Creating the Lean Enterprise: System-Wide Approach Provides

Today's competitive marketplace requires faster response, better service, added value, and lower prices. How can you address eroding profit margins, challenges to market share, and increasing costs How can you create an operation that is not only successful today but is also sustainable despite these ongoing challenges

The solution may lie in creating a strategic shift within your company. Many companies now have set their sights on becoming a "Lean Enterprise." This bigger- picture, long-term approach to lean manufacturing provides sustainable, enterprise-wide improvement that far outweighs the benefits of more intermittent lean implementation efforts.

One Wisconsin firm that embarked on a lean enter-prise journey three years ago reported over $4 million in new sales and $6 million in retained sales this year alone. As a result of the company-wide approach to lean improvements, the firm met customer demands for a 6 percent price reduction and beat its competitors' pricing, while maintaining a healthy profit margin.

Perhaps you have implemented lean manufacturing in some areas of your operation and have seen some improvement. But if your lean projects have not been integrated into an enterprise-wide program, you are missing the opportunity to maximize your lean improvement efforts.

Lean enterprise vs. isolated point solutions

There are two ways to take advantage of lean manufacturing and continuous improvement - through implementing isolated point solutions, or by developing an integrated, company-wide approach.

The point solutions approach to lean manufacturing involves implementing improvements in isolated parts of the organization, without integration into other organizational areas. This spot approach provides opportunities for reducing waste and generating savings. However, these benefits are generally isolated to the production floor or to a single department within a company and can be difficult to maintain.

The strategic, enterprise-wide approach reaches far beyond point solutions, with significantly more powerful results. The development of a lean enterprise requires a company-wide commitment to continuous improvement throughout the entire organization. It involves a cultural change that gets everyone thinking and acting lean. And it involves planning, or creating a roadmap to guide the company on its lean journey. This visual tool (roadmap) helps you plan your improvement efforts, taking into consideration the interrelation-ship of all parts of the organization.

Though the transition takes a long-term commitment to improvement, the results achieved by this systems-level approach are significantly greater than those achieved through isolated point solutions. Ultimately, the company becomes more profitable and competitive, and continuous improvement and adaptation to change are the norm.

Enterprise-wide approach produces exponential benefits

The enterprise-wide lean strategy engages the entire organization and enables the firm to leverage every opportunity to improve its overall performance.

Don't settle for partial solutions. On-time delivery is affected by the cumulative lead time of all the processes that occur from the moment the customer places an order until that completed order is delivered to the customer. While much can be done on the production floor to improve on-time delivery, there are more opportunities to reduce lead time - in quoting, design, materials management, scheduling. If you improve production time for a product from 10 days to 1, but it still takes a week for the order to get to the manufacturing floor, you are missing a greater opportunity to reduce overall lead time.

Avoid causing problems in related areas. Sometimes changes in one area cause problems in another. An improvement in one part of the company might actually have a negative impact on another area's goals; effectively moving a bottleneck from one area of the organization to another. When all areas of the organization are working together, you avoid the employee "push-back" that exists when goals are not uniform throughout the organization.

Ensure that improvements will be sustained through culture. Creating a "lean culture" in your organization is the key to sustaining the gains realized, and maximizing the overall benefits for the company and employees. A lean culture provides a structure that supports and ensures continuous improvement in all processes.

The first step is to nurture a learning environment and provide the tools for improvement. Encourage all employees to contribute ideas and solve problems. Mentor employees to develop leaders at every level of the organization.

A lean culture employs quantitative systems that measure progress in a non-judgmental way. Visual tools, such as the roadmap, communicate the improvement plan and results to the entire organization.

The goal is to improve processes, simplify those processes, and standardize them, so that improvements will be sustained.

Developing a lean enterprise: Fristam Pump's path to excellence

In August 2000, Middleton-based Fristam Pumps, Inc. had experienced average growth in sales of 14% over the previous 5 years, but with a 55% on-time delivery rate. Inventory was going up and the line of credit was stretched. "Our operational issues were disturbing," admitted Fristam's President, John Delmage. The company decided they needed to change.

