Transcript LRN2006 - Newcastle University Staff Publishing

An evaluation of the implementation of Lean
Manufacturing by the North East
Productivity Alliance
Chris Hicks and Tom McGovern, University of
Newcastle upon Tyne Business School
Colin Herron, One NorthEast
LRN2006/1
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Productivity (GVA per job) vs. Participation (jobs per population of
working age) - 2003
115
Productivity (GVA per Job - Index UK=100)
East
S East
110
105
100
E Mids
Regional policy
London
seeks to increase
England productivity and
UK
participation
Scot
S West
95
Y &H
NW
W Mids
North East
Wales
90
N Ireland
85
65
70
75
80
85
90
95
Participation (Em ploym ent rate)
LRN2006/2
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
100
NE sectoral performance, sector growth and regional significance
Agriculture, hunting, forestry & fishing
Mining and quarrying of energy producing materials + Other mining and quarrying
Manufacturing
Electricity, gas and water supply
Construction
Wholesale and retail trade (including motor trade)
Hotels and restaurants
Transport, storage and communication
Financial intermediation
Real estate, renting and business activities
Public administration and defence4
Education
Health and social work
Other services
Sectoral
Performance
NE 2002
(GB = 100%)
GVA Growth GB
1992-2002
Regional LQ
NE 2002
91%
99%
97%
87%
83%
86%
87%
89%
88%
84%
76%
101%
101%
78%
-6%
-26%
26%
39%
58%
102%
126%
77%
107%
161%
46%
124%
110%
150%
59%
137%
130%
142%
112%
88%
93%
89%
53%
69%
121%
132%
134%
89%
Lower than average manufacturing sector performance
UK manufacturing has relatively low GVA growth
Source: ONS & ABI
NE has high reliance on manufacturing
Increasing manufacturing productivity is a regional priority
LRN2006/3
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
North East Productivity Alliance (NEPA)
• The aim is to increase productivity by transferring Lean
Manufacturing from the automotive industry to other sectors.
• Methodology based upon Nissan/Industry Forum supplier
development initiatives.
• This paper reports on 30 interventions at 15 companies.
LRN2006/4
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Industry Forum model
• Hands-on training using ‘Common Toolkit’ comprising
– The Building Blocks 5C/5S, Standardised Work and Visual
Management, and 7 Wastes
– Supporting tools, data analysis, problem solving, set up
improvement and line balance
• Trainees receive NVQ in Business Improvement
Techniques on successful completion of training.
LRN2006/5
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Diagnostic Tools
• NEPA sponsored the development of a three stage
diagnostic tool to select participating companies:
– Productivity Needs Analysis, general information (sector, size,
turnover), DTI 7 measures (floor space utilisation, value added
per operator, stock turn ratio, OEE, not right first time, schedule
achievement and operator productivity) and other measures.
– Manufacturing Needs Analysis, records information on
manufacturing processes and framework for selecting Lean
tools.
– Training Needs Analysis
• Tool applied by independent consultants before and
during Lean interventions.
LRN2006/6
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
PNA Metrics
• Turnover gives a measure of overall activity
• Stock turn ratio indicates how effectively inventory is
utilised
• GVA per direct employee, absenteeism and staff
turnover relate to the effective use of labour
• The breakdown of labour into indirect, direct and
temporary indicates the significance of manufacturing.
• Breakdown of costs helps identify labour intensive
companies that are particularly vulnerable to competition
from low cost economies.
LRN2006/7
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
PNA Metrics
• OEE and floor space utilisation relate to the effective use
of plant and buildings
• Delivery schedule achievement and not right first time
are measures of customer satisfaction.
LRN2006/8
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Metric
Increased Unchanged
Decreased
No data
Turnover £M
10
0
3
2
Profit/loss £M
0
0
0
15
Profit margin %
0
0
0
15
Order success rate %
1
2
0
12
Stock turn ratio
7
1
4
3
Productivity / direct
employee
8
0
1
6
GVA / direct employee
9
0
2
4
Absenteeism %
5
3
5
2
Staff turnover %
7
3
3
2
Direct employees
5
0
8
2
LRN2006/9
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Metric
Increased No change
Decreased
No data
Indirect employees
8
0
6
1
Temporary labour
5
3
5
2
Total employees
3
0
11
1
Direct labour %
3
0
11
1
Temporary labour %
5
3
5
2
Turnover / employee
£
11
0
2
2
Material content %
7
5
1
2
Labour content %
2
3
6
4
LRN2006/10
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Metric
Increased
No change
Decreased
No data
Overhead content%
2
4
4
5
Turnover / floor space
£/M2
5
4
3
3
Delivery schedule
achievement %
4
5
3
3
Not right first time %
3
5
3
4
LRN2006/11
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Summary of results
• 10 of the companies had increased turnover (2.5-35%)
• Stock turn ratio improved in 7 cases – 4 showed
dramatic improvements of 18, 23, 92 and 100%
• 8 companies improved productivity (105% in the best
case)
• Number of employees reduced in 11 companies and
increased in 3 companies
• Turnover per employee increased in 11 companies, 7
companies with less employees increased turnover.
LRN2006/12
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Conclusions (1)
• There were some dramatic improvements in
performance, but some companies had not been
particularly successful.
• Some of the companies with implementation difficulties
have started to address barriers, but the benefits have
yet to be realised.
• Many of the measures lag actual improvements. There is
substantial anecdotal evidence that the impact has been
more positive than the quantitative data suggests.
• A further study of 50 companies with improved data
collection methods will provide more insight.
LRN2006/13
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne
Conclusions (2)
• Manufacturing productivity particularly important in the
North East.
• Total savings to date are £4.36 million with an average
saving per intervention of £149,000.
• With the Industry Forum evaluation method, which
ignores the highest an lowest cases the average saving
was £106,000
• Total returns were eight times the cost.
• NEPA supported lean manufacturing are an effective way
of addressing regional productivity problems.
LRN2006/14
© Chris Hicks, Tom McGovern & Colin Herron
University of Newcastle upon Tyne