Esterline Technologies and Lean Manufacturing - Assignment Example

22 May 2007 Esterline Technologies and Lean Manufacturing Is Esterline a successful company? What outcome evidence from the case supports your conclusion? The case implies that Esterline is a successful company: Financially speaking, its revenue is increasing. Quoting from the case, “Esterline closed the year with revenues of $835 million and income from continuing operations of $51 million, compared to 2004 revenues of $614 million and income from continuing operations of $29 million.” This represents a double-digit rise in revenues of 35% and 75% rise in income from continuing operation. With this strong financial performance, analysts expressed their positive outlook for Esterline Technologies: “According to analysts reports, 206 revenues were likely to exceed $1 billion.” The success of Esterline in its operation is also indicated by its capability of achieving Tier-1 supplier status with two of its largest customers. Tier-1 supplier status puts the business organization into a more advantageous situation, which gives it a higher bargaining leverage. On the other hand, it also highlights the company’s current performance. Cremin notes that, Tier-1 status “means that you can handle the next biggest thing; you can be trusted, you’re reliable, and you have financial strength.” 2. What is Esterline’s business strategy? How do lean manufacturing and IT support Esterline’s strategy? The success of Esterline Technologies has been a product of its efficient strategy which is supported by lean manufacturing and IT support. Esterline’s strategy is focused on achieving its targeted turnaround by a continuous product development effort. Lean manufacturing has been instrumental in the deployment and success of the strategy. Esterline recognizes that lean manufacturing is a system which helps it achieve its manufacturing goals of “lower cost, improve quality, and build competitive barriers to entry.” IT support has been part of the company’s manufacturing strategy. However, its importance is still debated within the business organization. 3. What are the key components of a lean system and how do they compare with components of traditional systems? As you prepare your answers consider dimensions such as: supply chain management, process architecture (layout), metrics, material flow discipline, inventory management, key performance metrics, use of IT, employee involvement, quality systems, equipment maintenance, scheduling, links between product design and manufacturing, and other factors that come to mind. Lean system is a quest in maximizing the efficiency through the elimination of wastage in the manufacturing process in a business organization. The key components of a lean system are often in contrast in a lean manufacturing system. In a lean system, supply chain management is very much important as the flow of goods within the organization is highly organized. Close collaboration with suppliers through the use of IT is emphasized in a lean system. In a traditional system, this is not practiced. In a lean system, plant and equipment layout is by product flow using cels or lines for product families. In traditional system, plant and equipment layout is by department function. Inventory levels and turnaround are closely monitored in a lean system where inventory levels are kept as low as possible while turnaround is high. The contrast is applicable to traditional system. In a traditional system, employee input into how operation is performed is low. In a lean system, employee empowerment is high as they are given the responsibility for identifying and implementing improvements. In the traditional system, there is no flexibility in the manufacturing schedule as manufacturing is difficult to handle and hard to adjust. Traditionally, production schedules are based on forecast. In the lean system, production is scheduled by customer orders which mean that product is pulled through the facility. In a traditional manufacturing system, quality is assured through lot sampling while in the lean system, quality is assured 100% at the production source. 4. What implementation challenges has Esterline faced on it’s “lean journey”? How did it overcome them? What challenges would you face or have you faced, in attempting to implement lean concepts (please add here from you own views and opinion).? Are there cultural and regional factors we should consider in adapting lean approaches? The implementation of a lean manufacturing system in the Enterprise Technologies has been generally smooth. The business organization has established employee workgroups, performance measures, support activities, and monitors the results of development efforts closely. I believe that one of the biggest challenges in implementing a lean system in a traditional business organization is the resistance among employees who have become comfortable in the current system. It should be noted that the shift to this manufacturing system also represent a change in the company’s culture. Another is overcoming the culture of high power distance in some countries. Some race has this innate perception that subordinates should not be empowered and be given much discretion in the workplace. It is also a challenge to determine which concepts are applicable to a business organization. Other stakeholders like suppliers and customers might not be in favor of the new system. 5. Do you agree with Bob Cremin’s view of the role of IT in Esterline’s lean manufacturing implementation? Why or why not? I believe that IT has a huge role in the implementation of Esterline’s lean manufacturing thus, I strongly disagree with Cremin’s view that IT only complicates manufacturing processes. With the real world example of business organizations who have shifted from traditional to lean, IT has been very instrumental. IT helps the company to maintain accuracy, speeds up processes, and generally boosts manufacturing efficiency. I think Cremin has just got used to the currently installed processes, that’s why he’s very close minded with the establishment of an IT system which will help Esterline in its growth prospects. 6. What advice do you have for Bob Cremin taking Esterline ito its next stage of growth as a multi-billion company? How will lean and IT help? Bob Cremin should first change his perspective and his viewpoint about IT recognizing that it can be very instrumental in taking the company further especially in this global era where technology plays a great role in companies’ operations. It should be noted that as there is no “one size fits all” IT which can be applied to the company’s various business units, Esterline technologies should invest in determining the specific IT packages which suits the individual units. In its Korry plant, Esterline will be more profitable if it chooses to outsource fabrication to lower cost producers like China. Should Esterline opt to do this, it will rid itself of the complicacies of the fabrication process, save on costs, and focus on its other core processes. It is also recommended that lean methods and systems be employed in the administrative department in order to cut costs. Korry has been incurring large costs because of these back office processes, even more than manufacturing. The company should also pursue closer strategic partnerships with its suppliers and customers through the use of an interface where it can place orders to each suppliers and where customers can directly place order real time. This will further support its quest of eliminating wastage in the organization. Closer ties and strategic partnerships will reduce lead time as well as help Esterline acquire products as they are need and manufacture orders as they arise. Read More