Toyota made history in April by surpassing GM in sales. Toyota’s success is due in large part to its well-known business philosophy and strategy: the Toyota Production System (TPS). TPS epitomizes a time-proven and successful business strategy, Lean Principles. Interestingly, it is only in recent years that these proven business principles have been adopted in the electronics industry – and the results continue to be as promising there as they have been for Toyota.
Different approaches to Lean
There are nearly as many varieties of Lean Practices as there are organizations practicing Lean. The Lean Enterprise, as envisioned by Toyota post WWII, was a goal to be achieved by maximizing the organization’s assets (especially the workers themselves) while eliminating inefficiencies, and hence waste. Naturally, each organization is inherently different, and so the adaptation of Lean will also vary, but each can be grossly categorized as either a short- or long-term strategy. Both short- and long-term strategies are based on the implementation of more efficient processes and communication across the enterprise.
Short-term: most frequently seen as a management strategy to engage in savings and cost cutting practices. In this case, Lean is understood as ‘trim’ wherein the removal of excess and waste is the primary (and in some cases the sole) purpose of adopting Lean Principles. An obvious target within the electronics industry is excess inventory and problems along the supply chain that lead to inventory misalignments.
Long-term: a philosophical and strategic approach to achieving a Lean Enterprise that is embraced first by top management and passed through all levels and individuals in the organization. There is an understanding that the goal is one of gradual but continuous improvement that seeks to maximize organizational knowledge leading to the development of an efficient and transparent value chain. While there may be a short-term component, the end result is broader in scope. A Lean Enterprise realizes significant improvements in worker and management morale, increased efficiency and productivity, lower costs and inventory holdings, and increased agility and flexibility. These enhancements lead to greater customer satisfaction and significant increases in profitability.
Obstacles to Achieving the Zen of Lean
Time: Perhaps the most difficult aspect of a successful implementation of Lean Practices is the amount of time necessary to develop the efficient practices and strategies that move the organization toward the Lean goals. In the end, both short- and long-term Lean Practices reap considerable rewards for those who have committed to change.
A means to overcome the hurdle of time is to consider a company’s value chain and engage those individuals from across the entire chain to assist in reviewing and implementing more efficient and profitable practices.
Forecasting: Another obstacle is the inherent set of uncertainties involved in forecasting. Having business plans and strategies in place to deal with inventory misalignments is critical to the electronics industry. While the goal of Lean Manufacturing is to have a batch of one (i.e., manufacturing one unit at a time), that is not the reality for the electronics manufacturer.
Transparency throughout the value chain with seamless communication channels to increase agility and efficiency will enable the successful solution to inventory problems.
Organizational Buy-In: The third obstacle is the most critical to achieving short- and/or long-term Lean goals. Lean Principles are based on the idea that each individual has the ability and knowledge to add valuable insight into eliminating process inefficiencies. In the end, the means for achieving true Lean Zen is an internal process, but what is internal need not be delimited by a company’s borders. Today’s value chains necessarily extend from the end customer to the component suppliers to the design engineers, and everyone has something to offer.
In order for the organization to reach its goals, there must be harmonious and far reaching acceptance and adoption. The most successful means for arriving at this Zen state is from the top of the organization down.
A Path to Lean
Companies throughout the electronics industry are adopting Lean Principles and Practices to realize some or all of the following business goals:
- Maximizing efficiency and profitability
- Eliminating waste
- Lowering costs
- Improving customer satisfaction
- Reducing inventory
- Streamlining supply chain management
Of the 250 electronics manufacturing companies recently surveyed by Technology Forecasters Inc. and Electronics Supply & Manufacturing, some have achieved improvements more quickly than others. The majority have realized “net profit margins greater than 5 percent [… and] an ROI greater than 10 percent” (http://www.my-esm.com/showArticle?articleID=198700644).
As OEMs are also increasingly looking to maximize profitability and increase value to their customers, Lean Principles and Practices are being adopted. Lean Practices include careful evaluations of the supply chain, both inside and outside the organization.
The Lean Enterprise today does not have company boundaries; all of the organizations along a supply chain and value chain are engaged in joint Lean implementations to achieve the desired results.
There are as many paths to the Lean Enterprise as there are enterprises that embrace the Lean business philosophy and strategy. Today, electronics manufacturers throughout the global marketplace realize that a critical element in their ability to eliminate waste and increase productivity and profits is through the adoption and implementation of Lean Principles and Practices. Recognizing that joint Lean implementations maximize knowledge and encourage the development of efficient processes is also recognition of the importance of the entire value chain in today’s competitive arenas.
Lean in Practice: Smith On-Site Purchasing Support
Not all organizations are positioned to engage in process change uniformly across their entire company or business unit. Most focus on activities where they will get the most impact from implementing Lean Practices. Supply chain partners can be the key to achieving gains in areas that do not receive as much attention on the change agenda.
In manufacturing, efficient and knowledgeable purchasing is extremely important. Electronics manufacturers have long used the open market as part of the purchasing strategy to fill shortages of critical parts, to achieve cost savings, and to trim excess inventory. Since open market procurement is not the primary activity for most manufacturers, many are working with Smith & Associates as their exclusive open market partner rather than develop the expertise internally. Engaging individuals from across the value chain through programs such as On-Site enables manufacturers to access considerable expertise immediately, thereby overcoming the hurdle of time and quickly realizing efficient procurement.
Smith On-Site Purchasing
One means to achieve Lean open market access is to bring Smith’s expertise in-house. Some of the ingredients to successful open market dealings include:
- Screening and maintaining a database of thousands of vendors
- Monitoring ongoing performance
- Quality control and inspection of parts procured in the open market
- 24/7 access to a global network of suppliers and potential buyers for excess inventory
- Immediate access to commodity experts to follow supply and pricing trends
Bringing Smith’s open market expertise to a client site achieves a greater understanding of the client’s unique requirements and purchasing processes. By becoming a member of the purchasing team, the Smith representative can also identify opportunities that might otherwise be overlooked. Some benefits of On-Site support include:
- Earlier visibility to potential shortages of critical components
- Intimate knowledge of packaging requirements, date code restrictions, and allowable alternates
- Identifying opportunities to source high volume, high dollar parts from alternate sources to reduce cost
- Ability to proactively trim inventory levels when excess positions develop or when favorable pricing is available in the open market for parts that can be replaced within normal lead times
The On-Site Purchasing Program is suitable for companies whose products involve a low-volume, high-mix collection of components or who seek to limit their vendors and thus leverage Smith as a single point for sourcing from numerous vendors. On-Site purchasing agents can also be used by high volume open market users seeking to repair and upgrade units. An On-Site open market expert, with the world wide resources of Smith at their fingertips, can assist the purchasing team in lowering inventory carrying costs while enabling other purchasing agents to focus on primary suppliers and initiatives to create a leaner supply chain.
If you are interested in exploring the Zen of Lean you can contact Gary Morrissey, Vice President of Business Development, at 713-430-3960 or
. Gary can help identify ways that you can use the On-Site Purchasing Program or other Smith resources to achieve your sourcing or inventory management objectives.