The Consulting Playbook, Edition #1
Welcome to our new series, the Consulting Playbook, a collection of posts designed to offer insights into how businesses and their executives can utilize consulting as a strategic lever to boost performance. Each Consulting Playbook post is broken down into a few elements: Case Study, Additional Information regarding the technical application, and Additional Links related to the topic.
Real Life Practices Situation –
A large industrial manufacturer was facing serious production issues at one of their plants. The CEO was forced to declare the plant’s current layout and working methods unsustainable. Defects would flow through the whole process spread on multiple manufacturing lines, resulting in an 18-month waiting list, decreasing profitability and unhappy customers.
In addition to the manufacturing lines, the company was dealing with an inflexible union and antiquated labor agreements making the changes needed to take place, difficult to implement and to manoeuvre. The CEO asked the VP of Operations to analyze two possible scenarios:
A) Keep the plant or
B) Create a new one in a lower cost region.
They brought in a third party to analyze the two options before them and after a careful review, decided to launch a transformation on the existing facilities.
With increased pressure on profitability and the displacement of thousands of jobs at stake, there were difficult choices that had to be made in the best interest of the company and its employees.
The Better Plan of Action –
After a quick diagnostic showed opportunities to reduce waste, standardize activities and significantly increase the quality level, the consultant and the management team came to the conclusion that the plant, as well as several other plants in the region, could be saved through a Lean Manufacturing Transformation.
However, the journey was only starting as they now had to carry out the change without disrupting the operations. The key principle was to shift from the top-down operating model to a new scheme where the operators generating the value were supported by the rest of the organization.
The consultant worked with the top management on that vision, shared the diagnostic, made sure that everyone was onboard with the rationale for change and general direction, and then worked with them to lay out the plan to reach their goals.
A large-scale, collaborative plan identifying improvement opportunities was put in place. Along with that, a specific training for operators to simulate the new work environment preparing them for the change ahead was put in place. The consultant also developed specific methods for the leadership to support, and champion the change. The change process and continuous improvement initiatives incorporated different team members at every level of the organization, ensuring the project’s success and fluidity.
The Results and the Benefits –
The new and more efficient plant was designed to boast the same production volume with only two thirds of the previous workforce. The adjustments made spurred huge cost savings contributing to an increase in the overall profit margins, and sending the stock price soaring over the next 3 years. They were also able to reduce the manufacturing surfaces by more than half, as well as revise the existing labor agreements to more beneficial ones.
What is Lean Manufacturing?
The simplest definition of it is – system of methods designed to eliminate waste within a manufacturing process. Lean Manufacturing or lean production centers around three main components:A) Elimination of waste (“Muda”) within a manufacturing systemB) Control over waste created through overburden (“Muri”)C) Waste created through inconsistency in workloads (“Mura”)Essentially, lean manufacturing is all about adding value and reducing everything else – expense, time, efforts, and so on. In today’s fast-paced world of business, communication and commerce, Lean manufacturing is an extremely powerful approach to secure an organization’s success.
Main Lean Production Principles
They originated in the Japanese manufacturing industry. The term was first coined by John Krafcik in his 1988 article, “Triumph of the Lean Production System,” based on his master’s thesis at the MIT Sloan School of Management.
Toyota’s view is that the main method of lean is not the tools, but the reduction of three types of waste: muda (“non-value-adding work”), muri (“overburden”), and mura (“unevenness”) exposing this way any problems or inefficiencies in the process.
Lean implementation focuses on getting the right things to the right place at the right time in the right quantity to achieve the perfect workflow, while reducing waste and being flexible and willing to change. These concepts, however, need to be understood and embraced by the whole organization’s team.
The single point behind “Lean” is to make the work simple enough to understand, to do and manage.
Lean Manufacturing strongly depends on implementing all the core principles through Lean Thinking and the role Lean Leadership plays in overseeing that.