he ran a risk in not getting more people involved in leading the process at an earlier stage. “If I had dropped dead while it was happening, the change programme would have died with me.”

He is equally convinced that he got some things entirely right. Working throughout with lean specialists TBM Consulting Group, GAI-Tronics made good use of intensive ‘kaizen blitz’ workshops and techniques. “It wouldn’t have worked without consultants or a big bang approach. They create an impetus. People feel it is important and different from previous programmes.” But this approach has to be matched by continuous effort afterward. The company is now getting a lot of success from one-day sessions. In a single half-day value stream mapping session, for instance, they traced the process from order entry through to completion, reducing the steps from 46 to 20.

“You can never stand still with it; you must keep on making small, important changes,” says Bradford. “It is great that those changes are now beginning to come from problem-solving sessions at shop floor level. But the whole process still needs constant involvement from above.”

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