Does Lean Manufacturing Still Make Sense?

In the face of massive upheaval, manufacturers have done their best to rise to the occasion with ingenuity, ingenuity and resourcefulness.

But here’s a ready tip worth emphasizing: Much of the resilience that allowed manufacturers to withstand these shocks was thanks to the lean manufacturing processes and techniques that many companies already had — which gave them the maneuverability they needed to run a dime, and the intelligence to work on key cues. From both customers and suppliers to determine the best next steps to take.

Is Lean still the right approach?

In the wake of the coronavirus and ongoing supply chain shocks, some have questioned whether Lean manufacturing is still the smartest strategy. Could it be that lean manufacturing has left manufacturers more vulnerable, with too little inventory to cope with a sudden surge in demand, and an over-reliance on remote suppliers?
These are logical questions to ask—and there’s no doubt manufacturers can adapt, including having more safety stock on hand, for example, or developing materials sources closer to home.

But overall, lean manufacturing is still the key factor to chart a path to be evidence of in the future. After all, the ability to respond to unexpected circumstances — or resilience — is at the heart of the Lean philosophy.

In the current environment, the combination of Lean Manufacturing principles and Industry 4.0 technologies is the most powerful recipe for success. In fact, a recent annual McKinsey survey found that a key factor in determining how well manufacturers have weathered the harsh waters of the pandemic is whether they have actually embraced Industry 4.0. Companies that have already adopted Industry 4.0 technologies have “finded themselves in a better position to respond to the crisis.”

To understand why this is so, let’s start with a little background. Transformational insights from an earlier era of unpredictability and disruption for manufacturers can help light the way forward.

The tendency to uncertainty: How innovation takes hold in times of turmoil

The philosophy that eventually became known as Lean manufacturing began to flourish in the 1930s and 1940s, with the development of the Toyota Production System.
In post-WWII Japan, manufacturers were dealing with scarcity of resources, cash, and space. Manufacturers needed a system that was flexible and responsive to changing conditions. Eliminating waste and inconsistency was critical. Part of the answer turned out to be smaller factories, where only materials needed for current work were kept. Keeping inventory levels low and managing resources quickly kept the flow moving.

Originally known as Just-In-Time Production (JIT), these ideas were eventually renamed Lean Manufacturing in the late 1980s and 1990s, and gradually spread.

In 1996, in their book Lean Thinking, James Womack and Daniel Jones defined Lean as “a way of doing more with fewer and fewer resources” and identified five key principles:

  • Values: Accurately define the value that the customer wants for each particular product.
  • The current value: Define the value stream for each product, and map out all the steps in the process of delivering value to the customer.
  • flow: Make the value flow through the stream without interruption.
  • sway: Let the customer withdraw value from the product.
  • perfection limit: Continuously managing towards perfection, to keep removing wasted steps from the process and to keep reducing the time and information needed to deliver value to the client.

Why Lean Manufacturing Still Matters: Kanban and Pull Power

The American supermarket was one of the main sources of inspiration for the Toyota production system. As shoppers take the correct number of items from the shelves as they need them, the empty shelf becomes the motivation to restock a particular item with the right amount of product for replenishment.

Toyota realized that this approach could work in the factory, too. This light bulb moment eventually led to the creation of Kanban system, where physical cards were used as messages to track and manage production within the factory.

Kanban is an example of a pull system, where demand signals determine the quantity of supply required and help regulate the flow of production. Unlike push systems, where products are produced—sometimes in larger quantities than the market actually needs or wants—and then pushed through the channel, a pull system is more flexible and less wasteful.

Of course, in the 21st century, kanban is digital like nothing else and has been incorporated into modern ERP software. But its essence remains the same.

Call it the power of drag: The elegance of this approach is more relevant than ever in a post-COVID world, where real-time response to customer demand is a critical feature. Cloud-based systems allow manufacturers to make decisions based on actual demand rather than expectations and reduce the time it takes to react when the winds shift.

How Lean Manufacturing + Industry 4.0 Work Together

Here are some examples of how Industry 4.0 technologies can increase manufacturers’ ability to succeed in tough times using the power of drag. Consider Lean manufacturing principles like those below to achieve uninterrupted value flow, allow the customer to pull value out of the product, and manage toward perfection.

  1. Smart factories and warehouses, powered by connected IoT devices that share data as well as machine learning, enable smaller, more efficient operations.
  2. Data from smart devices connected through the Internet of Things gives you superior visibility into every stage of your supply chain – from the production line to moving products, materials and more. This makes it possible to continually adjust your operations and eliminate waste, and gives you additional flexibility to adapt and respond to what’s around the curve.
  3. The real-time data stream provided by Industry 4.0 cloud-based applications helps you avoid over- or under-storage and allows you to scale up or downstream more quickly without relying on intuition or guesswork.
  4. Automating some tasks can reduce crowding on the store floor and help protect frontline workers from exposure to COVID. It is also a valuable tool at a time of labor shortage when resources are scarce. Robots don’t have to worry about social distancing or unexpected vacation and can be safely managed from a distance by humans.
  5. Preventive maintenance is a real boon to Industry 4.0 technology. Combining IoT enabled devices with predictive analytics can help you detect and prevent equipment problems before they happen, avoiding costly delays and downtime.

Much of this can be achieved with Dynamics 365 Supply Chain Management from Microsoft, which provides a set of tools for managing and optimizing Lean production processes – including the ability to model manufacturing and logistics processes as production flows, and set up and manage rules for the Lean manufacturing pull system using tools like Kanban. Among other things, its features allow you to:

  • Model your manufacturing and logistics processes as production flows, to reduce waste and improve the flow of materials and information.
  • Create multiple versions of production flows, which you can then use to analyze and improve processes.
  • Use Kanban to indicate ordering requirements within the checkout system by creating a framework of rules and sourcing strategies.
  • Plan, schedule and track kanban jobs.
  • Manage purchasing and billing processes for subcontracted activities.

Digital twins are another cutting-edge technology that can be deployed to gain valuable insights into the decision-making process. For example, you could create a digital twin of your supply chain and then test it with a variety of scenarios for unexpected events, using what you learned to develop robust crisis response strategies.

Digital Twins can also allow for faster and more efficient product development, so you can respond more quickly to new customer demands and market opportunities. By creating digital twins of existing products, you gain access to data and insights that enable a more or less continuous cycle of product improvement.

For more information on this, check out Microsoft Azure digital twins, which is available as part of the Azure suite of offerings.

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