Does Lean Manufacturing Still Make Sense?

Faced with the massive disruptions, manufacturers have done their best to rise to the occasion with ingenuity, creativity, and resourcefulness.

But here’s a takeaway that’s worth underlining: A lot of the resilience that allowed manufacturers to survive these shocks was thanks to the lean manufacturing processes and technologies that many companies already had in place — which gave them the manoeuvrability they needed to turn on a dime, and the intelligence to act on the key signals from both customers and suppliers to determine the best next steps to take.

Is Lean Still the Right Approach?

In the wake of COVID and lingering supply chain shocks, some have wondered whether Lean manufacturing process is still the smartest strategy. Could Lean manufacturing processes have left manufacturers more vulnerable, with too little stock to weather spikes in demand, and overly dependent on distant suppliers?
These are reasonable questions to ask — and there’s no doubt manufacturers can adjust, including having more safety stock on hand, for example, or developing sources of materials closer to home.

But in general, Lean manufacturing process is still the lodestar for charting a course that’s future proof. After all, the ability to respond to unpredictable circumstances – or resilience – is at the heart of the Lean philosophy.

And in the current environment, it’s the combination of Lean manufacturing principles with Industry 4.0 technologies that forms the strongest recipe for success. In fact, a recent annual survey by McKinsey found that a key factor in determining how successful manufacturing companies were at navigating the rough waters of the pandemic was whether they had already embraced Industry 4.0. Companies that had already adopted Industry 4.0 technologies “found themselves better positioned to respond to the crisis.”

To understand why this is the case, let’s start with a little background. The transformative insights that sprang from an earlier era of unpredictability and disruption for manufacturers can help light the path forward.

Leaning into Uncertainty: How Innovation Took Root in Times of Disruption

The philosophy that eventually came to be known as Lean manufacturing began to flower in the 1930s and 40s, with the development of the Toyota Production System.
In post-World War II Japan, manufacturers were dealing with a scarcity of resources, cash and space. Manufacturers needed a system that was flexible and responsive to changing circumstances. Eliminating waste and inconsistency was critical. Part of the answer turned out to be smaller factories, where only the materials that were needed for current work were kept on hand. Keeping inventory levels low and turning around resources quickly kept the flow moving.

Originally known as Just-In-Time Production (JIT), and eventually rebranded as Lean Manufacturing in the late 80s and 90s, these ideas gradually caught on and spread.

In 1996, in their book “Lean Thinking,” James Womack and Daniel Jones defined Lean as “a way to do more with less and less” and identified five key principles:

• Value: Precisely specify the value desired by the customer for each specific product.
• Value Stream: Identify the value stream for each product, mapping out all the steps in the process of delivering value to the customer.
• Flow: Make value flow through the stream without interruptions.
• Pull: Let the customer pull value from the producer.
• Perfection: Continually manage toward perfection, to keep removing wasteful steps from the process and keep reducing the time and information needed to deliver value to the customer.

Why Lean Manufacturing Processes Still Matter: Kanban and the Power of the Pull

One of the key inspirations for the Toyota Production System was the American supermarket. As shoppers take just the right number of items from the shelves as they need them, the empty shelf becomes the trigger to restock a given item with just the right amount of product to replenish.

Toyota realized that this approach could work in a factory, as well. This light-bulb moment eventually led to the creation of the Kanban system, where physical cards were used as messages to track and manage production within a factory.

Kanban is an example of a pull system, where signals of demand determine the amount of supply needed and help regulate the flow of production. In contrast to push systems, where products are produced — sometimes in greater quantities than the market actually needs or wants — and then pushed through the channel, a pull system is more agile and less wasteful.

Of course, in the 21st century, Kanban has gone digital like everything else and is incorporated into modern ERP software. But its essence remains the same.

Call it the Power of the Pull: The elegance of this approach is more relevant than ever in a post-COVID world, where real-time responsiveness to customer demand is a critical advantage. Pull-based systems allow manufacturers to make decisions based on actual demand instead of projections and whittle the time it takes to react when the winds shift.

How Lean Manufacturing + Industry 4.0 Work Together

Here are a few examples of how Industry 4.0 technologies can supercharge manufacturers’ ability to pull through in tough times by using the Power of the Pull. — Consider Lean manufacturing principles like those below for making value flow without interruption, allowing the customer to pull value from the producer, and managing toward perfection.

1. Smart factories and warehouses, powered by connected IoT devices sharing data as well as machine learning, enable leaner and more efficient processes.
2. Data from smart devices connected via IoT gives you superior visibility into every stage of your supply chain — from the production line to transport of products, materials, and more. That makes it possible to continually fine-tune your operations and eliminate waste, and it gives you the extra flexibility to adapt and respond to what’s just around the curve.
3. The stream of real-time data supplied by cloud-based Industry 4.0 applications helps you to avoid being over- or understocked and allows you to ramp up or scale down production more quickly without relying on gut instinct or guesswork.
4. Automation of certain tasks can reduce crowding on the shop floor and help protect frontline workers from being exposed to COVID. They are also a valuable tool in the time of a labor shortage when resources are scarce. Robotic devices don’t have to worry about social distancing or unexpected time off and can be managed safely from a distance by humans.
5. Preventive maintenance is a real boon of Industry 4.0 tech. The combination of IoT-enabled devices with predictive analytics can help you detect and prevent equipment problems before they occur, warding off costly delays and downtime.

Much of this can be accomplished using Microsoft’s Dynamics 365 Supply Chain Management, which provides an array of tools for managing and refining Lean production processes — including the ability to model manufacturing and logistics processes as production flows, and to set up and manage the rules for a Lean manufacturing pull system using tools like Kanban. Among other things, its features allow you to:

• Model your manufacturing and logistics processes as production flows, to reduce waste and optimize the flow of material and information.
• Create multiple versions of production flows, which you can then use to analyze and improve processes.
• Use Kanban to signal demand requirements within a pull system by creating a framework of rules and replenishment strategies.
• Plan, schedule, and track Kanban jobs.
• Manage purchasing and invoicing processes for subcontracted activities.

Digital Twins are another cutting-edge technology that can be deployed for valuable insights into decision-making. For example, you might create a digital twin of your supply chain and then test it with a variety of scenarios for unexpected events, using what you learn to develop solid strategies for responding to crises.

Digital Twins can also allow for faster and more efficient product development, so you can respond more quickly to new customer demands and market opportunities. By creating digital twins of existing products, you can access data and insights that enable a more-or-less continuous cycle of product improvement.

For more on this, check out Microsoft’s Azure Digital Twins, which is available as part of its suite of Azure offerings.