Customer Benefits from Lean Manufacturing Print E-mail
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Written by Steve Fraser   
Thursday, 01 March 2012 18:20

The payoffs can be substantial, provided upfront tradeoffs are made.

Does Lean manufacturing actually save money? The answer is yes and no. In the short term, it might not save money. Correctly implemented, however, the savings can be significant over time.

What are the true benefits and tradeoffs for an original equipment manufacturer (OEM) deciding to implement Lean in partnership with a Lean contract manufacturer? Once Lean recommendations are fully implemented, the OEM can expect:

  • Minimized raw material liability and finished goods inventory.
  • Higher quality yields due to less variation in the production process.
  • Increased production schedule change flexibility.
  • Faster design cycles and enhanced cost-reduction, as greater levels of standardization and Lean lessons are implemented in subsequent product generations.

In companies with minimal use of Lean philosophy, any one of those benefits could create significant savings. The challenge is making the tradeoffs necessary to reap benefits over time. Tradeoffs may include:

  • Redesign to implement design guidelines for optimum manufacturability or testability.
  • In some cases, higher tooling costs related to process standardization.
    • Incorporating procurement considerations into the design cycle.
    • Implementing a long-term design strategy that maximizes component commonality over product families.
    • Selecting multiple sources for each component.
    • Adjusting the approved vendor list (AVL), if a supplier is unwilling to support Lean
    • stocking practices.
    • Minimizing unnecessary customization and over-specification in custom parts.
  • Teaming with the EMS to implement a forecasting strategy that supports development of appropriately sized bonds.
  • Adopting continuous improvement recommendations over the life of the product.

While the tradeoffs all make sense philosophically, complete implementation is not always possible. Redesign opportunities may be limited due to low-volume legacy product or high requalification costs, which outweigh any cost reductions they would generate. In these instances, implementing changes on new designs may be the only feasible option. In some cases, a compromise option may be applying value-added/value engineering (VA/VE) techniques to identify small improvements that can be made without driving a full redesign or requalification process. In one such case at EPIC Technologies, a VA/VE analysis identified a secondary machining operation on the interior of a sealed custom metal component that could be eliminated. The overall product cost was reduced by 1.75%, and no requalification was required.

Forecasting can also be challenging, particularly with products that have variable demand. This is an area where contractor expertise can be helpful. For example, EPIC uses a formula to estimate order replenishment lead time, which includes:

  • Actual manufacturing lead time based on product specifics (technology, test requirements, coating/potting requirements, etc.).
  • Transit lead time from EPIC to customer consumption point.
  • Desired safety stock at customer location.

Initial finished goods kanban bin sizes are then established. Bins may be resized over time, as needed.

Truly reaping the benefits of Lean manufacturing is neither an easy nor rapid process. However, taking a focused approach that implements Lean philosophy gradually can provide significant cost savings over time. The biggest benefit of this type of long-term strategy is the sustainability it builds into the product realization process. Lean projects have more time to react to changes in component availability or variations in end-market demand. Quality is built in rather than inspected in. A disciplined design cycle that screens out issues before they happen evolves over time. Working capital is reduced. Transactions and non-value-added workload are also reduced. Customer satisfaction increases. When the benefits are added up, the long-term commitment proves well worth any initial investment.

Steve Fraser is vice president of operations at EPIC Technologies (; This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Last Updated on Friday, 02 March 2012 16:24


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