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1、Lean Summit China 2006ShanghaiOctober 24,2006,Lean Thinking for ChinaJames P.WomackChairman,Lean Enterprise Institute,Origins of Lean Thinking,Henry Ford pioneered Flow Production by1914Alfred Sloan at General Motors adapted flow production to erratic,high-variety markets and added management-by-obj
2、ectives,to create Mass Production by the 1920s.Widely copied by organizations across the world,such as General Electric,to become the standard business system.Toyota pioneered a new business system after 1945-wide variety,high quality and short lead times in erratic markets with continuous flow and
3、management by process,to create Lean Production.(Fully achieved in Japan by the 1980s),Elements of a Lean Enterprise,Product development process.Supplier management process.Fulfillment process,from order to delivery.Customer management process.Policy management process.All linked and reinforcing,thr
4、ough careful process management.A process is simply a series of steps that must be conducted properly in the proper sequence that the proper time to create value for the customer.,Principles of Lean Thinking(1996),Specify value from the standpoint of the customer.Identify the value stream of require
5、d steps for each product(the process)and remove the wasted steps.Conduct the remaining steps in continuous flow.At the pull of the customer.In pursuit of perfection.,Simplified Principles(2006),Lean=Purpose+Process+PeoplePurpose=Solving the customers problem so the enterprise can prosper.Process=The
6、 three key value creating processes:Design:Customer to Concept to Launch.Make:Fulfillment,from raw material to customer.Use:From delivery through the life cycle.Plus necessary support processes:People=Engaging everyone touching the value stream in operating and perfecting the process.,What Is a Lean
7、 Process(Value Stream)?,One in which value is correctly specified AndEvery step in the process is:Valuable(from Henry Ford&Taiichi Ohnos 7 Wastes)Capable(TQM and Six Sigma)Available(Total Productive Maintenance)For Toyota:capability+availability=stability,which is the foundation for the Toyota Produ
8、ction System(TPS).Adequate(Theory of Constraints,TPS)Flexible(TPS),What Is a Lean Process(Value Stream)?,And,the steps are linked by:Flow(TPS)by location in process sequence with right-sized tools,with single-piece flow where possible.Pull(TPS)by reflexive signals from next downstream customer with
9、pacemaker point,rather than cognitive information management through central decision point.Leveling(Heijunka)(TPS)by(a)taking noise out of order flow and establishing a standard inventory at a single scheduling point so the process can proceed smoothly from that point up stream and(b)leveling produ
10、ction by mix to minimize lead times&inventories.,Advantage of Lean,Compared with mass production for a given amount of output with high variety dramatically reduces:Manufacturing space required(50%or more.)Capital required(50%or more.)Defects(typically 90%or more.)Injuries(typically 90%or more.)Huma
11、n effort(50-75%,with less capital.)Throughput time(=order to cash)(typically 75-90%)Leader time and product development time(50-90%),How Can Employees See a Process?,Draw a value stream map.By having everyone touching the value stream take a walk together.Listing the important details of the existin
12、g process(the“current state”.)Envisioning a better process(the“future state”.),Current-State Value Stream,Future-State Value Stream,How Can Employees Improve a Process?,Toyotas A3 problem solving method.State the problem(value/purpose).(Go to customer!)Describe the process causing the problem.(Go to
13、 the gemba and observe!)Propose a better process likely to solve the problem.(Drawing on accumulated knowledge in organization.)Determine who must do what when to create the new process.Specify a measure of performance that will verify success.,Creating Lean Enterprise,Easiest in“greenfield”situatio
14、ns where product,processes and workforce are new.Harder but the more common challenge in“brownfield”situation where product,process technology,facilities,and workforce are already in place.Two key tools of improvement:Kaikaku(revolution)to dramatically transform a process,usually in crisis.Kaizen(ev
15、olution)to steadily transform a process,day-after-day,year-after-year.(A3 works for both.),The Spread of Lean Production,Fully developed by Toyota in Japan by 1980s(including through its suppliers and retailers.)But not fully embraced in Japan even today.Full application requires synchronized lean p
16、roduct development,supplier management,customer management,fulfillment,and policy management.Began diffusing to USA in early 1980s;to Europe a few years later.Now widely accepted in principle in most countries.“We are all lean as a matter of principle.”,The spread of Lean Production,Hard to implemen
17、t in brownfield operations in stagnant markets because a given amount of output requires less of everything(which is why the system is called lean.)The sad case of General Motors,Ford,Delphi and Visitant:Understand tools but cant create new management system or deal with legacy of excess workers and
18、 pension costs.Toyota has long passed Ford,now passing General Motors to become the worlds largest and most consistently successful enterprise!Lean wins!Cautionary tale for Chinese state enterprises.,An Accompanying Revolution,At the same time lean production has become global best practice,world la
19、bor markets have opened up to greatly expand labor supply.In just a few years China,India,Vietnam,Mexico,Turkey,etc.have become engineering and manufacturing locations completely tied to world markets.This creates pressures on existing manufacturing and engineering locations:particularly those in US
20、A and western Europe which have too many employees.,Lean Location Logic,For every product made for a given customer there is a best location in the world for production.Mass producers look at factory costs plus slow freight.Lean thinkers for each potential production site-calculate:Factory costs.Cos
21、t of slow freight.Cost of supplied items.Total inventory costs from raw material to customer.Cost of quality.Cost of premium freight to provide high level of service.Cost of out-of-stocks.Cost of remaindered goods.,Lean Location Logic,Lean thinkers then add:Currency risk.Country risk.Company risk(wh
22、en contracting out manufacturing.)To calculate total cost to supply a given product for a given customer from a given location.,Conclusions from Lean Location Logic,Build products with new technologies&immature processes near technical centers(near headquarters?)Build price-sensitive,time-sensitive
23、products at the lowest wage-cost site within the region of sale.(E.g.,China for East Asia,Mexico for North America,Turkey for Europe.)Build price-sensitive,time-insensitive products at lowest wage-cost sit in the world.(China for the moment.)Note:Chinese enterprises will need to globally diversify p
24、roduction locations for exports over time to become insiders in each region North America,Europe,East Asia,South Asia(?).,The Low-Cost Labor Revolution,Creates opportunities and risks for new-entrant global enterprises such those in China:Danger of adopting mass production practices because they are
25、 quick and easy(untrained labor+fancy machinery)but hard to replace later.Danger of over-dependence on markets that are declining and with potential barriers(USA,Europe.)If decline of the advanced economies constrains manufacturing growth in low-wage countries to their domestic markets:Productivity
26、becomes much more important to(a)lower costs and continually expand those markets while(b)allowing steady wage increased.But will be hard with mass production.,Key Reason for Chinese Industryto Embrace Lean Thinking Now,The best means for Chinese enterprise to:Protect themselves from shocks in globa
27、l markets.Steadily increase the Chinese standard of living.Important to remember:No country has built sustainable advantage in global competition on the basis of low wages,nor would any country want to!Sustainable advantage can be built by applying lean thinking to every aspect of enterprise as quickly as possible!,
