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Lean: A Silver Lining

There are dark clouds well over the horizon so far as conditions in auto go right now, but for those companies that practice lean, things aren’t entirely bleak. A new lean training organization may help those who are hoping to ride out the storm.

“Everyone talks about the weather but nobody does anything about it,” wrote 19th century essayist Charles Dudley Warner.

A 21st century updating of that might be to replace the words “ the weather” with “lean manufacturing.”

Which is to say that there are a whole lot of people talking about it. But as for doing anything with it . . .

As a bit of an experiment, I entered “lean manufacturing consulting” into two search engines: www.alltheweb.com and www.google.com. The former brought up 124 hits, and the latter more than double: 292. Which is not to provide an assessment of search engines as much as it is to point out that there are a whole lot of people who want to talk to you about lean manufacturing. (And to provide a bit of candor: I put the word “lean” into the search space on the www.autofieldguide.com home page [which, if you’re not familiar with it, is the homepage of the magazine you’re reading] and came up with 114 hits.)

According to Joe Day, chairman and CEO of Freudenberg-NOK (F-NOK; Plymouth, MI), “For the past 10 years, our North American auto industry has had access to most of the teachings of the Toyota Production System. And, during that time, you could put in a thimble the amount of success the industry has enjoyed in purging costs from the value chain.”

So, to review:

  • A whole lot of talk
  • A whole lot of consultants
  • A whole lot of available information (“Toyota Production System” and “lean” are, fundamentally, synonymous)
  • A whole lot of—nothing.

That doesn’t make Day happy. He even admits he’s “hopping mad.”

Actually, Day probably isn’t mad. He’s really a man who is a proselytizer for lean. Freudenberg-NOK is a supplier company, the 16th largest in North America and the 25th largest in the world. For nearly nine years, F-NOK has been working at its own lean program. Early on, a consulting company was used. But then Day and his colleagues determined that they’d rather do it themselves.

And to say that they “practice lean” is a bit like saying Barry Bonds hits “a lot” of home runs. They’ve conducted nearly 16,000 kaizens, continuous improvement events during which measurable transformation occurs. Of those, more than half were conducted in North America. And the results have been impressive, with work-in-process inventory going down by 80% and revenue per 1,000-ft2 of factory space going up by 350%.

When they started this activity, Day stated that his goal was to triple F-NOK’s sales to reach $1-billion by the year 2000. Which the company did. Oh, but there were a couple of conditions that he attached to his goal: it would be reached without any major acquisitions and without any major additions of bricks and mortar. He credits lean with helping the company to get where it is today.

And being a bona-fide believer in lean, he also points out that he’s convinced they still have a long way to go. (What ought to frighten F-NOK’s competitors is that the company has added a new tool to its lean kit, Production Preparation Process [3P], which it is applying to its highly kaizened cellular manufacturing. In one example, there is a cell that had started out as a batch production process that required 46 labor hours/day to produce 5,880 pieces/shift with a scrap rate of 6.8% and a dock-to-dock leadtime of 30 days. By the time they were almost done with it, the labor hours/day were 24 to obtain 9,570 pieces per shift. The scrap was down to 0.8% and the leadtime was just 16 hours. And then they applied 3P. It still requires 24 labor hours/day, but they are getting 9,630 pieces/shift. And although the leaditme is still 16 hours, the scrap rate is 0.1%.)

Day states, “I’ve been astonished—and a little angry—at the lack of progress and lack of support for lean practice that is so crucial to the survival of the North American auto industry.” He knows that lean works. He knows that it can save tremendous amounts of money—for OEMs and suppliers alike. He calculates, “If the top line industry revenue remains essentially unchanged at $350 billion—that’s 16 million cars at $22,000 each—and the industry can purge $25 billion to $45 billion of waste and reduce its on-going capital requirements per unit of production by 30 to 50%, then the added-value content would increase by $25 billion to $45 billion, capital demands would shrink and depreciation costs would decline. This industry’s projected price earnings ratio would be in the high teens instead of below 10.” All that from practicing lean manufacturing. (Imagine what the P/E ratios would be for OEMs if they truly practiced lean and had exceedingly popular products.)

But while the information may be out there, Day maintains, “there are not any affordable, credible sources of practical lean teaching that could help the smaller, sub-tier suppliers to learn and sustain the lean culture.” One of the problems, he thinks, is that in many cases, those people who talk lean—be they academics or consultants—just talk lean. Day is unequivocal in his belief that lean happens on the shop floor, not in a conference room, that lean must be worked repeatedly, not just something that occurs when a consultant comes in and performs what he calls a “drive-by kaizen.”

So F-NOK is sponsoring a new teaching organization called “The Lean Center” that is headed up by Thomas A. Faust, who had been in charge of F-NOK’s lean activities since 1994. It is located in F-NOK’s headquarters. And, perhaps critical to the viability of The Lean Center, it is being staffed, on an as-needed basis, by F-NOK’s 65 certified lean practitioners, each of whom have participated in an average of 250 kaizens. (Day points out, with a certain amount of distaste, that there are consulting organizations promoting their lean training that have an entire staff with less experience than a single F-NOK lean practitioner.)

Initially, The Lean Center is offering training packages for companies at various stages on their lean transformation. One is a 10-week program for the sub-tier suppliers that starts them on the road to lean. Ninety percent of the program is spent on shop-floor activities. To make the program affordable, it will group five non-competitive companies into a session. The fee is $50,000 per company. And to make it more attractive to larger companies with minority suppliers, Day says, “If an automaker or Tier 1 supplier kicks in $10,000 for a minority supplier’s Sub-Tier Lean Group Training, The Lean Center will discount the price by the same amount.”

Other programs are on 3P and Six Sigma.

The bottom line here is, well, the bottom line. With the auto industry undergoing the downturn associated with the recessionary conditions that preceded September 11 and the following tanking of sales across the board, it is clear that some supplier companies aren’t going to make it. The first to go will be those that aren’t lean.

And while no one can really do anything about the weather, anyone can do something about getting lean.—GSV