L.A.M.E.: Thinking Lean = "Zero Inventories"
It's unfortunate that one of the early (1983) popular books about lean (or “just in time,” as was the fashion of the day) was titled “Zero Inventories.”
Many people who didn't read beyond the title, mistakenly thought lean meant getting rid of your inventory. I've seen this first hand, as my master's internship was spent at a division of a company that thought they had previously “gotten lean” and cut their finished goods inventory to the bone.
Problem was, the production process had hundreds of steps and process yield variation was very unpredictable (semiconductors) … so they weren't meeting customer demand. It was brutal. They were the bottleneck for a high-tech end product that they couldn't sell enough of at the time. My job was to come up with a methodology for determining what inventory levels SHOULD be, given the lead times and variabilities involved (while using lean to try to drive down the variability, which would allow you to then reduce inventory).
One of my early lean mentors made the point very well. I'm paraphrasing his broken English, but he basically said:
“First flow, then low inventory. Shutting down line is not lean.”
That's a lesson that has served me well. Variation shouldn't be a “forever” excuse to hold inventory, but you can just cut inventory without fixing the variation.
I was reminded of all of this reading the linked article, it gives this example:
“… their corporate anorexia may have made them look svelte but not necessarily beautiful in the eyes of customers. Take the example of the Industrial Controls Division of Moog, Inc., which found that, along with its many clear benefits, lean had also produced an embarrassing tendency to miss customer due dates. “
Here's another case where people might say “Lean nearly killed us,” but it's more likely another case of “L.A.M.E.” (or “Lean As Misguidedly Executed.”). How is it “lean” to miss customer due dates? Sheesh.
The article goes on to describe how Moog utilized the services of Professor Mark Spearman, co-author of the wonderful textbook Factory Physics (yes it's worth the price!) and founder of the firm of the same name. Spearman is one of my favorite people in the manufacturing world (he was a professor of mine when I was an Industrial Engineering undergrad at Northwestern) and many of the invaluable lessons of my early manufacturing career are thanks to him.
Spearman's company and software tools allow you to determine “optimal” inventory levels that trade off service levels and inventory costs. I'm sure the tools do the job, but I also assume that Moog, Spearman, and company are not assuming that today's variation HAS to be that way forever. This is the same idea that you can't assume that today's long changeover times ALWAYS have to be that way (thus justifying large batch sizes). Reducing setup time allows you to reduce batch sizes. You don't just arbitrarily cut batch sizes (in many cases) the same way you don't (or shouldn't) arbitrarily cut inventory levels.
On the demand side, working with customers (or salespeople) to help level load sales will reduce demand variation, allowing you to reduce inventory. That's the “heijunka” principle at work.
On the supply side, using TPM tools, for example, will improve your production stability (reducing lead time variation), which will allow you to, again, cut inventory levels.
Just to be clear, I'm not calling Dr. Spearman “lame”!! Companies and managers who make arbitrary decisions without considering the consequences to their customers are L.A.M.E.
Please check out my main blog page at www.leanblog.org
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