The following Supply Chain Matters Guest Post is Contributed by Richard Lebovitz
In a prior Supply Chain Matters blog, What to Expect in the New Normal- Fostering More Connected Manufacturing and Supply Network Synchronization, Editor Bob Ferrari indicated that manufacturers and businesses now face a reality of more globally extended product demand and supply networks that increasingly require more agility and overall synchronization of activities. Owned factories and customer fulfillment or distribution centers generally remain as black boxes that manifest isolated islands of information or multiple systems of transactional record.
In this associated guest posting, noted Lean expert and thought leader Richard Lebovitz shares insights on the new definitions and directions in Lean thinking related connected manufacturing and what they will become in the “new normal’ of business.
“Digital Transformation” is a term bandied around ad nauseum by journalists and certain analysts across every swath of the economy, and because of this, a very subjectively interpreted phrase. Like most things today, Lean manufacturing is undergoing a digital transformation of its own.
Throughout my 30-year career, I’ve advocated, consulted, and built solutions for manufacturers to transform through Lean practices: Continuously improving operations to find new efficiencies, reduce waste, and exceed customer expectations using as few resources as possible.
Customers are demanding more customization and accelerated deliveries, so the pressure is on for suppliers and manufacturers to continue delivering amongst growing complexity.
With COVID-19, the challenges and drive for change were catalyzed, as the industry was split on whether supply chains were too lean during the pandemic.
Waste is more abundant than ever and times have changed, so we’re redefining and digitally transforming Lean manufacturing for today’s customer-driven supply chain.
The Before Definition
When I began consulting and training on Lean practices around the world as a partner at Japan’s Streamline Strategy, Lean transformation at that time was decidedly not digital. I remember the push to keep everything that way, too: On whiteboards, and using pencil and paper. My Japanese partners felt it was a badge of honor, crucially important to walk the floor with paper sheets and put them on the whiteboard. To be Lean, you had to literally touch everything to understand the processes, reduce waste. Before, it was not an area yet touched by computers, digitized data, and Cloud-based solutions.
The Current Situation
Lean manufacturing has transformed over the years, relying now on Excel spreadsheets instead of pen and paper; moving things onto Cloud servers; building new solutions on top of BI tools; using predictive analytics to understand future demand before it happens—all moves to find new efficiencies, reduce waste, and exceed customer expectations using as few resources as necessary.
Twenty years later after my days at Streamline Strategy, and as Founder and CEO of my second Lean transformation company, I have witnessed seismic changes in the manufacturing world that require a newer frame of reference for connected manufacturing and factory management overall.
The multi-industry trending towards more customer-driven supply chains is a result of either heightened customer demand, the need for mass customization of product configurations or needs to reduce the operational impacts of huge increases in the number of SKUs.
Recent news headlines highlight the demand fluctuation and subsequent supply disruption resulting from events like the Boeing 737 MAX grounding for aerospace manufacturers and COVID-19 shocks among multiple industries.
Compounding all of the above, manufacturing is facing a factory management talent gap that is far more serious than the temporary furloughs and layoffs spurred by the pandemic: Gen Z and millennials are fundamentally less inclined to take positions that rely on long hours, manual processes, and constant firefighting. They reveal in leveraging technology to provide added insights and more proactively avoid added problems.
Lean thinking is still about efficient problem solving with no waste—only value-add activities and the elimination of everything else. In a world of surplus, waste is imminent, so today’s Lean manufacturing definition includes finding efficiencies through automation, Cloud-based connectivity, and standardized processes. It is built into the daily lives of manufacturing leaders to identify the value-adding activities.
Digital Transformation now includes Lean manufacturing in its ever-growing definition as manufacturers look to more advanced technology to decide what waste should be eliminated, reduced, simplified, or integrated to deliver to customers.
Here’s my view of how new manifestations of Lean manufacturing will transform modern manufacturing:
1)Eliminate or revise classic just-in-time
This is the big one. In 2021 and beyond, just-in-time inventory will be redefined as manufacturers realize success is not about achieving zero inventory.
Traditional just-in-time thinking—where manufacturers keep just enough inventory on hand to operate—is no longer the goal.
