Recap: New Manifestations of Lean and the Next Normal of Manufacturing
2021 is the year of new for manufacturers. New challenges are bringing on new manifestations of lean, new ways to connect manufacturing operations, and a new focus on the factory as a strategic force for leaders. Last month, LeanDNA CEO Richard Lebovitz joined industry analyst Bob Ferrari’s latest installment of his podcast, “Supply Chain Matters” to discuss these themes and more. “Supply Chain Matters” is widely regarded as one of the top internet blogs in the field of supply chain management thought leadership.
Find and listen to this installment of the podcast here, or read on for the main takeaways from Ferrari and Lebovitz’s discussion.
The Factory as a Strategic Force
In today’s manufacturing landscape, industry supply networks and manufacturing plants are being driven by outside-in forces such as increased product customization and conflicting needs of sufficiency versus flexibility. The two experts began their discussion there: The current status of the factory during times of widespread component shortages and significant changes in those forces.
According to Richard, “The factory used to be considered a black box, but now it’s becoming a strategic component to the business, which has not always been the case.” While other aspects of manufacturing have been technologically advanced and invested in, such as shop floor automation, robotics, and data acquisition, the area of factory operations management is overwhelmingly still managed manually with Excel. “These types of tools worked five, 10 years ago, but they are not effective today due to the increasing product complexity and supply chain expansion and globalization that these factories now have to deal with,” says Richard.
To successfully position the factory as a strategic force in the supply chain, “factory operations need tools to support tactical daily execution and decision-making,” says Richard. “The goal is to leverage technology to make the work easier for people and shift their focus to be more strategic and spend more time actually working on improving the business performance.”
“The way you can handle change in today’s complex environment is through better execution, not planning. And unfortunately, most of the end-to-end planning systems are just more of the same.
The goal in my opinion is to be able to connect to the existing ERP systems very quickly and provide that out of the box workflow and advanced analytics that will help them reduce excess inventory while at the same time improving on-time delivery.”
Richard Lebovitz
CEO and Founder, LeanDNA
The Lean-hybrid Model
For manufacturers successfully weathering unpredictable demand and unexpected supply chain disruptions, the lean-hybrid model is the best strategy. In this hybrid model for managing inventory, plans and visibility are available for both made-to-stock and made-to-order products, resulting in a more resilient supply chain
According to Richard, issues and unexpected changes will always happen, but this model gives manufacturers the flexibility and efficiency to handle whatever comes your way—without sacrificing safety stock and on-time delivery. “It gives you that flexibility, the efficiency, and delivers improvements all within the same system.
“This is kind of similar to supply chain segmentation, where you basically look at the process and try to differentiate the traditional just-in-time inventory, which is very predictable, as opposed to one that’s going to be customized or is going to flex, which is going to require that hybrid model,” says Bob.
“The modern lean factory uses a hybrid pull-push replenishment model that optimizes inventory balance based on supply network risk and resiliency. This uses electronically-managed and monitored Kanban or reorder point processes that are designed in close collaboration with suppliers. MRP or PTO, which is often like purchased order processes, are still leveraged, but for those low volume parts.”
Richard Lebovitz
CEO and Founder, LeanDNA
New Lean Processes and Connected Manufacturing
According to Bob and Richard, new manifestations of lean and connected manufacturing—including an increased investment in technology and an emphasis on creating a more resilient supply chain—will transform modern manufacturing in these four areas:
1. Automate repeatable activity. By automating predictable processes, teams can spend more time managing more complex processes and parts.
2. Reduce reliance on static data. Many manufacturing teams still rely on spreadsheets to catalogue and analyze their critical data. These manual processes are time-consuming and prone to human error. Richard recommends investing in “technology applications that integrate and transform real-time data, create purpose-built workflows geared towards buyers, planners, and analysts, and have out-of-the-box electronic dashboards providing end-to-end visibility into the factory and supply chain.
3. Improve decision-making and action prioritization. This is done by focusing on the top three to five actions that have the most impact on the business. Oftentimes teams receive hundreds of messages a day, but they can’t immediately tell which tasks are the most critical. On top of that, being able to do a root cause analysis of the issue helps teams understand it and feel confident they’re making the right call.
4. Integrate and connect factories and suppliers. Doing this allows teams to manage shortages and excess inventory across different sites and even ERP systems—a pivotal capability in today’s shortage-ridden supply chain. Richard says doing this helps to “leverage cloud-based connectivity that exists today to establish and enforce best practices across the organization to help optimize for factory operations management.”
“As I partook of some of the briefings from LeanDNA and looked at some of the functionality that you just described, I very much saw it’s a technology tool for just-in-time in the new era kind of thing, where it helps to balance all these risk factors.”
Bob Ferrari
Industry Analyst
Predicting the Next Normal
Lean manufacturers are always on the hunt for the QCD trifecta: quality, cost, and delivery. In Richard’s opinion, “it’s easy to get one out of three. It’s actually not too hard to get two out of three. But when you try to get three out of three, that’s where it gets really, really challenging. Lean linked with systems can actually make that happen.”
The COVID-19 outbreak brought supply chain news onto the front page with major manufacturing disruptions and shortages felt worldwide. How will manufacturing evolve in this past-COVID era? On this topic, Bob and Richard discuss three major opportunities for growth and change in the next five years.
- Digital transformation and building resiliency in factory operations management. This is one of the latest opportunities coming out of COVID-19 in Richard’s opinion. The technology being deployed right now, often BI solutions, is doing a better job of reporting data, but they don’t necessarily guide improvement. Richard’s main criticism is that these data solutions are “showing you how good or bad you’re doing, but they’re not making you better.” Richard encourages “using things like machine learning to help [teams] learn from those specific actions and results to enable even smarter decisions.”
- The new generation of manufacturing leaders. “The young generation who are now taking over factory management,” Richard says, “want to bring information online.” Compared to previous generations that preferred manual processes, the new generation, Richard predicts, will prefer and depend on digital solutions to unlock more efficiencies.
- Focus on factory-to-factory and factory-to-supplier workflows. While traditional enterprise supply chain solutions are often based on a very top-down approach, with little understanding of modern lean manufacturing operations, the factory will be viewed as a more critical link in the supply chain. Because of this, Richard says, “we see leading manufacturers rethinking how supply chains are managed and focus more on this factory-to-factory and factory-to-supplier optimization and tactical execution systems and less focus on the planning side.”
Manufacturing KPIs aren’t changing all that much in the next normal, according to Bob and Richard. Even though there is growing product complexity and challenges, the goals are the same: “We want to improve on-time delivery, we want to reduce excess inventory, we want to improve quality, while at the same time lower operating costs.”
Businesses can remain successful (and achieve the trifecta) despite growing product complexity and growing challenges within overall supply chain management, according to Richard, if they can “leverage technology and process and people all in the right way.”
“The data is there, but the problem was the analytical and collaboration tools were just missing. So by linking these tools with the purpose-built workflow I mentioned earlier, we are seeing the factory-to-factory and factory supplier connections starting to become normal operating procedures with a lot of the companies that we work for today.”
Richard Lebovitz
CEO and Founder, LeanDNA
Final Thoughts
“The exciting thing for me is the factory and the supply chain is now being seen as a critical part of business operations,” concludes Richard. “Let’s use this opportunity to leverage technology to drive real transformation in manufacturing, which is something that hasn’t been done yet.”
For the full conversation between Bob Ferrari and Richard Lebovitz, listen to the full episode of the “Supply Chain Matters” podcast.
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