The Concept of Lean Management - Coursework Example

Lean tools Table of Contents Introduction 3 Brief background 3 Production levelling strategy adopted by Intel Corporation 4 Pull inventory control adopted by Intel Corporation 5 Implications of implementing such strategies 6 Conclusion 7 Reference List 8 Introduction The concept of lean management was introduced in automobile manufacturing companies. Automobile engineers in previous decades although were highly skilled with several abilities, their production was still inefficient and cost ineffective (Worley and Doolen, 2006). The major contributions made in the area of lean management have come from Henry Ford, the pioneer behind Ford Motor Company and Eiji Toyoda and Taiichi Ohno, creators of Toyota Motor Corporation (Krafcik, 1988). They combined the skills and knowledge possessed by master automobile engineers with efficiency and standardization of the continuing assembly line and incorporated this concept in their respective production processes (Womack, Jones and Roos, 1990). Although Lean manufacturing has several definitions, in actuality, it refers to a manufacturing process that enables systematic elimination of waste from all spheres of value stream (Worley, 2004). Some of the major practices of lean manufacturing include kanban, production levelling, pull inventory control, kaizen events and value stream mapping (Ross and Francis, 2003). These practices are associated with advantages such as, reduced manufacturing time, enhanced flexibility, reduced inventory and enhanced level of customer satisfaction (Alavi, 2003). Several companies all over the world have been adopting different practices of lean manufacturing process in order to render value stream process efficient. Two of the primary practices adopted in majority of organizations are production levelling and pull control. These two strategies will be discussed in details in accordance with their implementation in Intel Corporation. The following sections will involve a thorough analysis of production levelling and pull inventory control strategy undertaken by the company. Thereafter, implications of adopting such strategies will be discussed and finally, a conclusion will be provided. Brief background Intel Corporation has been the undisputed leader of semiconductor industry over the last decade. However, in recent past, the company has been striving hard to maintain its position due rising intensity of competition. In addition, the company has suffered a loss, in terms of depleting customer base, as competitors were able to offer greater cost benefits (The Economist, 2006). In order to be able to regain the lost position, management of Intel decided to implement strategies that would bring about improvement in company’s operational efficiencies and in turn minimize the cost. This is why the company chose to adopt production levelling and pull inventory control strategies. Production levelling strategy adopted by Intel Corporation The management at Intel identified necessity to remove the unexpected spikes in requirement for the restricted resources. In order to be able to do so, the company chose to implement a two-pronged production levelling mechanism (depicted in figure 1). This mechanism will enable the production segment to perform customary pre-emptive maintenance so as to ensure greater availability of equipments and lower downtime through impromptu maintenance. Production levelling strategy also allowed the company to ease unpredictability in the production process, thereby securing even mix of product and removing WIP bubbles (Subramaniam, 1999). Figure 1: Two pronged solution (Source: Subramaniam, 1999) Production levelling, also known as heijunka, refers to development of a ‘level schedule’ through serializing orders in a recurring manner and easing the daily changes in overall orders for the purpose of responding to continuing demand (Womack and Jones, 2013). This mechanism can be perceived as a production system that is devised to achieve a consistent and even flow of work. To be able to achieve production levelling right from initiation, it is essential for the company to identify products that can be mixed in an even manner, in order for the production process to meet the expected output. As far as Intel Corporation is concerned, it is primarily engaged in manufacturing of microprocessors and various chipsets, which are fabricated over silicon wafers with the help of several chemical processes. The processes are executed in the company’s manufacturing facility called FAB 17. Now for a wafer to be completely ready for the fabrication process, all the layers need to be incorporated in a particular sequence. Thereafter, if steady state of output of the manufacturing facility is 500 wafers on a given day, then a view of the WIP will show 500 silicon wafers in every phase of manufacture. So, through application of production level strategy, if the production is smoothened, then the company would be able to achieve an even mix of all layers in the manufacturing facility, thereby eliminating any WIP bubbles. Therefore in this case, products that can be mixed in an even manner in order to ease overall production process are the various layers that collectively form the silicon wafer. This is a highly efficient process that can be executed through implementation of production levelling strategy (Subramaniam, 1999).   Pull inventory control adopted by Intel Corporation Intel Corporation realizes that its supply chain, right mix of employees, processes, technology as well as accessibility to resources for converting components and materials into finished goods and delivering them to their customers on schedule are pivotal for attaining success (Intel Corporation, 2012). However, at the same time, the company has to make sure that its supply chain management strategies are highly cost efficient that will enable them to realize higher profits. One such strategy that has been adopted by the company is pull inventory control mechanism, which has allowed the management to lower carrying cost of inventory as well as prevent wastage of useful resources. This has been largely possible due to the idea that is followed within the pull inventory control mechanism. In the pull inventory control model, manufacturing process of products is initiated, after order is placed by the customer. Work