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Nov 8, 2017 in Economics
The Impact of Lean Manufacturing on the US Manufacturers
The Impact of Lean Manufacturing on the US Manufacturers
During the last couple of decades, the manufacturing sector in the United States has experienced diverse changes in its structural and recurring environment. Some of the changes included severe back-to-back downturns and the extensive efforts to restructure that were employed in the early 1980s. Those also included heightened foreign competition, high swap rate, instability, and the most recent build-down in the sector of defense. Moreover, the very central part of manufacturing has experienced changes through the establishment of an innovative paradigm called the lean manufacturing system. In its very basic outline, lean manufacturing is described as the systematic eradication of wastes from every aspect of operations that an organization engages in during its production process. In this case, waste is viewed as any utilization or loss of resources/capital that does not result in direct creation of a service or product, as per the timeframe of customers. In most industrial processes, more than 90% of the total activity of a factory is comprised of such non-value additional activities.
This approach has been used more regularly in distinct manufacturing, as compared to the process/continuous sector. The primary reason for that is several perceived barriers in the continuous environment that have made managers act reluctantly in making the needed commitment. The focal point of the approach is on reduction of cost through eradication of value-added accumulated activities. Major businesses in the United States have embarked on adopting and employing the system of lean manufacturing as one of the major initiatives to enable them to remain competitive in a surging world market. Having originated from the Toyota production system, lean manufacturing has numerous techniques and tools, such as cellular manufacturing, just-in-time (JIT), short-term exchange of dies, total productivity continuance, and smoothing of production. As a result, the system has been widely applied in discrete manufacturing. Therefore, the new lean system of manufacturing requires special concentration due to its prospective long-term effects. This paper attempts to discuss the impact of lean manufacturing on manufacturers in the United States.
A large number of manufacturing sectors in the United States, such as electronics, automotive, consumer products and white goods manufacturing industries, have been expanded due to the application of lean manufacturing systems. However, there have been fewer applications of lean manufacturing in the constant process sector (Abdulla and Rajgopal, 2003). It has been suggested that this scenario is due to the fact that the majority of companies in the United States are intrinsically well-organized and, therefore, do not need to embark on major improvement undertakings. Companies’ executives have been reluctant in adopting lean manufacturing tools and methods in the constant sector due to other distinctive features characteristic of this sector. This includes big and flexible machines, lengthy setup times, and wide-ranging complexity in manufacturing in small batches. Even though some of the tools used in lean manufacturing are too complex to be adopted in the continuous sector, it does not necessarily mean that the system is entirely inapplicable (Ahmad et al, 2005).
Manufacturers in the United States have shifted from the conventional Fordist system of mass or large-scale production toward the lean manufacturing system. The najority of global manufacturing sectors used to be dominated by Fordist manufacturing due to mass production of a restricted number of models at an extremely low cost made possible by a constantly drifting assembly line. By contrast, lean manufacturing focuses on excellence and quick response o the prevailing market conditions by using advanced technological equipment and a production process that is flexibly organized. Lean manufacturing is by all means a more effective production system. According to Aoki (1988), lean manufacturing techniques of setting up a more organized and coordinated process of production allow for a quicker and well-timed horizontal management between distinctive manufacturing processes, as well as a subsequent cutback in inventory costs.
Benefits of Applying Lean Manufacturing Practices
The advantages of implementing lean manufacturing can be divided into operational, strategic and administrative. Even to date, the majority of companies that practice lean methods do so with an emphasis on operational benefits. This is mainly due to the opinion that lean practices can only be applicable to business operations. Nevertheless, most researchers have certified that strategic and administrative benefits are equally remarkable. Provided below are the advantages of applying lean practices in production.
According to a recent NIST survey of manufacturers who have partnered together to extend their production processes, several distinctive improvements have been reported. The improvements include: reduction of cycle time (lead time) by 90 percent; intensification of profitability by up to 50 percent; reduction of work-in-process Inventory by 80 percent; improvement of quality by 80 percent; reduction of space utilization. These findings reflect the significance of lean methods for manufacturers in the United States, as they provide them with adequate strategies for profitable operation in domestic and global markets.
Basing on personal experiences, lean methods of manufacturing have made particular enhancements in administrative functions. Their benefits for the administrative sector of companies include: minimizing orders processing mistakes; reformation of functions on customer service such that customers are no longer put on hold; reduction of paperwork in office areas; minimizing demands of staff by allowing the same number of employees to handle larger amounts of orders. Streamlining and documentation of the procedure of processing through lean manufacturing allows for the outsourcing of unimportant functions, which enables business corporations to direct their effort towards the needs of customers. As a result, this minimizes the turnover and the resultant costs of attrition. It also allows business executive to embark on pre-employment outlining and job standards, which ensures recruitment of above-the-average performers. This also enables the organization to assess and predict everyone’s performance and invest into individual and corporate enhancement.
