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Jeff Liker

Dan Jones: Lean Saves Capital

By Jeff Liker, - Last updated: Saturday, April 2, 2011 - Save & Share - Leave a comment

Lean is undoubtedly about doing more with less, including less capital. Saving capital may be one of the early consequences of lean but a full realisation of the potential for designing capital saving equipment and systems only comes much later along the lean journey. Quite rightly early lean efforts are initially focused on improving customer satisfaction by performing every action right first time on time. This in turn allows many activities to be eliminated and the remaining steps to be linked together, saving cash tied up in unnecessary inventories and reducing costs by using less people. Very often this also means that planned capital expenditure on new equipment or warehouses is no longer necessary. When we began streamlining Tesco’s supply chains over a decade ago they were able to save over £400m by postponing their warehouse building programme by four years.

But avoiding unnecessary capital expenditure is only half the story. The further down the lean journey the more you learn to see consequences across the value stream of the design and engineering choices made when the current products and production systems were designed. Feeding this lean knowledge back into the clean sheet design of the next generation products, production equipment and supply chains reveals all sorts of opportunities to save capital. I remember seeing a brilliant design for a series of simple desk top tools for making a complex automotive component that replaced long and very expensive lines of traditional machines, and that could be transported easily around the world over the life cycle of the product.

Toyota with it’s focus on target costs has long been a master at both designing products that are easier to make and designing what we call right-sized tooling to perform just the necessary tasks rather than buying over-engineered general purpose tooling from outside vendors. Indeed Art Smalley often makes the very important point that we have heard far less about the contribution of production engineering at Toyota than we have about operations management. To be fair this is something Toyota has not wanted to draw too much attention to and their latest smart tooling has always been off limits to visitors. It is no surprise that in these tougher times they and several German manufacturers have redoubled their efforts to design smart, right-sized equipment that makes it possible to complete from high wage locations without excessive capital.

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