Lean and then some

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

Unless you’re a high volume producer, lean techniques may not give you the flexibility you need to keep your customers happy. John Dwyer talks to some who have learned the difference between lean and agile

Some are agile; some have agility thrust upon them. CHK, the Crewe, Cheshire, manufacturer of metal fabrications for heavy goods vehicles (HGVs), began its lean journey five years ago. With help from the Manchester-based Manufacturing Institute (TMI), CHK used value stream mapping and other techniques to move to lean from batch-and-queue.

Lead times fell from two weeks to two days, people productivity rose 60 per cent, value added rose 26 per cent; stock and work-in-progress (WIP) fell from £71,000 to £5,000 and quality and waste control also improved.

But CHK still had a fight on its hands: “A lot of the things that apply in the rest of the automotive industry, in volume manufacturing, don’t apply here,” says managing director Alan Pinkney, managing director. “We need to be more flexible. Volatility these days is the norm. We’re dealing with constant change. And if you are not agile and flexible you are not going to survive.”

As Pinkney lists the pressures, you begin to see why. Customers have imposed new conditions: three year agreements which set five per cent a year price cuts. Processes are in constant change: “The major load fabrications that we make are going over to castings and, if they do, we lose that work.” In addition, “The cost of steel is going through the roof and most of our customers have told us to absorb at least some of that.”

Within the last month Pinkney learnt that by the end of 2006 Leyland Trucks will stop making Foden vehicles at Leyland, Lancs, and Arvin Meritor (AMI) will close its Wrexham plant.

Foden is five per cent of CHK’s turnover. CHK hasn’t yet lost AMI’s work, which may relocate, but if it did, “It’s 25 to 30 per cent of our business,” Pinkney says, “and we would not be able to survive.”

But he is philosophical: “You’ve got to be able to do this, to manage that volatility. If you don’t do that you are stuck and you’re going to fall over.”

The Harmon group of Wimborne, Dorset, supplies precision parts to the aerospace and military industries. “We’re being driven by most of our customers to go down the lean route,” says works director Dave Harmon. Each customer wanted Harmon to do things their different way.

Less than a year ago, with help from the West of England Aerospace Forum (WEAF) – which includes some of its major customers – Harmon chose its own path: “We’ve looked at what lean means and translated it into what’s good for us rather than what’s good for our customer. We’ve taken on the concepts and adapted what works for us.

Harmon had to stick to its guns: “There is no point in doing something unless you get a benefit from it,” says Dave Harmon, “and we couldn’t see the benefit that we were going to get by doing what everybody wanted. It keeps the customer happy, but in the long run, does it make the business more profitable? And the answer to that is no.

“Everyone has their own outlook on lean manufacturing… It really depends upon the business that you’re in. We’re not into high volume production parts, so getting a correct flowline for many thousands of components to run through is not what we want. We manufacture probably mid- to high-complexity parts, which are critical, and they generally tend to come in smaller quantities.”

It’s moot whether this 70-employee company is lean or agile: “We did a study on a machine on one of the cells and 25 per cent of the actual running time of the day was spent setting.” Harman cut this by 75 per cent, boosting machining time by a fifth: “We analysed what constitutes the setting time – waiting for material to come to the machine, waiting for tooling to be there, work being programmed in advance, tools, fixtures. All that’s currently brought into the cell to make sure that when the work’s ready to go everything’s there and we reduce the time down.”

Pinkney says he can’t see a useful distinction between lean and agile at small to middle-sized volumes. Lean production in small volumes also means agile production, “and lean is part of agile. It’s lean plus extra flexibility.”

Professor Mohamed Naim of Cardiff Business School’s logistics systems dynamics group says lean and agile have “a lot of similarities. There are also subtle differences. Lean has been going down the stability road. The aim is to minimise variants. Variants lead to uncertainty, and lead to increased costs. Agility on the other hand means exploiting instability.”

Rather than thinking about lean or agile, says Naim, companies should be “finding the right solution for the right problem. It depends which market you are in. If your market is low cost, low price then you will want to be leaner. But if you’re in a market where there is a high degree of customisation and your customers are willing to wait, or to pay a bit extra, then you’ll go down the agile road, if that’s what you want to call it.

“One size doesn’t fit all,” says Naim, “and it isn’t going to happen overnight. It does evolve with time.”

James Aitken, now a consultant with SA Partners of Pontypridd, doesn’t believe there’s any life left in the lean-versus-agile argument: “They should be complementary,” he says, but adds: “If you try to go ‘agile’ before improving your processes you are just going to find your costs going up.”

Aitken once managed a UK lighting company. The business used lean production to run high volume repetitive products. Another part of the business ran what Aitken calls “extremely high volume” products, but allowed Aitken to install a postponement system to build the units common to all the products, then finish the product in the warehouse. “The base unit was common to all the units, but they might use a different lamp type or different glass. That was all done at the warehouse end.”

In a separate building, Aitken’s lighting company made bespoke products ‘from scratch’: “That was design and build on a very short lead time, and it required different intellectual capacity of people employed, and much higher manning levels.” Aitken says that the direct to indirect labour ratio for lean production was about 20 to one, whereas it was only three or four to one for agile production. The benefit was that, if the product was successful it would become a ‘runner’ product.

The skills issue is a bear trap. In a lean factory, says Aitken, “you standardise an awful lot. The processes can be repetitive and you foolproof a lot. You take out the intellectual capacity. An agile factory can’t be as regimented as everything changes so quickly.”

What that does, he says, is to create an accounting problem. “You’ll be asked why we only needed one indirect for every 20 direct workers in the lean factory but now you need one indirect for every three directs in the agile factory. How can that be justified? You need a different structure.”

Pinkney has lost more workers than he’d like: “We’re opposite Bentley Motors, and they have swiped our people,” he says. “We have been able to trim down the cost of production. We now have small cellular groups rather than individual welding bays, and we have people working in small teams now. That does help. We’ve managed a 15 to 20 per cent increase in productivity… We are getting better and better with fewer and fewer people.” Despite all this, Pinkney remains positive. AMI is still talking to CHK about a three year deal, says Pinkney: “We’re still in the frame.”

Pinkney also sees a return of business it once lost offshore. And CHK is diversifying to avoid being too reliant on one set of customers: “In the last four years we have got involved with a couple of inventors and we’re going to produce standard products.”

What advice would he offer companies that haven’t yet become as fit as CHK? “Being agile means you can respond to things out of your control. Organise yourself internally so you can be agile and move people around, and be flexible. For Pinkney that means trying to surround yourself with educated, well trained staff.

IT tools can help. Harmon says the company could not run three shifts without its Preactor scheduler: “If you have no planning system there’s no continuation of work. You don’t know what the next job is so you can’t get it ready for the cell. The Preactor part of it gives the people the information they need to make sure cells are fed.”

Harmon is starting to see benefits, “There’s no two ways about it. We’re seeing increased business. We’re seeing lead times starting to come down.” Though he can’t yet put numbers on them, “you can see bottlenecks going. You can see work flowing through.

“Because of what’s going on we are becoming more successful. We are satisfying customers’ needs. Most people nowadays, their prices are about the same [and] their quality is the same – otherwise you’re not in business. The only thing that makes you stand out is giving the customer what he wants when he wants it, and the only way you can do that is by putting in a manufacturing system that makes it flexible. That allows us to win more business.”

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