in the pull production system is authorized on the basis of current status of the system. The pull system employed in Intel Corporation established a priori limit on the work in process on the basis of the priority of customers’ demands (Hoppman and Spearman, 2011). In practice within the organization, the pull system follows three basic principles. Firstly, pull system works on the principle that work in process is restricted within process steps and a previous process is only permitted to produce if adequate space is obtainable in input buffer of the subsequent process. Secondly, the pull inventory control mechanism works on the basis of a make-to-stock replacement system, which stores different types of resources required to meet orders of customers. When a particular variant of resource is removed from the stock in order to be used in a product, same amount of the resource is piled in. The third principle that Intel’s pull control system is based on is associated with company’s internal production logistics, where raw materials are supplied to the production line on the basis of actual demand of customers (Hoppman and Spearman, 2011). Implications of implementing such strategies By implementing production levelling strategy as lean management tool, Intel Corporation has been able to meet the rising demands of customers over a certain period of level production. The production process of the company is distributed in such a way that entire value stream becomes more efficient. Production levelling also enables the management of Intel Corporation to replenish raw materials in exact quantity, that have already been used up in production process, in order to meet unexpected demands of customers for short periods. The company has also been able to develop conventional work schedules, which help them to determine an approximate time of output delivery. Given the fact that Intel Corporation through application of production levelling strategy has been able to transmit stability over to the suppliers, level of inventory has greatly reduced, which has enabled the company to minimize its inventory carrying cost as well eliminate waste (Reyner and Fleming, 2004). Intel Corporation has also resorted to implementation of a pull inventory control model, which aimed towards manufacturing products, once orders for them are placed by customers. This helped the company to accrue several potential benefits. The company was able to enhance its responsiveness to rising demands of customers. The supply chain managers have been largely successful in reducing the level of inventories as well as minimizing extent of product obsolescence in order to cater to need of the market, which is shifting at a rapid rate (Intel Corporation, 2012). Through application of this strategy, Intel Corporation only makes products that are sufficient for fulfilling orders of customers. One of the major advantages associated with the pull strategy is that the company do not have any excess inventory. This enables them to cut down the cost of holding and storing inventories (Hunt, 2014). This is also an attribute, which is very similar to the production levelling strategy adopted by Intel Corporation. Conclusion The intensity of competition in the current business sphere is increasing at a swift pace. Companies operating in such a competitive environment are seen adopting strategies, as deemed appropriate, in order to distinguish themselves and stay ahead in the competition. This fact holds true for Intel Corporation as well, who has implemented effective lean management strategies so as to regain its position of being the undisputed leader in the semiconductor industry. A thorough analysis of different dimensions of the lean tools utilized by Intel Corporation’s supply chain managers have revealed the substantial contribution made by the production levelling and the pull inventory control processes towards enhancing performance of supply chain as well as improving overall productivity of the organization. This analysis enabled the researcher to understand the level of efficiency that lean management strategies bring upon company’s production process. The researcher could infer that implementation of production levelling and pull control strategies considerably depends upon the industry in which the organization operates and the operations that it engages in. It was understood that lean manufacturing is a complex activity and failure to adopt an appropriate strategy may jeopardize overall objective of the organization. Supply chain management cushioned by lean manufacturing process is a critical factor ensuring success for an organization. Therefore, for Intel Corporation to become the leader in the industry, management has to bring about further improvements in the two strategies, which have been discussed, so as to be capable enough to shield the organization from any potential risk exposures. Reference List Alavi, S., 2003. Leaning the right way. Manufacturing Engineer, 82(3), pp. 32-35. Hoppman, W. J., and Spearman, M. L., 2011. Factory Physics. 3rd edition. Illinois: Waveland Press. Hunt, J., 2014. Push System Vs. Pull System Inventory Control. [online] Available at: [Accessed 1 May 2014]. Intel Corporation, 2012. Transforming Intel’s Supply Chain to Meet Market Challenges. [pdf] Intel Corporation. Available at: [Accessed 1 May 2014]. Krafcik, J.F., 1988. Triumph of the lean production system. Sloan Management Review, 30(1), pp. 41-52. Reyner, A., and Fleming, K., 2004. Product & Production Leveling. [pdf] MIT. Available at: [Accessed 1 May 2014]. Subramaniam, N., 1999. Lean manufacturing in a semiconductor environment: Production Levelling. [pdf] MIT. Available at: [Accessed 1 May 2014]. The Economist, 2006. Not paranoid enough. [online] Available at: [Accessed 1 May 2014]. Womack, J. P. and Jones, D. T., 2013. Lean Thinking: Banish Waste And Create Wealth In Your Corporation. London: Simon and Schuster. Womack, J. P., Jones, D. T. and Roos, D., 1990. The Machine that Changed the World. New York: Rawson Associates. Worley, J. M. and Doolen, T. L., 2006. The role of communication and management support in a lean manufacturing implementation. Management Decision, 44(2), pp. 228-245. Worley, J., 2004. The role of sociocultural factors in a lean manufacturing implementation. [pdf] Oregon state. Available at: [Accessed 1 May 2014]. Read More