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November Newsletter from the Lean Academy |
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Two questions from very different perspectives illustrate how the
reasons for going lean are changing. First from Denmark, where a few
years ago they were very worried about losing manufacturing jobs to
low wage countries to the east. Since then Dansk Industri, the
national industry association has run one of the most successful
campaigns I have seen to encourage their members to go lean. As a
result they are not just retaining manufacturing jobs in Denmark, but
they are also running out of people to fill manufacturing jobs! At
the same time they liberalised their labour market and unemployment
is now very low, even amongst young people.
So their question was "how can we use lean to enable our existing
employees to produce two or three times as much in the future?" As
population ages and declines in many European countries, as well as
in Russia and Japan, this question will be asked more frequently. We
are going to need to find ways to produce the goods and deliver the
services with less people, or to increase immigration. To achieve
this means going beyond streamlining today's processes and
fundamentally redesigning tomorrow's products, production processes
and supply chains.
The second question was from a group of very senior managers from
China. They are very enthusiastic to embrace lean, and could see how
lean can help make locally produced goods more affordable to local
consumers. But they realise that to meet the growing economic
aspirations of their citizens they will have to do so in ways that
require fewer resources and that create less environmental pollution
and greenhouse gasses. So they were interested in "how can they use
lean to save resources and avoid pollution?" In other words, how can
lean help us also become green?
Lean thinkers are used to tracking the time and effort as a product
moves through an organisation and to distinguishing the few minutes
it takes to create the value customers are paying for from the month
or more that it spends in the organisation. Compressing throughput
time from several months to a few days clearly requires far less
space and energy. It almost certainly also uses less materials and
produces less scrap and obsolescent stock. The ability to produce in
line with demand also reduces the inventories (and hence storage
space and energy costs) in the pipeline all the way to the end
consumer.
But the really significant gains come from compressing supply chains
by relocating value creating steps closer together, and where
possible also closer to customers. Most organisations are unaware
that their products take between three months to a year or more to
travel through their current supply chains, often going back and
forth across the globe before reaching the customer. Although current
wage cost differentials and low transport costs encourage this trend,
if we look at total supply chain costs much of this does not make
economic sense, as we described in Lean Solutions.
If we also start tracking the energy and emissions from all the
processing, storage and transportation steps across supply chains and
convert them into units of CO2 per product we will also be able to
see the environmental footprint of each end-to-end supply chain, We
know from earlier work that the most polluting part of the supply
chain for consumer goods is the trip to the supermarket and then
storing the goods in our refrigerators and freezers at home until we
eat them. But it also shows the choices we will increasingly have to
make between for instance air freighting more and more products
across the world or enabling people to fly across the world.
Beyond this the next step is to fundamentally rethink the product. A
few weeks ago, tucked away inside the Financial Times I noticed a
very interesting quote from the R&D Director of Toyota. He announced
that their third generation hybrid engine to be launched in three
years time would be "half, the size, half the weight and half the
cost" of the current generation engine in the Prius. With
characteristic understatement he said he thought a lot of people
"might be quite surprised at this".
They should not have been - Toyota began their green technology quest
back in 1990 when Eiji Toyoda, the post war genius who built the post
war Toyota, questioned whether it was a good idea for Toyota to keep
making cars with conventional technology. At each stage Toyota has
clearly announced their green intentions in their Annual Report -
which everyone ignores - and then fulfilled them! Will the next
generation diesel engine make such a dramatic leap in resource use
and cost? What preparations are your organisations making to meet the
green challenges of the future?
Yours sincerely
Daniel T Jones
Chairman, Lean Enterprise Academy
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