The overgeneralization is over

During the past several years, the term Lean has been overused and overgeneralized. Yet the principles of lean remain ever important, as it reduces not only an organization's own costs and time-to-market, but also overall business costs and global environmental impact.

To generate actionable ideas and renewed inspiration, it's time to get specific with nitty-gritty cases of lean and the resulting savings in quantifiable measure. But first, some background.

In a January 2007 study by Technology Forecasters, Alameda, Calif., hundreds of electronics-industry managers answered 40 questions about the use of lean in their companies. In particular, responses to the question, "What is your understanding of the term lean?" include several true-to-form definitions—as well as some cynical views—as quoted here:

• "It is another 'short-term initiative' emphasized by top management."
• "It is an employee-education initiative."
• "It is another name for quality-improvement initiatives."
• "It only works in certain cultures."
• "It is expensive and resource-intensive to implement."

Some companies may have a skeptical view of lean if they haven't seen case studies from multiple users, and the diverse regions of lean's measurable benefits. Or they may think of lean in functionally narrow terms—such as only in the manufacturing process. Even when electronics-industry members learn of dramatic lean successes, such as at Toyota, they may need tangible, electronics industry-specific cases to relate to lean personally.

To bring lean benefits home even to the strongest skeptic in the electronics industry, let's give several examples a try. Note that these cases span global regions and company functions. These include product design—often overlapping with Design-for-Environment rules—and application of lean principles for the entire product life cycle, as well as sourcing activities, manufacturing/production processes, order fulfillment, transportation and logistics, sales and support, and facilities.

• San Jose, Calif.-based Cypress Semiconductor designed an integrated circuit that replaced 58 other components, leading to sourcing, assembly, and disassembly efficiencies.
• A storage system from Japanese supplier Fujitsu uses half the number of screws as previous designs, realizing benefits in sourcing, assembly, and disassembly for reuse, upgrade, recycling.
• Jackson, Mich.-based electronic manufacturing services supplier Sparton Corp. integrates lean principles with Six Sigma and ISO quality standards well beyond its contract-manufacturing floors. Corporate VP and Six Sigma Black Belt Linda Munsey explains, "Sparton's application of these tools to the quoting process, materials receiving, stockroom management, and lead-free processes reduces costs in areas typically considered 'overhead'—with immediate and positive impact on Sparton's bottom line." (see Figure 1)
• Thomson, based in Boulogne-Billancourt, France, figured out how to reuse all but 0.7 percent of the plastic scraps generated from manufacturing televisions and other electronic products, in part by using thinner molded plastic. Plastic purchases and landfill contributions decreased dramatically.
• The Oregon facility of LSI Logic cut by four-fifths the amount of acid used to "bathe" semiconductor chips, and the company recycles solvents onsite for repeat use. Efficiencies are reported in the areas of sourcing, processing, and hazardous-substance disposal.
• Celestica's Monterrey, Mexico facility formed a five-person lean team. Using various tools and principles to simplify internal processes and reduce operational inefficiencies, the team reduced line set-up time by 48 percent, lead time by 71 percent, distance traveled by 29 percent, equipment and spaced used by 34 percent, consumables by 25 percent, and scrap by 66 percent.

If by implementing lean principles an organization reduces its costs in a single aspect of its business, that benefit can be called linear. Consider this success story: A group at telecommunications leader Tellabs figured out they could eliminate certain types of shipping boxes by simply realizing that more product categories could fit in fewer types of boxes. The company saved $150,000 in 2006.

Benefits become exponential when the application of lean principles positively affects multiple functions of an organization, multiple organizations, or otherwise leverages benefits to the next level of magnitude (see Figure 2).

For example, the next step after reducing box types and the correlating costs is not to buy boxes at all. In the late 1990s, Ian McKeown of Polaroid's Scotland location discovered that corrugated plastic boxes could be used more than 100 times for shipping parts and products back and forth with suppliers. At the end of their useful life as boxes, Polaroid recycles them into bins for specific functions in the manufacturing line. Polaroid saved a reported £3.8 million by the year 2000, and the system worked so well that Polaroid suppliers and other customers adopted this lean practice as well.

But when do the benefits of lean thinking reach global proportions? It is when companies extrapolate efficiencies not only in their own businesses, but also for global business practices, and often for environmental conservation.

While it is a source of pride at many companies to speak of the size and number of facilities around the world, Sun Microsystems management is proud of having reduced its number of offices. In Sun's Open Work program, employees telecommute or work in flexible offices. According to Dave Towne, Sun's director of engineering technologies and services, "It's a concerted effort. So far, with 35,000 employees we need only 25,000 offices—and this number is declining."

The financial gain achieved thereby is simple to calculate based on percentage reduction in the cost to own or lease power, supply, manage, and maintain buildings. The idea is to increase the efficiency of facilities, and reduce the number and size of facilities—resulting in significant operating cost savings and a smaller environmental footprint.

Global-level benefits include reducing waste associated with facilities, and reducing petroleum use and emissions generated by employee vehicles. And for the approximately 25,000 offices, Towne says Sun is using a model that eschews having a PC on every desk—a further reduction of costs and impact.

Philips Global—motto: "Sense and Simplicity"—is known for creating efficiencies in its electronic products and processes that have far-reaching global benefits.

For example, the hazardous substance mercury is used in lighting products, yet Philips' ALTO lamps use 70 percent less mercury—100 percent of which is recycleable and lasts longer than industry averages. The benefits to Philips come in the areas of procurement and hazardous-waste disposal, and—given that lighting consumes 25 percent of the energy used by a typical building—fewer petroleum, nuclear, hydro, and other power-generation resources are used.

Companies must set goals now that go beyond achievements of linear benefits through lean programs, to get exponential benefits by rethinking business tenets that have been taken for granted, but no longer make sense economically or environmentally.

For the big picture, ask yourself and your colleagues, "In what ways can we rethink business models, infrastructure, and product and service offerings for lean benefits?"