Lean champions

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Magazine Article, Source : The Manufacturer
Zone : Leadership and Lean
Published : January 2005

Lean doesn’t work in isolation. Ruari McCallion finds out what the champions of lean are doing to spread best practice

Ten years ago, Sainsbury’s was Britain’s biggest supermarket chain. Ten years before that, Tesco had started to implement a long-term strategy to improve every aspect of its operations. Between 1983 and 1996, it introduced automation and technology like POS scanning, centralised automated ordering, centralised distribution, automated warehouse control and EDI with its main suppliers. It cut lead times and stock levels at the same time as it increased its SKUs from 5000 to over 40,000. In 1996, it embarked on a second push, which was inspired by the example of Toyota. Aided by Prof Daniel T Jones and his team, Tesco undertook value-stream mapping of the whole supply chain. The work done since has cut stock in the entire supply chain to just 3.5 days, yet availability has improved to the level where customers expect that they will get their first-choice product, whenever they visit – and 99.8 per cent of the time, they do.

No apologies for starting with an example from retailing: no-one has a monopoly of good ideas. Tesco learned a great deal from Toyota’s practices and has worked with its suppliers – packaging companies, logistics providers, food processors and garment and homeware manufacturers – spreading its knowledge of lean to them. It’s now the leading retailer in the UK: Sainsbury’s has fallen to third.

The biggest competition now is between supply chains. Lean enterprise doesn’t exist in a vacuum: you can be as lean as you like inside the factory walls but, if your suppliers aren’t, then there’s avoidable cost in the system.

Spreading the lean message makes sense. If it didn’t, then government and regional agencies wouldn’t bother investing time and money in initiatives like Accelerate West Midlands, the SEEDA (South-East England Development Agency) supply chain initiative, which grew from the Sunseeker supply chain exercise, and the North-West and Farnborough aerospace associations. There is a push on – and not beyond time. Last year, Prof Garel Rhys of the University of Cardiff Business School said that: “The Japanese are disappointed at the glacial rate that tier one is transferring knowledge to tier two and beyond.” In the auto industry especially, the leading OEMs have been pushing lean for all it’s worth. But it hasn’t been as successful as could have been hoped.

“Part of the problem is that customers want all the gains,” Rhys said. “OEMs still don’t buy in to partnerships – they remain too adversarial for their own good. Suppliers need to keep something, too.” The situation persists, unfortunately, especially in the European and American-owned companies, so the glacial transfer of lean is hardly surprising. Not all are like this, thank goodness. UYT was established in Coventry in 1996 as a joint-venture company in the Honda supply chain. One of the partners was (and remains) Honda. Its principal products are pressed steel critical components but, in 1998, it won the contract to supply sunroofs.

“Honda looks to outsource and resource activities if they can be done cheaper or better in the supply chain,” said John Greaves, deputy managing director of UYT. Not only was the product itself outsourced, so were the methodology and techniques. Honda expects the tier one companies to act the same way with their suppliers: thus is knowledge and best practice moved out from the centre. Honda’s attitude to difficulties may make others green with envy, too.

“If you have a problem, Honda sends people to help sort it out,” said Greaves. “That means you can be open about mistakes and issues – so long as you learn from them. There’s no shame in reviewing the process to see how it can be done better.” Any engineering company that wants to stay in the game over the longer-term should be beating a path to the door. Honda works closely with its suppliers from the earliest design stages in the product lifecycle. It’s seeking price-competitive supply sources, naturally, but it does so collaborating with its supply chain.

Something else that typifies the best of Japanese practices is long-term relationships. The two Japanese partners in UYT have been suppliers to Honda for decades. The parent company of Denso Midlands Manufacturing, which is based at Hall Green, in Birmingham, has been part of the Toyota keiretsu (family) since it was spun out in 1949. Similarly, Musashi Auto Parts Europe, which has a factory in south Wales, is part of Honda’s keiretsu and originally came to the UK to supply the Swindon plant with balljoints and part-machined gears. Such relationships mean that suppliers will be more willing to collaborate properly with the OEM.

The transfer of knowledge within the supply chain in the UK may be glacial, but even glaciers can gain speed when things warm up. The marketplace isn’t getting any cooler, so it isn’t a shock to find that British companies are upping their game, too. Charlie Blakemore, at BAE Systems Land Systems, has often talked of the value of benchmarking as a means of gaining insights in to good practice. He happily hosts visits to the plant and enthusiastically visits other companies, too. The lean practices that had been implemented at the Plaxton coach plant were instrumental in bringing it out of the wreckage of the Mayflower administration as a viable business. Just four years earlier, when the lean programme was introduced by the new team, headed by Alastair Davidson and with support from consultants Hosca, the lean programme had saved the plant from closure.

“We’ve been practising lean for three or four years at Scarborough. We introduced work cells, have cut down inventory and have lineside deliveries for stock,” said managing director Mike Keaney. The supply chain was supportive when the company came out of administration and has been eager to assist with the measures to improve efficiency.

“We’re working with key suppliers on a DTI initiative and feeding to them the improvements we’ve implemented here. Obviously, it helps them to reduce their costs,” said Keaney. “Each company appoints a change agent, who’s charged with generating improvements in their business. A number of our suppliers didn’t previously measure scrap, on-time deliveries (OTD), waste and so on. Our lean champions go and work with them; Warwick Manufacturing Consultants also go in and do counselling and coaching.” Plaxton has seen OTD from its suppliers improve from 75 to over 95 per cent. But does it expect to reap all the benefits? “We expect to share in savings generated by the improvements, yes – but it’s sharing,” said Keaney. Improved competitiveness helps vendors secure their position the supply chain – and to gain business elsewhere. Plaxton is at the top of its chain: Special Metals Wiggin (SMW) is a supplier in the aerospace industry. Ray Stone, director of operations, agreed that it often takes a ‘burning platform’ to focus the mind – and SMW had one. The American parent company restructured out of Chapter 11 bankruptcy in November 2003 and the new owners set some pretty exacting targets.

“Part of the initial strategy was to analyse whether there was a business here going forward,” he said. “I recommended a lean programme. The board directors visited the plant in October, had a presentation and are very committed to it.” The intervening time had not been wasted, waiting for a decision.

“We’ve been running kaizen, six sigma and leansigma events with TBM Consulting, who were chosen because they operate on both sides of the Atlantic,” said Stone. “One of TBM’s consultants did a presentation on what leansigma is about at a conference in March. The events since then have been very successful,” he said. The focus is on getting the internal house in order, with the help of one of the best-known names in the aerospace business. “One of our biggest customers is Rolls-Royce, who are already practising lean manufacturing. We’ve been working closely with them.” The company has three sites – two in the US and one in the UK – and the operations directors in each are the lean champions. Leadership – or lack of it – had, previously, been a problem.

“SMW had made various attempts in the past but they weren’t driven from the top and they simply fizzled out. The programme started with senior management, to ensure that they all bought in to it and are involved in leading it,” he said. In common with the whole aerospace industry, SMW has had a traumatic time since 9/11 but is now driving forward. Is it going to help its suppliers, as Rolls-Royce helped it? “We have to get our own house in order first but we’ll be having a strategic review with TBM and work with our suppliers is on the agenda to be discussed then.”

We’ve seen the US Big Three auto manufacturers swing from mouth-watering profits to eye-watering losses, year on year. Meanwhile, Toyota and Honda continue to gain market share and enjoy steady profitability. They share: others don’t. There can be no doubt about the value of sharing and spreading best practice.