Lean Concept on Developed Countries and Developing Countries - Case Study Example

Lean Management: Environmental and Economic Impact in the Developed and Developing Countries Introduction The 80's was a decade of change in the manufacturing industry in the United States and Europe. Japanese' 'Just-in-time' production pushed mass production and scientific management as pass. The concepts of Japanese production showed a better paradigm and were known as 'Lean Production'. The concepts of lean flowed through other industries due to its successful results and its universality was evident. If one considers that lean manufacturing is the systematic elimination of waste from all aspects of an organisation's operations, where waste is viewed as any use or loss of a resource that does not lead directly to creating the product or service a customer wants when they want it. This may further impact on growing economic aspirations of developed and developing countries, which will require fewer resources that create less environmental pollution and greenhouse gases. At the same time, these improvements in production and logistics have given consumers a growing range of higher quality products at lower prices through many different sales channels. What is the Lean Concept Federal Express' originally thought of delivering packages within 24-hours and they did. In 1983, Lens Crafters followed suit by assembling eyeglasses in one hour. Dell computers maintains it market share and profit level even when the competition is very stiff by made-to-order computers in a very short time. What is common in all of these entities The answer is Lean and its application in their respective organization. Basic principles of lean: (1) Add nothing but value (eliminate waste); (2) Center on the people who add value; (3) Flow value from demand (delay commitment) and; (3) Optimize across organization. Add nothing but value (Eliminate Waste). In Lean, it is a primary task to determine what adds value and what activities add value to a product. Then, one will be able to determine the essentials of an activity and reduce or eliminate waste. Unfortunately in any organization, nobody wants to admit that his or her job is sometimes just waste. Breakthroughs are recognized upon recognition of waste. If an activity or cost does not add value, then it should be considered as waste or if an activity; or cost can be forgone with, then it is waste. Taiichi Ohno, the executive of Toyota Production System identified several sources of waste in a manufacturing industry: Overproduction, Inventory, Extra Processing Steps, Motion, Defects, Waiting, and Transportation. Center on the people who add value. Organizations would not admit that their own people are waste at times, unless they are asked which of their employees or system adds value to their output. Unless they can identify areas where people become the value-adding system in the work place, they will not know which is essential and which is waste. The criteria to determine the people who do the work that add value: Resources, Information, Process Design Authority, and Organizational Energy. Usually in a manufacturing entity, the design of tasks is divided to the unskilled worker doing the routine tasks (manual) and the managers doing the production tasks like planning, forecasting and so on. When problems arise, the task of solving lies on the managers and not on the frontline workers who knew what went wrong. This is due to the fact that these workers are not tasked, encouraged and even involved on these matters of production dilemma. They simply asked to keep or maintain the production quota. Womack (1990) stated that a truly lean organization transfers the maximum number of tasks and responsibilities to the workers who add value and place a system for detecting or recognizing defects. In this way, it empowers people to add value to their work. It reorients human resources to become a flow of value and not a functional expert. In the production of Toyota cars, the management figured out how to reduce multiple stamping and create a single-purpose stamping. Prior to that idea, it takes a specialized machinist simply to remove or change dies from parts to parts. It resulted in reduction in cost, space and volume just to simplify the methods of changing dies and eliminated complicated machines. He transferred jobs usually done by managers and engineers and created subgroups or teams to work on problems encounter with their work. When defects are detected, the decision to stop production of cars was also given to workers instead of waiting for managers to approve. At the early days of its implementation, it can only be described as disastrous. Every now and then, production stops. Later, the problems were no longer recurring. The atmosphere among workers was no longer to hide errors but find them, expose them and as a team, solve the problem. Flow value from Demand (Delay Commitment). One of the fundamentals of lean is allow the idea of flow. As we have solved the 'add value' activity, flow should come in as rapid as possible. If flow is absent in an organization, the tendency of inventories, waste and unnecessary motion is to accumulate as waste. Flow should be pulled from demand meaning there is an actual need for the production to move rather than move production because of the forecast. Therefore delayed commitment comes in, indicative of what the customer wanted. In mass production, raw materials and supplies are purchased in anticipation of the demand coming in. But in lean, production was made at rapid rate so that it