Office furniture maker, Herman Miller, explains how the company has introduced lean manufacturing across the business to shorten lead times, increase efficiency and reduce costs, and how it uses IT to support the lean movement
Office furniture manufacturer Herman Miller has manufacturing and distribution centres in North America, the UK and Asia, alongside sales offices, dealers and licensees in North America, Asia/Pacific, the Middle East, Africa and Latin America. Sales for 2007 reached $1.9 billion.
Like most companies in the office furniture industry, it has been dogged by long lead times and delivery delays, largely because of the sheer scale of possible product options. With so many ‘base’ products, such as tables or chairs, each with their own potential features and finish options, the number of product permutations runs into the millions.
Coupled with the complexity and inefficiencies of legacy manufacturing practices, this bewildering array of possible product types has proven a barrier to improved reliability, customer service and profitability.
Because customers can customise their orders with their choice of colours, fabrics and designs, Herman Miller carries over 400 million stock keeping units (SKUs).
Consequently, in early 2002 the company began an aggressive drive to reinvent its operations. One important early step was a teaching partnership with the Toyota Supplier Support Centre. Studying the success of Toyota – the world leader in lean principles – the company began to adopt and implement world class, lean manufacturing processes.
However, simply copying the Toyota system was not appropriate. Herman Miller not only sought to reduce costs, but also to promote strong environmental principles which it applies throughout design, production, supply and commercial activities. The product portfolio and methods of production are designed to be ecologically sound and its catalogue includes many examples of ‘ecodesign’ techniques.
Disassembly concerns are included at the design stage and actual production is based on energy efficient manufacturing, using recycled and recyclable content. The waste elimination and reduced physical footprint associated with lean is a key reason for its deployment across the company.
The deployment of lean has also been driven by issues of customer service. This has meant a clear focus on integrating lean manufacturing with the customer facing elements of the business. The company’s network of dealers, consultants and financial partners offers customers an array of specialised services to plan, design and manage their workplace. Every project and every company has its own pressures and criteria which means each project has to be addressed individually.
This focus on customer service has put build to order (BTO) at the heart of the Herman Miller version of lean. Deploying the Infor ERP SyteLine product, Herman Miller has forgone the safety net of a hybrid BTO approach and now makes each product to order, holding no finished product stock and only low inventory levels of the most needed components. Such inventory has been reduced by $1.2 million in the past two years.
However this individual fulfilment cannot be at the expense of speed. Kevin Hall, international business systems manager for Herman Miller, explained: “Time is everything in this industry. The time it takes to acknowledge and fulfil an order is critical to delivering superior customer service and achieving competitive advantage. Our production systems have to be very streamlined as delays in production and delivery are unacceptable.”
In order to link these two facets of sales and production, SyteLine is fully integrated into the sales ordering system, enabling the company to acknowledge and confirm an order online in less than one minute. The goal of this drive into sales processes is to create a totally electronic chain that eliminates waste and erroneously specified orders.
It is, however, within the production and supply chain environments that lean has made the biggest impact at Herman Miller. Within production, the need for maximum equipment uptime has led to a renewed focus on proactive and preventative maintenance, including stringent uptime targets.
Throughout the supply chain processes, systems and even entire relationships have been adapted to drive lean success. The use of electronic kanban has evolved into electronic self-billing for some suppliers. This closed loop process involves publishing the details of parts needed for an order to suppliers, the suppliers then propose prices which are subsequently negotiated and authorised – updating all related systems. Demand schedules are published and, when received, the invoice is cleared for payment.
The JIT (just in time) supply chain has been enhanced by the fact that electronic purchase orders are now pulled through the system and sent to key suppliers automatically without any manual intervention.
Other areas of innovation have included the ‘warehouse on wheels’. This initiative sees containers from a given supplier arrive at a production facility with the contents in build order at the correct quantities. The container then makes deliveries literally ‘to the door’ of the relevant production station. This programme of developing an optimum workcell places the onus on the supplier to ensure the next stage of production is possible and carried out accurately.
As part of its ‘green’ credentials, the company is making a conscious effort to manufacture products in close proximity to its markets. This cuts the costs and complexity of distribution within that market. Combined with the idea of the warehouse on wheels, this opens up the possibility that only those components that are needed are ever even transported to a production facility, eliminating waste before it even arrives at a site.
The adoption of lean principles across the Herman Miller business has yielded dramatic results. The business has reduced manufacturing square footage, consolidating three sites into one. Inventories and the transport costs associated with them have been drastically slashed. All of this has been accomplished while dramatically growing sales and profitability.
From a customer service perspective, the average for standard product lead times has been cut from eight weeks to four and many products are regularly available in 10 business days. The speed of production and the delivery of finished goods has been improved with 100 per cent of the relevant products reaching customers within the 10 day limit.
By focusing so clearly on manufacturing exactly what has been ordered, and streamlining and accelerating that order fulfillment, Herman Miller has drastically reduced wasted and duplicated effort. As a result the organisation has become more agile with a much faster time to market.
Such has been the success of lean that it has even spread to the administrative and typically back office functions. Many internal processes have been redefined and reengineered with clear benefits. In the case of pricing books, seven parallel processes have been rationalised back to just one. As a result, discrepancies within the sales and invoice processes have been eliminated.
“The results of our lean operational reinvention have been extraordinary,” Hall explained, “and the journey has only begun. Herman Miller and its suppliers and all plants are geared to produce orders for individual customers. Our ERP system coordinates sites, parts, people, and equipment across all facilities and we now have digital, real-time transactions between ourselves and our partners.”
Looking to the future, the company is set to continue exploiting technology to deliver lean information systems built on service orientated architecture (SOA). Driven by a need to continually integrate and enhance inter-company, company-supplier and company customer communications, as well as improve supply chain visibility, the use of SOA will begin within the ERP systems at the heart of the vision of lean manufacturing.
Hall pointed out that the move to SOA yields many potential benefits: “SyteLine has already delivered speed and accuracy. The SOA-based version will build on that, delivering electronic invoices, consistent pricing throughout the company and single points of contact for any customer.
“Our lean strategy has been driven by a number of factors,” he concluded. “We aim to ensure that Herman Miller is capable of satisfying tight deadlines without compromising product quality and our green responsibilities. A fast turnaround, accurate orders and product quality are the hallmarks of our superior customer service and lean thinking has fed into all these elements.”