How the Best Companies Apply Lean Manufacturing Principles to Shatter Uncertainty, Drive Innovation, and Maximize Profits
Press Release
HEADLINE:GOING LEAN:HEADLINE
SUBHEAD:New AMACOM Book Shows How the Best Companies Apply Lean
Manufacturing Principles to Shatter Uncertainty, Drive Innovation, and
Maximize Profits:SUBHEAD
We have all heard that the business world is in a state of crisis.
Increasing competition, shifting customer expectations, and disruptive
world events have shattered the marketplace and undermined
once-straightforward management techniques. Despite these ever-changing
circumstances, most companies continue doing business as usual, often
using the same model year after year, much to their detriment. However,
in this time of uncertainty, there are companies who are continuing to
thrive. In January of 2008, Toyota knocked Ford from its number 2 spot
in the US for the first time in 75 years and is vying to become the
world's biggest automobile manufacturer; Southwest continues to with
strong earnings while its competitors struggle or fail; and Wal-Mart has
expanded to offer $4 prescription drugs and even in-store health
clinics. The secret to their exceptional success lies in Lean Dynamics.
Stephen Ruffa is the originator of the concept of "Lean Dynamics,? which
combines the traditional improvement techniques of Lean and Six-Sigma
with strategic analysis of the interrelationships of decisions over time
and across business functions. He is an expert in cost control with more
than 18 years experience in the design, manufacture, test, and
in-service support of complex aerospace vehicles. In GOING LEAN: How
the Best Companies Apply Lean Manufacturing Principles to Shatter
Uncertainty, Drive Innovation, and Maximize Profits (AMACOM 2008) he
sets aside the notion that efficient operations and powerful innovations
are only possible when business is steady and demand is growing.
Instead, companies must learn that sudden shifts or unpredictable
conditions need not undermine their results. Led by a new breed of
companies -Toyota, Wal-Mart, and Southwest Airlines—a powerful, yet
unexpected mindset is reshaping the rules for business competitiveness.
GOING LEAN tells their story in the context of their response to dramatic
events, from September 11th to more recent crises - showing how they
consistently thrive amid extreme circumstances that have captured the
public eye. In doing so, it brings a brand new perspective to "lean
production? - one of the hottest topics in business management today.
And it puts this all into an actionable context that will help
corporations finally maximize the value from the enormous investments in
technology and other business improvements so many have already made.
In GOING LEAN, readers will learn how to:
• Rethink business right down to the very goals of the organization
• Become effective in creating and sustaining value
• Set a critical foundation for achieving sustained excellence
• Describe the underlying techniques to maintain steady and predictable
flow
• Deliver industry-leading returns
About the Author:
Stephen A. Ruffa is an engineer who worked for the American
Defense Department and researched lean manufacturing across seventeen
large aerospace producers. His previous book, Breaking the Cost
Barrier: A Proven Approach to Managing and Implementing Lean
Manufacturing was awarded the 2001 Shingo Prize for Excellence in
Manufacturing Research. He lives in Oak Hill, Virginia.
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Excerpt
Introduction: Solving the Mystery of Success
THIS BOOK IS FOUNDED on one simple but enduring truth: Excellence is
best seen in a crisis.
In 1973 when oil shortages compromised the profitability and stability
of the global automotive industry, the excellence of one corporation
stood apart. Its booming operations fueled continued profit and
competitive advantage just as others were clinging to survival. Its
sustained success ultimately catapulted this firm—the Toyota Motor
Company—to market prominence, and has made its unique approach to
management the envy of the business world.
This very same phenomenon can be seen again today.
In the wake of disaster—from September 11th and into war, to economic
downturn and then hurricane Katrina—American business throughout this
decade has been thrust into crisis. Corporations everywhere have been
hard hit from lost sales, disrupted by shifting customer demands, sent
reeling from new uncertainties rippling from customers to suppliers.
Once-unquestioned leaders found themselves in a terrible struggle, one
by one driven into financial turmoil or even bankruptcy. But a few
firms—Toyota, Wal-Mart, and Southwest Airlines—remained strong, even
thriving amid the chaos that crippled their peers.
