Weekly Brief
Be first to read the latest tech news, Industry Leader's Insights, and CIO interviews of medium and large enterprises exclusively from The Manufacturing Outlook
A featured contribution from Leadership Perspectives: a curated forum reserved for leaders nominated by our subscribers and vetted by our Manufacturing Outlook Advisory Board.
Wings Group
Lean Manufacturing Deployment on the Balanced Scorecard and Strategy Map
Rudy Susanto
Lean Manufacturing is a concept that has been proven effective for increasing productivity and the main focus is to eliminate or reduce waste. According to Voehl et.al (2014: 67) in his book titled “The Lean Six Sigma Black Belt Handbook”, there are 9 types of waste that are defect, overprocessing, waiting, transportation, inventory, motion, extra production, underutilized employee, and behavior. However, in the actual implementation of KPIs, the main focus is cost centric by setting target cost saving without digging into the current organizational situation.
Cost saving is very popular, but sometimes the targets seem contradictory. For example: eliminate safety incidents but reduce costs related to personal protective equipment, increase machine effectiveness but reduce maintenance costs, improve manpower skills but reduce training & development costs, improve quantity task completion but reduce manpower, increase product availability but reduce the stock level quantity, etc. The problems will get more complex when each department begins to prioritize and execute improvements related to its own KPIs without caring about the effect on other departments. The impact is decreased communication and coordination among departments and leads to the situation getting out of control.
In this article, I will describe 3 important points in the implementation of lean manufacturing regarding the above phenomena that focus on waste, timing deployment, and integration measurement in determining sustainable KPIs.
Focus on waste
KPIs are usually defined while a strategic meeting event and commonly target cost saving has been determined based on the previous year’s cost structure component without identifying waste and manpower capability improvement skills in each stage. For instance, the target reject rate for production materials is 1%, overtime costs are 5%, maintenance costs are 30 IDR/kg, manpower reduction is 0.5%, and so on. This situation will drive the organization to focus on the target number but not focusing on how to achieve the target optimally, so the silos mindset will be formed in each department. If the company is still in the early stages of implementing a lean manufacturing system, it can easily find opportunities for improvement. This happens because the majority initiative still is categorized as waste, so the improvement initiative doesn’t interfere with other KPIs. But if the organization reaches a certain level of efficiency, synergy among departments is a must because the improvement starts to overlap and conflict with each other’s KPIs.
To anticipate it, the first step is to identify the potential waste and formulate it into an improvement that has been weighted to the skill capability and maturity of the organization. The second is to conduct a mapping or grouping of each initiative to find out the relationship so that the primary initiative can be determined. For example, the main initiative is to improve the efficiency of machine performance, which will have a direct impact on reject rates, overtime costs, maintenance costs/kg, and excess manpower. The third step is prioritizing and aligning the initiatives that have been determined in the second step to agree on the pros and cons of the initiative by forming a project team consisting of departments that especially have conflicting KPIs. The remaining initiative will be parked for the next journey.
“Cut the fat, not the meat”.
Timing Deployment
There are 4 main production factors required to get maximum output, namely machines, materials, methods, and manpower. The most important factor is manpower. The timing of deployment must be adapted to the maturity skill capability and knowledge of the organization which can be seen from the level of the qualification matrix. An important point that must be reviewed by the leader is to set medium-long-range planning targets to be achieved by establishing a development plan to fit the manpower competency skill gap. So that synergy is formed between the target business needs and manpower capability requirements. For instance, a company has a target of reducing manpower with automation initiatives, while the mindset and behavior of manpower are still in manual mode. This will make the initiative unsustainable because the equipment will not be able to run optimally due to a lack of maintenance which has not been prepared previously. The impact is causing other waste in the investment.
The next important point is the principle of sowing and reaping. We must realize that the results obtained today are the actions of the previous investment to build capability manpower. Through the increased skill of manpower, the organization is already capable of translating from “meat to fat”. For example, reduction of maintenance costs cannot be achieved without distinguishing the consumption costs of each machine. The cost consumption of each machine cannot be achieved without knowledge of the machine structure. Knowledgeable machine structures cannot be achieved without capable engineers. A capable engineer cannot be achieved without identifying the skills that must be met. So when we focus on closing skill gaps our engineers continuously are a step towards reducing maintenance cost initiatives.
“Focus on the process, not the output and the result will happen in time”
Integration Measurement
Generally, each department has its purpose, for instance, the safety department will focus on safety incidents, the quality department will focus on customer complaints and quality indexes, production will focus on the amount of production output, and engineering will focus on machine efficiency & maintenance costs. But in the implementation, we will find several conflicting issues, such as the quality department asking a production department to stop because there was a quality issue in a certain index that has not been integrated with related departments. This situation will transfer the loss quality index to the loss of output production and machine efficiency. Another example is to get maximum production output, the production will ask for the replacement of parts extremely so that the machine can run smoothly with impact transfer of the loss of production output to maintenance costs.
Based on the above phenomenon, an integration measurement is requisite to determine the KPIs target level of the deployment to get the lowest loss and highest result to achieve optimal resource utilization.
“Most initiatives have negative risks, mitigate the risks and execute it”
The articles from these contributors are based on their personal expertise and viewpoints, and do not necessarily reflect the opinions of their employers or affiliated organizations.
