Fond of answering questions tongue-in-cheek, Drucker—referred to by his mother-in-law as a “happy-go-lucky Austrian”—would respond to the queries with any number of answers. Once, he told an inquisitor that he simply “looked out the window” and reported what he saw. He gave another interrogator a four-word response: “I listen … to myself.” (According to William Cohen, Ph.D., Drucker’s longtime friend and student, the four words were split in half by a dramatic pause that lasted several seconds).
Perhaps Drucker’s most well-known response, though, about foretelling future events is this one: “The best way to predict the future is to create it.”
On the surface, Drucker’s answer can be construed as flippant. But disciples of his teachings and practitioners of his management concepts note the ingenuity of his retort. Drucker, they claim, recognized that analyzing internal information such as cash flow, liquidity, productivity, competency and resource allocation data yields only a short-term gain. To create long-term gains, companies (or, more precisely, corporate managers) must analyze events that already have taken place and determine how these events will shape the future.
Drucker explained his hypothesis in an article he wrote for the Harvard Business Review when he was 80 years old. In the article, Drucker describes supply chain theory and the ways in which manufacturing fits into that theory, the essential nature of statistical quality control (SQC), and the requisite for Lean accounting.
“By now, everyone with an interest in manufacturing knows that SQC is a rigorous, scientific method of identifying the quality and productivity that can be expected from a given production process in its current form so that control of both attributes can be built into the process itself,” Drucker wrote in his 1990 article, titled “The Emerging Theory of Manufacturing.” “In addition, SQC can instantly spot malfunctions and show where they occur—a worn tool, a dirty spray gun, a overheating furnace. And because it can do this with a small sample, malfunctions are reported almost immediately, allowing machine operators to correct problems in real time. Further, SQC quickly identifies the impact of any change on the performance of the entire process ... Finally, SQC identifies where, and often how, the quality and productivity of the entire process can be continually improved. This used to be called the ‘Shewhart Cycle’ and then the ‘Deming Cycle’; now it is kaizen, the Japanese term for continuous improvement.”
Kaizen is a critical concept in Lean manufacturing, a methodology companies use to eliminate all waste from the production process. Lean principles can help businesses reduce costs, improve product quality, streamline processes and increase customer satisfaction, experts claim.
To achieve a perfect waste-free production process, corporate managers must change their way of thinking. Rather than optimize separate technologies, assets and vertical departments, managers must be willing to supervise the flow of products and services through entire value streams that flow horizontally across technologies, assets and departments to customers, according to a definition of Lean from the Lean Enterprise Institute Inc., a non-profit education, publishing, research and conference organization based in Cambridge, Mass., that develops and tests hypotheses on Lean thinking.
Eliminating waste along entire value streams benefits companies as well as customers. Streamlined processes require fewer workers (which reduces personnel costs), less space, abated capital and less product development time compared with traditional business systems. According to the Institute, companies that adopt Lean thinking can better respond to changing customer needs with high variety, high quality, low costs and speedy throughput times. Lean thinking also can improve communication and the accuracy of analytical data.
Lean Thinking Rooted in History
Waste never has been a popular concept. Efforts to avoid or remove waste—either from a business production cycle or in everyday life—are prevalent throughout history, and the storied tenure of these attempts form much of the basis of Lean thinking.
Most of the basic goals of Lean thinking are common sense (i.e., pursue perfection, define value from the customer’s perspective, avoid excess inventory). Documented examples of the philosophy popped up as early as the 18th century, well before the start of the Industrial Revolution. In 1737, Benjamin Franklin shared some Lean concepts in his yearly periodical Poor Richard’s Almanack, writing “He that idly loses 5 s. worth of time, loses 5 s., and might as prudently throw 5 s. in the River.” Franklin also noted the benefits of avoiding unnecessary costs: “A penny saved is two pence clear. A pin a day is a groat a year. Save and have.”
At the time, Franklin’s Lean ideas were considered little more than the musings of a satirist, printer and budding author. However, his thoughts on excess inventory laid the groundwork for just-in-time manufacturing and eventually, the Toyota Production System (TPS), the methodology that typically is associated with Lean manufacturing.
