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V. Rishi Kumar

Shape up with minimum fuss, maximum result. That, in a nutshell, is what business is all about in the digital age.

Rick Jewel

TECHNOLOGY is often termed disruptive as it forces companies to change course. Further, they have to invest in upgrades while changing processes. But large corporations like Toyota have adopted what is now called `lean manufacturing' that streamlines the work process and ensures better management of infrastructure.

Rick Jewel, Vice President, Manufacturing and Supply Chain Execution, Oracle Corporation, explains how lean manufacturing can make a world of difference to small and medium companies in the Asia-Pacific region. Excerpts from a chat:

How does lean manufacturing differ from other enterprise applications?

Lean is an increasingly popular concept pioneered in Japan by Toyota Motor Corporation. It has since been embraced in the US by thousands of firms. Lean manufacturing is more than simply implementing ERP (enterprise resource planning) and/or supply chain systems. This is because real-time data must be used to drive manufacturing, thereby increasing internal efficiencies.

Plant-level systems to manage manufacturing processes are beyond the scope of financially-oriented systems such as ERP or supply chain planning. Manufacturing systems must present current data and information about the entire value stream, regardless of physical location and information barriers across the supply chain.

A lean manufacturing solution must support key practices such as `single-piece flow planning and scheduling' referred to as ikko-nagashi, production-smoothing, heijunka, and feeder line and supplier delivery synchronisation (Just-In-Time) while cutting down wastage.

As a concept, lean manufacturing is relatively new. What are key trends in its adoption and which verticals can benefit from this?

Lean logistics in place internally enables company's extended value chain — enterprise, suppliers and customers — to achieve agility, throughput and efficiencies. Lean manufacturing has been around for some time and has often been sold and embraced as a culture and a process not requiring any technology investments.

So what has changed?

Several things. First, a good deal of the lean approach has made its way into common practice, and is no longer seen as revolutionary. Lean has moved beyond the automotive industry to the broader discrete manufacturing segment.

Second, concepts such as demand-driven production, visibility and inventory replenishment techniques find parallels with supply chain activity over the past few years.

Third, manufacturers are no different from anyone else in their increased comfort level with software solutions that enhance productivity.

Fourth, many of the inquiries arise from the need for solutions that take lean from inside the factory out to the extended enterprise.

Finally, there is growing recognition that software to design, model and operate a lean enterprise is readily available.

Lean management seeks to minimise the resources required for production. It does this by eliminating waste (non-value added activities) that inflates costs, lead times and inventory requirements. It emphasises the use of preventive maintenance, quality improvement programmes, pull systems, and flexible work forces and production facilities. Its goal is to reduce human effort, inventory, time to develop products and use less space to become highly responsive to customer demand while producing top quality products.

How big is the market for lean manufacturing applications? What is the potential in the Asia-Pacific region and in India?

The market potential in the Asia-Pacific is immense. Today larger organisations are realising the benefits of viewing progress across the various stages of the product development cycle and are trying to extend their ERP systems to cover the supply chain as well as automate interfaces with customers. Small and medium enterprises (SMEs) too are realising that they must be more productive and quality-conscious to withstand global competition. Business process automation is hence increasingly seen as a critical success factor.

Organisations are also trying to use the Internet to manage business processes and mid-tier vendors are aggressively expanding the market through extended offerings and added functionalities. As the demand for products such as telephones, TV and PC in India is set to increase, for optimum utilisation and profit, lean-manufacturing solutions could be directed towards these products.

How does this differ from, say, a real time enterprise or on-demand business application?

With lean manufacturing, finished goods are not built to stock. Instead, customer demand pulls them through the system. Work is not performed unless a part is required downstream. Lean systems provide flexibility in production so that any product can be produced in any combination. Customers know they can get what they want, when they want it. Therefore, demand becomes much more stable. You need a system that allows you to mix rate and order-based production.

Today's sophisticated ERP systems enable office-based production planners to monitor and control production and procurement, based on a mix of demand and forecasts, using primarily large-batch runs to gain economies of scale. Combining these philosophies allows lean manufacturers to gain considerable competitive advantage.

What kind of return on investment can enterprises expect from this?

Companies should look at increased user productivity, better financial management, reduction in costs, and better planning and forecasting. Better productivity and improved financial management is achieved through reduction in inventory and lead times at all levels. Reduced IT costs covering software, hardware, consulting, training and maintenance, is possible.

According to a recent survey of 40 companies that adopted lean manufacturing, typical improvements included operational improvements of up to 90 per cent, administrative improvements through reduction in process errors, and streamlining of processes.

Reduced lead time, reduced costs and improved quality provide opportunities for new marketing campaigns, allowing companies to gain market share from competitors that are slower, costlier or of poorer quality.

Potential industry-specific and mission-specific functionality, compatibility with current platforms, and the ability to handle different types of databases and degree of customisation possible are some of the factors that influence the selection of a solution.

vrishi@thehindu.co.in

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