Lean Manufacturing, a business management system made famous by Toyota, is helping companies around the world shave overhead, boost production, and speed new products to market-all while improving service to their customers.
According to Chet Marchwinski, director of communications at the Lean Enterprise Institute in Cambridge, Massachusetts, lean manufacturing “typically requires half the human labor, half the capacity, and a fraction of the development lead time of other mass production systems.”
The basic idea behind lean manufacturing is that companies can boost their productivity and generate more revenue using the resources they already have in place, says Derek Lothian, national manager for communications at the Canadian Manufacturers & Exporters trade association (CME). Mike McAloney, NovAtel's vice-president of operations, says, “NovAtel works within its own definition of lean, which is to continuously eliminate waste so that every step in the manufacturing process adds value to our customers.”
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Achieving those payoffs, however, requires a paradigm shift in how a firm handles its work processes and manages its relationships. The one clear rule for achieving that shift is making every decision based on “value,” says McAloney, with value defined “through the eyes of the customer.”
“We look at a process and tear it apart into its component pieces,” he explains. “We look at every one of those pieces and say 'What kind of work is it?' Is it value-added work that the customer would willingly pay for? Or is it a business non-value-add we have to do, maybe for regulatory reasons? Or is it just plain non-value-added work...We are trying to eliminate those pieces of work that the customer wouldn't willingly pay for.”
For NovAtel, the decision to adopt the manufacturing approach 10 years ago bolsters its remarkable growth story since then.
Faced with a surge in its GNSS business that almost overwhelmed its traditional manufacturing processes, the Canadian firm turned to lean manufacturing to help it through its growing pains. Starting from a point where it was struggling to address quality issues and deliver products within weeks, the company now has a product quality that is two to three times better than the industry average and a 95 percent on-time delivery rate for its products.
What is particularly notable is that the company's definition of “on time” has changed over the past decade. Customers are now the ones setting delivery dates-and 70 percent of them want product the next day, according to McAloney.
“It all started in 2003,” he says. The company was just starting to break into the GPS business and getting some great traction.
“But we could see the orders coming in, and we could see the new products coming from design, and we knew we were in trouble,” McAloney recalls. “We were going to have more products, and we were going to have more demand from customers. But we were already struggling to meet our deliveries and deliver products of quality. We knew we couldn't keep doing what we were doing.”
Looking for ideas, McAloney and Manufacturing Manager Dennis Ho went to a conference on the subject organized by the Association for Manufacturing Excellence (AME).
“It was a five-day conference,” McAloney recalls, “and by about Day Three we realized that we had found a new 'religion' on the manufacturing side of our world in terms of how we needed to think about building and delivering product to customers.”
NovAtel Builds a Lean Workplace
Convinced that “lean” was the way to go, NovAtel joined a local consortium managed by CME Canada's largest trade association, and they hired a trainer to teach “Lean 101” to every person in the operations group.
“We spent the day building Lego airplanes of learning,” said McAloney. “We learned about onepiece flow and point-of-use material-all these things. So, we started first by training everyone and getting them on board with these concepts... to see what it could do to help us.”
Then, starting with one of the its simplest products, an antenna, the company began implementing changes-the first steps on what NovAtel employees regularly refer to as the “Lean Journey.”
“We started experimenting with point-of-use material [handling],” said McAloney, “With small batch builds, we were back-flushing material- we started eliminating all the delays and the waste we could think of.”
Keeping materials and essential tools close at hand is one of the most important elements in streamlining manufacturing. In fact, a formal lean process prescribes how to organize manufacturing workspaces.
“We had a very, very small work area when we started implementing lean manufacturing,” says Ho. So, NovAtel introduced 5S, which stands for Sort, Set things in order, Shine (clean things up), Standardize what you have done, and work out ways to Sustain it, Ho explains. “By doing that, we actually created some space for [ourselves.]”