LEAN MANUFACTURING

Have you optimised your asset care strategy?

-Ian Walsh, Partner, Argon & Co NZ It’s great to see the recent government announcements allowing additional tax deduction for new assets, which will encourage business to invest in plants and equipment to help drive productivity. These are all a step in the right direction for making New Zealand’s manufacturing sector more competitive on a global stage. With that said, any investment should be reviewed in terms of the cost and benefit, and the overall business case for making it. When I worked in Japan the approach taken was to drive efficiency and productivity until you had exhausted the potential of your existing assets. The aim was to get the absolute maximum possible out of all the equipment and space available, and only then to invest in extra capacity. This led to a relentless focus on efficiency and debottlenecking to get the most reliable, most productive assets. I remember a conversation I had with a production manager at one of these Japanese plants. He explained to me how he disliked new equipment, as “the first day was the worst day”, and it got better after that. He preferred older equipment because “we know everything about it and how to run it highly efficiently”. This is interesting to compare with more ‘Western’ approaches where we assume that new equipment is at its best on its first day and then we depreciate it, because it’s deteriorating and will only perform worse from then! The difference is that the better performing factories don’t only invest in new capital when they need capacity (or to meet an innovation need); they invest in the total asset. This includes how it is commissioned, optimising it for its role, how it is run, how it’s maintained, care for its individual parts, how people are trained to operate […]

Is your value network world class?

Over the last 40 years I have seen significant change in how manufacturing businesses compete. We have moved through the quality revolution which brought new expectations around quality and cost, to the lean revolution and associated methodologies delivering better service, value and reduced costs. Businesses then shifted their focusses onto supply chain optimisation, bringing end-to-end thinking. Their approaches moved from comparing their business models with their competitors’, to comparing their supply chains. Top performing supply chains became enabled by ERPs, and are now enabled by value networks, no longer in point-to-point structures but integrated webs of suppliers and partners delivering products and services seamlessly through a multitude of channels. Of course, the rapidly increasing deployment of AI further fuels optimisation and connectedness in these supply chains. At the root of this change in manufacturing are constantly moving market-led goalposts for how businesses better deliver what the end customer wants, when they want it, at the lowest cost possible. Understanding this value equation and then aligning their service delivery model to meet and exceed this expectation better than competition is what separates the wheat from the chaff, and industry leaders are doing this at the most competitive cost to maximise their margins. Very few, if any, businesses can do all of this by themselves. Generally, larger businesses with more scale, buying power, and connections have more capability than SMEs. However, interconnected SMEs can create highly efficient clusters which can compete with anyone and be highly agile and scalable. As we know NZ has a high proportion of SMEs and this presents both an opportunity and a risk. The opportunity is that we can create high-value clusters and that can be highly agile, integrated and capable of delivering high-value products and services through multiple channels to customers around the world. We certainly […]

No More Excuses: Manufacturers Need to Lead NZ Productivity Shift

From March issue NZ Manufacturer magazine www.nzmanufacturer.co.nz By David Altena and Rob Bull Podcast: https://www.linkedin.com/company/the-better-smb/ David Altena is Head of Growth & Partnerships | SmartSpace.ai Co-Founder | The Better SMB Podcast Rob Bull is Director & Principal Consultant at Plexus Consultant & Co-Founder & Host of The Better SMB Podcast New Zealand’s productivity crisis has dragged on for decades, waiting hasn’t worked. Our productivity lags other OECD nations, with clear consequences: stagnant wages, reduced competitiveness, declining living standards, weak business investment, an over-reliance on commodities and low-value industries. We work longer and harder, not smarter. The Treasury has called it our biggest economic challenge, yet we continue to treat it as an abstract problem rather than an urgent, business-led priority. The Numbers Don’t Lie To make any meaningful progress and catch our peers, businesses en masse must focus actively on performance improvement. Even with that level of action and momentum, it would still take three to five years before we begin seeing national productivity improvements. To achieve this, we’re not talking about “some manufacturing businesses” making incremental improvements. We need to redefine New Zealand’s economic landscape… According to Statistics NZ (2023) there are ~ 23,000 NZ manufacturing businesses. For meaningful change we need 15,000 manufacturers, or two-thirds, to make this their top priority for the next five years. Why Government Targets Won’t be Enough Our government has set ambitious targets spanning: Doubling exports Improving R&D Strengthening skills Reducing crime rates Improved healthcare Focusing on sustainability But these span every sector and shift with the political cycle. While government policy provides a foundation, it’s not enough. Business leaders must take charge. Without individual businesses improving their performance, national productivity will remain stagnant. What if prioritising productivity delivered more impact than today’s scattergun approach? Without productivity gains, even billions in […]

