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Lean vs. Information Systems

#Ford #Toyota #Mitsubishi


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Manufacturers are torn between two "opposing" camps. In one corner is Lean manufacturing. In the opposite camp is computer-based planning and control systems. The explosive growth of e-business is forcing many companies to revisit where they stand in this apparent conflict. Indeed, some wonder whether a reconciliation is possible that would combine the best of both worlds. This new force is referred to here as e-Lean.

Spawned by the Toyota Production System, the classic Lean movement has gained tremendous momentum and respect over the last decade. However, it has been almost anti-information systems (IS) in its stance.

For Lean aficionados, less is best. This means:

  • Less inventory
  • Less material movement
  • Less floor space
  • Less variability
  • Fewer steps, options and choices in work.
For those in the computer camp, on the other hand, more is best. This includes:
  • More information
  • More flexibility
  • More functions and features
  • More comprehensive business processes
  • Faster, more frequent decision making made by more people.

Hence, it is no surprise that these two camps clash. However, it is a mistake for a manufacturer to pursue one of these strategies totally to the exclusion of the other. Indeed, tomorrow's most successful manufacturers will learn how to artfully blend the best of both worlds to create the next-generation powerhouses.

In terms of manufacturing's end goals there is no dispute between the two schools. Manufacturing always seeks to maximize productivity and quality at the lowest possible cost. Firms also wish to become exceptionally responsive to customers.

In the auto industry, customer responsiveness today is taking the form of fast order-to-delivery and mass customization. For instance, in Europe 15% of the vehicles are low-volume, niche vehicles, such as the Focus Coty built by Ford.

Japan's phenomenal success in manufacturing derives heavily from its Lean practices. In a nutshell, the approach emphasizes creating great systems and solutions and then running them repeatedly with minimal change. For instance, in its assembly plants Toyota creates one daily build sequence, and then repeats that sequence daily for an entire month, making only the most modest changes.

The four, principle concepts in Lean are:

  • Eliminate waste
  • Standardize work
  • Produce zero defects
  • Institute one-piece flow.

Materials flow through a Lean plant without interruption, attaining impressive throughput rates at exceptional quality levels. Lean production lines feeding Japanese assembly plants similarly enjoy superior inventory turns and overall performance, found University of Michigan professor Jeff Liker.

Many in the Lean camp look at information systems almost with disdain. In their eyes, IS introduces far too many complications and extraneous tasks. Almost all would become moot if the manufacturing processes were set up right in the first place, they believe. For synchronizing material flow, for instance, no fancy computer control systems are needed. An empty container is sufficient to alert a worker to make more parts.

James Womack of the Lean Enterprise Institute argues that workers require only a few metrics to guide their behavior—not the screens full of numbers that computers gleefully spew out. With dirt-cheap, networked personal computers everywhere, "maverick" workers have the power to intervene and alter work flows. Rogue-like changes even in one work cell, however, can ripple through an entire supply chain, disrupting the overall flow.

The sheer presence of considerable automation and computer systems likewise can drain manufacturing resources from a firm's core mission: producing vehicles and parts. The most high-tech-ish plants (e.g., Mitsubishi's Illinois plant) often spend inordinate amounts of time struggling with their systems and fixing wayward robots, not building product.

Even when the systems work flawlessly, computer systems can encourage band-aid solutions. For instance, a computer savvy worker may try clever work arounds instead of fixing a manufacturing problem (e.g., shoddy equipment maintenance or high worker absenteeism) at its source.

In planning and execution, the Lean camp also argues that computer-based planning and control dangerously removes control from the plant and over centralizes it. This has been especially true for traditional Material Resource Planning (MRP) and Enterprise Resource Planning (ERP) systems. Using these planning systems can lead to a major disconnect between reality on the plant floor and computer-generated schedules, inventory counts, and the like.

Despite this litany of "faults," the IS camp makes a compelling case for why it should play a critical role in manufacturing. Even after all the efforts to simplify, auto manufacturing will always be extraordinarily complex. Only by using computer systems can manufacturers possibly get their arms around this Herculean task. This includes recognizing the multitude of constraints and issues that inevitably impact operations and planning.

Only by extensively relying on computer systems can a large manufacturer possibly hope to create optimized plans and schedules across a broad swath of suppliers, plants, and logistics companies.

Advanced planning and scheduling (APS) systems such as from i2 Technologies may be IS's strongest card for playing in manufacturing. APS systems excel precisely where Lean does not: abrupt shifts in customer demand. Lean systems require stable demand to operate well. However, abrupt shifts in demand (e.g., caused by skyrocketing gas prices) expose where pure Lean systems are weakest: serving volatile markets with a broad product mix.

Recall that Lean manufacturers want to repeat the same schedule, to stamp out variability wherever possible. A business executive, on the other hand, wants to retain maximum, last-minute flexibility. This is to adjust build sequences and configurations to satisfy current market conditions. When demand causes orders for more fuel-efficient engines to mushroom, for instance, a manufacturer wants to immediately shift to that high-demand product. Greater market volatility, therefore, plays to the strength of high-powered, computer systems.

This responsiveness is possible only if manufacturers have visibility throughout the supply chain and if they are able to factor in the constraints that limit their range of choices. In its most pristine form, APS is continuously replanning, rescheduling and resequencing. It constantly updates manufacturing operations to reflect changing market conditions, capacity constraints, etc. Expecting empty kanban containers to somehow accommodate and communicate such rapid shifts is a pipe dream.

However, manufacturers shouldn't throw out the baby with the bath water. The Lean approach should always be pursued even for today's shorter windows of operational stability.

Computer systems can play a critical role even in the leanest of environments. They should be used to accommodate major shifts in demand. APS software can help reset quickly two critical parameters: determining the new piece-flow rate and setting the inventory buffer sizes between work centers and plants. Specifically, this is in the heijunka box and kanban lot sizes.

A danger in continuous replanning, rescheduling and resequencing is that it destabilizes the whole supply chain. If everyone in the chain is constantly changing their plans and production, then chaos reigns. Operating in lockstep does have its advantages. For instance, vehicle makers in Japan act in unison when transmitting monthly schedule updates to their suppliers. A supplier gets all the updates at about the same time every month.

Some rapprochement has been underway for the last couple years between the computer and Lean camps. Indeed, Oracle, American Software, and i2 Technologies all sell Lean or flow-manufacturing software.

In sum, Lean should be the foundation of manufacturing. Onto that should be layered parsimonious computer systems that optimize areas not well handled by Lean. Only then can manufacturing truly serve today's highly dynamic business environments.