Lean AND Agile: Kaizen Update

Last Spring, we reported on our efforts to incorporate Lean manufacturing into our processes at OCM Manufacturing. Although Lean manufacturing poses challenges in the low-volume, high-mix sector (LVHM), we have identified a “sweet spot” for it at OCM and we are proactively pursuing this method of waste reduction in specific areas.

Why Try Lean?
Lean manufacturing is the practice of eliminating waste in the manufacturing process. Specifically, the purpose of lean processes is to eliminate “the expenditure of resources for any goal other than the creation of value for the end customer.” In the ideal case, then, a 100% lean manufacturing operation or lean enterprise would spend exactly the resources needed to serve the customer well – and the cost charged to the customer would represent the pure cost of that value.

At OCM Manufacturing, we’ve always looked forward and in particular have a history of pursuing initiatives that provide value to customers and which reduce waste. For example, we have been 90% paperless – yes, even our ISO process is paperless – for many years; we were the first contract electronics manufacturer in the region to be lead-free ready; and, we were first to provide managed offshore services for low-volume product lines.

Exploring how we can become a more Lean operation is, for us, a natural extension of this philosophy.

The Challenges of Lean & LVHM
The primary challenge for LVHM manufacturers like OCM is that our business is characterized by numerous customers and varied product types that require frequent process set-up changes and diverse materials inventories. Often, we are constrained by minimum order quantities that dwarf the requirement for a customer’s standard build.

In addition, much of the equipment available for use in electronics assembly is geared towards volume production and is not optimized for the sort of rapid changeovers that are ideal in Lean. While it can be and is done offline, surface mount technology (SMT) components must still be loaded on feeders and this requires labour effort – and so, small lots are less economical than larger lots.

Nevertheless, with the assistance of a Lean consultant, we identified a group of parts for which it does make sense to implement Lean inventory practices. We have also incorporated a Lean production control system throughout our plant.

Lean Inventory Practices
We now use a hybrid system for inventory replenishment, which includes:

  1. Materials Requirements Planning (MRP). Also called “just in time inventory”, this is a traditional method of inventory management via an automated MRP system. When a customer sends in an order, the MRP system determines what parts need to be purchased, in what quantities, and when to place the orders such that the parts arrive a few days in advance of their being needed in production.
  2. Kanban pull system. For customers with steady turnover on particular groups of parts, we now also use a Kanban system of parts replenishment. This is a simple and elegant system in which each Kanban component is stored in two bins. Regardless of demand, when one bin is emptied, a new order is triggered.

This hybrid system suits the LVHM business model and minimizes inventory waste on a per-part basis. Incorporating Kanban on certain higher-volume parts has simplified ordering and replenishment. It also alleviates concern about the accuracy of the MRP system’s lead times because Kanban ensures that we always have a minimum level of stock on those parts.

Lean Production Control System
We now also utilize a Kanban card system to maintain efficient flow of labour during production. This system governs how we manage work-in-progress and has replaced our previous MRP-based scheduling. In simple terms, this system empowers our staff to apply their labour where it is needed most. It keeps production flowing and makes excellent use of available resources.

We have found that the lean production control system is simpler for our staff to understand and follow, and has improved our scheduling and delivery. It is now possible to walk through our plant and literally see where the workload is heaviest, and more efficiently control the flow of product through the factory.

Future Improvements
One of the crucial elements of our ability to stay in business for more than 22 years is flexibility. We’ve remained agile and focused on keeping our customers satisfied. Lean manufacturing, which originated in Japan with Toyota, comprises a continuous stream of “Kaizen” events. Kaizen is a Japanese word for improvement of the small, ongoing kind – ideally, incremental daily improvements to a target process.

The Lean processes that we have been able to implement to date have improved our efficiencies and internal satisfaction – both of which translate into customer value through improved accuracy and lower inventory risk. In the true spirit of Kaizen, we continue to explore new ways to incorporate Lean processes in to our operations.

Suppliers are catching on, too. Many are recognizing that there is a market for small quantities of components needed at the beginning of product lifecycles, or for LVHM producers like OCM’s customers, and are becoming willing to break minimum quantities – for example, selling partial reels of components. It’s early days yet but we believe this business will grow as more OEMs and manufacturers like us create the demand.

To learn more about our operations or to tour our factory, please contact us.