In the rush to focus on revenue, many businesses forget to consider the importance of business process and the effects of waste. Put another way, businesses that strive to remain streamlined and well organized have a signifi cant advantage over those that lack effi ciency.
For decades, leading Japanese companies directed their cost management efforts toward muda (waste elimination). Western companies mirrored the success of this “Japanese Miracle” of the 1970s and 1980s. Concepts of just in time (JIT) and waste elimination meant that new terms, such as process analysis, process mapping, and re-engineering, became part of the business lexicon. The idea of process analysis is to think of business activities as a chain of events, perhaps from the beginning of the manufacturing process through to the end, and to break down the chain of activities into very discrete, yet identifi able, tasks.
Following diffi culties in the 1970s, senior managers at Harley-Davidson visited Honda’s motorcycle facility at Marysville, Ohio. The difference between Honda’s facility and Harley-Davidson’s
was dramatic in terms of layout, production fl ow, effi ciency, and inventory management. The managers decided that Harley-Davidson needed to introduce a business-wide JIT manufacturing initiative called MAN (Materials As Needed). Production operations were brought together, reducing the amount of resources required for material handling. Harley-Davidson reduced both the amount of supplies received too early and the inventory produced too early. This also reduced the space required for manufacturing, which liberated additional space to increase production.
Caterpillar, a leading manufacturer of agricultural and construction machinery, had a similar experience. During the 1980s, Caterpillar’s cost structure was signifi cantly higher than that of its principal competitor—the Japanese fi rm Komatsu. Caterpillar concluded that Komatsu’s “fl ow” process was more effi cient than Caterpillar’s method of moving parts and partially fi nished products through the production process. It undertook a signifi cant plant rearrangement initiative called PWAF (Plant With a Future). The new fl ow process reduced the distances between operations, which improved material handling expenses, inventory levels, and cycle time to make each product. In some cases, cycle time was reduced by as much as 80 percent.
• Analyze your production process for ineffi ciency and wastage. Ask the people who run the processes how they could be improved. This applies to service businesses as well as manufacturing and process industries.
• Create a clear, workable plan for reducing areas of ineffi ciency and replacing them with streamlined operations.
• Decide what success will look like, how it will be measured, and when it will be assessed.
• Be cautious when introducing the new plan. Changes to any process can have unforeseen consequences—be aware of these possible problems and be ready to make adjustments to compensate for them.