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Lean University --
Lean Articles
Lean
report detects solid gains, common obstacles
Nearly
three-quarters of lean production efforts are reporting
solid progress and the national economy appears to be
benefiting, according to the First Annual State of Lean
Report compiled by the nonprofit Lean
Enterprise Institute (LEI).
The
report consists of an annual survey of the lean community
and inventory turns calculated from data compiled by the
U.S. Census Bureau.
Seventy-four
percent of survey respondents reported positive progress
from lean implementations, a 4 percent increase over 2003.
Inventory turns for the U.S. economy hit an estimated 8.7
last year, a record, and up from 8.6 in 2003. Inventory
turns are calculated by dividing sales to customers for a
given period by the sum of the average inventories of raw
materials, work-in-process, and finished goods on hand
during the same period.
"This
is the highest level of turns on record, said James
Womack, LEI president and founder. If you follow the
census data back to their beginning in 1958, you find no
improvement trend until the end of the previous recession in
1992, which is just the point at which American companies
began to take lean thinking seriously. In almost every
manufacturing industry, and in wholesale and retail as well,
something good is happening as lean techniques are
applied."
The
rebound in turns after the latest recession is impressive.
After a dip in 2001 caused by the recession, turns in 2003
climbed back above their previous peak recorded during the
bubble economy in 2000. Turns always decline in
recessions in an economy dominated by traditional mass
producers.
This
is because the front end of the economic train goes off
the track long before the back end hears about it, Womack
said.
The
push production systems of traditional mass producers
continue moving products toward the front of the train at a
steady rate long after output should be reduced to
correspond to reduced demand. This can't happen to
anywhere near the same extent in a truly lean economy because
each production step pulls only what it needs from the
previous step and the previous step replenishes only what
has been consumed.
The
change in turns is most dramatic in the auto industry, where
they have increased from 15 to more than 20 since 1992. This
is not surprising since lean methods were pioneered in
this industry by Toyota, and all car companies felt the
need to respond in the 1990s. The LEI report tracks turns in
automotive, electronics and aerospace industries. It also
measures turns for manufacturing, wholesale, retail and the
economy as a whole.
Womack
called inventory turns "the measure that can't lie,
particularly over a period of years" because all
companies must count them in a similar way for their balance
sheet.
"They
are an output, and one critical to business success, while
many other measures, such as the amount spent on improvement
activities or the number of employees receiving training,
are inputs that may or may not lead to strengthening
business," he said.
Common
obstacles
In the survey, a combined total of 74percent of respondents
reported positive progress. Forty-six percent
characterized their lean implementation efforts as
early, consisting of pilot project with some positive
results. Twenty-eight percent characterized
their efforts as extensive with many areas applying lean
concepts and tools, and reporting solid progress. Last year,
the responses for these two questions were 39 percent and 31
percent, respectively, for a total of 70 percent
Only
4 percent of respondents this year said their efforts were
at an advanced stage and 18 percent described them as being
in a planning phase with no implementation occurring yet.
Last year, the responses for these questions were 5 percent
and 15 percent, respectively. Seven percent had no answer
this year compared to 12 percent last year.
Among
other questions, the survey asked the lean community to rank
some of the most common obstacles to implementing lean.
The
results were:
backsliding to the old ways of working, cited by 36 percent
of respondents;
lack of implementation know-how, 25 percent;
lack of a crisis to create a sense of urgency, 24
percent;
a traditional cost accounting system that doesn't
recognize the financial value of shop-floor improvements, 22
percent;
resistance by middle management, 21 percent;
regarding lean as the flavor-of-the-month, 19 percent;
failing to remove anchor draggers who oppose change, 18
percent;
resistance by hourly employees, 11 percent;
resistance by supervisors, 10 percent; and,
failure of past lean projects, 6 percent
The
survey was based on 999 responses to a January 2004
questionnaire distributed electronically to members of the
Lean Community. See
the report.
Based
in Brookline, Mass., USA, the Lean Enterprise Institute is a
nonprofit training, publishing, and research organization
founded by James Womack in August 1997. It developed simple
but powerful tools for implementing a set of ideas known as
lean production and lean thinking, based initially on the
Toyota Production System and now extended to an entire Lean
Business System. For
more information visit the LEI
News page.
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