A few weeks ago I read an article titled; 'Is there a formula to predict or evaluate the success of a lean implementation?' written by Art Byrne. He has led Lean transformations in the US for 30 years at very senior levels, so he has a few ideas about what process improvement goals are realistic. Read on to explore this further...
Byrne cites the example of Wiremold: (he was CEO at the time until it was sold to a large competitor)
After 9 years we more than quadrupled sales, increased operating profits by 13.4 times and increased enterprise value by 2,467%.
A number of books and articles have referenced the Wiremold transformation, starting with Lean Thinking.
Let’s examine what they did and see if it would be realistic for a China-based manufacturer.
What process excellence goals did they set?
What did they do in order to get close to those objectives?
Our focus was on the customer. To serve the customer better, we reduced our lead times from 6 weeks to 1-2 days. That let us provide better customer service and gave us a significant strategic advantage over our competitors, who still had 6-8 week lead times. We did this by focusing on setup reduction. Machines that used to changeover 3 times per week were being changed 20-30 times per day. Customer service went from 50% to 98+%. Inventory turns, a major focus for us, went from 3x to 18x, freeing up lots of cash and space and taking working capital/sales from 22% to 6.7%. Gross profit increased by 13 points. All driven by our focus on the five operational excellence targets shown above.
In The Lean Turnaround, a book published a few years ago, Byrne gave a list of business results that can be expected:
My experience and that of many others, would suggest that for manufacturing companies you could achieve at the least, the following results:
Can this be expected of a factory based in the US, buying materials and components locally, and selling products to other US companies? Yes. We have heard of many factories that achieved it.
It does take strong leadership, good direction, and protection from departments that might sabotage the efforts (e.g. accountants show ratios that deteriorate, purchasers are unhappy because they can’t buy large batches and possibly get a nice kickback, etc.)
Let’s look at issues that many Chinese factories face:
Overall, reducing inventory below a certain level is difficult, but many of the usual excuses against profound changes don’t stand scrutiny.
If we take Byrne’s list of 5 goals, what should they be for an average China-based factory?
Read also: How to Reduce Inventory in a Chinese Factory?
What about the Chinese factories in your supply chain? Have they achieved this level of excellence? Have they tried, and what happened? Do they not believe they can improve markedly and in a sustainable manner? What have you done to convince them? Get in touch with us by leaving a comment below!