This article was published on 4 March 2020
Nearly 70 years after it was pioneered in the car manufacturing plants of Toyota, the Lean business methodology is helping businesses all over the world continuously improve what they do and identify the value they can offer their customers.
By Robert Blache and Jonathan Miller
At a glance
It started in manufacturing, but the Lean approach is now applied in everything from software development to retailing. Callaghan Innovation’s Lean workshops, which help New Zealand businesses understand the Lean methodology and how to apply it to their business processes, have regularly been oversubscribed.
Many of those participants are applying Lean principles to great effect. But they now face a new opportunity - and a challenge. A range of technologies that come under the Industry 4.0 banner, from IoT sensors and robotics, to the application of AI and automated processing systems, promise to transform business processes.
The New Zealand IoT Alliance estimates that improved use of IoT systems could create at least $2.2 billion in net economic benefit for New Zealand over the next 10 years. The Government’s Business Advisory Council has recommended embracing automation to address New Zealand’s relatively low productivity, particularly in the manufacturing sector.
Love the problem, not the solution
Ultimately, any business considering adopting these technologies needs to proceed with caution. The old saying ‘love the problem, not the solution’ is more relevant than ever. It is easy to become enamoured with new technology. But there are plenty of examples of companies combining the Lean approach with these new technologies to not only greatly improve their processes but develop new business models as well.
Take the example of SKF, the Swedish company that is the world’s largest manufacturer of bearings. SKF has been making bearings for over one hundred years. But a decade ago it began experimenting with putting sensors in its bearings to monitor their health and performance.
SKF is a Lean company through and through, with its programme of continuous improvement (Kaizen) and use of Six Sigma tools and techniques to improve its processes. That Lean approach combined with industrial digitalisation has allowed SKF to use the data coming from bearing sensors to detect potential failures and avoid damage to machinery.
SKF has created digital dashboards for customers to remotely monitor the sensors and the data coming from over one million bearing sensors is informing the improved design of the bearings.
Similarly, Dutch manufacturer Philips Lighting has combined a Lean approach with new technology to move from selling lightbulbs to providing lighting as an end-to-end service. At Terminal 2 in Amsterdam’s Schipol Airport, hundreds of LED lights have been installed as part of the airport’s drive for more sustainable and energy-efficient lighting.
Each LED luminaire is connected to a control system, with failures immediately signalled and the LED replaced as part of a 24-7 management service. Instead of owning its lighting infrastructure, the airport instead rents it on a ‘pay as you go’ model. Philips now has a successful new business model.
Lean is transforming business
Similar transformations are underway here as Lean principles have been adopted by New Zealand businesses.
Methven is the Auckland-based designer and manufacturer of showers, taps and valves and has been in business since 1886. Methven makes a significant investment each year in research and development and by applying Lean principles, is now employing a new generation of technologies to improve its manufacturing processes.
"At Methven, improvements in our manufacturing have particularly come from putting in place Lean techniques such as visual management and Six Sigma,” says Aaron Latimer, Group Director of Operations at Methven.
“That has allowed us to move to the next stage, Digital Lean, which is helping us to smarten up our factory floor for better visibility into the production process and optimisation of the workplace environment."
Digital Lean improvements don’t just relate to manufacturing but can be applied through every part of the value chain, from design and production, through to purchasing and customer service.
Callaghan Innovation and its partners have begun delivering Digital Lean pilot programmes with the likes of Methven, NZ Steel, Kiwicare, Lion, Silver Fern Farms and Oasis Engineering participating in projects that will conclude by March 2020.
The overarching focus of our Digital Lean programme is to examine the potential to make small changes that yield significant benefits – and then to scale those changes and apply them to more of the business.
Indeed, our Digital Lean mantra at Callaghan Innovation is to “think big, start small, scale fast”. It is that sort of thinking that has, for instance, seen Methven adopt the Tulip manufacturing app platform, which automates assembly, training and quality control without the need for significant software development.
NZ Steel has the simple aim to deliver better supply chain transparency for its customers and therefore greater customer satisfaction.
Innovative garden care and pest control company Kiwicare is considering a ground-up approach for gathering data from its distribution network. It is also looking at how weather and seasonal trends impact sales, so it can better anticipate demand and proactively manage its supply chain.
Underpinning most of these projects is a desire to use data to inform better decision making that can drive improved product design, manufacturing and a better experience for customers.
Our Digital Lean experts can help you to understand how the Lean methodology can improve your business processes and assist you in testing the potential of new technologies.