Lean Manufacturing Best Practices in Thesis

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These measures of performance vary significantly across manufacturers, yet lean manufacturing initiatives share a common basis in core areas of measurement. These common areas of measurement to evaluate the performance of lean manufacturing initiatives include company-specific, Sales, Quote and Order, Customer Service, and Warranty & Returns (Hallgren, Olhager, 978, 979). Depending on the intersection of lean manufacturing process and level of product customization as defined by to-order strategy a subset of the metrics shown in Table 3: Comparison of Lean Manufacturing Metrics and Performance are often used.

Table 3: Comparison of Lean Manufacturing Metrics and Performance

Areas of Measurement

Baseline: What is Measured

Resulting Performance

Company-specific

Project costs and expenses

Use as a baseline for defining ROI

Number of orders per year

Determine configuration's impact on inventory turns

Current inventory and costs

Inventory turn savings

Customer Data

Lifetime cost per customer; avg. deal size by customer

Sales

Order cycle time

Order cycle times reduction of 37% or more recorded with mftrs contacted

Cost of Sales

Days Sales Outstanding reduction from 54 to 24 days on average

Cross-sell and up-sell revenue

Increase of 47% on aggregate

Average sales price per order

Increase from 6% to 31%

Quote and Order

Average costs to complete an order

89% reduction in cost per order

Special Pricing Requests

Over 90% ROI on automating Special Pricing Requests

Bad or incomplete orders

Incomplete order reductions of 36%

Customer Service

Number of customer complaints

82% reduction in cost of simple requests

Revenue lost to churn

69% when cross-selling is used with quote-to-order

Number of calls on order status

Median level of 16,000 per week to 100

Warranty and Returns

Reduction in warranty cost on customized products

13% reduction at a minimum

Labor cost reductions

Decrease order re-work from 17% to 2%

Conclusion

The use of lean manufacturing strategies inducing Six Sigma is successfully being used for the continual improvement of mass customization, build-to-order, configure-to-order, and engineer-to-order strategies in manufacturers globally (Reidenbach, Goeke, 49). The integration of Six Sigma-based lean techniques into the PLM strategies of companies also is showing significant potential for the development of metrics-based reporting that ties performance to lean process improvement outcomes (Hallgren, Olhager, 998). The development of mass customization strategies that seek to be agile enough to respond to customers' needs on the one hand yet stable enough to deliver financial gains in performance is critically important during economically turbulent economic periods.

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For manufacturers to attain the levels of performance shown in Table 1: Financial Impact of Lean Manufacturing Applied to Build-to-Order Workflows it is also critically important for the Six Sigma methodologies of DMAIC to be engrained into core process areas over time. The consistent use of lean manufacturing approaches can deliver exceptional financial performance, yet without consistency and a continual focus on driving out variability from the production strategies shown in Table 2, Definition of Mass Customization Production Strategies. The continual efforts to achieve exceptional performance in production also need to be gated by metrics that can capture how customers' perceptions are changed . The metrics shown in Table 3: Comparison of Lean Manufacturing Metrics and Performance illustrate represent metrics used often in scorecards to measure the impact of lean manufacturing over time.

Appendix

Table 1:

Financial Impact of Lean Manufacturing Applied to Build-to-Order Workflows

Sources: (Cavusoglu, Cavusoglu, Raghunathan, 12 -- 28) (Hallgren, Olhager, 976 -- 999) (Kumar, Craig, 194 -- 214) (Sharma, LaPlaca, 476 -- 486).....

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