Transcript Innovation and Lean Manufacturing

Innovation and Export the
Secret to Growth in
Manufacturing
Searching for Solutions in
Japan
Dr John Blakemore
Principal
Blakemore Consulting International
Sydney
[email protected]
www.blakemore.com.au
Australia
Has a Problem
Heavily in Deficit Despite
Resources Boom
-1000
-2000
-3000
-4000
Year 1971 to 2007
Jul-06
Jul-05
Jul-04
Jul-03
Jul-02
Jul-01
Jul-00
Jul-99
Jul-98
Jul-97
Jul-96
Jul-95
Jul-94
Jul-93
Jul-92
Jul-91
Jul-90
Jul-89
Jul-88
Jul-87
Jul-86
Jul-85
Jul-84
Jul-83
Jul-82
Jul-81
Jul-80
Jul-79
Jul-78
Jul-77
Jul-76
Jul-75
Jul-74
Jul-73
Jul-72
Jul-71
Millions of Australian Dollars
Trade Balance
Australia's Trade Balance 1971 to 2007
2000
1000
0
Australia Versus Japan
Japan
1
Economic Growth Rate (94 to 2004)
%
2
GDP per Head
$
3
% workforce employed
4
Expenditure on R&D % GDP
5
Innovation Index
6
Unemployment (95 to 2004)
7
Australia
1.2
3.7
$36,170
$32,020
%
52.0
50.8
%
3.1
1.6
5.7
4.4
%
4.4
7.1
Current Account (% of GDP)
%
3.7
(6.2)
8
Population Growth
%
0.2
1.1
9
Inflation 2000 to 2005
%
(0.3)
3.0
10
Money Market Rate
%
0.0
5.5
11
Household Savings Rate
%
6.9
(3.0)
12
Trade Balance
$Bn
132.0
(18.1)
13
Living Standard Rank GDP per Head
2007
11
22
14
Living Standard Rank GDP per Head
1900
40
1
CSIRO Exp vs Comparative Adv
Parameters 1
• The resources boom and a weak US$ has led to an
elevation of the $A and squeezed manufactured
exports…Dutch/Spanish Disease in the future?
• Labour costs often blamed (incorrect?)
• Serious infrastructure constraints
• Servicing costs on foreign debt high
• Interest rates high by global standards and will go
up higher when Net Financial Debt seen as a
problem (60% GDP, CAD = 6% GDP)
• Italy highest on record in 1924 at 7.1% of GDP, then,
in 1925 what happened?
Parameters 2
• R&D and Innovation are the key drivers
of manufacturing growth and
sustainability
• Australia’s private R&D investment is
very low by world standards
• Australia concentrates its innovation
and R&D in the middle of the supply
chain. This effort is more valuable
closer to the customer.
Innovation and Performance
• We need to be flexible and fast like
Australia 2 in the America’s Cup in
1983 when we came from behind 3 to 1
and had to win the next 3 races in a row
Even though we lost the next 3 starts
we won the cup.
• The secret was the Ben Lexcen’s
innovation.
• We need a winged keel!!!
Why Japan?
• Trades in Surplus despite being poor in
natural resources and energy
• International manufacturers well above
the rest in quality and value dedspite
strong currency
• Able to move the culture of precision
and manufacturing capability to a new
high
• Live on innovation for growth
Which Companies?
•
•
•
•
•
•
Canon (Excellent Quality)
Honda (No 1 for Reliability)
Toyota (TPS, Lean)
Kawai ( Sydney International Piano Comp)
Panasonic (Good all rounders)
Sony????? (Innovative but Unreliable)
Manufacturing or Service?
•There is no such thing as a pure
manufacturing company
• All companies are service driven
•What is your position in the supply
chain?
Canon Performance
2005
Parameter
Bn US$
Net Sales US$ Bn (10 power 9)
31.8
Total Assets US$ Bn
34.2
R&D US$ Bn
2.4
Capital expenditure US$Bn
3.5
No employees
115,000
Growth Rate
17.40%
Net Profit
10.23%
R&D as % Sales
7.60%
Key Operational Ratios
•
•
•
•
•
•
•
•
On Time Deliveries % (CROTD, Actual) =100%
Changes to plan (nil)
Planning lead Time (target 1 day)
Lead Time ( Time to produce from RM = CRLT)
Value Added Time (Run Time/ 168 )(aim 100%)
Measures (Setup,Run,BD,PMT,Idle,CU),
Manned Time (% Available = run time)
% Major Ops with adequate backup personnel =
100%
My Australian R&D and
Innovation Grant Observations
• 800 R&D Innovation Applications (6yrs)
• 50% received grants, 5% successful
• IP mostly exploited Overseas
•(e.g. Shi Zhengrong and Suntech)
• Tasmanian windfarm technology to China
• Small no. people rich
• Little National Benefit
• Favours Product over Process Innovation
• Commercial Ready needs Improvement!