What makes these corporations different? How do they seemingly defy
gravity, extending their edge in a business environment that should have
dragged them down?
The answer is simple. While others insist on managing their businesses
just as they had done in the past, these companies took a different
path. They saw that the world has dramatically changed, that uncertainty
and crisis are no longer the exception but are now the rule. And they
adopted a set of principles and practices I call lean dynamics—thus
preparing themselves long beforehand to meet this head on.
Those who read this book will learn what years of success followed by
decades of struggle should have taught managers everywhere: What marks
excellent companies is not how efficiently they operate when demand is
stable and conditions are optimal. Rather, those who apply lean dynamics
continue to thrive—sustaining strong profitability, growth, and
innovation—even when unpredictability is constant and change is normal.
Lean dynamics goes beyond tweaking existing operations and
organizational structures—quick fixes that offer uncertain benefit to
the bottom line. It goes further than simply finding and removing
today's most visible problems—the focus of so many of today's
improvement efforts. Instead, it is transformational—a new way of
managing that corporations of all types and sizes can put in place to
create the tangible, sustainable, bottom-line results they need to
compete.
Throughout the last century, corporations struggled to refine a system
of management that was never originally intended to accommodate the
business needs of today. Founded by Henry Ford as an answer to the
unsolved problem of bringing his new innovation—the Model T—to the mass
markets, America's management system quickly spread to become the gold
standard for much of the world. Its basic premise—that tremendous
efficiencies can be derived from managing jobs by their most basic
steps—permitted managers to drive out hidden variation and waste,
streamlining work and making complex products widely affordable. Yet,
their system for keeping such a myriad of independent tasks moving
together in lock step brought with it a new problem: Its effectiveness
demands stability—a condition that has become increasingly hard to find.
For years, new strategies and techniques arose to hold chaos at bay. As
expanding mass markets gave way to fragmented, variable customer demand,
managers came to rely on buffers and quick fixes to protect their way of
doing business. And with bouts of change increasingly driving disruption
and crisis, corporations continued to do what worked so well for them in
the past: Struggle harder until conditions once again stabilize.
A few have come to understand the losing proposition of demanding
stability from a world that over the last several decades has become
increasingly driven by disorder. Advanced technology and heroic effort
can no longer overcome the shortfalls of a system that has reached its
limits. What was once a manageable gap has grown to a chasm, one that
can no longer be bridged through the methods of the past.
The solution is clear. Corporations can no longer thrive on a system
that is built on the presumption of stability. Instead, they must
prepare for change.
Going Lean challenges how companies have learned to think about
the way they do business. It sets aside the notion that efficient
operations and innovation are only possible when business is steady and
demand is growing; that disruption and loss are the price that must be
paid each time change is introduced. Instead, it shows how a new breed
of companies has demonstrated a powerful yet unexpected weapon in the
battle against uncertainty. Their lessons strike to the core of what is
perhaps today's greatest mystery of success: how one firm's adversity
can become another's competitive advantage.
This discovery did not come as the result of a single project or event.
Rather, it grew from the combined experiences of innovators from diverse
industries striving to gain the quality, flexibility, and cost structure
they needed to compete.
More than a decade ago I first saw the need to pull these lessons
together. Immersed in the furious problem solving that marked the
development, production, and fielding of military aircraft, I found that
this industry—a beacon of American ingenuity and achievement—was not at
all as it seemed. Manufacturing inefficiencies were high, flexibility
low, and quality came at a tremendous price. Simply stated, the
management of its operations stood in stark contrast to the
technological prowess that characterized its products.
How could this be?
This is the question I spent much of the next dozen years exploring.
Fortunately, as my passion for gaining this understanding grew, so did
my ability to study and report on it.