Now, almost three years into the lean journey, the company boasts a 95% on-time delivery rate. Inventory turns have doubled. Changeover times have greatly improved. "We've also generated $1.8 million in free cash flow," noted Delmage.

Fristam's strategic pursuit of lean manufacturing helped create this radical shift in performance. How did they make this happen

Develop goals and communicate management support. A company striving to become a lean enterprise must be committed to continuous improvement throughout the organization. It's essential to communicate the goals, and align and involve everyone to achieve the company's lean vision.

On every project team, at least one of the members of Fristam's Executive Team is directly involved, cleaning machinery or doing whatever is needed. "We all work together to find solutions," Delmage stated. "The way to get results is through the involvement of everybody."

Generate an awareness of lean concepts and provide employees with the tools they need. An in-house, lean manufacturing workshop at Fristam began company-wide understanding of lean principles. Ongoing training continues through off-site courses in lean concepts.

Create the structure to support change. The next step was to create the organizational structure and management systems needed to support a cultural shift, and accelerate and enhance decision making at the point of knowledge. A core management team was established. Additionally a steering team was created to guide the continuous improvement effort.

Identify and prioritize opportunities for improvement. Fristam used Value Stream Mapping to analyze existing processes and identify improvement. opportunities. They were then able to create a roadmap for the company's lean journey.

Pursue the high-priority improvements. Focus on those improvements that will give you the best return on your investment of time and money. And be sure to monitor and report results to the organization so that you create buy-in for ongoing success.

Repeat the analysis and improvement on an ongoing basis throughout the organization. Fristam's team has become fully engaged in lean practices. Employees on the floor now routinely initiate improvement projects.

There are now built-in structures throughout the company to accommodate crisis and change. "Two and a half years ago, we were in a state of panic all the time, scrambling constantly," Delmage recalled. "That's gone. We now may spend 1 hour looking forward versus 10 hours to fix a problem... Things that used to turn the plant upside down are now handled routinely."

Fristam's leaders, 2-1/2 years into the lean journey, realize that this effort is an ongoing but necessary process. Delmage reflected, "I've come to the conclusion that we never will have ‘made it.' We will always be working it - always."

New atmosphere, new culture - keys to success "Within a lean enterprise, you explore the full depth and breadth of your company's potential," states WMEP's Jerry Thiltgen, a lean manufacturing expert.

It's challenging to stand back and take an overall view of your organization, exposing its strengths and flaws. But by taking a big-picture approach, you create the atmosphere to unleash the firm's full potential. The strategic development of a lean enterprise will significantly increase the benefits gained. And it will allow you to sustain those gains into the future.

Moreover, developing a lean enterprise is dependent on creating a culture that embraces change. And in an ever-changing marketplace, the ongoing ability to quickly adapt to new demands may be the real key to long-term success.

Fristams Improvements

Ontime delivery rate:improved from 55% to 95-99%.
Average Delay/late arrivals:improved from 2 weeks to 2 days.
Production meetings:originally no daily meetings, now they meet every day for 10 minutes.
Machine Changeover: improved from 76 minutes to 8 minutes.
Reaction to emergency orders: used to create chaos, now they are an established part of the routine.
Inventory: was on the rise, Fristam has now decreased it by 45%.
Their financial condition: used to include an extended line of credit, now they have generated $1.8 million in free cash flow.
Shipement date projections: used to be identified to the week, now they are identified to the day.
Competitiveness: Fristam used to struggle to meet growing demand, now they are not only meeting the increased demand, they are adding two more product lines and innovating ahead of the competition.

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WMEP provides technical expertise and hands-on implementation assistance to small and midsize manufacturing firms on advanced manufacturing technologies and business practices includinglean manufacturing, ISO, value chain management, and strategic repositioning services for manufacturers and manufacturing facilities located in Wisconsin.