August 22, 2007

Beyond manufacturing: The evolution of lean production

This McKinsey article happened to be a good read on the Lean principles outside of manufacturing...

Many non-manufacturing sectors are rapidly adopting lean techniques. Soon they will no longer be a differentiating factor in themselves; the important thing will be how well you implement them.

Lean principles
were originally developed in industrial operations as a set of tools and practices that managers and workers could use to eliminate waste and inefficiency from production systems—reducing costs, improving quality and reliability, and speeding up cycle times. Toyota Motor pioneered lean practices, and much of their allure today stems from the fact that the phenomenal performance of this automaker, in one of the world’s most competitive sectors, rests to a considerable extent on its ability to develop and perfect these practices over the past five decades.

Recently, lean techniques have moved from manufacturing plants to operations of all kinds, everywhere: insurance companies, hospitals, government agencies, airline maintenance organizations, high-tech product-development units, oil production facilities, IT operations, retail buying groups, and publishing companies, to name just a few. In each case the goal is to improve the organization’s performance on the operating metrics that make a competitive difference, by drawing employees into the hunt to eliminate unneeded activities and other forms of operational waste.

The biggest challenges in adopting the lean approach in nonindustrial environments are to know which of its tools or principles to use and how to apply them effectively. In emerging markets such as China or India, manufacturing managers trying to implement the lean approach also face these challenges. Differences in everything from culture to infrastructure mean that managers can’t apply the lean tools and techniques used in manufacturing operations in Moline or Munich to nonindustrial environments or to manufacturing plants in the developing world; the approach must be tailored to the realities of specific environments.

The four articles listed below show how managers have met the challenge of applying the lean approach in a variety of operating contexts. In the public sector, for instance, we’ve seen managers use lean tools and frameworks with existing resources to deliver more and better services. Applications-development organizations—the units that write new software for the IT operations of large companies—have adopted an overall end-to-end perspective for the coding process. In China multinational and domestic companies are achieving positive results through frequent kaizen events (group problem-solving sessions) that help Chinese workers to participate in discussions more directly. Finance departments have successfully used lean principles and tools in accounting and budget processes, reinforcing a fundamental point of the lean philosophy: everything starts with the customer.

Finally, as the lean approach percolates into ever wider circles of operations, it ceases to be about best practice and starts to become a part of the fabric of doing business. Operating executives in many sectors are adopting lean techniques rapidly, so soon they will no longer be a differentiating factor; the important thing, in the heat of competition, will be how well companiesimplement them. This next level of the lean journey is managing the softer side of the equation—less about tools and frameworks, more about building the energy and engagement of employees from the shop floor and the office pool upward, tapping into their ideas, focusing them on constant problem solving, and keeping them open to change and flexibility.
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