Lean positioned for cost cutting vs. customer-driven change. This is also a critical mistake many manufacturers make, and often becomes the main focus these companies continue to pursue, as opportunities to better integrate their strategies with customers, suppliers, buyers, and service organizations present themselves.

Evolution of the Lean Enterprise

Manufacturers have continually struggled to gain the advantages of lean manufacturing, starting first with manufacturing processes at the shop floor level and progressing to a vision of implementing an entire lean enterprise. What's become essential in the pursuit of the lean enterprise are the creation of strategies for driving waste of all types (time, logistics, costs) out of the enterprise. Table 1, Characteristics of a Lean Production System, show the specific lean production processes and accompanying system change initiatives, an analysis based on the research completed by the MIT Lean Aerospace Initiative, which has applicability to the auto industry as well.

Characteristics of a Lean Production System,

Lean Production Process

System Change Initiative

Focus

Production line (tasks, activities, and cells)

Single organization (departments, processes, suppliers, and customers)

Practices

Cellular manufacturing, quality circles, supplier relationship management, pull production, reengineering setups.

TQM, JIT, Six Sigma and, process reengineering

Performance

Measurement

Systems

Takt time, on time delivery, first time through safety performance production rate

Visibility - real-time reporting and the use of analytics to track the entire value chains' performance

Casual relationships (production tasks and activities)

Use of single version of the truth and single information reporting

Quality, delivery, process time, cost, flexibility, customer satisfaction

Balanced set of strategic metrics (financial and non-financial)

New methods of cost accounting (ABC, target costing) down communication

Internal vs. external focus (benchmarking and self-assessment)

Process management and measures (value delivery)

Source: (Bennett 2003)

Table 2, Comparing Lean Production and Lean Enterprise Characteristics, illustrates the many differences in focus, practices, metrics, and performance measurement systems. The shift required in manufacturing companies to achieve this level of performance needs to start with the recommendations at the end and continually build upon insights gained from the survey contained within this paper.

Comparing Lean Production and Lean Enterprise Characteristics,

Lean Production Process

System Change Initiative

The Lean Enterprise

Focus

Production line (tasks, activities, and cells)

Single organization (departments, processes, suppliers, and customers)

Extended enterprise (value streams and all stakeholders)

Practices

Cellular manufacturing, quality circles, supplier relationship management, pull production, reengineering setups

TQM, JIT, Six Sigma and, process reengineering

Seamless information flow, integrated product and process development, process capability and maturation, identify and optimize enterprise flow, maintain stability in changing environment, align and involve all stakeholders to achieve lean vision, relationship based on mutual trust and commitment across the extended enterprise, make decisions at the lowest levels, optimize capability and utilization of people, focus on external and internal environment, nurture a learning environment

Metrics

Takt time, on time delivery, first time through, safety performance, production rate

Quality, delivery, process time, cost, flexibility, customer satisfaction

Stakeholder value (effectiveness), overall efficiency, system availability, system level flexibility

Performance

Measurement System

Visibility - real-time reporting

Casual relationships (production tasks and activities)

Use of single version of the truth and single information

Balanced set of strategic metrics (financial and nonfinancial)

New methods of cost accounting (ABC, target costing)

-down communication

Process management and measures (value delivery)

Stakeholder value measures

Uniform set of measures

Casual relationships between measures across all levels

Source: (Bennett 2003)

Framework for Evaluating Lean Process Maturity

Based on the collective work completed at the Massachusetts Institute of Technology (MIT) Center for Transportation and Logistics relating to manufacturers and the theoretical frameworks developed by the MIT Lean Aerospace Initiative the following benchmarking framework has been created. The 18 life-cycle lean processes (Bennett 2003) measured in this benchmarking instrument include the following:

Business Acquisition and Program Management

Leverage lean capability for business growth

Optimize the capability and utilization of assets

Provide capability to manage risk, cost, schedule, and performance

Resource and empower program development efforts

Requirements Definition

Establish a requirements definition process to optimize life-cycle value

Utilize data from the extended enterprise to optimize future requirement definitions

Develop Product and Process

Incorporate customer value into design of products and processes

Incorporate downstream stakeholder values into products and processes

Integrate product and process development

Supply Chain Management

Define and develop supplier network

Optimize network-wide performance

Foster innovation...