Most companies that practice lean methods do not fully utilize their advantages and improvements. Highly competitive and successful business corporations plan how to market the new benefits of the lean manufacturing system, and convert them into enlarged market share, e.g. a Midwestern manufacturer that produces common health care products. Among about 40 competing companies in the U.S. market, the third largest firm embarked on putting lean principles into effect. The average lead-time for the industry was fifteen days, during which time the company was without any exemption. At the culmination of the project, the average lead-time was four days, excluding shipping of products in less than seven days. To be able to benefit from these enhancements, the company initiated an advertising campaign to ensure that its products would reach customers within ten days, or the order would be delivered for free. Immediately, the volume of sales rose by 20%, and after implementing proper improvements to enable them to handle the current demand, the firm embarked on another campaign with 10% premium which would be shipped within a period of seven days. The sales volume rose again by 5% because new clients needed the product within a period of seven days. Eventually, the firm was able to boost its revenues by approximately 40 percent without any increase in overhead or labor costs. Another major benefit was that the firm managed to invoice its customers eleven days earlier that before, which significantly improved the cash flow.
What Causes the U.S. Companies to Engage in Lean Manufacturing
The main reason why most companies in the United States adopt and implement the system of lean manufacturing lies in attaining products and services of the highest quality at a minimum possible cost and with the highest responsiveness of customers. Consequently, they characteristically focus on three chief objectives, such as: reducing the resources needed in production in form of materials and capital; intensifying flexibility and velocity in manufacturing; and making improvement on the quality of first time product.
Competitiveness and economic aspects associated with responsiveness of customers, quality of products, and cost are increasingly causing companies in the United States to implement the systems of lean manufacturing. Global competition is increasing in almost every sector of business. The interaction of financial markets, intensive industrial growth, and decrease in barriers of trade in Asia, as well as other regions where costs of production are often lesser, are removing barriers to competition. Therefore, being the first one to venture into market and respond to the needs of customer, improving the quality of product, and minimizing the cost of production (to assist in maintaining or lowering of prices) contribute heavily to overall success. With its primary goal of the systematic eradication of waste, lean manufacturing has rapidly proved to be an outstanding strategy for reaching these objectives and upholding the competitiveness of a business in domestic and global markets (Friedman, 1999). The following are major impacts that lean manufacturing has on the operation and profitability of manufacturing industries in the United States;
Impact on Resources Required for Production and Subsequent Costs
Advanced methods of manufacturing through lean system can impact on enhancing the productivity of a company by decreasing the cost of production in various ways, such as lessening the total cash engaged in inventory and “work in process” (WIP) and cutting down the time between when a firm procures inputs and obtains payment for delivery of product or service. The “batch and queue” approach that is aligned according to functions is applied in conventional methods of production in a large-lot mass. There, production of parts is done in huge amounts of batches that remain “in queue” awaiting the batches to move to the subsequent stage of the process. This leads to the need to maintain important inventory stocks in turn serves at the bottom-line in production, and intensifies costs and energy requirements. The lean system of manufacturing realigns the process of production to center on products by putting all the machines in groups and carrying out all the process stages in a compact cell that streams one portion through the process as required. Through this realignment, the inventory requirements are substantially reduced, thus leading to substantial reduction of intensity of capital in production. Implementation of lean manufacturing also intensifies the inventory turns (number of periods annually of turning over of an inventory facility) and reduces the likelihood of damage or deterioration of product. As a result, obsolescence and overproduction are avoided, cash for other uses in production is provided, a further cut down of stock inventory requirements is achieved, and the intensity of time for manufacturing of products or delivering of services is generally minimized.
For instance, execution of lean manufacturing methods has reduced the number of days needed to refurbish a C-5 transport plane from 360 to 260 on a US Air Force Base in Warner Robins, Georgia. This had a major implication for the resource requirement of the Air Force, because a 25 to 30% decrease in the period of maintenance indicates that the Air Force requires procuring a smaller number of planes - in other words, maintaining a lower supply of planes - in order to maintain an intended number of planes in operation. Therefore, the overall cost of maintaining a certain target level of serving aircrafts is reduced substantially. Such advanced manufacturing systems have made it possible for a high-priced water-saving machine for washing produced by Maytag Corporation to participate competitively against lower-priced counterparts in the market. The work in process was cut by 60% in a dishwasher plant in Tennessee’s Maytag Jackson, thus reducing space requirements by 43,000 square feet. On the other hand, quality was improved by 55%, whilst capacity intensified by 50% , thus making it possible for the plant to swiftly change the mix of production as a response to demand of department store for a variety of models.
