In my last article, I gave credit to lean for generating the savings that helped manufacturers survive the Great Recession, and I stand by it. But now it’s time for the next generation of savings, savings that will dwarf anything we’ve accomplished through lean. To do that, we need a new mindset about savings and where to look for it. It’s time to see our lean savings as small.
There’s a lot to overcome with this new thinking: First, lean savings have been large, larger than anything we’ve ever experienced. It may be difficult to see our biggest savings as small, but that’s not the toughest part. Second, while there is no end to lean savings, the low-hanging fruit has been picked, and we all know it. We till the soil harder, and it yields less. Even so, we can expect a bumper crop of savings even though our soil has been depleted. It’s time to rotate the crops to a field untilled by lean-the product field.
Optimism requires a reasonable possibility of success and insignificant consequences of failure, neither of which seem likely when looking for radical savings. But, let’s dig a little. On consequences, aren’t you the folks who already saved a boatload with lean? Aren’t you the experts, the most capable in your company? If radical savings are not realized, it says little about you and a lot about your company’s approach. For you, the consequences of failure are insignificant.
But a reasonable possibility of success? Seriously? “Mike,” you say, “with our strong focus on process, we’ve worked tirelessly to squeeze out all the waste we know. We’re not optimistic.”
Who said anything about process? Success will come from the product, not the process. Want some optimism? Check out this formula: Savings = material cost x volume x 50 percent.
The entitlement from product-centric savings is half of your material costs-a ridiculously large number. Don’t think it’s big? Run the numbers for your highest volume product. I dare you. After you regain consciousness, run the numbers again, this time for your largest product family. Write the number down on a big sheet of paper, and sit with it. Don’t say anything, just sit. It’s a big number. And it gets better: Your previous lean work has not touched material cost. No lean project has ever reduced material cost-the product has been off-limits to lean. You may have reduced carrying costs by shortening lead times, but not the material cost itself. Which is bigger, carrying costs or material costs? One step closer to optimism.
With the right mindset and tools, product design can reduce material costs by 50 percent. I’ve done it and so have others. The savings are real. With a data-driven understanding of your existing product’s material cost (you can’t design it out unless you know where it is) and an unyielding focus on part count reduction (the material cost for eliminated parts is low), there is more than a reasonable possibility of success. Optimism is warranted.
All the pieces are in place to make it happen: a need for radical savings, an untilled field of material cost to work on, and an established toolset and process (design simplification). But, clearly, since everyone isn’t doing it, there’s something in the way.
That something is our unnatural separation of product and process. The red team, design engineering, is measured on what it does, and the blue team, manufacturing, is measured on how to make it. The recipe for radical savings requires a team we don’t have, a purple team, a team that knows both product and process, a team that treats each other with mutual respect, a team that can change the product to lean out the process.
I’m not sure of the best way to create the purple team or what to call it, but to realize the next generation of radical savings, don’t you think you should figure it out?
Editor’s note: Mike Shipulski is a leading authority on lean manufacturing, product development, and design for manufacturing and assembly. His column will appear every other month, alternating with Austin Weber’s “On Campus.” E-mail Mike with comments via email@example.com or follow his blog at www.shipulski.com.