Lean manufacturing not always effective: study

04-10-2011

Lean manufacturing principles, widely touted by companies as an effective way to eliminate waste and boost the bottom line, often do not achieve targeted cost savings, according to a new study.

Analysts at New York-based consulting firm AlixPartners LLP found about 30 per cent of companies surveyed achieved a 2010 goal of cutting at least 5 per cent of manufacturing costs by employing lean practices such as those championed by Six Sigma, Kaizen or Value Stream Mapping.

Nearly half the 100 executives surveyed were targeting savings of 5 per cent or more. The majority of executives reported savings in the 1 per cent to 4 per cent range, which AlixPartners views as being below the optimal range.

Also, nearly 60 per cent of the executives surveyed do not expect they can sustain at least half of the savings they did make over the long term.

The results of the study could raise eyebrows in a business community where several executives and managers consider themselves lean-manufacturing loyalists, clinging to their status as a Six Sigma Black Belt or a Kaizen master.

So-called lean principles have grown in popularity over the past four decades after companies including Toyota Motor Corp, General Electric Co and Motorola pointed to these programs as a key driver of continuous improvement, not just cost cutting.

"Most companies don't apply lean principles in a way that gives them the most potential bang for the buck," AlixPartners Managing Director Steve Maurer said in an interview.

Maurer said companies do not typically set aggressive enough targets, and lean programs are often viewed as a "checklist" of do's and don'ts in a narrow corner of the business rather than a broader way to run an entire company.

The firm did not disclose the names of the companies it surveyed but said they included an array of global manufacturing firms spanning the automotive, consumer products, industrial, aerospace and defence, and other sectors.

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