The electronics industry has found Lean. It was a natural marriage. Electronics companies faced with challenges like decreasing margins, increasing flexibility requirements, and rising inventory risk were destined to embrace the benefits offered by the Lean ideology. That’s the good news. Unfortunately what we have seen recently in electronics companies is really “Lean Lite” – that is the bad news. Lean has been simplified to that portion which deals with demand-flow and pull-systems. While these may be necessary elements of Lean, they are NOT sufficient. Companies that only adopt these pieces will soon find themselves with a different set of problems and none of the long-term results for which they had hoped.According to prominent authors James Womack and Daniel Jones in their book Lean Thinking, there are five elements to Lean. In the following paragraphs we address each of those elements and give you some thoughts on how you can apply them to your electronics supply chain.
1. Define customer value
When narrowing the discussion of Lean to the supply chain, customer value really becomes a question of time and place: Where is your product available and how long does someone have to wait to get it? The standard answer you hear from companies is “it has to be off-the shelf, in all configurations, at every distribution point!” If there were no trade-offs involved, that would be the answer. Unfortunately you will have to make decisions about costs and priorities. In keeping with the Lean ideology, you should make these decisions while focusing on what the customer values most. Do not expend resources and take risks to deliver something “off-the- shelf” when the customer ranks delivery lead- time 3 rd or 4 th on the list of priorities. In every company where we have done an assessment, we have found opportunities to increase responsiveness on some product families and in other cases to reduce financial risks by increasing product lead- times.
2. Define the value stream
For high-tech electronics, this is the heart of the supply chain work. This is where you should map how value is added to your product and how the product flows. The key is for you to understand where value is really being added versus non- productive time. If yours is like most electronics companies, the value-add portion will be small relative to what Toyota’s Taiichi Ohno identified as the seven types of waste. By going through this mapping exercise you will learn new things about your supply chain and you will also get a sense of the opportunities in front of you. The obvious goal is to minimize or eliminate the non- productive portions of the process.
3. Make it “flow”
With traditional manufacturing, products move from step to step in batches. The holy grail of Lean is to be able to efficiently move a lot of only one unit through the entire value-add process. In other words, you want to make it flow from raw materials to finished product without stopping. There is no magic bullet here. To get to efficient smaller lots you will need to deal with set-up times, factory flow, transaction costs, information velocity, etc. It is a basic blocking and tackling type of exercise and you need to focus and be consistent to see sustainable results.
4. “Pull” from the customer back
The basic idea is that you should only produce more of something when demand from the customer is “pulling” the products forward. The concept has been called different names (e.g. Kanban, JIT) since it was popularized in the 1980’s and today this is what some people are calling “lean.” The basic process is to use a two-bin system and to “pull” from one step to another in a serial domino-like fashion. You will see the most benefit if you use a more sophisticated multi-bin approach and set-up parallel Kanbans that ripple down the supply chain simultaneously. Also, new system tools that accelerate information up and down the supply chain can increase decision efficiency and improve supply chain responsiveness.
5. Strive for excellence
It is so easy to say and yet so hard to do consistently. We believe that companies need an over-arching, consistent driver to keep the focus on Lean. For the supply chain, measuring and tracking improvement in Inventory Exposure is the key. Inventory Exposure allows you to quantify your supply chain in terms of time and dollars. While it too big a topic to address fully here, the important point is that as you take time out of your supply chain and move inventory to lower cost, more flexible points, all of your work will show up in a metric like Inventory Exposure. It becomes the long-term tracker of your efforts to get better continuously.
We are excited that Lean is getting attention in the electronics industry because we know the potential it has. However, history shows that most companies who start down the path of Lean never complete the journey. As one of our fellow supply chain professionals said recently, “Lean is today what outsourcing to China was a few years ago.” It is a trend with a lot of potential, but like the transition to China, most companies act before they think when it comes to Lean.
We want you to achieve your full potential with Lean, which is why we wanted to show a picture of Lean beyond the basic pull systems that are being packaged as Lean. We would be happy to answer any questions you might have or to tell you about our services that can help you implement a complete Lean solution.
Please contact us at info@symphonyconsult.com or call (650) 948-3909.