My first opportunity arrived with my study of seventeen aerospace
facilities across a dozen major aerospace firms—from GE to Boeing—who
granted me and my team of researchers tremendous access to scrutinize
their factories.1 We traced their improvement initiatives from beginning
to end, looking to see what had worked and what had not, across
practices ranging from lean manufacturing to statistical process control
and Six Sigma.
I quickly found that things were not as I had imagined. As an engineer I
had been trained to use a straightforward, logical approach to problem
solving. I came to believe that finding a solution lies in isolating
those steps where problems are most evident and then targeting them for
action. What I found to be true was quite the contrary. While most
struggled, those who managed to make substantial gains did not do so by
giving greater attention to the disruption they could readily see or
those problems already at hand. Instead, these companies had reached
beneath the surface, taking steps that addressed the underlying
conditions that had led to their occurrence in the first place. In doing
so, many of the problems they once faced simply went away.
By taking a range of internal actions, these firms had made great
strides in overcoming the substantial constraints of their external
environments. They had been able to mitigate many of the effects of
their variability, overcoming huge amounts of waste that had long been
seen as a standard and accepted part of doing business.
I searched for the means to study this closer. Could these same methods
be extended for even greater advantage? Were the steps they had taken
transferable to other industries; and could they be applied across broad
enterprises? How could companies avoid risk to their operations as they
put them in place?
Then opportunity struck again. As I set out in a different management
position, I was immediately confronted head on with many of the very
same problems that plagued those whom I had previously studied. Charged
with leading efforts aimed at mitigating the Defense Department's risk
in obtaining a wide range of critical supplies during sudden demand
surges—particularly those seen in times of war—I had to find a way to
help overcome the effects of the tremendous uncertainty faced by those
who produced them. From aircraft spare parts to medical and
pharmaceutical supplies, I searched for ways to demonstrate how the
techniques I had discovered could help.
The result? Through a series of initiatives using internal measures for
mitigating external conditions, I was able to show tremendous, tangible
results. Lead times for critical items dropped by as much as two-thirds;
availability of hard-to-get spare parts skyrocketed even during extreme,
unforeseen circumstances (including a demand spike to more than one
thousand percent of normal levels).2 In all, these succeeded in driving
down the risks of supply disruptions while eliminating the need to hold
as much as a billion dollars of inventory.3
I had proven that this new way of thinking could quickly achieve what
many did not seem to believe was possible. Still, one question remained:
With such great potential, why weren't America's leading businesses
using this approach already?
Or were they?
To answer this, I looked to retailers, airlines,
manufacturers—businesses of all types. I focused my research on those
who managed to profit amid the terrible uncertainty and crisis that
shook American business since September 11th; on those
industries—retailers, manufacturers, and especially airlines—that were
the most hard-hit from lost sales, reeling from skyrocketing fuel
prices, and then struck by the ill effects of Hurricane Katrina. A few
firms had indeed yielded very different results. Had they also applied
the tools and practices that I had shown to be so successful?
I was astounded by what I found. As I anticipated, these firms had taken
a range of internal measures to overcome tremendous change and
uncertainty, but they had gone much farther. Each turned out
high-quality, low-cost products and services using a fraction of the
effort—but not just when conditions were steady and predictable.4 They
had demonstrated something new—the set of principles and practices of
lean dynamics—turning what should have been overwhelming circumstances
into tremendous advantage.
And in doing so they were changing the rules of business for all.
For much of the last century, sudden change and uncertainty affected
everyone in much the same way. It was widely understood that periodic
shifts in the economy would temporarily create disruption, drive down
profits, and lead businesses to stagnate. All were impacted; no one was
immune. Thus, these dynamic factors did not favor one firm over
another—so long as the same management system remained the standard for
all.
But this was not to be. The Toyota Motor Company was the first to
visibly defy this standard three decades ago.5 While other automobile
manufacturers buckled under the tremendous pressures of a global oil
crisis, this company reaped the fruits of a management system it had
been honing for years. And with its ability to consistently create value
when others could not—across a wide range of expected and unexpected
circumstances—Toyota was able to overcome the tremendous advantage once
held by the "Big Three,? as it was now on the verge of becoming the
world's largest automobile producer.
