Most manufacturing and operation individuals can state the business case for lean manufacturing quite clearly: lower costs, less inventory, and greater flexibility. While these improvements are the driving force behind the majority of all lean implementations, there are other, less quantifiable benefits that can have significant impact on the operations of a business. One of these benefits is the Reduction in Transactions.
It’s been quoted that as much as 30 to 40 percent of a company’s personnel work in daily sales and administrative functions to support the manufacturing activities. The current, non-lean roles of these individuals are to constantly monitor and update the information system with changes to the status of the manufacturing facility. There are 12 categories of transactions greatly effected by a lean manufacturing initiative:
- Accounts payable and procurement.
- Accounts receivable.
- Authorizations and sign-offs.
- Month end closing.
- Material cost posting.
- Labor and overhead cost posting.
- Inventory tracking.
- Product costing/quoting.
- Process performance tracking.
- Performance measures tracking.
- Budgeting and planning.
- Managing product profitability.
There are four phases along the transformation path from a traditional manufacturer to a lean manufacturer. Most companies are able to move to the second phase of transaction reduction simply by completing a diagnostic tool and understanding what improvements are required.
As a company progresses from a traditional mass manufacturer to a lean manufacturer, processes are stabilized, manufacturing cells are developed, and material begins to flow through the facility. The increase in material flow is due to smaller, consistent amounts of inventory continuously moving through a facility.
The inventory stability lends itself to less cycle counting and fewer transactions—plus it’s hard to count something if it doesn’t stop moving. Backflushing materials, labor, machine time, and overhead through either production reports or shipping reports gradually replace transactions.
The migration toward lean manufacturing allows companies to replace transactions with process stability. This added stability allows companies to focus on product flows and manage their environment through the use of value streams (all the operations required to process a product from raw material to finished good).
The reductions in transactions will have a very large financial impact on the Organization—an impact that will rival the improvements in the plant floor. IBI