A recent article in the Lake Forester, a small newspaper based north of Chicago, was surprisingly accurate with regards to certain core aspects of lean manufacturing. I'd like to give credit to the author, however there was no by-line.
For 100 years, manufacturing companies adhered to this mass production philosophy. Factories made products in bigger and bigger lot sizes. Workers became more specialized as the manufacturing engineers worked to standardize products to reduce costs and improve manufacturability. Products that ranged from automobiles to pharmaceuticals were manufactured in long production runs and the output was distributed in sophisticated supply lines that were designed to reach the ultimate customer. The distribution systems needed large warehouses to store finished goods while they waited for the customers to buy them.
In spite of the investment in these large plants and warehouses, this philosophy of manufacturing products in large lots began to change in the last 30 years. Pioneers in global manufacturing methods challenged this standardized, assembly line approach.
The author then brings that concept home by... bringing it home.
On a personal level, this idea really hit home recently when my wife and I geared up to make a batch of our chocolate chip cookies for a neighborhood get-together. We assembled the ingredients needed to make all 10 dozen cookies in one giant batch. This included bags of chips, blocks of butter, and several big sacks of flour. Everything was carefully measured into our biggest steel mixing bowl as we manufactured a giant batch of cookie dough.
After the first cookie sheet came out of the oven, we realized something was wrong. The canister of salt got mixed up with the canister of sugar. When we taste tested our first cookie, we found that we had manufactured a huge batch of cookie dough that included three cups of iodized salt rather than three cups of granulated sugar. We had to start over when we recognized the error. As we dumped this big batch of cookie dough, my wife remarked, "Too bad we didn't make only enough dough for the first dozen. We would have caught the error sooner."
He (yes, we can now infer the author is a "he" unless they're in a handful of states) has just done a great job of explaining one of the most counter-intuitive aspects of lean manufacturing: why smaller and smaller lots are more efficient than large lots. The hidden cost of risk.
The author then gets to his article's primary premise: that Dell is a great example of why small lots work.
Michael Dell built a company on this philosophy of small lot manufacturing. In the process, he taught a world-class manufacturing company like IBM, by example, how to build computers. The idea is simple enough. Instead of making 100,000 identical personal computers on an assembly line and storing them in inventory while they wait for customers, Dell decided to design a system which would make one computer at a time and only make that particular computer when a specific customer ordered it.
And further explains the benefits.
Building computers one at a time means that there is no costly inventory of finished computers waiting for customers in a warehouse somewhere.
Small lot manufacturing also means that quality problems are caught quickly, as it would have been in my salty cookie experience. In a more agile manufacturing system and there is a built in ability to improve the system and lower costs on the fly.
Essential elements of such well known systems as the Toyota Production Process, Six Sigma Manufacturing, Cellular Manufacturing, and Lean Manufacturing are based on small lot, build to order systems. The customers see better quality, lower costs, and more responsive tailored products that are available more quickly.
Ah, but alas. Dell missed the one critical aspect of lean: respect for people. Without the people side of lean, they could not evolve rapidly. By not evolving, they eventually found themselves in an unfavorable cost position compared to their competitors. Without understanding that second pillar of lean, their cost reduction efforts are focusing on closing plants and shedding people, and even outsourcing manufacturing. Why is why last month we took Dell to task.
Let's dispel once and for all the hubris that "Dell practically invented lean manufacturing." Nothing could be further from the truth... both in terms of what company invented lean and in Dell being lean to begin with. But without the core competency of supply chain management (note I did not say "manufacturing") that Dell did excel at, what is Dell?
Indeed. Which could explained why I now drive a Mac.