More than 200 years before the Japanese introduced TPS to the manufacturing world, Franklin had this to say about superfluous inventory: “You call them goods; but if you do not take care, they will prove evils to some of you,” he wrote in 1758 in The Way to Wealth (a summary of his advice from Poor Richard’s Almanack). “You expect they will be sold cheap, and, perhaps, they may [be bought] for less than they cost; but, if you have no occasion for them, they must be dear to you. Remember what Poor Richard’s says, ‘Buy what thou hast no need of, and ere long thou shalt sell thy necessaries’… Many have been ruined by buying good penny worths’.”
Motion efficiency expert Frank Bunker Gilbreth weighed in on Lean thinking in the early 1900s, though his dapple with the concept was quite serendipitous. Working as a bricklayer early in his career, Gilbreth became preoccupied with finding a faster and easier way to do his job—ideally, without having to constantly bend over to pick up 5-pound bricks (a motion he considered inefficient and wasteful). His determination led to the introduction of a non-stooping scaffold that held bricks at waist level and allowed masons to work about three times as quickly, and with less effort.
The modern Lean movement began with Henry Ford, who developed a production system in the early 1900s that focused on high output, continually optimized workflow and elimination of waste.
After World War II, Toyota engineers Taiichi Ohno and Shigeo Shingo expanded upon Ford’s principles and developed TPS. Unlike Ford, who focused on producing millions of Model T cars the same way at dozens of assembly plants worldwide, Ohno and Shingo created a series of production processes that were flexible and quickly could be changed. Those processes produced small batches of various automobile models as needed, but without the overproduction (and waste) associated with Ford’s assembly line system.
Building upon the management approach introduced by Ford and refined by Ohno and Shingo, Lean thinking involves a central mind-set that uses the waste elimination process to create additional value for the customer. Companies that incorporate Lean principles into their processes do more with less (less equipment, less time, less activities, less materials) while providing customers with precisely what they want, when they want it. Such streamlining enables companies to redeploy their resources to value-adding activities, improving both process efficiency and effectiveness.
“Lean manufacturing is about creating a culture toward waste elimination across all aspects of a company,” explained Thomas Ho, operations manager for Inzign Pte Ltd., a Singapore-based contract manufacturer specializing in plastics injection molding and assembly of disposable medical devices. “It embraces a set of tools covering identification of wastes, value streaming and sometimes includes Six Sigma. Lean and Six Sigma programs have evolved over the years from manufacturing applications to virtually operations of all kinds. The challenge has been to identify what tool(s) to adopt and how to apply them effectively for long-term sustainability across different cultural settings.”
Some companies have become more adept than others at addressing such a challenge. Medical device firms have a considerable advantage based upon the continuous improvement philosophies (such as kaizen and total quality management) they have employed for decades to gain a competitive edge. As Lean thinking and Six Sigma programs have evolved, medical device manufacturers have adopted the methodology to best suit their culture, industry experts said.
Boston Scientific Corp., for example, refined the Lean program at its Maple Grove, Minn., manufacturing plant several years ago to halve its lead times, increase stent production by 15 percent and reduce scrap by 15 percent. The Natick, Mass.-based firm accomplished such a feat by creating “islands” of Lean in the production area of the Maple Grove plant, connecting the islands, and then branching those islands out from production to business systems. Using a metric of 40/20/25 (the result of data analysis) and a sense of entitlement, each island was expected to achieve 40 percent space utilization, 20 percent production improvement, and 25 percent lead time improvement.
Boston Scientific also created a concept called “Born Lean” to incorporate Lean thinking in new product development. The initiative placed an industrial engineer on every product development team to ensure Lean thinking would be part of the process.