can be custom made or made to order. The result is also lean inventory. Lean distribution channel works side-by-side with lean supply chain to lean manufacturing resulting into lean system. Optimize across organization. The biggest impediment to adopting lean ideas is organizational in nature. As the individual department varies in their performance evaluation measurements, each moves away from the other departments such that the flow of products is compromised. A vivid example of a machine whose performance is measured in terms of output produced. This machine stimulates the accumulation of inventories. This accumulation of inventories would later on affect the other entities, a phenomenon known as sub-optimization. This occurs when a unit in an organization optimizes itself without taking into consideration the other units on its environment, which it operates. In human resources, sub-optimization is common because personnel are measured in terms of earned value rather than business value. Earned value is selfish. Lean Concepts on Developed Countries and Developing Countries Universal applicability of Lean concepts found its way on manufacturing and environment both in the developed and developing countries. In the shipbuilding sector in the United States, Lean production initiatives had contributed significantly in terms of competitiveness. Lesser waste and efficient operations and manufacture of ships could be attributed to the activities patterned or inspired by Lean. Because of its zero or minimum waste practices, the practices of ship manufacturing corroborates with the findings that there is significant impact on environment improvement (United States: EPA, 2004). Industry Week Magazine (2004) reported that US companies using Lean in their management reported a 7% savings on cost of goods sold. Because developing countries is rich in unskilled and semi-skilled labor, the use of lean concepts in these areas may likely burst the unemployment bubble. Transfer of jobs from high paying white collar jobs to the blue collared jobs are now observed as trends. Workers now recognized the value of zero to minimal waste in developing countries as propagated by Lean would lessen the external industrial pollutants. Private multinationals enforce creativity and innovation not only in the developed countries but in the developing countries through the electronic media. The evolution of workforce through information technology coupled with Lean management will be a sunrise of growth again for the developing worlds. Vietnam is adapting to Lean principles, in fact they have established a guideline in using lean for investors who wish to set-up their businesses in their country. Vietnam's Mekong Capital's Introduction to Lean Manufacturing (2004) realigns its goals and objectives with Lean such as: reduction of wastage and defects, reduced cycle times for industries, low level of inventories, increased labor productivity, optimized utilization of space, flexibility and output oriented. Developing countries follows the western countries in this age of borderless economies to survive competition through reduction in costs and become environmentally compliant organization. Reduction in wastage alone is seen as realignment in the reduction of costs and pollution. On January 2005, the quota for export of garments and textiles had been removed such that the developing countries like Bangladesh and China become vulnerable. The clothing industry was projected to become service-oriented industry. Although China's garments and textiles were seen 33% higher on prices compared to Bangladesh, it was expected that international buyers would flood Bangladesh. But the opposite had been observed. China's garment industry's motto had been "You want it We will make it!, You need it We have it or if not, we can find it!"(International Trade Press Release, 2005). Lean Production could be seen more on the positive outlook for developed countries. Its impact on the developing countries is yet to be seen. In the examples presented, developing countries like China and Vietnam is seen to leap through it. Industry-wise, these countries could compete with the Western Corporations. Human resources had been an advantage of developing countries over the developed countries due to the cheap and skilled labor supply. China and Philippines are two major suppliers of labor in the international community. These countries could provide skilled labor at home and abroad. Many US companies and European companies employ contract labor through Internet. The unskilled labor no longer occupies the niche for contract labor. Skilled labor like clerical and other routine jobs are being passed to contracting companies in order to unload businesses of these burdens. In this area of labor market, developing countries are seen to be promising partners and gainers in the Lean Production concepts. But a backside of this could be reduction in the industries as it pinpoints only the value-adding activities will be retained, maximize human resource hour per hour rather than output and motion efficiency. Zero waste corroborates with the environmental laws and optimized production scheme. China today leads in industrial production of cheap goods for export to United States. Staggering pollution had been recorded in China due to these fast growing industries. China had been reported to increase its economy by 9% per year. A slow down may be projected but increase in quality may be attained also. In the United States, Washington's Department of Ecology realized the cost of handling, sorting, tracking