By Ken Koenemann
Over the past several months we have seen much written about the difficult economic times and the focus on becoming "green." While Lean continues to focus on the relentless pursuit of waste, several new tools have been added to the Lean toolkit to help improve energy footprints and free up working capital. A third key recent focus area of Lean implementation is applying these concepts across the value chain.
Energy Kaizen Events Really Pay Off
Certainly, widespread societal demand exists for energy conservation to preserve the environment, but manufacturing leaders know that energy reduction also is crucial to their companies' long-term survival. By ignoring the call to conserve energy, manufacturers risk losing the gains reaped from years of LeanSigma and other continuous-improvement efforts. Energy is essential for goods production, but compared with other widely consumed raw materials, energy has become one of the costliest and most volatile. Therefore, stabilizing energy-consuming processes and removing as much waste as possible become the mandate to remain a globally competitive manufacturer.
By applying Lean activities to energy use, an average facility can reduce its energy consumption by up to 20 percent, of which 30 percent can be achieved by making procedural and behavioral changes. Manufacturers such as agribusiness, food and beverage, paper and packaging, and other continuous process industries can potentially double these reductions because their processes operate around the clock and tend to be more energy intensive. For example, one continuous-process manufacturer working to cut energy consumption achieved a minimum 10 percent reduction with each process change.
Manufacturers that reduce energy usage do more than lower their utility bills. A focus on reducing energy consumption:
- Creates a reputation of social responsibility locally and globally, which makes a company's products more attractive to customers;
- Makes a more attractive partner to new and existing customers that have environmental-sustainability mandates for suppliers; and,
- Ensures compliance with current or future government regulations or industry guidelines regarding energy consumption and/or carbon emissions.
Develop Service Strategies Based on Demand Segmentation
Demand segmentation is a tool that has recently become a key component of Lean implementations. Most approaches to production planning treat all products the same. By analyzing and segmenting products, a company can optimize planning, control and manufacturing. Plotting the volume and variability for each product segment can lead to more predictable and responsive production processes, while reducing inventory at the same time. Demand segmentation will determine, for example, if a product should be made using a "pull" system, if it should only be produced on a made-to-order basis, or even if it should be discontinued altogether.
A demand segmentation initiative will look at production volumes, historic inventory levels, shipment records and point-of-sale data if they are available. Simply overlaying these data on a graph can make it obvious for everyone to see how promotions, seasonality and other market factors influence demand and production processes. Once these influences are understood and changes are implemented, companies should expect up to 30 percent improvements in inventory and 10 percent or greater improvements in operating margin from addressing under-performing products.
Create Competitive Advantage by Implementing LeanSigma across the Value Chain
Traditionally, manufacturers have started their Lean implementations on the factory floor. Some may then use Lean on their business processes. Few work on the links in their value chains that touch customers, distributors and suppliers because such work can be complicated, risky and difficult to tackle. Developing a Lean value chain means addressing four key links: demand management, order fulfillment, business planning and scheduling, and supply management.