It is not enough to simply look at a binary, either/or condition for each factor. It is rather the level of maturity on each of these 18 attributes that determines an organizations' potential for attaining best practices as a lean enterprise. Using a four-point scale applied to each of these factors yields a self-scoring questionnaire which is shown in the following table. Giving just one answer for each of the 18 factors, calculate a given process's lean enterprise performance with an organization of interest. The development of aggregate scores by each specific area will define the level of process maturity as defined by their lean characteristics.
After having scored an organization and its processes on its lean initiatives, use the following table to define where an organization is on the Lean Enterprise Maturity Model:

Score

Level in the Lean Enterprise Maturity Model

Orchestrating - Where an organization has a very high level of cross-department and division collaboration and often has a corporate-wide edict that forces lean enterprise principles deep into the organization.

Collaborating - a series of process -- and it-based infrastructures exist to ensure cross-department and cross-divisional collaboration.

Anticipating level - Marked with in-division collaboration only.

Isolated approach to lean - Heavily influenced by silos

The following graphical representation of the Lean Enterprise Maturity Model illustrates how each level of maturity varies by Process Maturity and Information Maturity. This graphical concept of a maturity model was originally proposed by AMR Research in the definition of Demand Driven Supply Networks (DDSN) maturity levels, and has direct applicability to lean enterprises' levels of lean manufacturing maturity. Both process and information maturity is measured, progressing from being purely reactive from a process standpoint through creating processes through anticipating departmental requirements, through collaborating to orchestrating processes to attain level process best practices.

Recommendations for driving Lean Process Transformation

In the studies referenced implementing lean manufacturing strategies for automotive refurbishment suppliers the following key recommendations emerge:

Greater system-level integration with downstream stakeholder values and greater visibility into customer demands. Relating back to the discussion at the beginning of this paper how the highest performing manufacturers are able to eliminate several types of waste while concentrating on delivering exceptional value to their customers is a key success factor in attaining lean manufacturing strategies. Using the 18 attribute lean manufacturing framework to evaluate an organization can serve as the catalyst for further diagnosing of processes' areas of strengths and weaknesses.

Delivering greater process standardization and greater cross-functional communication eliminates wasted time, duplicated processes, and lost opportunities to better serve customers. In several of the case studies that MIT and others have cited as examples of best practices in lean enterprises, the senior management teams worked to tear down the silos between departments by actively encouraging and rewarding cross-department and cross-division collaboration. The greater the level of integration between functions and processes, the greater the reduction of waste in over-processing, waiting, transport, processing, inventory carrying costs, in addition to defects & spoilage (Monroe 2006).

Integrate and reward lean initiatives success and include them in both strategic planning and production systems planning. The automotive manufacturers and automotive refurbishment companies gaining the greatest competitive advantage through their efforts to become lean enterprises have started first with smaller projects and then progressed to enterprise-wide ones once the payoff has become clear.

Integration of environmental protection, compliance, health and safety systems corporate wide. Clearly the need for mitigating the significant costs of compliance as they relate to the use and disposal of chemicals and raw materials used in the production of complex products are many manufacturers' most critical concern, and this area of automotive manufacturing is gaining in importance as governance, risk and compliance (GRC) continues to gain in prominence as a strategic initiative within organizations. The development of lean initiatives that include GRC components have increasingly been developed as a result of global compliance requirements as well. The intersection of GRC and lean process workflows has also contributed to exponential growth in Business Process Management (BPM) and Business Process Re-engineering (BPR) as well. Continually pursuing best practices through the use of BPM and BPR techniques also generates a more accumulated knowledge within the organization as well. In short, this contributes to a much greater level of collaboration over the long-term, especially when manufacturers, suppliers, buyers and distribution channel partners are involved in the re-vamping of BPM-based workflows.

Allow the customer to have a seat at the development table. MIT found that the highest performing lean enterprises re-define their product development processes to support the inclusion of customers in the actual development environment. This has increased…