From Survive to Thrive: FMCG Strategies for Growth and Profitability in 2025

From NZ Manufacturer magazine, February 2025. Chris Foord, Partner, Argon & Co New Zealand As we look forward to 2025 the outlook for business and NZ are improving. Many businesses in 2024 were focused on the “survive till 2025” mindset, controlling costs and avoiding discretionary spend. Very few though forgot about the consumer/customer and the need to continue to serve, surprise and delight with excellent product, service and pricing. Most FMCG businesses will be looking to return to better margin positions in 2025 and indications are favourable that this is achievable. The inflation beast has been tamed, so interest rates have fallen and are predicted to drop further (albeit not by a huge amount) through 2025. Business sentiment is on the rebound. Consumer confidence is at its highest level for two years, which in turn improves business confidence. Whilst the signs are positive, navigating from the survival mindset to a thrive mindset doesn’t happen without intent. So, what are some helpful tips to consider as FMCG businesses transition into what should be a period of growth, and importantly how to create value and embed sustainable profitability. Here are some areas to consider and explore: Align operations to execute your business strategy Plan to drive profitable growth Unlock, deliver and celebrate quick wins Create and embed a continuous improvement culture AI: Proof of Value Align operations to execute your business strategy Operations is where the rubber hits the road for your business strategy. Are your operational teams involved in the key decisions as you launch new products, drive innovation, review range, pricing and promotional plans? If not, they should be. They operationalise strategy, plans and tactics into reality. Get them onboard early and you will realise value faster and more effectively. Plan to drive profitable growth Continue your focus on productivity. […]

Don’t change for Lean’s sake

Change for your own business growth. There is no doubt that lean thinking is driving massive changes in manufacturing processes worldwide. It lies at the heart of measurable improvements in quality, reliability and performance. What lean is not, however, is a magic formula that solves manufacturing issues in one easy application. Businesses that announce they are ‘going lean’ are missing the point. Lean principles work best when they are applied in pursuit of specific business goals rather than grand, general initiatives. In other words, use them first to tackle the main problems that stop your company getting where it wants to be. The truth of this is underlined by the work of a producer of gas turbines and generation packages. Part of a famous international engineering group, its products were excellent, its workforce skilled, and it had recently had good capital investment. So where was the problem? Quite simply, the company was risking missing out on a huge market opportunity unless it could shorten its lead times and increase throughput and productivity fast. Within the next 25 years, it is expected that the volume of new equipment installed will equal today’s entire installed capacity. The company needed a new way of manufacturing to meet its goal – a large share of an expanding market. Facing the issues The company was realistic about its current situation: its processes and performance were variable and unpredictable. It wasn’t getting the volumes it wanted nor realizing the potential of its existing capacity. There was also little visibility of information at both shopfloor and at management level. Lead times were measured in double digit months; its target was the same number in weeks. It was also carrying far too much work in progress (WIP) with idle inventory stacked up behind bottlenecks across the shopfloor. Clearly, this […]

Pragmatic steps for Lean success

In recent conversations with manufacturing and service industry leaders, lean managers discussed problems they face as they work to advance operational excellence in their organizations. The sticky issues will likely come as no surprise; they include ones most of us are already aware of and have encountered for years: Lack of real engagement with top leadership Difficulty sustaining a process focus. No consistent systems for developing talent from within. As one lean manager put it: “The main problems are internal in nature; for example, real engagement of the top levels of the organisation to support and realise the value of operational excellence; and the adoption of process thinking and structured problem solving as opposed to traditional functional approaches and cost-cutting.” Ironically, these same issues are key requirements for sustaining lean initiatives, but they were raised by managers in the context of a question about problems they encounter that fall outside the scope of their lean or operational excellence initiatives. Moreover, process focus and development of internal talent are elements that the initiative itself should be designed to address. Here are several pragmatic approaches lean leaders can follow to counteract these problems, working within the purview and scope of their improvement efforts: Re-Examine the values behind your lean efforts Typical rationales driving operational excellence initiatives include things like cost reduction, improving efficiency and effectiveness, and even propelling growth. You might figure thatÕs just obvious. Yet the impetus for your initiative can have a telling effect on the outcomes you achieve over the long term. ItÕs not a bad idea to dig a bit deeper and re-examine the big ideas that are driving you forward. Technical improvements and results can be powerful, but the ability to sustain comes from the social or cultural changes in the organization, which don’t happen quickly. While […]

Production benefits found from standing in the circle

The simple Lean Management process observation technique of Standing-in-the-Circle opens your eyes to new ways for improving the effectiveness and efficiency of your processes. Good decisions are based on thorough data collection and good data analysis. To find useful productivity improvements go Stand-in-the-Circle to see why things are as they are and look for opportunities to apply Lean methods and Lean practices. Value is always to be seen from the customer’s perspective, the customer being the person that will use the output. Value-adding are those actions and resources which create the value the customer gets from the product. Non-value-adding is everything done in a process that contributes no value for the customer, but which they are forced to pay for when they buy the product or service. It is anything the customer does not need or will not pay for. Lean manufacturing helps companies satisfy customers by improving delivery, quality and price. When an organisation has eliminated waste, reduced costs and improved quality, they gain competitive advantage through the ability to respond better and faster to customer needs and requirements. The simplest way to find opportunities for improving delivery, quality and price is to Stand-in-the-Circle in the middle of your processes. Standing in the Circle means to go to the workplace and observe for yourself what actually happens. When it is necessary to get facts about what is really done in practice (as opposed to what the procedure says is supposed to be done) the person making the observation selects a position from which to look and draws a chalk circle on the floor and then stands within it. The circle signifies that they are observing to collect facts, not to find fault or to check that people are working. It is explained by management and understood by employees that […]