“Lean Six Sigma has been applied to new product development as industry leaders estimate that over 70 percent of all quality problems are design related and not caused by manufacturing,” noted Becky Stroh, vice president of operations for Smiths Medical, a device manufacturer with North American headquarters in Boston, Mass. “Design for Six Sigma is used to create new product or process designs, while DMAIC [define, measure, analyze, improve, control] is used for projects aimed at improving existing business processes. It is widely believed that companies that employ Design for Six Sigma will do less DMAIC because the product is designed right the first time.”
Such enormous savings have not yet been realized at Smiths Medical, which, compared with GE Healthcare and Boston Scientific, is a relative newcomer to the Land of Lean. Still, strategies the firm has implemented over the last two years has enabled the company to better utilize its space and workforce, improve quality and consolidate its manufacturing sites, Stroh said.
Earlier this year, Smiths Medical presided over the union of its St. Paul, Minn., and Pewaukee, Wis., production facilities. The firm incorporated 29,000 square feet of production from the Wisconsin plant into the St. Paul facility to reduce its global footprint. The Pewaukee plant produced and distributed products sold under Smiths’ BCI and Surgivet brands.
Biomet Inc. used Lean thinking several years ago to better utilize its workforce. After the orthopedic manufacturing firm was acquired by Kohlberg, Kravis, Roberts & Co. in 2007, its new owner implemented Lean initiatives to boost sagging sales and reduce sales force attrition. The company implemented sales force incentive plans to attract more qualified workers and reduce turnaround, and it hired managers with experience in supply chain management and surgeon relations. Cost saving measures included moving products closer to customers, consolidating plant and warehousing operations as well as vendors, and standardizing product launches and new product development.
As a result of its Lean initiatives, sales force attrition was cut in half and fill rates ended fiscal 2008 at more than 95 percent.
Inzign also has begun implementing Lean principles into the company’s production cycle to improve processes and identify problems that easily can be overlooked. The initiative entails defining each employee’s standard of work, creating daily production achievement charts and performing daily reviews to measure accountability, Ho said. The company also uses a visual production board to help employees recognize the everyday issues that can impact their performance.
“The visual production board provides an avenue for the ground crew to surface out day-to-day issues that are hampering their work,” Ho told Medical Product Outsourcing. “This helps us to identify problems that sometimes might be overlooked. With these [initiatives], we are seeing increased employee ownership and a sense of responsibility toward improvement.”
Lean vs. Six Sigma: The Basics
Lean and Six Sigma originated as improvement methodologies for manufacturing processes to help reduce costs associated with product and process defects and variability. The thought process of Lean is thoroughly explained in the 1990 book, The Machine That Changed the World: The Story of Lean Production, by James P. Womack, Daniel Roos and Daniel T. Jones.
In their book, the authors outline five basic principles that companies can use to eliminate waste and clearly identify the value stream for their products. These principles are an integral part of any Lean initiative:
• Specify the value desired by the customer
• Identify all steps in the value stream for each product family and eliminate the steps that do not create value
• Make the product flow continuously through the remaining value-added steps
• Introduce pull between all steps where continuous flow is possible
• Strive for perfection, so that the number of steps and the amount of time and information needed to serve the customer continually falls.
There is no magic switch that companies flip when migrating to Lean techniques. Rather, the process is one of continuous improvement as each value stream is defined and reworked for optimum efficiency and performance.
“Lean is a way of life. It’s not something you adopt for a week or two to solve a problem,” said Dan Faupel, quality control manager at Johnson Matthey San Diego, a business unit of Johnson Matthey Inc., a West Chester, Pa.-based specialty chemicals company that also produces precious metals, alloys and Nitinol for orthopedic, endoscopic, cardiac and neurological devices. “Lean is a continuous improvement process and it needs to be part of the culture that you develop. It’s a culture shift, not something you implement casually a couple of times a year when you think you have a problem. You have to have cooperation from everybody because it’s a continuous effort. It’s like a marriage, it takes work for it to be successful.”
Sometimes, that continuous effort is bolstered by the union of Six Sigma, a scientific-based, problem-solving methodology created by the Motorola Corporation in 1981 to improve product quality. The five-step DMAIC approach is used to better analyze customer requirements and to map, analyze, measure and improve processes in order to deliver 99.9997 percent defect-free products and services, improve cycle time and eliminate non-value added activities. To achieve Six Sigma quality, a process must produce no more than 3.4 defects per million opportunities.
