An evaluation of the implementation of Lean Manufacturing by the North East Productivity Alliance

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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

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Productivity (GVA per job) vs. Participation
(jobs per population of working age) - 2003
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NE sectoral performance, sector growth and
regional significance
Increasing manufacturing productivity is a
regional priority
4
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.

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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.

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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.

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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.

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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.

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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
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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
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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
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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.

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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.

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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.