lean manufacturing for small and medium sized manufacturing enterprises

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TXM Lean Solutions

Lean Manufacturing as a lever for Growth for Small and medium sized ManufacturersTim Mclean TXM Lean solutions TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#1OutlineThe growth challenge for Small and Medium Sized Manufacturing Enterprises (SMEs).Why SMEs fail to grow.Key success factors in a successful SME Lean transformationDeveloping your outline A3 Plan.Conclusions.Q&A

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#8.05TIM

2Process for this workshopAssumptions: 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.

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#3Working 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). TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#4Imagine your business with Double the SalesWhat would your business be like?What is stopping you from getting there? TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#5What typically happens when an SME grows? TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#6Economies of Scale What should Happen when you growVariable costs grow in line with salesOverheads grow slower than salesProfit margin (% and $) grows faster than sales. TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#7DIS-Economies of Scale What usually HappensVariable costs grow faster than sales.Overheads increase with sales or faster.Profit margin (% and $) disappears TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#8WHY DOES THIS HAPPEN?? TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#9IN the beginning there was

YOUYOUR CUSTOMERSIMPLE EASY TO MANAGE TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#THEN YOUR BUSINESS GREW

YOUR COMPANYYOUR CUSTOMERS TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#You then need some people to help you out because you cant do it all on your own

You find more customers

But now your people start to have interactions with each other and with your customers, so you don't know everything that goes in your business11And GREW.

YOUR COMPANYYOUR CUSTOMERS

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#Your people now need people of their own so you start to form functional departments. These have relationships within themselves. You add more customers and now you no longer have personal relationships with all your customers.Lots of people are interacting with customers. 12And GREW.

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#As we add more business and more layers to our organisation relationships further down the organisation are more one-wayWe add new functional departments to bring tasks you may have previously outsourced in-house (e..g accounting)You add even more customersYou then employ a General Manager and Sales and Marketing Manager so you can step back and see the big pictureNow there are lots of relationships and you are now quite remote from all of them. You have departmental silos where people dont talk to each other across your organisation.What is going on??13The answer to all this complexity is of course.

COMPuters

YOU Start to Lose control of your business TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#Computers are supposed to bring all the data together and make sense of the complexity so you know what is going onBut instead they usually make things more complexThen you need more of these guys 14The 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 fallsMore people harder to supervise.Defects and problems increase.Problems dont get solved because there are just too many to solve. Profit margins decrease.YOU WILL STOP GROWING AND PROBABLY GO BANKRUPT TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#15Describe your current state

What do you need to Change about your business?Start with your Business Right NowA3 TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#8.23Mike: Facilitate discussion about what are the things we would like to change about 16The Keys to Lean success in A Small and Medium Sized Manufacturer TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#17Lesson 1: Have a Clear strategy

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#18WHAt is your Strategy?

Describe your future stateA3 TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#19Lesson 2: Align your management team

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#20ALIGNING for Lean Success

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#21What are some of the cultural and Leadership barriers in your business?

What are the obstacles that stand between you and your future state?A3 TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#22Lesson 3: Map your Value Streams

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#23Develop a Product family Matrix

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL# 24Lesson 4 Set and Maintain high Standards

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL# 25Lesson 5 - Develop your front Line Leaders

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#26Lesson 6 Simple Solutions are best

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#Visual Controls

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#What Kind of countermeasures might work to overcome the obstacles to change in your business? TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#29Lesson 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.. TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#30What is your current target and what do you need to achieve?What are the key shop floor metrics for your business?A3 TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#10.58MIKE

31LESSON 8 ITS HARD BUT STICK WITH ITReprinted from Grow Your Factory, Grow Your Profits: Lean for Small and Medium-Sized Manufacturing Enterprises. TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#11.15TIM

32Complete your Action PLanHow will you resource and carry out your Change?A3 TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#11.17MIKE

33Economies of Scale The Impact of leanProductivity 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. TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#11.38TIM

34VIRTUOUS IMPROVEMENT CYCLE TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#11.41TIM

35KEY POINTSSmall 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.

TXM Lean Solutions Pty Ltd 2012 CONFIDENTIAL#11.45TIM

36CASE STULearn More

Contact Us at TXMwww.txm.com.au/contact-us

Read More in Grow your Factory Grow Your Profits: Lean for Small and Medium Sized Manufacturing Enterpriseshttp://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

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