Lean manufacturing reduces the resource equipment needed for production, and lessens the cost to maximize or minimize the levels of production or change the mix of the produced products. Within the conventional high quantity production approach, firms often procured large equipments with enough capacity to meet the highest predicted levels of demand with an addition of some. Large machines would then be utilized in performing the same task (for instance, milling) on varied types of parts, with use of tooling variations, which are often difficult to operate and take a lot of time. Functional sectors that are established this way then focus on reducing marginal costs by manufacturing huge batches of identical parts within a longer span of time. This can utilize the machine’s full capacity and reduce changes involved in tooling. However, this is achieved at the expense of necessitating large inventories, limited plasticity, substantial additional of overall time in production, and the necessity to accurately forecast demand or withstand the expense associated with overproduction. On the other hand, lean systems are meant to advance smaller equipments of the right size, which are designed for a specific product or product variety that meet prevalent requirements in a more flexible and considerably low capital intensive manner.
For instance, Apollo Hardwoods, a start-up company that manufactures veneer, applies lean methods to create ample-sized equipment that is roughly one and a half times the capital amount of the equipment used by the industry today. Business firms such as Boeing Company, Hon Industries, and Goodrich Aerospace, have invented small portable equipment (for instance, presses, paint booths, parts washers, and drying ovens) whose cost is tiny compared to large equipment, and that can be duplicated easily in order to meet large demand. It is impossible to include new capacity without investment in resource equipment under a predictable approach of large-scale production with big equipment.
Using lean manufacturing system leads to substantial reduction of facility production footprint. The reorganization of production about products and to cells with the use of equipments that are right-sized - which then stimulates supply requirements and progressing out of the process of production - has given room for firms to decrease their floor space requirements by almost 50%. This can result in a significant reduction of facility investment costs (like buildings or property), and also the expenses of operating a facility (e.g. utilities and maintenance). For instance, Goodrich Aerostructures merged the manufacturing process from five buildings to two, while doubling the output due to implementation of lean manufacturing methods at its facility in Chula Vista, California. This reduced the general space requirement of the facility by 50%, thus allowing the facility to put the property on the market for redevelopment of the waterfront in the city.
Application of lean system in manufacturing minimizes the costs of operation that are related to movement, utilization of material, re-work, equipment downtime, as well as other aspects. The methods and tools of lean manufacturing are meant to optimize any particular process of manufacturing, administration and service, as well as encourage business corporations to cut down the cost of operation and time requirements. Lean methods result in reduction of material use, which addresses the control of inventory, management of point-of-use substance and organization of workplace. Realignment of the process of production results in reduction of movements, while reduction in equipment downtime is achieved due to the execution of Total Productive Maintenance (TPM) that averts malfunctions and blunders. Reduction of re-work and defects is accomplished due to “mistake-proof» processes and equipment.
These methods and tools are used in the general system of thinking that facilitates payments of higher prices, e.g. if materials minimize the costs of overall system owing to efficiency increments in other parts, such as time, errors and loss of material. For instance, this type of thinking may result in a company having to pay more to obtain smaller quantities of chemicals conveyed in “right-sized” containers instead of purchasing chemicals in bulk at cheaper prices. The processes of optimizing and reducing costs of operation can take place prior to major exchange and aligning of products, cellular manufacturing or even after. The consolidated effect of reducing diverse costs of operations through the use of lean tools and constant enhancement endeavors can offer large dividends. For instance, the use of lean methods for a small number of maintenance operations at an Air Force Base in Robins enabled the Air Force to save about $8 million.
Impact on Flexibility and Velocity of Companies in the United States
Lean methods allow manufacturers in the United States to attain a substantial increase in flexibility and velocity of a service or a manufacturing process. These produce two significant benefits, such as: 1) reducing required cash for the process by limiting the timeframe and expenses for acquisition of material and payments of customers; 2) intensifying marketplace and customer responsiveness. The need to be responsive to the needs of customers and marketplace causes companies in the United States to implement the lean system. Such receptiveness entails meeting “just-in-time” demands of customers through changes of products and intensity in production velocity. Time is always a significant measure of customer responsiveness, i.e. providing customers with what they require when they require it. Many manufacturers in the United States need a continual improvement of responsiveness time with regard to contemporary products (meeting specifications of customers through prompt delivery of products) and innovative products (through reduction of overall marketing time for launch and development of product), in order to succeed in the market.