Consider the case of Southwest Airlines. In an industry that found
itself at -ground--zero in the weeks and months following September
11th, Southwest continued to advance. The company extended its low
prices and superior service into new markets—even expanding into
competitors' traditional strongholds. It continued as the only major
airline to remain profitable, extending a streak now more than thirty
years long while its competitors announced multibillion dollar losses
and bankruptcy. For Southwest, the rules of business had clearly changed.
How was this possible? The company's founder, Herb Kelleher, had
prepared the firm well. He never learned what most corporate leaders
have come to accept: that business is generally predictable and stable.
Instead, he came to see that "reality is chaotic,? and built his system
of management around it.6
Wal-Mart exhibited much the same phenomenon. During the economic
downturn that began after September 11th, this firm pressed forward,
posting strong profits just as it had done during downturns before. In
fact, Wal-Mart seemed to thrive on these downturns, each time expanding
into new territories and new markets. Again and again Wal-Mart defeated
long-established leaders within the most challenging sectors, taking
commanding positions in everything from consumer electronics to toys and
even food.
Even more astounding was how Wal-Mart smashed conventional thinking by
setting the standard for rapid response in its relief efforts following
hurricane Katrina. Rather than exhibiting the sluggishness normally
associated with such enormous scale, the company showed tremendous
agility, overcoming vast damage to its stores and unprecedented
destruction to the region's infrastructure, quickly reopening to hand
out truckloads of water and other critical supplies in
hurricane-ravished areas. Aaron F. Broussard, president of New Orleans'
Jefferson Parish, praised the firm in his captivating "Meet the Press?
interview, saying that, if relief efforts ". . . would have responded
like Wal-Mart has responded, we wouldn't be in this crisis.?7
Today, Wal-Mart, Southwest Airlines, and others are reaffirming what
Toyota showed years ago: Sudden shifts or unpredictable conditions need
not undermine a company's ability to efficiently operate. Instead, these
firms continue to thrive despite some of the most severe circumstances,
setting the new standard for value.
Moreover, this ability to sustain steady value underlies what is perhaps
their greatest strength: their ability to innovate. The same flexibility
that lets their operations smoothly adapt to the turmoil around them
also streamlines their introduction of new products or services, making
possible updates or changes that others might deem too costly and
unrealistic. Equally critical is their ability to sustain a low-cost
structure no matter what conditions they face. This helps create a
stable stream of capital to invest in new development—the kind that
offers real value to their customers, inspiring them to buy the
company's products or services in the first place.
These companies came from different industries and businesses; each met
with different barriers and constraints. Yet each had followed much the
same path—letting go of the prevailing methods of management in favor of
something very different. Knowingly or not, they adopted a common
philosophy and a new set of rules.
And each achieved the same result: excellence in the face of crisis.
Going Lean shows how corporations can make the shift from a
system of management that has served America well to one that will serve
it better. It lays out the path paved by those who have succeeded
despite today's harsh conditions and the hazards uncovered by those who
have not. It demonstrates how producers of goods and services alike have
abandoned the tried and true and embraced lean dynamics to achieve the
seemingly impossible.
But it is not simply about applying such cases directly to other
businesses. It is not about chasing anecdotes—a strategy that itself
leads to disruption and crisis. Instead, this book shows how companies
of all sizes—and across disparate industries—are applying their
underlying lessons to achieve sustained excellence.
I began this study by examining an industry steeped in innovation—one
whose continued success has depended on its ability to turn advanced
technology into new products. As I look again at aerospace and then to
other industries I see that even this lead is beginning to decay. What
has worked well in the past is no longer enough; corporations must see
that only in conjunction with a broader management shift can they
preserve the effectiveness of this long-standing advantage.
For managers to succeed, they must begin by rethinking their business
right down to the very goals of their organizations. They must cease
striving for simply lowering costs or improving quality within the
environment in which they prefer to operate. Instead, they must become
broadly effective in creating and sustaining value within the one that
now exists.
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