Though Lean and Six Sigma initiatives address similar shortcomings and have synonymous goals, each approach attacks quality and business process issues differently, experts said. Lean, itself, focuses on speed. It emphasizes reducing the amount of time between activities, events, and cycles, and it identifies areas where process waste and bottlenecks can be eliminated.
The Six Sigma methodology is a quality tool that emphasizes reducing the number of errors in a process, industry experts said. It focuses on identifying variation in the types of data inputs, and looks at root cause analysis to determine the source of errors.
“Lean and Six Sigma don’t always go hand in hand,” noted Chris Munroe, engineering director at EPIC Technologies LLC, an electronic manufacturing services provider based in Norwalk, Ohio. “The basic fundamental difference is that Lean manufacturing is a way of doing a process whereas Six Sigma is more of an investigation to identify the root cause of a concern. They are definitely two different approaches. A lot of people use them concurrently. We have Six Sigma black belts within the company that are focused on Lean initiatives. For instance, improving operational efficiency at surface mount assembly—that would be a Lean initiative. We do a lot of Lean initiatives with our black belt group but a true Six Sigma project would be reducing scrap rate on a product that is falling out maybe 2 or 3 percent on a functional task.”
EPIC’s weave of Lean and Six Sigma approaches has helped the company cut setup/changeover times in half, improve its on-time delivery rate and increase its first-pass yield at in-circuit test and function test.
While the Lean and Six Sigma professional communities are not always in accord, accomplishments such as those achieved by EPIC clearly illustrate the benefits of a combined Lean/Six Sigma approach. Together, Lean and Six Sigma work through process mapping to model and automate the most efficient, quality workflows possible, allowing companies to maximize productivity while eliminating waste and reducing costs.
Leaning the Supply Chain
For decades, companies were rather stingy with their Lean and six sigma initiatives—they rarely shared them with outsiders. But today’s global economy and the prevalence of outsourcing (particularly in the medical device industry) has prompted many firms to share their Lean/Six Sigma knowledge and initiatives with suppliers and outsourcing partners. Such generosity can help both organizations improve performance by reducing supply chain errors.
“OEMs will call us and say they have a new Lean program they want to implement and this is how we as a supplier would be involved,” said Chris Craft, production manager at Johnson Matthey San Diego. “On our end, operations are running very, very Lean. We keep our inventory low and we have quick turnaround times. OEMs are usually looking at lead times, so they start a dialogue with us and the end result is hopefully streamlining the processes enough to cut their prices back. We look at our suppliers and do the same thing because we are going to be asked to Lean out everything at that point—both material coming in and goods going out. Vendors jump on board pretty early. When we approach them they say, ‘No problem. What can we do?’ Right now it’s rare to talk to a vendor or a customer and have them not know what [Lean] is or have no [Lean] programs in their organization.”
When those rare occasions do arise, companies easily can rectify the situation by including suppliers in their value stream, Lean experts claim. They also should encourage suppliers to make the Lean transformation. Such moves allow suppliers to help companies fix problems and share in the cost savings. And companies, in turn, can return the favor by helping their supplier set continually declining price targets and improved quality goals.
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Increased global competition has prompted medical device manufacturers to become more customer-centric in their approach to the market. Lean and Six Sigma initiatives can help companies pinpoint inefficiencies and remove wasteful, non-value-added steps that often stand in the way of cost effectiveness, superior product quality and top-notch customer satisfaction. Rapid changes in the market and customer demands for greater product flexibility have prompted an increasing number of firms to broaden the scope and focus of their Lean initiatives to encompass all processes that contribute to the bottom line. Lean thinking is no longer limited to the manufacturing process; it now applies to engineering, research and development, human resources, sales and marketing and finance as well. With Lean thinking, the possibilities truly are endless. As one OEM put it, “You can never totally eliminate waste in a manufacturing operation. There will always be something to look at.”