Post on 11-Jul-2015
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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LEAN MANUFACTURING AS A
LEVER FOR GROWTH FOR
SMALL AND MEDIUM SIZED
MANUFACTURERS
TIM MCLEAN
TXM LEAN SOLUTIONS
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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OUTLINE
• The growth challenge for Small and Medium Sized Manufacturing
Enterprises (SMEs).
• Why SMEs fail to grow.
• Key success factors in a successful SME Lean transformation
• Developing your outline A3 Plan.
• Conclusions.
• Q&A
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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PROCESS FOR THIS WORKSHOP
• Assumptions:
• This is a working session as well as a learning session.
• You are interested in growing your business.
• You have a working knowledge of lean .
• Process will include presentation of key concepts, with working group
sessions to develop an A3 action plan for application to your situation.
• Organizing principles for 2 person work groups – natural teams and interest.
• Key activities will include thinking, reflecting, and creating a document to
support your organizations growth.
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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WORKING DEFINITION OF SME:
• Small or Medium Sized Manufacturing Enterprise (or site).
• Less than 200 Employees on one site.
• Sales less than $100M.
• “Small Manufacturer usually less than $5M sales and 30 people.
• May be privately owned business or stand alone operation in large corporate.
• Managers have multiple roles.
• Limited staff functions and support (e.g. no HR, Production Engineering,
Training, Lean departments).
• Often manufacture complex or customized products in low volume and/or a
complex product range.
• Strategic focus is on growing the business (not downsizing).
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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IMAGINE YOUR BUSINESS
WITH DOUBLE THE SALES
WHAT WOULD YOUR BUSINESS BE LIKE?
WHAT IS STOPPING YOU FROM GETTING
THERE?
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CONFIDENTIAL
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WHAT TYPICALLY HAPPENS
WHEN AN SME GROWS?
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ECONOMIES OF SCALE – WHAT SHOULD HAPPEN WHEN
YOU GROW
0
20
40
60
80
100
120
Profit
Overheads
VariableCosts
• Variable costs grow in line
with sales
• Overheads grow slower than
sales
• Profit margin (% and $) grows
faster than sales.
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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DIS-ECONOMIES OF SCALE – WHAT USUALLY
HAPPENS
0
20
40
60
80
100
120
Profit
Overheads
VariableCosts
• Variable costs grow faster
than sales.
• Overheads increase with
sales or faster.
• Profit margin (% and $)
disappears
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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WHY DOES THIS
HAPPEN??
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CONFIDENTIAL
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IN THE BEGINNING THERE WAS
YOU YOUR CUSTOMER
SIMPLE – EASY TO MANAGE
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THEN YOUR BUSINESS GREW
YOUR COMPANY
YOUR CUSTOMERS
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AND GREW….
YOUR COMPANY YOUR CUSTOMERS
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AND GREW….
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CONFIDENTIAL
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THE ANSWER TO
ALL THIS
COMPLEXITY IS
OF COURSE…….COMPUTER
SYOU START TO LOSE
CONTROL OF YOUR
BUSINESS
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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THE CONSEQUENCES OF GROWTH = INCREASING
COMPLEXITY.
WITHOUT BETTER BUSINESS PROCESSES YOU WILL GET:
• Lead times increase.
• Batch sized increase to maximize
“efficiency”.
• Inventory increases.
• Demand for cash exceeds extra cash
from revenue.
• Insufficient cash to support growth.
• More people, more layers, vertical silos
more overheads.
• Labour efficiency falls
• More people harder to supervise.
• Defects and problems increase.
• Problems don’t get solved because
there are just too many to solve.
• Profit margins decrease.
YOU WILL STOP GROWING AND PROBABLY GO BANKRUPT
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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DESCRIBE YOUR CURRENT STATE
WHAT DO YOU NEED TO CHANGE ABOUT
YOUR BUSINESS?
START WITH YOUR BUSINESS
RIGHT NOW
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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THE KEYS TO LEAN SUCCESS
IN A SMALL AND MEDIUM
SIZED MANUFACTURER
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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LESSON 1: HAVE A CLEAR STRATEGY
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WHAT IS YOUR STRATEGY?