A hybrid model is evolving that leverages a combination of demand-driven (pull) replenishment with advanced analytics linked to ERP/MRP planning. With increasing product customization and supplier globalization, manufacturers need to establish optimized inventory levels that they can quickly scale up and down, adjust on the fly, and make the best possible inventory decisions for the business at any given time. As of right now, 43 percent of manufacturers are planning on investing in safety stock after COVID-19, but cushioned inventory that ties up excess can be just as detrimental.
2) Reduce reliance on spreadsheets.
Managing millions of dollars of inventory across thousands of parts with spreadsheets no longer suffices. There are more efficient ways to consolidate, harmonize, and analyze disparate inventory and demand data and KPIs across sites and sources. Manufacturers see the immediate value of replacing cumbersome manual analysis with real-time data, purpose-built workflows, and out-of-the-box dashboards that provide end-to-end inventory and shortage visibility across the entire organization. Excel spreadsheets were a mere train stop on the journey from the tactile processes in the 80s to the digital based solutions of today.
3) Simplify decision-making toward value-add activities.
Manufacturers striving to make the right decisions at the right time when it comes to inventory can still rely on lean manufacturing principles as well. With digital transformation comes tools that do more than just statically display numbers, but instead perform cohesive analysis to surface root causes and inaccuracies, and then automatically and proactively present future opportunities. Modern tools for lean manufacturing are geared to simplify the daily work of key decision-makers and prioritize the value-add activities to reduce excess inventory and prevent shortages.
Plus, this simplification and modernization is appealing to the new workforce once turned away by antiquated and cumbersome processes in the supply chain.
4) Integrate connected factories into your network of suppliers.
2021 will be the year manufacturers think beyond traditional factory transformation (read: shop floor automation) to Cloud-based connectivity for factory management.
How? Starting with individual factory locations, manufacturers can use inventory intelligence to view all of their information in one place, allowing them to right-size inventory in each location. Leveraging the power of SaaS software, each individual node can be tied together, resulting in true network optimization—a connection of optimized factories that will be vastly more powerful than a single “smart” factory.
Long gone are the days of whiteboards and sticky notes. Companies that connect their factories and myriad data points across all sites will drive significant improvements in today’s complex chains through optimized inventory and AI-driven prescriptive guidance that prioritize daily actions. This will alleviate the concerns of just-in-time thinking and focus leaders on the new hybrid model that is being leveraged in the next generation of digital modern factories.
What is the value of this power?
It is the ability for supply chain leaders to measure and optimize inventory levels and metrics across multiple sites. Factory leaders will be able to quickly address business-critical interruptions or critical shortages, at one site, by moving over inventory from a sister site with excess material—the new lean solution to just-in-time manufacturing.
Connecting factories through SaaS technology and standard work is the key to achieving greater flexibility, efficiency, resiliency, and actionability, especially for global organizations. And as an enterprise’s own factories are seamlessly connected, the next step is weaving together the broader supply network for end-to-end traceability and surveillance along the chain.
The world has changed quite a bit since the advent of Lean practices in the 1930s. It has changed significantly even since I began my career in Lean almost 30 years ago.
Today’s digital transformation will not replace Lean thinking as well as Lean manufacturing—it will bring it into its most optimized, automated state, ensuring people are working smarter with complete visibility into the value-adding activities and interconnectedness of a global, complex chain wrought with vulnerabilities.
As companies embrace the digital transformation of Lean, they’ll be better equipped for customer-driven supply chains by design. That will include the ability to quickly scale inventory up and down, weight supply risk factors, adjust on the fly, and make the best possible and most-informed inventory decisions for the business at any given time.
About the Author:
Richard Lebovitz is the Founder and CEO of LeanDNA, a cloud-based actionable intelligence platform for factory management, built by lean experts with powerful analytics and best-practice operational dashboards and workflows. Prior to his current role, Richard was the Founder and CEO of Austin based Factory Logic, Inc. (acquired by SAP), which he started in 1997. He built Factory Logic into a leading provider of software that models the Toyota Production System and won the Shingo Prize for Manufacturing Excellence in 2001.
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