and disposing hazardous wastes. With the advent of Lean production in their system, they were able to free up their resources. They found that the principles on which Lean operates is economically sensible (Shoptalk, 2004). Industries involved in hazardous waste externalities could learn from government agencies. Washington's Department of Ecology had created guidelines on waste management and prevention. Emiliani (2006) reported that when Lean principles are applied to government services, one would think of privatization. A 'small government' is the answer. Turning over government services to private sector would be easy but he does not agree. Privatization does not reflect decrease in wastage but simply a transfer of waste production from government to private. That is not lean management. Government may reduce cost of its operation and increase efficiency. The sources of these are: 1) lower benefits and wages to private sector employees due to subcontracting of private companies from countries with lower wages 2) measuring unit cost savings rather than total cost savings in the operation. Examples of these are the postal services of many developed and developing countries. The universal situation prior to Lean management: 1) reduction in the volume of first class mails; 2) Low worker productivity; 3) high cost in maintenance; 4) financial losses; 5) greater customer expectations. Developing countries seek also to find the efficient processes for them to optimize their limited resources: their model - the developed countries particularly the United States. They opt to privatize government services too like power, water distribution and as mentioned postal services. If developed countries had employed Lean management earlier, this would have been followed also by the developing countries. Developed countries started to privatize its postal industry in response to these problems. Only in 1996 did Canada applied the Lean techniques and achieved remarkable results. US Postal focused on cost pressures rather than standardization and innovation. In Japan, it is only in 2007 that the privatization has effected (Emiliani, 2006). We can only surmise how efficient is sending documents, letters and even money domestic or international. Government services may benefit from Lean principles when managed correctly under local or federal/national governments. It could create an understanding of everyone's existence in the organization. It could provide a clearer and more consistent path to its goals; efficient information dissemination; prompt and correct decision; lesser errors; openly interacting with people and learning from people; provide quality services to taxpayers. Conclusion Its implication to the economy both in the developed and developing country is universal. The difference may lie on the type of culture and political set-up that exist. Efficiency and sense of purpose in government service, politicians and employees, would certainly improve economic performance due to better legislation and execution of laws, better and efficient government services like taxation and infrastructure development. The economic impact of Lean however are not well documented country-wise either developing or developed country. This is due to the fact that Lean is mostly practiced by private companies whose management is small, efficient, profit and results oriented or motivated. However, a correlation with the economic performance as well as the industries operating within the economy practicing Lean has to be studied and explored. We can only site few examples but extensive and convincing data may not be available at the moment. Individual industries practicing Lean Management could already attest to the success of its business. Impacts on the environment are documented in many industries in the United States, Japan, Canada and other developed countries. Industries practicing Lean management had better working environment, lesser waste resulting into lesser emission of pollutants whether gaseous, solid or liquids. Reduction in the toxicity of emission, improved productivity and concrete definition and recognition of waste are products of Lean management. Even in software production, time and motion, energy conservation, and human resource motivation were improved. Environmentally, the sound and sustainable practices of Lean could revive damage of industry to its environment. Unknowingly, business entities are already practicing corporate social responsibility. It has taken into account that their businesses do not exist in vacuum but interacts with environment, society and governments. Such that profiteering at any cost is costly. References Emiliani, Bob. 2006. "Lean Government: Crazy Dream or Absolute Neccessity" Superfactory July 2006. http://www.superfactory.com/articles/Emiliani_lean_gov.htm Exporting Clothing - Let Sellers Beware. International Trade Center. 05 October 2005. Press Release. Geneva. http://www.intracen.org Industry Week Magazine. 2004. http://www .industryweek.com/ currentarticles/ asp/articles.asparticleid=1589 Mekong Capital's Introduction to Lean Manufacturing. 2004. Mekong Capital. United States. 2004. Shoptalk: Go "Lean" for Profit and Pollution Prevention. Washington State Department of Ecology. Volume 14, No.3. Pub #04-04003. United States. 2004. EPA: The business case for connecting: Lean and Environment. http://www.epa.gov/sectors/shipbuildings/ems.html Womack, James, Daniel T. Jones and Daniel Roos. 1990. Them Machine That Changed the World: The Story of Lean Production. New York: Rawson and Associates; 1990. Read More