Global competition in the automotive industry aided by computer and highly developed production methods has cut the time required to develop a new vehicle from five years to eighteen months. A compromise should be reached between expanding a product mix through fragmentation of demand in the market, and meeting demands of customers for shorter lead times for delivery of vehicles. General Motors, Ford, and other U.S. companies that make automotives are being involved in the “3 Day Car” initiative aimed at reducing the lead times of vehicles from 60 to 3 days. There are also a surging proportion of vehicles that are build just-in-time, with requests from customers for an increased variety of features and types of vehicles. The companies that manufacture such vehicles designate that diversification of product mix, minimizing the lead times of products, and structuring to orders of customers are the major features of their competition strategies.
Lean manufacturers strive constantly to minimize “flow time” (the overall time required to produce one unit of a product), “cycle time” (time taken by a machine to performe a single operation) and “lead time” (the overall time required to deliver an order to a given customer. When operating in a lean manufacturing environment, balancing the process of production with the timeframe around which completion of each product needs to be accomplished to meet the requirements of the customers becomes an essential goal. As a next example, heightened competition in the 1990s caused numerous aerospace companies in the United States to practice lean manufacturing systems, thus allowing them to minimize lead time for satisfying customer orders, as well as shortening the duration between expending of cash for procurement of input and collecting cash on delivery. For instance, three lines of production in Renton, Washington required over 22 flow days to assemble one Boeing 737 airplane. After the three lines were replaced with a more effective, constantly moving, and one-piece flow assembly line of, Boeing has minimized the time of flow for 737 to 15 days and predicts further cutback of flow time to 5 days.
Impact on the Quality of Products
Maintaining consistent and high quality of product is a major element of competitiveness, impacting on both the cost of product and loyalty of customers. The imperfection of products in costs of compound manufacturing owing to accumulated time and space for repair and rework, waste disposal costs and waste materials. Persistent delays in delivery of products and imperfections in parts or products can minimize the sales or cause the loss of productive supply contracts to well-established producers, distributors or retailers. For instance, from 1993 to 1997, Saginaw Steering Systems, an automotive system plant in Delphi, applied lean methods to minimize the number of defective parts from 2,000 to 75 defective parts per a million, thus causing General Motors to continue to source steering parts from Delphi.
There are numerous ways through which lean production can attain a significant enhancement of the quality of products compared toconventional large-scale manufacturing. Conventional manufacturing methods of “batch and queue” mass production mean that extensive quantities of WIP (work in process) or inventory always continue to be on the factory floor for longer periods of time, thus intensifying the likelihood of damage or deterioration of product. The defects remain mostly undiscovered until the completion of an entire batch, a point at which refurbishing process is often costly and time-consuming. On the other hand, lean manufacturing provides several strategies to identify and eliminate product defects at an earlier stage of the production process, which is less costly. These techniques include: one-piece flow, cellular production, which allows the workforce to rapidly stop the process of production at the first indication of quality problems; rapid enhancement processes of kaizen-type for a rapid involvement of cross-functional panels to identify and provide a solution to problems in production; six sigma, a numerical process to control the rates of product defects; poka-yoke, which entails processes and equipments to proof the errors involved in production; and overall productive maintenance, which is a process that assists to make sure that equipments perform to their best.
Lean manufacturing is an advanced manufacturing model used in several sectors of the US economy. Reduction of production cost, improvement of products quality quicker response to customer queries and a pioneer marketer status are crucial in for surviving competition and scoring achievement. The major focus of lean ideologies and principles is on coming up with a constant development culture that involves workers minimizing the amount of materials, time and capital essential to fully meet the clients’ requirements. Even though the primary aim of lean production lies in the methodical removal of non-value added actions or ravage from the production system, the achievement of lean values and methods also translates to improved performance. By concentrating more on value and less on cost, the lean manufacturing system aims to eliminate every component and process that is non-value-adding, while improving the value-adding components and processes. It is value-oriented and tries to identify main points in the production and development system where value may be added. Any company with superior quality measures has an upper hand in the markets. The company is able to dictate higher market prices for their services and products, as compared to those with inferior quality. This strategy is required in markets, and most manufacturers encourage suppliers to adopt the lean principles in carrying out their business strategies. This allows companies to be responsive to trends in the market, achieve a quicker delivery of goods and services and provide products that are less expensive than those produced through using non-lean measures. Industry boundaries are bridged, company functions are addressed, and the whole system is impacted through lean manufacturing.
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