DESCRIBE YOUR FUTURE
STATE
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LESSON 2: ALIGN YOUR MANAGEMENT TEAM
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ALIGNING FOR LEAN SUCCESS
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WHAT ARE SOME OF THE
CULTURAL AND LEADERSHIP
BARRIERS IN YOUR
BUSINESS?
WHAT ARE THE OBSTACLES
THAT STAND BETWEEN YOU
AND YOUR FUTURE STATE?
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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LESSON 3: MAP YOUR VALUE STREAMS
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DEVELOP A PRODUCT FAMILY MATRIX
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LESSON 4 – SET AND MAINTAIN HIGH
STANDARDS
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LESSON 5 - DEVELOP YOUR FRONT LINE LEADERS
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LESSON 6 SIMPLE SOLUTIONS ARE BEST
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VISUAL CONTROLS
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WHAT KIND OF
COUNTERMEASURES MIGHT
WORK TO OVERCOME THE
OBSTACLES TO CHANGE IN
YOUR BUSINESS?
© TXM Lean Solutions Pty Ltd 2012
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LESSON 7: ESTABLISH SIMPLE AND RELEVANT
MEASURES
• Aim for measures that can be
“counted” on the shop floor.
• Record hourly or daily.
• Recorded by front line leaders.
• Consider safety, quality, output,
delivery, cost.
• There is no perfect metric..
© TXM Lean Solutions Pty Ltd 2012
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WHAT IS YOUR CURRENT TARGET AND WHAT
DO YOU NEED TO ACHIEVE?
WHAT ARE THE KEY SHOP
FLOOR METRICS FOR YOUR
BUSINESS?
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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LESSON 8 – ITS HARD – BUT STICK WITH IT
Reprinted from Grow Your Factory, Grow Your Profits: Lean for Small and Medium-Sized Manufacturing
Enterprises.
MA
NA
GE
ME
NT
W
OR
KL
OA
D
Time
BUSINESS AS USUAL
Total Workload
FirefightingWorkload
ImprovementImpact
TIME
© TXM Lean Solutions Pty Ltd 2012
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COMPLETE YOUR ACTION PLAN
HOW WILL YOU RESOURCE
AND CARRY OUT YOUR
CHANGE?
© TXM Lean Solutions Pty Ltd 2012
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0
20
40
60
80
100
120
Profit
Overheads
VariableCosts
ECONOMIES OF SCALE – THE IMPACT OF LEAN
0
20
40
60
80
100
120
Profit
Overheads
VariableCosts
• Productivity increase means
variable costs grow slower
than sales – gross margin
improves.
• Improved processes and
employee empowerment
mean overheads grow slower
or stay fixed.
• Profit margin (% and $) grows
faster than sales.
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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VIRTUOUS
IMPROVEMENT
CYCLE
LEAN PRODUCTION
SYSTEM
INCREASED CAPACITY-PHYSICAL
AND HUMAN
MORE RESOURCES
INVEST IN MORE
GROWTH AND
INNOVATION
INCREASE SALES AND
PROFITS
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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KEY POINTS
• Small or medium size manufacturers are usually focused on growth. Many
stall because of poor process.
• Most manufacturing SMEs we see suffer diseconomies of scale – profit margin
and cash flow goes down when sales go up.
• Lean can change this paradigm for SMEs.
• Align lean with your strategy and get your leadership team on board first.
• Map your value streams and engage your people.
• Lean is hard – but stick with it – IT WORKS.
• Increased productivity leads to higher margins, lower inventory and more cash
to support growth of your business.
© TXM Lean Solutions Pty Ltd 2012
CONFIDENTIAL
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CASE STU
LEARN MORE
• Contact Us at TXM
www.txm.com.au/contact-us
• Read More in “Grow your Factory –
Grow Your Profits: Lean for Small and
Medium Sized Manufacturing
Enterprises• http://txm.com.au/store/products/grow-factory-grow-
profits-lean-small-medium-sized-manufacturing-
enterprises
• Read and Watch Case Studieswww.txm.com.au/case-studies