“Indirect” Lean

Lean initiatives are not just for production and other ‘direct’ activities. Lean principles can be applied to ‘indirect’ costs and activities to good effect as well. And these efforts are definitely green.

At a recent meeting of our local APICS chapter, two gentlemen from BAE Systems here in New Hampshire presented on a “Lean Energy” program they conducted at multiple BAE facilities. The focus was on identifying waste and taking action to reduce or eliminate as much of that waste as was practical. Perhaps the most interesting aspect of their journey was the use of Lean techniques to make these improvements.

BAE had already applied Lean to their production processes and had a number of Lean-trained individuals to help in this process. They applied standard Lean tools like value stream mapping, A3, and Kaizen to the use of energy throughout several facilities, with great success.

This energy conservation initiative went beyond the typical steps of installing energy-saving light bulbs and beefing up the insulation around heated areas. They looked at all forms of energy usage and founds many opportunities to reduce waste and save the company a lot of money while at the same time improving performance in other areas.

One example concerned the compressed air system, which was used throughout the plant. They discovered that there were many, many small leaks that each individually was inconsequential but taken together constituted a significant misuse of the resource. They were able to avoid the purchase of a larger compressor and, in fact, reduce the load enough to extend the life of the existing system by several years – it had been needlessly overworked. The cost to fix the leaks was relatively minor.

Another striking example was efficiencies in the use of an oven. They added insulation, changed procedures to minimize heat loss and scheduled the oven more intelligently to maximize throughput and reduce the number of hours the oven had to be kept up to temperature, saving considerable energy.

They summarized their efforts this way:

• It was the right thing to do
• There was a definite direct pay-back
• It was virtually free with an immediate ROI
• It was a ‘fairly easy’ way to reduce energy costs and decrease demands on facilities and maintenance
• The Lean approach worked great – “If you know lean, this is easy. If you don’t know lean, it’s still easy.”
• It was unprecedented – not being done anywhere – but would be duplicated and expanded throughout BAE

The Lean Supply Chain

We are used to talking about Lean in the context of Lean Manufacturing and the techniques that are used to achieve Lean within our own plant – things like 5-S, Poka-Yoke and Kaizen. But how does Lean extend beyond the plant?

Extending Lean makes logical sense. Once we trim our own operations, reduce lead time and improve responsiveness, the path to further improvement leads outside of our own doors to the suppliers, customers, warehouses, transportation providers, and other supporting entities. Those entities can help get materials to us sooner and more in line with our needs and they can help speed products through the distribution chain to the end customer.

Some aspects of Lean naturally extend beyond our own four walls. Kanban replenishment, for example, works best when the suppliers are linked in to receive and respond to replenishment triggers directly. In most cases, this involves a blanket purchase agreement and a mechanism to signal releases (electronic kanban) directly to the supplier. However, other techniques that support Lean within the plant are not easily moved out into the broader world.

It's important not to confuse the techniques with the philosophy. Lean is a focus on adding value and eliminating those activities that don't add value (waste). Lean principles can be applied far beyond the plant floor – throughout the enterprise in such areas as customer service, administration and engineering – and throughout the supply chain. But the specific techniques used within the plant may or may not apply, or may need major rethinking to generate the kinds of improvements that we might expect and demand.

Applying Lean principles to the supply chain means enlisting trading partners in our efforts to drive out waste – it's not something we do by ourselves. The path to Lean in the supply chain can be summed up as CO-CO-CO-Collaboration

CO-operate: Establish the kind of close relationship with trading partners that will foster real cooperation to drive waste out of all activities both internal to the partner's operation and ‘in the seams' where product and information move between organizations. There has to be a certain level of trust between partners to enable such cooperation

CO-mmunicate: Open communication is the key to close cooperation. Electronic kanban is one example of communication on an operational level, but there also must be communication on a management and process improvement level to open new doors to waste elimination.

CO-ordinate: Collaboration is most visible in coordinated activities – smooth hand-offs of data and materials supported by joint efforts to link information and activities to eliminate delays, errors, miscommunication, or surprises.

All this adds up to collaboration, which the dictionary defines as working together, especially in a joint effort. Lean transformation within the plant can pay big dividends but the benefits of extending Lean thinking through the supply chain can be huge. To find out more about Lean Manufacturing visit www.daveturbide.com