Lean Sigma yields more than just cost reductions.

When looking at cheap labor rates in China and other offshore locations, some people assume that American manufacturing has a limited lifespan. However, labor is simply one aspect of the cost associated with the production process. Domestic manufacturing operations that focus on eliminating waste and meeting market demand can create a sustainable competitive advantage.

Preco Electronics Inc. is an electronics manufacturing services provider that serves midsized original equipment manufacturers. It offers a full array of printed circuit board assembly capabilities ranging from rapid prototyping to full production.

Preco Electronics grew 20 percent in 2003, during a time when many domestic electronic manufacturers were moving offshore. The company attributes this growth to a solid business foundation based on the principles of Lean Sigma, a process for implementing lean manufacturing and Six Sigma in a single, coordinated effort.

The company's first step along its continuous improvement journey was implementation of lean philosophies using kaizen events. Kaizen is a Japanese term that describes self-improvement in the workplace. It is a proactive philosophy that focuses on rapid improvement, concentrating on single areas or processes-one at a time.

First, top management identifies work areas and production processes that need to be improved. Then, kaizen events gather together a cross-functional team that analyzes how things are done and questions why each step of the process is performed. The goal of a kaizen event is to eliminate any tasks from the assembly process that do not add value.

Kaizen events typically last 3 to 5 days, and result in improvements and cost reductions. Typical events yield positive results for processes such as setups, product travel, equipment downtime, redundant activities, work-in-process inventory, and material replenishment cycles. Improvements usually include increases in plant capacity, as well as a reduction in the amount of floor space needed to assemble products.

Kaizen teams are led by a coordinator who is experienced in various aspects of the company's processes and has a passion for efficiency. The primary objective of the coordinator is to help the team define the existing process in detail and then analyze "why" in each step. The coordinator guides the team toward improving product travel and flow, workstation layout, tooling usage and other waste reduction techniques. Because one of the goals of a kaizen event is to implement change quickly, extensive data collection is discouraged.

Kaizen events at Preco Electronics yielded significant improvements over the first three years of implementation. However, a higher level of analysis was required to move to the next level of cost reduction.

Beyond Kaizen

Preco Electronics found it necessary to add the principles of Six Sigma to its kaizen events. Because it is driven by data, Six Sigma demands more discipline than the kaizen process. The events become larger projects, with the duration of the teams' activities stretching months rather than days. The goal of Six Sigma is to reduce variation of the process instead of simply eliminating waste.

The difference in the goals of each team changes the mix of members and their roles. Lean Sigma requires an understanding of statistical tools to analyze the available data. Therefore, this requirement typically reduces the involvement of many members from the factory floor.

Lean Sigma leaders require a higher level of training. Typically, a kaizen coordinator will evolve into a Lean Sigma black belt. All black belts participate in a rigorous 4-week training program, learning to use statistical tools and new ways to lead a team.

After team members complete their first project, they are identified as green belts. They typically perform the majority of the tasks during a project, while black belts offer assistance. The teams are responsible for measuring, analyzing, improving, and controlling key processes that affect customer satisfaction and production efficiency.

This two-pronged approach to long-range continuous improvement has enabled Preco Electronics to respond more quickly to its customers' needs. In addition to being more cost-effective, this has increased quality levels, delivery times and overall customer satisfaction.

While all of the team activity was occurring, there was some resistance to the changes stemming from the continuous improvement process. Over time, it became apparent that it was not the workforce that was resistant to the changes; it was the process used to sustain the improvement. The pressures of everyday manufacturing deadlines often make it easy for individuals and managers to revert to their previous behaviors and processes.

At this point in its lean journey, Preco Electronics began to implement the 5S principles-a methodology for organizing, cleaning, developing and sustaining a productive work environment. These principles are also known as the five pillars of the visual workplace.

The focus on improvement concentrates on waste, nonvalue-added actions, speed and cycle-time, standardization, inventory performance, logistical cost reduction, and variance reduction. These are all concepts addressed in kaizen and Lean Sigma, but in 5S, these principles are reinforced daily and not just during specific events or projects.

Many experts claim that this is the most important step for productivity improvement. The five pillars are the foundation upon which a company can build its lean initiative, and therefore, maximize the effectiveness of its physical factory environment. This allows each individual on the factory floor to work at his or her greatest potential, while supporting the key initiatives of improvement.

