|
Industry Trends
Lean Manufacturing Can Save American Manufacturing
Today, it seems no industry is safe from the drive to lower costs by relocating to developing countries. Even highly skilled jobs in design, research and technical development that once seemed untouchable are finding their way to the Third World, such as IBM which announced that 5,000 high-tech American jobs would be moving offshore.
The statistics are staggering. Since 2000, some estimates are that nearly 3 million U.S. jobs have moved overseas. Interestingly, we now seem to be in the second wave of relocations.
A recent visit to a manufacturer of computer devices in a low-cost labor region of Mexico provided another insight. They had just finished research on emerging competitors and found that similar products were being offered for sale in China at 30 percent of their selling price. The manufacturer was convinced it had to lower its cost structure to compete in the long run and was actively working to improve productivity. Ironically, the same arguments probably were the very reason it was established decades ago.
The lean answer
Lean manufacturing has evolved from its roots as almost a cult-like philosophy spread by a small group of dedicated disciples. Those early advocates learned most of the techniques from the teachings of Japanese masters of the Toyota Production System. Today, virtually all major manufacturing companies have some form of lean initiative. Smaller companies and non-manufacturers have been generally slower to adopt the technology but several notable exceptions exist.
The power of lean lies in its ability to reduce costs in all areas. This is accomplished not through traditional cost reduction efforts but by challenging every activity to determine if it adds value in the eyes of the customer. This seemingly simple approach has powerful implications. Business processes that may have been taken for granted for decades are candidates for elimination. The emphasis is not on doing things more efficiently – instead, the first question is why an operation must be done at all.
The benefits of lean
The drive to eliminate non-value-added activities has obvious benefits. Almost invariably, preventing a defect is more efficient than finding and fixing it. Fewer errors mean less rework. More reliable processes lead to less work-in-process (WIP) inventory and reduced space requirements. As wasteful activities are eliminated, the elapsed time to manufacture a product is reduced. The bottom line is that customers receive a better product, at lower cost and in less time.
The ultimate payoff of lean
As the economics of Lean Technology reduce the incentive to focus strictly on low labor and direct costs, other factor begin to become more significant. Excess inventory is another form of waste since it is expensive to store, is subject to damage and has a nasty habit of becoming obsolete. Lean companies work hard to reduce inventories to the minimum level required to meet customer demand. However, offshore manufacturing almost always adds to inventory – either because it is sitting in containers or because extra inventory is needed to meet changes in actual demand.
The future according to lean
There is little doubt that lean technology will continue to spread in the coming years. Many manufacturing companies are just starting to see the benefits of Lean and even those that are considered leaders today realize that they have just scratched the surface of opportunities.
The lure of low-cost labor will always exist somewhere in the world, and a reasonable distribution of business investment makes economic and political sense. However, locating business based solely on finding the rock-bottom lowest price of labor (if only for the moment) is a destabilizing approach. By eliminating the waste that drives companies to low-cost regions, lean technology has the potential to stem the recent tide of job loses.
|
