Dec 15 2011
Lean causing an increase in backorders?
The following is lifted from the quarterly report of a public company and is attributed to the CEO:
We experienced a temporary increase in backorders at the close of the first quarter as we rebalanced inventories as part of our lean manufacturing initiatives. […] We also implemented a new ERP system during the quarter that will enhance our real-time information for inventory levels, shipments, sales information and production costs.
It seems that the leaders of their Lean Manufacturing initiatives forgot one key principle: First, do no harm! A professionally planned and executed Lean Manufacturing initiative enhances performance. It does not decrease it, even in the beginning and even for the short term.
It is essential for the long-term success of the initiative that its first pilot projects be unquestionable, rapid, obvious successes, and projects that lengthen order fulfillment lead times do not qualify. Nothing should ever take priority over delivering to customers, even Lean.
Furthermore, implementing a new ERP system before you are far enough along in Lean is a generally ineffective for two reasons:
- Lean changes your business processes, and embedding your old business processes in an ERP system is a waste of time and will make the changes more difficult.
- The implementation of ERP is a resource drain that you cannot afford while implementing Lean.
Dec 16 2011
“Muda” just means “Unnecessary”
Discussions of Lean often contain statements like the following:
While such statements sound deep in casual conversation, they are impractical. First, not having access to end customers, most employees are left to guess what they might value, and second, much of the work of manufacturing is unintelligible to end customers, like revision control on engineering changes. Everyone recognizes the existence of such activities, but the above definition of waste leads to calling them “non-value added but necessary” or, even worse, “necessary waste.”
Having to resort to such convoluted oxymorons is a clear sign that there is something amiss in the definition. The English literature on Lean uses “waste” as translation of the Japanese “muda,” which just means unnecessary. If an activity is muda, you are better off not doing it. Overproduction is muda because you don’t need it, and so are excess inventory, overprocessing, etc.
More formally, if you eliminate muda, your performance does not degrade in any way. It also means that muda is what keeps your operations from being Pareto-efficient, because, if you didn’t have any muda, there would be no way to improve any aspect of your performance without making others worse.
The bottom line is that there are only two kinds of activities in manufacturing: those you need to do and those you don’t. And you can tell them apart without asking an end customer, by using, for example, Ohno’s famous list of 7 categories.
In what you need to do, you pursue effectiveness and efficiency; for what you don’t, elimination. It is a simple idea. It gets complicated enough when we work out its practical consequences. But we don’t need to make it unnecessarily complicated.
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By Michel Baudin • Management • 0 • Tags: Lean, Lean manufacturing, Management