A new study reveals some significant shortcomings in Lean manufacturing and other operational excellence practices, begging the question of whether Lean still works for manufacturing.
Is Lean manufacturing bankrupt?
In some circles, that question stirs a reaction similar to dropping a bank CEO into an Occupy Wall Street demonstration. Proponents of Lean manufacturing and related principles of operational excellence such as Six Sigma are often strident in their belief that the practices deliver significant business advantages. Some take on the sheen of religious fanatics when they promulgate Lean.
What if they’re wrong?
Yes, I’m poking a sacred cow. But you can’t always tell a sacred cow from a sick one unless you look closely. The business process consultants at AlixPartners recently did just that. They turned an empirical eye to the world of operational excellence and Lean manufacturing, polling senior executives on the effectiveness of such efforts. The opening statement of the resulting study might read like blasphemy to some:
Despite significant investments in “lean manufacturing,” “Six Sigma,” and other productivity programs, most large manufacturers failed to reach—or even come close to—their cost savings targets over the last 12 months.
Consider some of the study’s findings. Among the manufacturers AlixPartners surveyed, 47% had hoped to achieve savings in excess of 5% of their manufacturing costs by implementing Lean manufacturing and operational excellence practices. Only 31% actually achieved that mark. Thirty-six percent realized 3%-4% savings, while 19% reduced costs by 2% or less. Fourteen percent couldn’t quantify their results.
Not a rousing endorsement. “Still,” reads the AlixPartners’ report, “despite these poor or unknown returns on investment, more than 90% of executives surveyed considered their programs to be somewhat or very effective, indicating a substantial perception gap in this area.”
For companies in which the operational excellence program did not deliver the expected benefits, 23% of respondents said the culprit was an “inaccurate opportunity analysis.” Which makes me wonder if the original opportunity analyses were swayed by dogma. That is, have the backers of Lean manufacturing and operational excellence so colored our views that we can no longer tell a sacred cow from a sick one?
Apologists will say that the manufacturers who found little benefit in Lean manufacturing came up short not because the philosophy is flawed, but because their execution was. But if failure is such a common result of Lean manufacturing efforts, maybe there’s something wrong with the system. If it works swimmingly on a diagramed process flow but fails in real factories, maybe Lean manufacturing methods aren’t suited to real-world manufacturing. Maybe it’s a bridge too far to expect the principles honed in one industry to apply to all others. Maybe today’s manufacturing reality is too volatile, too fast, for Lean manufacturing to keep up.
What do you think?
(See the Canadian Business Journal for a good analysis of the AlixPartners’ findings.)