Download - Lean Manufacturing For Small and Medium Sized Manufacturing Enterprises

© TXM Lean Solutions Pty Ltd 2012

CONFIDENTIAL

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LEAN MANUFACTURING AS A

LEVER FOR GROWTH FOR

SMALL AND MEDIUM SIZED

MANUFACTURERS

TIM MCLEAN

TXM LEAN SOLUTIONS


CONFIDENTIAL

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OUTLINE

• The growth challenge for Small and Medium Sized Manufacturing

Enterprises (SMEs).

• Why SMEs fail to grow.

• Key success factors in a successful SME Lean transformation

• Developing your outline A3 Plan.

• Conclusions.

• Q&A


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PROCESS FOR THIS WORKSHOP

• Assumptions:

• This is a working session as well as a learning session.

• You are interested in growing your business.

• You have a working knowledge of lean .

• Process will include presentation of key concepts, with working group

sessions to develop an A3 action plan for application to your situation.

• Organizing principles for 2 person work groups – natural teams and interest.

• Key activities will include thinking, reflecting, and creating a document to

support your organizations growth.


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WORKING DEFINITION OF SME:

• Small or Medium Sized Manufacturing Enterprise (or site).

• Less than 200 Employees on one site.

• Sales less than $100M.

• “Small Manufacturer usually less than $5M sales and 30 people.

• May be privately owned business or stand alone operation in large corporate.

• Managers have multiple roles.

• Limited staff functions and support (e.g. no HR, Production Engineering,

Training, Lean departments).

• Often manufacture complex or customized products in low volume and/or a

complex product range.

• Strategic focus is on growing the business (not downsizing).


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IMAGINE YOUR BUSINESS

WITH DOUBLE THE SALES

WHAT WOULD YOUR BUSINESS BE LIKE?

WHAT IS STOPPING YOU FROM GETTING

THERE?


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WHAT TYPICALLY HAPPENS

WHEN AN SME GROWS?


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ECONOMIES OF SCALE – WHAT SHOULD HAPPEN WHEN

YOU GROW

0

20

40

60

80

100

120

Profit

Overheads

VariableCosts

• Variable costs grow in line

with sales

• Overheads grow slower than

sales

• Profit margin (% and $) grows

faster than sales.


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DIS-ECONOMIES OF SCALE – WHAT USUALLY

HAPPENS

0

20

40

60

80

100

120

Profit

Overheads

VariableCosts

• Variable costs grow faster

than sales.

• Overheads increase with

sales or faster.

• Profit margin (% and $)

disappears


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WHY DOES THIS

HAPPEN??


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IN THE BEGINNING THERE WAS

YOU YOUR CUSTOMER

SIMPLE – EASY TO MANAGE


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THEN YOUR BUSINESS GREW

YOUR COMPANY

YOUR CUSTOMERS


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AND GREW….

YOUR COMPANY YOUR CUSTOMERS


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AND GREW….


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THE ANSWER TO

ALL THIS

COMPLEXITY IS

OF COURSE…….COMPUTER

SYOU START TO LOSE

CONTROL OF YOUR

BUSINESS


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THE CONSEQUENCES OF GROWTH = INCREASING

COMPLEXITY.

WITHOUT BETTER BUSINESS PROCESSES YOU WILL GET:

• Lead times increase.

• Batch sized increase to maximize

“efficiency”.

• Inventory increases.

• Demand for cash exceeds extra cash

from revenue.

• Insufficient cash to support growth.

• More people, more layers, vertical silos

more overheads.

• Labour efficiency falls

• More people harder to supervise.

• Defects and problems increase.

• Problems don’t get solved because

there are just too many to solve.

• Profit margins decrease.

YOU WILL STOP GROWING AND PROBABLY GO BANKRUPT


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DESCRIBE YOUR CURRENT STATE

WHAT DO YOU NEED TO CHANGE ABOUT

YOUR BUSINESS?

START WITH YOUR BUSINESS

RIGHT NOW


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THE KEYS TO LEAN SUCCESS

IN A SMALL AND MEDIUM

SIZED MANUFACTURER


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LESSON 1: HAVE A CLEAR STRATEGY


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WHAT IS YOUR STRATEGY?

