For several decades, the principles of lean manufacturing have dominated productive industry around assembly lines to ensure maximum profitability.
But in the past several years, the question of lean vs. resiliency has arisen. How lean should a manufacturing operation be? How much inventory and inputs should be kept on hand in order to be prepared for unforeseen circumstances? How much inventory on hand is too much?
the world. Six Sigma and other lean logistics programs have revolutionized the efficiency of factories and The post-COVID world is a very different place now. And the supply chain crisis of 2021-2022 has given us occasion to step back and re-evaluate the place of lean in the current economic reality. Is lean manufacturing still relevant? Does it still make sense?
In the post war years of the 1950s, Japanese manufacturers introduced the concept to the rest of the world that excess is waste and waste is unprofitable. Primarily built on two pillars of automation and Just-In-Time (JIT) manufacturing, lean manufacturing sought to reduce waste (or “muda” in Japanese) to boost efficiency.
As initially laid out by the Toyota Way or model, there are several primary wastes that hurt productivity:
Therefore, by reducing these wastes, eliminating redundancies, and operating with precision and continuous improvement, manufacturers cut out the fat and work on extremely thin margins to meet demand. They receive goods only as they need them for the production process so that nearly 100% of the operation goes to profit making.
There is one little problem with this model that has become more obvious in recent years. And that is that it requires producers to forecast supply and demand accurately to avoid wiping out benefits by minor delays in the supply chain. Lean operations require high levels of predictability in outputs, processes, supply, and demand. And none of these were available in the wake of the COVID crisis.
So, when the recovery began, the companies who kept minimal inventory on hand simply weren’t prepared to scale up. And suddenly, attitudes about lean began to shift.
The need for real-time information, highly integrated digital systems, and inventory reserves to fall back on to keep operations running was excruciatingly obvious. And in the recovery, this was exacerbated further by the inability to deliver both inputs and finished products on time. The rapidly rising demand strained the supply chain to the point of leavings hundreds of container ships drifting in deep water outside of ports.
Just-In-Time manufacturing is profitable only when the materials arrive on time.
In 2022, shippers and manufacturers began holding noticeably more inventory. The reaction was an obvious swing to increasing in-house inventory to be prepared for whatever other problems might arise. This swing was called the “Just-In-Case” approach rather than Just-In-Time. And it caused some to argue that lean manufacturing just might be dead. Perhaps lean had ended and was no longer relevant.
The “management-by-stress” methods were overtaxing workers. The Great Resignation was underway. And manufacturers were looking for answers to meet the challenges of the “new norm.” As a result, inventories rose 7.1% annually from 2019 to 2022, sacrificing efficiency for sustainability and resilience.
The ideas of relying on just one supplier source, receiving parts only as they were going to the assembly floor, producing products only as they were needed, and maintaining supply chains that stretched across the globe no longer looked like such a good idea. And with geopolitical uncertainty in the middle East and eastern Europe, rising fuel costs, and rapidly evolving demand patterns, lean manufacturing has certainly taken a back seat to resilience.
But it’s not out for the count.
Some are arguing that the beauty of lean manufacturing is that its principles allow for an evolution in response to external stimuli or global changes. In spite of the new uncertainty and economy instability which characterizes the world today, it will always make sense to streamline manufacturing logistics.
While nearshoring has clearly won out in the world of manufacturing, and producers are streamlining supply chains by operating and sourcing closer to their target market, modified lean principles can still apply. However, some necessary changes rise to the surface:
Lean companies must embrace and adopt Industry 4.0 digital technologies like AI, Machine Learning, the Industrial Internet of Things (IIoT), cloud computing, and augmented reality.
Manufacturers must transform and evolve to identify and address supply chain problems in real time. They should come together to share updates, analyze changing supply and demand trends, provide perspective, and brainstorm alternate solutions and workarounds.
Relying on a pull-based system can help manufacturers meet actual rather than projected demand. In this way, lean companies can still minimize excess inventory while better understanding customer preferences and needs to be better prepared. Amazon uses this system to better balance inventory with demand.
One of the most powerful lean principles is to partner with others to avoid having to take on what is needed to do everything, yourself. In this way, your company can achieve scalability and efficiency by partnering with a shelter service, contract manufacturer, and other selective and strategic partners.
The world has fundamentally changed. There is no denying that industry and manufacturing must change with it.
Highly strict lean principles may not fit in the new global marketplace, but modified lean principles still remain relevant in reducing wastes and in continuous improvement. By embracing new technologies and logistical efficiency, manufacturers can be prepared to meet the challenges of tomorrow with streamlined and adaptable systems for the future.
