When lean companies stay fat: as Danaher's experience demonstrates, lean manufacturing is an exacting discipline requiring a comprehensive view of the business

Chief Executive, The, Oct-Nov, 2006 by Paul Loftus

Lean manufacturing initiatives, much like diets, are designed to trim fat and make you fitter, faster and more competitive--in short, a high performer. The overall goal is the lasting improvement in company profitability that underpins high performance. And it's achieved by fighting flab of all sorts, from excess inventory to overextended equipment setup times. The benefits can be dramatic and well worth the effort.

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In fact, most companies that initiate lean manufacturing programs see a positive cash flow within 120 days of the program's start. And when they stay the course, the benefits in more specific measures--including inventory and order-to-delivery cycle time over the long term--can be striking.

Building flexibility into manufacturing processes and facilities and integrating and coordinating your overall supply chain network both simplifies and speeds up product flow and also facilitates just-in-time delivery. A slimmer supply chain optimizes the alignment of product capabilities with what customers actually want.

Studies indicate that more than half of all U.S. manufacturers have embarked on some kind of lean manufacturing initiative. Yet far fewer actually achieve lasting profit improvement. Why? Much like fad dieters, most companies drift back to bad habits.

In order to succeed, lean manufacturers must:

* Make lean manufacturing a way of life. Commit 100 percent and involve everyone in the company, from top management to the shop floor, in changing the company's culture along lean lines.

* Recognize that long-term success involves far-reaching change. Embrace changes boldly.

* Get--and stay--on the scale. Measure the right things with appropriate technologies and share the results.

* Avoid the big letdown. Stay the course through fully integrated and consistently communicated change programs.

What differentiates high performers from others is their approach to the challenge they face. Like successful dieters, they don't allow the "diet of the month"--the rules, tools and schools that claim to guarantee success--to distract them. They focus instead on four core capabilities:

1. Lean manufacturing is a way of life.

Asuccessful lean manufacturing program is a long-term strategy, not an isolated project. What's more, it has to be an integrated, operational strategy that encompasses the entire company and its culture.

This means challenging current thinking and driving lean principles and a lean mind-set into the manufacturing environment and beyond. Companies must instill the enterprise with the underlying philosophies of lean: elimination of waste, a "lot size of one" mentality, visual management and just-in-time delivery. They must also foster a spirit of continuous improvement that leverages these philosophies.

What needs to happen for the plant to be able to build lot sizes of one? For example, how can visual management techniques be used in accounting? Is there waste within the product development cycle that is increasing time-to-market for new products?

The original lean manufacturing initiative was the Toyota Production System, which revolutionized productivity at the Japanese car company. At Toyota facilities around the globe, kaizen is a word ingrained into the corporate culture. The word, which means continuous improvement, is a key factor that drives Toyota quality. Kaizen guides Toyota's engineering and manufacturing teams to constantly improve their operations. It also drives their service personnel.

For example, Toyota has been a leading supplier of innovative lift trucks for more than 40 years. To date, they've sold over one million units to thousands of satisfied customers in over 200 countries. In every phase of their operation, a total dedication to continual improvement yields safer and more efficient material-handling products. The company's commitment to quality, performance and customer service has paid off with phenomenal success. One in every five lift trucks sold around the world is a Toyota.

The kaizen philosophy has become a blueprint for others--notably Danaher Corporation, which translated it into the Danaher Business System (DBS). The DBS operates on two levels. At the level of daily management, kaizen events employ a diverse range of operational efficiency tools, including Six Sigma and value-mapping techniques, to eliminate such sources of waste as excess inventory, waiting time, overproduction and quality defects. The events run continuously, minutely examining business processes to identify all sources of waste and to develop a standardized, repeatable working system that will avoid them in the future.

What distinguishes DBS from other such systems is hoshin kanri, or policy deployment. This next level sets aggressive breakthrough targets across the company. These targets are limited to one or two a year and typically relate to a specific product line or geographic expansion. Set at senior management levels, they cascade down the corporate hierarchy so that every employee understands exactly what to do to achieve the breakthrough. "Tracking boards" at the end of each production unit in every Danaher facility reflect in detail the progress made toward the breakthrough, often by shift.