To begin with a clear goal was set to implement Lean as a culture in order to be competitive within custom-made lighting solutions.
Strong support from the beginning
To start off with there was a need to raise the knowledge of Lean - and therefore everyone was involved: all leaders, the sales team, development, the administration and production. The enhanced knowledge served as the right foundation for identifying more new improvement areas and as a means to reaching the goals. The company's structure for working with improvements was revised, and the leadership group managed to free up time to concentrate on larger improvements. The added level of responsibility with the employees got the ball rolling - many, really many smaller yet still annoying problems were solved - problems that people had just lived with for a long time. The early success lead to strong support from all areas of the business as they were quick to experience the results of their own and others' efforts. The departments were in charge themselves of their own improvements and by measuring the effects they could track progress towards the goals.
Reduction of inventory and lead time
One of the company's largest challenges was to reduce the level of inventory, both for raw materials and work in process. In certain instances there was too much stock, leading to added handling, a risk of damaging parts and incurring extra costs. In other cases there was too little in stock and a risk of prolonging the lead time due to the need for a replenishment of components from suppliers.
In order to get to the root of the problems there was an intense effort with tidyness, auditing each and every department. By using 5S as well as a change of layout and stock locations, a significant tightening-up was achieved. Precise rules for stock levels and reordering using kanban were agreed upon - all along managing to maintain a calculated balance between the level of inventory and delivery efficiency for electrical components, consumables and metal profiles. This lead to a greater appreciation of which items were truly special and which would probably be used in future orders - because the term "standard order" does not exist in the company's dictionary.
- The average lead time was reduced to less than 30 days: for a twelve month period to 13.9 days, and for the last 6 months to 9 days - less than a third of the original lead time.
- Orders that still have a lead time of over 30 days have been reduced in numbers by 50% over the course of the last 6 months. Where it still happens today, it is identified in advance, and expectations can be aligned with the customers from the start.
- A significant reduction in the inventory level for both raw materials and work in process lead to a vast improvement in cashflow to the business.
Increase in productivity and reduction of mistakes
When it was to be investigated which mistakes had the largest impact some curious nuances turned up. To begin with there was a perception of quality problems at some of the customers of the company - this was based largely on misunderstandings and different terminology was used by the customers, the sales team and in production. This often lead to delays and in certain instances to finished solutions not meeting customers' requirements at the time of delivery.
A thorough investigation of the causes was carried out and the result was a common terminology for task descriptions and methods were put in place to better understnad the customers' terminology in the sales process. In addition, the internal quality systems was improved and focus was raised on specific internal mistakes which had an impact on the appearance of products and on costs. At the same time demands were placed on the supply chain so that to a larger extent mistakes are now caught before arriving at the company.
As part of the work with mistake-proofing, a series of processes in production were analysed and the extent of manual handling was reduced as sources of error were erradicated.
- The contribution to the bottom line per person was increased by 42% for the period July-December as compared with the previous six month period
- Productivity per person grew by 20% over 6 months
- The sales have risen by 28% from first til last half year period
- 44% of mistakes pertaining to the appearance of items were identified as originating from suppliers, leading to a drastic reduction of costs to the company.
To enhance productivity, reduce the average lead time to under 30 days, halve the number of customer complaints and reduce internal mistakes as well as reaching a more appropriate inventory level. A stretch-goal was set to increase productivity by 100%, a goal that still exists in the company.
The participants experienced a very practical Lean improvement process in which the company's goals were in focus while the individual participant obtained a certification in Lean under the Australian Quality Training Framework. The company detailed the goals and chose to work with selected Lean methods that supported the goals: flow and just-in-time system, 5S, mistake-proofing, cost reducton, managing workplace learning via TWI, methods to maintain continuous improvements and use of the right KPI's and measurements.
The lead time was cut to an average of 9 days, less than a third of the original value, internal mistakes were reduced and 44% of nuance-based mistakes were identified to come from suppliers and are now removed. At the same time, productivity has risen by 20% and sales by 28%.
The electronics company is based in Australia and produces custom-made high-tech lighting solutions.