Innovation
Process versus Product
There is no point in adding a new
product to a bad system.
Honda, Canon, Kawai, Toyota,
Panasonic, all link Process and
Product Innovation
Australian R&D
•How successful are
we?
Reasons for Failure of Australian
R&D and its Commercialisation
Poor Understanding of the:
1. connection between Process & Product Innovation
2. use of correct resources (inc Partnerships, Pana/Leica)
3. ways to release working capital to max Technology
4. needs of the market (needs versus wants)
5. scientific method (observation and measurement)
6. need to articulate the concept and plan
7. way to raise funds to support the application
8. best way to use capital
9. measurement of risk
10. need to tap the wisdom of the worker
11. financial institutions risk averse
Where Do You Start?
The World is your Market
1. Integrate processes and systems, pull
by customer, then spread out both ways.
2. Substitute pull for MRP on short planning cycles
3. Use internal digital data on shorter periods
4. Hook up digitally with customers & suppliers
5. Eliminate forecasting as much as possible
How do we Implement
Creative Manufacture and
Innovation, The Step Beyond
Lean ?
It is all about
People, Training,
Culture,
Leadership and Commitment
Rule 1
Make to Order (MTO)
Demand = Production
•Pull by Customer
•Apply Continuous flow rules (26)
•Continuously reduce batch sizes by
reducing the Economic Production
Run (One piece Flow?)
•Plan by replacement short Lead t
•Reduce forecasting as much as
possible
Rule 2
Maximum Flexibility Machine and
Labour
• Match Manufacturing Capability with Demand
• Tirelessly improve flexibility by reducing EPR’s
• Continuously reduce lead time
• Focus on the financial parameters to prioritise
• Aim for continuous flow
•Maximise the use of Appropriate Technology (Six Sigma)
• A process can be treated like a machine (Adam Smith)
Rule 3
Innovate
•
Drive Product Innovation with
Process Innovation
Rule 4
Use Digital Data Effectively
•
Recognise that Digital Data can be
obtained at the POS and sent to any
point in the supply chain
Rule 5
Design for Flexibility
•
•
•
•
•
Reduce Complexity
Modularize
Introduce Complexity late in SC
Universal design (Toyota)
Backup suppliers (standardise)
Rule 6
Reduce Waste in All Forms
• Planning waste
• Expenses waste
• Resources waste
Some Values of Key Parameters
• Days Inventory = 8 Days (Canon
Australia actually 38 Days but 30 Days
on Water)
• Value add % = Never stop Improving
(Samurai Warrior, Toyota < 10%)
• Planning Cycle = 7 days to one day
• R&D as % Sales = > 5%
• Process Control at 6 Sigma
• On Time Deliveries (CRLT) = 100%
Kyosei
• Kyosei = Living and Working Together for the
common good
• Kaizen = Continuous Improvement
• Genchi genbutsu = place of understanding
• Obeya = big room
• Sensai = teacher
• Poka-yoke = mistake-proofing
• Jidoka = stop machines (Toyoda Loom)
• Miyamoto Musashi “The Book of Five Rings”
the Samurai warrior after Shogun liberation
Australian Example 1
Profit in $300M T/O
(Ref Blakemore Consulting Reports )
EBITA for 6 Months Periods
25
20
Millions of Dollars
15
10
5
0
July Dec2001
Jan-June2002
Jul-Dec2002
Jan-June2002
-5
6 Months Period
Jul-Dec2003
Fcast
140
Australian Example 2
(2X Productivity
(Ref Blakemore Consulting Reports)
120
Output
100
80
60
40
Defectives
20
0
1
2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Months
Conclusion
• Build a flexible system that can respond to changing
markets quickly and optimize the supply chain.
• Remove wasteful inventory by matching lead time
and cycle time and continuously increasing value
added time
• Use the capital released from wasteful inventory to
innovate flexible systems and processes that can
respond faster to new products.
• Continuously innovate new products and processes
• Use a consistent strategy based on the systems of
Honda, Toyota and Canon
• Use all resources and be aware of the tools and
knowledge available and foster partnerships with the
best.
The End