Cost-Effective Results

During the first year of the implementation of the 5S program at Preco Electronics, the following results were achieved:

  • Work-in-process was reduced by 60 percent.
  • Cycle time was reduced by 70 percent.
  • Changeover times were reduced by 40 percent.
  • Surface-mount technology output was improved by 42 percent.
  • Output per employee was improved by 11 percent.
  • Schedule adherence was improved by 60 percent.
  • 4,000 square feet of manufacturing floor space was freed up for future customers and projects.
The continuous improvement process (CIP) at Preco Electronics provides recognition and opportunities for employees to implement changes that improve their ability to work more efficiently and productively. It defines the process for selecting projects for improvement, initiates actions to implement change, and provides recognition to the employees responsible.

When employees have suggestions for improvement, they review their ideas with their supervisors and complete a CIP form documenting the project scope. The employee then implements the improvement.

At the completion of the project, the supervisor signs off on the CIP form, noting project scope, staff involved in the project, and the estimated cost or time savings. A completed form indicates the project is done, and the individual becomes eligible for a monthly random drawing for gift certificates from local merchants.

Once a lean program is implemented, it is management's responsibility to understand and recognize common resistance to the program. Rather than blame any resistance on employees, management must look inward at the system that sustains the culture and communicate why change is necessary. Above all, management must support an environment where people can take risks and fail, while alleviating the cost impact of these failures.

By encouraging assemblers to use their training to take action, a solidly cultivated foundation is built and will continue to be strongly preserved. It is critical to maintain a system and sustain the process of continuous incremental improvement.

One-time kaizen events alone would not have yielded the results achieved by Preco Electronics. Adding Six Sigma disciplines to the program has enabled teams to successfully handle more complex issues. In addition, implementing 5S concepts has created a corporate culture where individuals are encouraged and rewarded for continually identifying and eliminating waste.

This culture has enabled Preco Electronics to provide significant value-and sustainable competitive advantages-for its customers through process improvements. Cost reduction becomes a natural output of the process, rather than an artificial target set once a year which may or may not be achievable.

The Five Pillars of Lean Manufacturing

Five related terms, called the Five S's, are used to describe workplace practices conducive to visual control and lean production. Preco Electronics defines them as:

  • Sort-refers to the removal of surplus materials, tools, equipment and furniture from the work space. The main guideline for analyzing the work space is frequency of use. The key principle in the analysis of production materials is based on whether the item will "remain resting in place" or will be "moving." The objective is to keep materials consistently moving as work in process. Typically, this step results in improved communication between workers, better production flow and less floor space. During the initial sort process at Preco Electronics, more than 800 unused items were removed from the production floor.
  • Set in order-identifies a goal in the arrangement, placement and sequence of items remaining after the sort process. Although most production lines are highly structured, additional work is required to adjust the arrangement of materials and tools used to perform specific operations. Set in order also considers the number of materials in the workplace and uses various methods to improve visual neatness. This results in the reduction of inventory levels, as well as elimination of waste, on the plant floor.
  • Shine-refers to the guideline of keeping the workplace clean and orderly. This is best accomplished by identifying the tasks to be performed, the tools needed to perform the task, and the assignment of personnel to do the task. To accomplish this, a 5S job cycle chart must be developed. It should include the 5S task and the frequency the task is to be performed. This creates pride of ownership among the individual workers and creates a safer work environment. It also reduces defects in finished goods and reduces equipment downtime.
  • Standardized cleanup-refers to a standardized process for maintaining sort, set in order and shine. The main objectives include committing 5 minutes daily-at the end of each shift-for 5S cleanup; employing measures that prevent excess inventory and unwanted items in the work area; and creating a work environment that incorporates in-process cleaning and avoids cleaning as a separate activity. Production managers should engage in 5S discussions with their employees at least once per week.
  • Sustain-directed at the follow-up appraisal of the entire system. One of the best methods for sustaining the 5S principles in the workplace is a site audit. All findings are recorded in a 5S standardized checklist, which includes a ranking and scoring system to judge the effectiveness of the program. Each production team performs a self-audit on a weekly or biweekly basis. A 5S patrol, comprised of three individuals from each production team, plus their team leader, is formed. They make regularly scheduled visits to other production areas within the facility and audit the 5S standardized checklists of the other teams.