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Can Lean Increase Employment?

May 16, 2011

There seems to be a change in the air this spring.  Manufacturing is increasingly being discussed in a positive tone.  No longer the type of industry to escape from, it is often being hailed as leading the U.S. out of its recession.

With labor rates in other countries rising and a relatively weak U.S. Dollar, manufacturers are beginning to enjoy increasing demand.  As operations groups look to increase capacity while continuing to decrease unit cost, they will look towards the next level of automation possible due to advances in technology.

But these projects are not without risk. Over the years, I have participated in and seen less than successful automation projects with good intentions that fall prey to three traps:

A focus on the operation and not the entire process

The metric Overall Equipment Effectiveness (OEE) is often described by six major losses that stop a machine from working at full effectiveness.  One of those six reasons is Small Stops.  An example of a small stop is when a piece of material jams in the machine and it has to be stopped and cleared.  What this brings to mind is that the machine has not been designed to manage the variability it will encounter in raw materials. Maybe the required cycle time required to justify the project required perfect raw materials or maybe the pace to load raw materials is unrealistic with mistakes being made. This is most evident when a machine takes on a personality in a plant and is considered “finicky” by maintenance or operators.

Too big a capacity jump

Sometimes the volume of product required to justify the equipment is larger than realistic demand.  There is one of three outcomes is possible here.

  • Companies commoditize the product by dropping the price to increase demand.
  • Companies find new products to run on the equipment (Dairy producers do this by running orange juice through their bottling lines)
  • Companies reduce their profits as they run at less than profitable volumes.

Not enough flexibility

I recently visited with a large global manufacturer and as we walked through their warehouse I was amazed.  Not a single person.  They had completely automated the warehouse with robotic forklifts that could both pick and put-away.  I complimented them on their achievement and their response was “Were taking them out.” I asked why and they responded. “It’s so expensive to make any kind of change due to the programming costs that we can’t adjust our processes.  We think we have a better way of doing something but the justification hurdle is so high to re-program and test that every idea gets shot down.”

Look to  identify capacity still hidden within existing infrastructure and labor.

While automation certainly holds a large and important place in all processes, it’s important to consider an alternative:  Could a smaller investment in applying continuous improvement to the workforce yield enough of an improvement to meet market requirements?

Companies that have applied Lean Labor techniques to their workforce have identified 5-10% increases in utilization. For most companies that translates into a similar increase in capacity. They also retain the flexibility to react to market changes that automation projects lack.

Lower capital risk, improved flexibility and the continued (and increased) employment of the people who become consumers when they go home…It’s probably worth putting a Lean Labor column as an alternative choice in your next automation project.

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