By Jack Healy, Director, Manufacturing Advancement Center, jackh@massmep.org
The last several years have been trying for the entire New England
Manufacturing Community. We have suffered through weak demand and relentless
global competition. Indeed, the overall manufacturing community's curtailing
of investment and slashing of payrolls these past few years was significant
enough to push the entire US economy into recession. The consequence
of all of this is that I know of no manufacturer who is not in constant
pursuit of productivity improvement.
This adverse downturn was significant in another way. After years of
denial, it drove many manufacturers, such as the US automotive industry,
to become more productive by embracing the Toyota Production System
(aka, lean manufacturing). After implementing lean, Chrysler raised
its total productivity by over 7% last year; this comes on top of a
6% increase the prior year. The move to lean has now spread far beyond
the automotive industry. Lean can be found generally throughout manufacturing
and is providing a methodology for helping manufacturers become globally
competitive.
Traditional manufacturing philosophies stress high utilization of machinery
and labor with little concern for cycle time or manufacturing waste.
Lean manufacturing is a philosophy of production that focuses on creating
greater production efficiencies through maximizing value-added activities
while minimizing waste. The return for companies who embrace the "Lean
Philosophy" is sizeable.
Recently, the Manufacturing Extension Program (MEP) surveyed 29 of
its client manufacturing enterprises that started their lean journey
a year ago and found sustainable change that produced:
$15.8 million in cost savings
149 net jobs created or retained that otherwise would not have existed
$12.2 million in increased and retained sales
$10.8 million in new investments
The Ripple Effect of Lean
The effects of this increased economic activity extend far beyond the
surveyed client firms. Increased sales by MEP clients going lean require
that they increase their purchases of intermediate goods and services
to support their increased output. The supplying companies, in turn,
generate additional demands of their own. In this way, dollar expenditures
for final demand can be traced back to all of the affected industries
in the regional economy.
In addition, the income from new jobs generated by MEP lean clients
and their suppliers results in increased demand for consumer goods.
In turn, each of these effects generates subsequent, although diminishing,
ripples through the economy. The sum of these direct, indirect, and
induced effects, indicates that the 29 manufacturing enterprises who
received lean assistance and training from the MEP are responsible for:
Creating or retaining 6,061 jobs that paid a total of $300.2 million
in employee wages and benefits
Increasing or retaining economic output worth $928.8 million
Contributing or retaining $428.9 million of gross state product
Generating or retaining $113.3 million in additional tax and non-tax
revenues at the federal, state, and local government levels.
(NOTE: IMPLAN Professional Version 2.0 software and year 2000 economic
and tax data was used for this analysis)
If this kind of economic impact can be generated from just a handful
of manufacturers, imagine what our economy would look like if all manufacturers
went lean? The jury is no longer out as to whether lean can work outside
of the automotive industry or even manufacturing. We now see other industries
which are also under competitive pressures, such as healthcare and distribution,
rapidly adopting lean philosophies as well.
For anyone who is interested in learning about what lean can do, check
out the Lean Certificate
Series sponsored by the Associated Industries of Massachusetts.
Or you can join the Lean Champions Group,
sponsored by the Association for Manufacturing Excellence.
Most people claim to recognize opportunity when it knocks. Lean Manufacturing
is opportunity knocking. The companies that were used in the preceding
survey receive a 45:1 return on their investment. You can find an opportunity
through the following organizations:
