Implementation of Lean Production in Small Sized ... - CyberLeninka

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ScienceDirect Procedia CIRP 12 (2013) 420 – 425

8th CIRP Conference on Intelligent Computation in Manufacturing Engineering

Implementation of Lean Production in small sized Enterprises D.T. Matt*, E. Rauch Faculty of Science and Technology, Free University of Bolzano, Piazza Università 1, 39100 Bolzano, Italy * Corresponding author. Tel.: +39 0471 017 000; fax: +39 0471 009. E-mail address: [email protected].

Abstract The introduction and implementation of Lean Production Principles over the last twenty years has had a notable impact on many manufacturing enterprises. The practice shows that lean production methods and instruments are not equally applicable to large and small companies. After the implementation in large enterprises belonging to the automotive sector the concept of lean thinking was introduced successfully in medium sized enterprises. Small enterprises have been ignored for a long time and special investigations about this topic are rarely. Considering statistical data and analysis about the economic importance of small enterprises we can see, that they are numerous and create a notable part of the total value added in the non-financial business economy. This paper analysis in a first step the role and potential of small enterprises – especially in Italy – and shows then a preliminary study of the suitability of existing lean methods for the application in this type of organization. The research was combined with an industrial case study in a small enterprise to analyse the difficulties in the implementation stage and to identify the critical success factors. The results of this preliminary study should illustrate the existing hidden potential in small enterprises as well as a selection of suitable methods for productivity improvements. This research will be the base for a further and more detailed research project. © 2013 The Authors. Published by Elsevier B.V. Selection and peer review under responsibility of Professor Roberto Teti

© 2012 Published by Elsevier Ltd. Selection and/or peer-review under responsibility of CIRP ICME 2012 Keywords; Manufacturing, Productivity, Small Enterprises

1. Introduction In the last years so called SME, small and medium sized enterprises, moved into the focus of many authors in their scientific work. The reason for this trend is based on the fact, that micro, small, and medium-sized enterprises are numerous and usually the backbone of the economy [1]. SMEs are defined by the European Commission as having less than 250 persons employed. SME make up 99,8% of all enterprises in the EU27, representing about 20 million companies employing almost 65% of total employees. In Italy, these percentages are even higher! A closer inspection reveals that 91,8% of the total are micro enterprises (employing fewer than 10 persons), while 6,9% were small enterprises (with 10 to 49 persons employed), 1,1% were medium sized enterprises (with 50 to 249 persons employed) and the remaining 0,2% were large enterprises (with 250 or more persons employed) [2]. Due to their flexibility, the entrepreneurial spirit and the innovation capabilities SMEs proved to be more robust

2212-8271 © 2013 The Authors. Published by Elsevier B.V. Selection and peer review under responsibility of Professor Roberto Teti doi:10.1016/j.procir.2013.09.072

than large and multi-national enterprises, as the actual financial and economic crisis shows [3]. In Figure 1 we can see the industry turnover (manufacturing enterprises without construction) broken down by enterprise size classes of different European countries. The graphic illustrates that the Italian industry turnover is structured very different as compared to other European countries like Germany or France. While the German and French industry turnover is based predominantly on large enterprises, in Italy only about 40% of the total turnover are created by this type of organizations. The medium sized Italian industry enterprises produce about 26% and small enterprises about 24% of the total turnover. Only in Cyprus the share of small enterprises shown in Fig. 1 is higher than in Italy. The fact, that in Italy small industrial enterprises produce nearly 25% of the total turnover demonstrates the enormous potential of this size class for the Italian Economy, being more productive and efficient through the implementation of Lean Production.

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D.T. Matt and E. Rauch / Procedia CIRP 12 (2013) 420 – 425 100% 90% 80% 70% 60% 50% 40%

35%

30% 20%

24% 20%

19%

19%

19%

15%

15% 13%

10%

12% 13%

12%

11%

11%

10%

10%

10%

8%

10%

8%

8%

7%

7%

7%

0%

0-9 (micro)

10-49 (small)

50-249 (medium)

over 250 (large)

Fig. 1. Industry turnover broken down by enterprise size classes of different European countries [4].

Knowing the potential in the introduction of Lean Principles, we have to think about how to realize it in every single production unit. To quantify the number of small enterprises we analysed the structure of the Italian Industry (see Fig. 2). We can observe, that in Italy exist a lot of micro enterprises with up to 9 employees (81,34%), only 2,12% medium sized and 0,30% large sized enterprises. About 75.000 enterprises fall in the category of small sized organizations (16,24% of all enterprises). 0,30%

2,12%

0-9 (micro) 10-49 (small) 50-249 (medium) over 250 (large) TOTAL

373.932 74.647 9.753 1.396 459.728

16,24%

0-9 (micro) 10-49 (small)

81,34%

50-249 (medium) over 250 (large)

Fig. 2. Italian Industry – Enterprises broken down by employment size classes [4].

Therefore special research and investigations are needed to create simple and practically guidelines for the implementation of Lean Production in this size class of enterprises as well as we need the work of universities, the local chambers of industry and commerce and the responsible associations to put it into practice through Know-how transfer and training. 2. Literature Review In the literature we can find many examples for the implementation of Lean Production in large and medium sized enterprises. Considering the size classes we can observe, that Lean Manufacturing concepts are basically

realizable by large, medium and small enterprises. An implementation of Lean Production concepts in micro enterprises with less than 10 persons employed wouldn’t make sense. However, for many small enterprises between 10 and 49 employees the application of Lean Manufacturing could be one important step to increase the productivity and to be more competitive on the market. Typically SMEs and especially small enterprises are not only adaptive and innovative in terms of the products but also their manufacturing practices. Recognizing the continuing competitive pressures, small organizations are becoming increasingly proactive in improving their business operations [5], which is a good starting point for introducing lean methods. Different authors believe that lean manufacturing or productivity improvement methods in general harbour enormous difficulties [6, 7, 8, 9]. Hayes [10] discussed that a successful implementation of Lean Production programs in SMEs requires properly planning before realization to avoid such difficulties and problems. Lean Manufacturing has been discussed extensively in the past decade [11]. Only few authors like White, Conner or Achanga discussed the implementation of Lean Manufacturing in SMEs and especially in small enterprises [11, 12, 13]. SMEs are still not confident of the cost of its implementation and the tangibility of the results and benefits they may achieve. Most of these companies fear that implementing lean manufacturing is costly and time consuming [11]. Compared to larger firms, small firms have fewer resources and often less access to capital [14], resulting in lower levels of adoption of cost intensive packages. It is argued that SMEs who adopt Lean Manufacturing can benefit by

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improving competitiveness through faster innovation and production, increasing flexibility and reducing costs [15]. Very often small enterprises are leaded by the owner or are family companies. In this case the business owners need to be convinced of the benefits of Lean Thinking, because Management involvement and commitment are identified as perhaps the most essential prerequisites to implement a Lean Production System in small enterprises [16, 17]. Small business managers often also do not trust external experts and consultants who could assist and help in the implementation stage [18]. Small firms have the advantage to be more flexible than large companies. Once they decide to introduce Lean Production methods, small business managers can often bring change more quickly in small firms than is generally possible in larger firms because they have less bureaucracy, have shorter communication lines and are less bound by tradition. The informal nature of smaller businesses and leadership of owner/managers can make implementation of Lean Production programs therefore easier in small firms than in large [19].

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3. Actual situation in small sized Enterprises – interview based analysis During this research we interviewed 10 small firms between 10 and 49 employees to analyse the actual situation regarding the use and implementation of Lean Production in small enterprises. The interviews were very useful to understand, why most of small enterprises today don’t apply lean methods and where they see the difficulties in its implementation. The main results of these interviews are summarised in the following 7 points: • In many of these firms lean methods are not well known. The fact that methods like Kanban, Just in Time or other are used by large companies and international active corporate groups generates a certain fear and barrier. Many of these small enterprises are just applying lean principles in different ways without noticing it. In many cases this unconscious use of lean production methods is not well structured, planned and not standardized. This shows often a great challenge in the implementation process of an integrated lean production system. • Very often these firms are trying to gain production efficiency through larger lot sizes and therefore a minimized machine capacity. Pursuing such a production strategy they risk losing an important advantage on the market: flexibility. We know, that introducing Lean Practices it would be a better solution to analyse for example the production setup times trying to reduce them to a minimum. • Lean Thinking, if just existing, stops at the ramp of the production site. An interesting result of these

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interviews was also the straight and isolated mindedness in relation to possible collaborations with suppliers or clients. In many cases a close collaboration with suppliers and customers could help to reduce delivery times, to reduce waste for material handling right up to involve them into Material Requirements Planning. Many of the interviewed firm owners have no or few confidence in their business partner along the supply chain and are afraid to betray company secrets. Small firms do not apply Lean Practises on their own initiative. The few firms that have introduced productivity improvement methods or programs often work for the automotive sector or are operating on international markets. In many cases their clients insisted in the implementation of Lean Production or started Supplier development programs to achieve a higher productivity in the whole Supply Chain. There exists a lack of knowledge and managerial education. A lot of business owner in the interviewed firms did not know the concept of Lean Production. Many of these firms started as micro craft enterprises growing over years to small industrial organizations. Therefore many of the business owner are very good technicians, but don’t dispose of a managerial education or Lean Production Know-How. It is hard for small enterprises to hire qualified staff. The lack in qualification and intellectual capital is a generally difficulty for small enterprises. Many of the interviewed firms confirmed to suffer under the rising complexity that requires qualified persons in product development and manufacturing. For firms that are trying to introduce productivity improvement programs the presence of a specialist or an industrial engineer seems to be critical. Because of the limited budget and the only moderate attractiveness for highly experienced engineers many small firms hire young industrial engineers coming from the university or collaborate with external consultants. Know-How-Transfer by public and private associations is needed. The interviewed enterprises have concrete expectations against public or private associations like the local chambers of industry and commerce or crafts associations as well as against colleges and universities. Because of the limited capital in small enterprises these partners should work on an integrated Know-How-Transfer through trainings, further education, internships, consulting service and coaching.

4. Suitability of Lean Production methods for small sized Enterprises One of the primary objectives of this research was the elaboration of a list of suitable and recommendable

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methods and instruments to implement Lean Production or productivity improvement programs in small enterprises. This Clustering (see Table 1) is based on the findings of several authors [14, 20, 21] and the results of the interviews with small enterprises and experts from Lean Manufacturing Consultancy. Table 1. Cluster of Lean Production methods by their suitability for different enterprise size classes [in accordance with 14, 20, 21].

Quality

Production planning and control

Organization and staff

Material flow and layout

Machinery and equipment

Type

Lean Production methods Low Cost Automation OEE Overall Equipment Effectiveness Preventive Maintenance Setup Time Reduction (SMED) Total Productive Maintenance Cellular Manufacturing First in first out (FIFO) One-piece-flow Simulation software (e.g. MatFlow) Optimization of the supply chain Value Stream Mapping Work station design 5S Autonomous work groups Benchmarking Ideas Management Job rotation Lean Office (Administration) Kaizen (CIP-Meetings) Standardisation Just in Sequence Just in Time Kanban Line Balancing and Muda reduction Milkrun PPS Simulation software Economic (optimal) lot size Visual Management FMEA Poka Yoke Quality Circles Quality Function Deployment Six-Sigma Statistical Process Control (SPC) Supplier Development Total Quality Management Zero Defect (Jidoka) unsuitable

less suitable

micro

small

medium

large

surely it will rest always a selective implementation of single methods. Even if not all methods from the cluster are applicable in small enterprises we can deduce a selection of suitable/recommendable methods: • First-in-first-out (FIFO) • 5S (Seiri, Seiton, Seiso, Seiketsu, Shitsuke) • Benchmarking • Kaizen - Continuous Improvement meetings • Just in Time delivery • Pull-principle and Kanban • Visual Management in Production • Zero Defect through process-integrated failure control • Idea Management to utilize the worker’s Know-How • Setup Time Reduction to reduce waste • Value Stream Mapping • Efficient and ergonomic work stations • Poka Yoke and standardisation in product and process • Cellular Manufacturing and autonomous teams • Job rotation to avoid monotony • Low Cost Automation (“keep it smart and simple”). 5. Practical example in a small Italian Enterprise

suitable

well suitable very suitable

As we can see in Table 1 not all of the listed instruments for Lean Production are suitable for every enterprise size class. We notice, how just explained in the Literature review form several authors, that most of the instruments of Lean Production have their origin in large companies and are very suitable for this type of organizations. Certain methods, like Six Sigma, FMEA, QFD or simulation software are only recommendable for large organizations, because the complexity and the effort for implementation is only realizable for firms with enough resources in sense of qualified personnel, time and capital. Other methods like Statistical Process Control (SPC) or Supplier Development programs have a high potential for improvements in medium sized organizations but are still to ample to be implemented successfully in a small sized organization. The implementation of a Lean Production program in micro enterprises would not make sense. We can find some instruments that are well applicable also for this type of organisations (Benchmarking, FIFO, …) but

This paper has been developed accompanying small sized companies in the north of Italy to implement Lean Production. The applied approach for implementation will be illustrated in a case study at a small sized company with 25 persons employed. The firm started in 1995 as a small crafts enterprise processing solid surface material (Corian®) for kitchens and interior design in corporate and public spaces. In course of time the firm focused his activity on the production of exclusive bathroom furnishings in solid surfaces and increased to a small industrial organization with 15 production workers. The Management wants to be prepared to benefit from the predicted upward phase of the market cycle and started a project to improve the productivity rate in manufacturing. Considering the list of identified recommendable Lean methods for small enterprises at the end of the research, was started the following Lean Production project called PEP: WW W͙͘͘džĐĞůůĞŶĐĞ ŝŶWƌŽĚƵĐƚŝŽŶ h^dKDZ^d/^&d/KEĂŶĚWZKhd/s/dz

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Fig. 3. Concept of the Productivity Improvement program.

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To implement this concept in the illustrated firm with 25 employees it was important to decompose the whole concept into single working packages and to plan them on the time axis. The management decided in close collaboration with an external manufacturing consultant to implement the concept within a period of two years in single steps. Small companies are very flexible and fast in their decision-making, but in account of the limited resources the people in this firm were not able to dedicate too much time to the project. Therefore it came out, that it is better to realize such a project step by step. The time was a very critical factor in the implementation process. In small enterprises the implementation of single steps presses very often on the shoulders of single persons; in medium or large companies the work load is usually distributed on a team. After this decomposition phase and the elaboration of a detailed realization plan (containing responsibilities and due dates) the concept was presented to the whole staff in an official kick-off-meeting. The first operative working package consisted in the reorganization of the manufacturing layout introducing work cells and small autonomous teams (to ease the workload of the production manager and to increase productivity). How we can see from Fig. 4 the production was split into 4 teams: (W) Warehouse, (T) Thermoforming of semi-finished components, (M) Manufacturing and (G) Grinding. In every team was named a highly experienced and organizational capable worker as team leader. The team leaders had to start their job with the moderation of CIP-meetings to gather ideas and suggestions to reduce waste and inefficiency. In every team were done 5S-Workshops to clean up the production and to define guidelines for order and tidiness. The teams had also to develop new and more efficient work stations.

components as well as the special Corian®-adhesive. The worker at the picking station has to commission all the needed components on a special trolley and to bring this trolley to the single manufacturing cells. The advantage of this reorganization was an incredible increase in productivity of more than 25% over all products, because in the prior situation every worker had to provide the single components oneself. Therefore times for walking, searching and handling were enormous. In the new situation every worker in the single cell does not have to leave his cell during the working hours. Also the specialization in the manufacturing cells helped to reduce manufacturing times. The results in productivity increment are shown in Fig. 5. 90,00

Productivity (added value/h)

80,00 70,00

before

33%

after

9%

18% 12%

60,00 50,00 40,00 30,00 20,00 10,00 0,00 shower trays wash basins

kitchen countertops

special products

Fig. 5. Improvements in Productivity (added value per hour).

To ensure a zero defect approach, every team is now responsible for the quality of the own process steps. There were defined also two Quality Gates with a detailed Quality Check using Check-Lists: a) from manufacturing to shipping, b) at the packaging station. The improvements in Quality could not be valued at the moment and will be compared at the end of 2012 with the quality rate in 2011. Every team leader had to elaborate standardized working instructions with photos for the different positions to ensure the Knowledge Management and a standardized process. These visual work instructions are also very helpful to train new and foreign workers. In a central point of production was created an Info-Point for Visual Management to show news and production KPIs on a Whiteboard. 6. Conclusions

Fig. 4. The redesigned production layout

An important improvement was realized through the central picking station to prepare and cut the raw material, to pick the semi-finished and purchased

In the introduction of this paper was illustrated how important are small enterprises for the whole economy. They are not only numerous (16% of all enterprises in Italy) but create also about 25% of the total Italian sales volume in the industry. The literature shows, that most of the medium and large companies have introduced

D.T. Matt and E. Rauch / Procedia CIRP 12 (2013) 420 – 425

productivity improvement programs. In the actual situation, the interviews in several small enterprises showed, that small companies hesitate to make the same move, because they fear the needed resources in form of personnel, time and capital as well as the lack of Knowhow. The case study in this paper showed in form of an action research in a small company with 25 employees, that the introduction of Lean Production methods is not only possible, it brought also improvements and advantages for the described company. We have seen also that a lot of business owners expect from local and national associations and chambers initiatives to enhance the Know-how Transfer. Based on the results of this preliminary study will be started in 2012 a research project with the chamber of crafts to analyse and prove in a more detailed study the suitability of productivity improvements methods in small enterprises.

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