DESCRIBE YOUR FUTURE

STATE


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LESSON 2: ALIGN YOUR MANAGEMENT TEAM


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ALIGNING FOR LEAN SUCCESS


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WHAT ARE SOME OF THE

CULTURAL AND LEADERSHIP

BARRIERS IN YOUR

BUSINESS?

WHAT ARE THE OBSTACLES

THAT STAND BETWEEN YOU

AND YOUR FUTURE STATE?


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LESSON 3: MAP YOUR VALUE STREAMS


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DEVELOP A PRODUCT FAMILY MATRIX


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LESSON 4 – SET AND MAINTAIN HIGH

STANDARDS


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LESSON 5 - DEVELOP YOUR FRONT LINE LEADERS


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LESSON 6 SIMPLE SOLUTIONS ARE BEST


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VISUAL CONTROLS


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WHAT KIND OF

COUNTERMEASURES MIGHT

WORK TO OVERCOME THE

OBSTACLES TO CHANGE IN

YOUR BUSINESS?


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LESSON 7: ESTABLISH SIMPLE AND RELEVANT

MEASURES

• Aim for measures that can be

“counted” on the shop floor.

• Record hourly or daily.

• Recorded by front line leaders.

• Consider safety, quality, output,

delivery, cost.

• There is no perfect metric..


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WHAT IS YOUR CURRENT TARGET AND WHAT

DO YOU NEED TO ACHIEVE?

WHAT ARE THE KEY SHOP

FLOOR METRICS FOR YOUR

BUSINESS?


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LESSON 8 – ITS HARD – BUT STICK WITH IT

Reprinted from Grow Your Factory, Grow Your Profits: Lean for Small and Medium-Sized Manufacturing

Enterprises.

MA

NA

GE

ME

NT

W

OR

KL

OA

D

Time

BUSINESS AS USUAL

Total Workload

FirefightingWorkload

ImprovementImpact

TIME


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COMPLETE YOUR ACTION PLAN

HOW WILL YOU RESOURCE

AND CARRY OUT YOUR

CHANGE?


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0

20

40

60

80

100

120

Profit

Overheads

VariableCosts

ECONOMIES OF SCALE – THE IMPACT OF LEAN

0

20

40

60

80

100

120

Profit

Overheads

VariableCosts

• Productivity increase means

variable costs grow slower

than sales – gross margin

improves.

• Improved processes and

employee empowerment

mean overheads grow slower

or stay fixed.

• Profit margin (% and $) grows

faster than sales.


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VIRTUOUS

IMPROVEMENT

CYCLE

LEAN PRODUCTION

SYSTEM

INCREASED CAPACITY-PHYSICAL

AND HUMAN

MORE RESOURCES

INVEST IN MORE

GROWTH AND

INNOVATION

INCREASE SALES AND

PROFITS


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KEY POINTS

• Small or medium size manufacturers are usually focused on growth. Many

stall because of poor process.

• Most manufacturing SMEs we see suffer diseconomies of scale – profit margin

and cash flow goes down when sales go up.

• Lean can change this paradigm for SMEs.

• Align lean with your strategy and get your leadership team on board first.

• Map your value streams and engage your people.

• Lean is hard – but stick with it – IT WORKS.

• Increased productivity leads to higher margins, lower inventory and more cash

to support growth of your business.


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CASE STU

LEARN MORE

• Contact Us at TXM

www.txm.com.au/contact-us

• Read More in “Grow your Factory –

Grow Your Profits: Lean for Small and

Medium Sized Manufacturing

Enterprises• http://txm.com.au/store/products/grow-factory-grow-

profits-lean-small-medium-sized-manufacturing-

enterprises

• Read and Watch Case Studieswww.txm.com.au/case-studies

http://txm.com.au/store/products/grow-factory-grow-profits-lean-small-medium-sized-manufacturing-enterprises


http://txm.com.au/contact-us

http://txm.com.au/contact-us



http://www.txm.com.au/case-studies

http://www.txm.com.au/case-studies

Download - Lean Manufacturing For Small and Medium Sized Manufacturing Enterprises

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