What is Flexibility for Lean Manufacturing?

What is flexibility for Lean manufacturing? There’s the beginnings of a good discussion on flexibility and what it means for Lean manufacturing on the Lean blog, posted Thursday September 7th. Blogger Luke Van Dongen notes that flexibility is sometimes used interchangeably with Lean. Flexibility refers mostly to a traditional philosophy on capacity and capital equipment and Lean philosophy more on ability to respond to customer demands through reasonable customer service policies and leveled production schedules.
What is flexibility? Flexibility is the opposite of stiffness. Flexibility is the ability to expand or contract in response to pressure. Flexibility is the ability to adapt to new, different or changing requirements. Flexibility is measure of the ability of a company to respond to changes in demand. Flexibility is one of those metrics that gets added on but rarely defined in concrete terms by manufacturing executives, as in “We need to focus on quality, cost, speed, and flexibility.” Flexibility is usually snuck onto this agenda by marketing and sales folks, if the said executive is not one herself.
I’ve seen examples where flexible meant the exact opposite of Lean. A particular client had a management philosophy of being “flexible” which meant to them that they could make whatever the customer wanted, whenever they wanted. Their customer service policies and sales philosophy of “being flexible” resulted in demand swings like Figure 1. As a result they kept a certain amount of work in process in one step in their manufacturing process, from which they assembled final product according to customer specifications, on demand.
hj 1.png
Because they wanted any of their 50 assembly lines to be able to make any product any time, none of the assembly lines were particularly suited to making any product very well. Productivity was low, cross training was limited, and errors were high for some products.
Our client’s philosophy of flexibility made them very sales-driven and over the years their customers learned to change their minds at the last minute and get away with it, so the planned versus actual schedule on the shop floor fluctuated wildly. While they do a good job of flexing with customer demand changes, their supply chain struggles mightily at times. In an ideal world production capacity would be completely scalable and you respond flexibly to demand as in Figure 2, but unless your entire supply chain can do this, you will have big problems, otherwise known as the Bullwhip Effect.
hj 2.png
When you have fluctuating customer demands and you want to have a leveled schedule (heijunka) you need to either keep finished goods stock as in Figure 3 (which this company did not do) or have enough equipment capacity to be able to ride the peak waves (which this company did do). So flexibility meant lots of idle equipment and people on some days, as you can see in figure 1.
hj 3.png
Teaching Lean was tough because there was an entrenched philosophy of “flexibility” as defined by well-meaning marketing and sales people. In the case of our client there was initially a desire not to identify product families and create assembly cells with takt times and timed material delivery routes to support each cell or group of cells by product, because the management believed that they would lose their flexibility, or the ability to make anything anywhere any day for any customer. In theory this is true. If certain assembly lines were designed around processes for product family A, these cells may not be ideal if all orders in the factory were for product B the next day.
To some degree we were able to Defend with Data and demonstrate that the “all B” situation almost never happened and that 99% of the time they ran their shop inefficiently “just in case” they needed all B. When sales trumps manufacturing, and sales trains customers that they can get whatever they want, whenever they want, this is not always a good thing for manufacturing. Yet this company is very successful, so perhaps sales is king after all.
In another example of flexibility not meaning Lean, just today I was talking with Joe Jud of Gemba about the irony of the naming choice of the machines known as FMS – Flexible Manufacturing Systems. This label is typically attached to a big machine (actually a combination of machine tools, material handling equipment, computer hardware and software) that is used for metal machining. From a technology standpoint the FMS is a marvel. Load the part, push a button, remove finished part. No more unload, load, unload, load.
Machine tool salesmen friends won’t like me saying this but there’s nothing flexible that I can see about FMS from a production system standpoint, since you have one machine that does everything (as opposed to a cell with many single function machines) and the only way to scale up or down in capacity is to add or subtract the number of FMS machines. Figure 4 shows what happens when you can only make step increases in capacity by adding blocks of capacity via FMS or other means, versus by incremental capacity additions through lower cost single-function machines.
Figure 4.png
These systems aren’t cheap, so companies aren’t casually flexing the number of FMS units very often. You need a step increase in production volume to justify a new FMS. If you are a tier 1 automotive supplier relying on the marketing forecast of the automobile manufacturer in making your investment plan, cost estimation, etc. to win the business you can be left with expensive, idle, inflexible capacity since you can not scale down an FMS or move just part of it into another machining line to free up space and capacity.
Consider what would happen if the cost of a “step” addition in capacity was $10 million (“Initial Capital Investment” line) in the Figure 4 example. By the time you learned that the marketing forecast was wrong you would already be committed to selling parts costed based on a certain volume, but you’re stuck with the higher equipment depreciation costs. The business solution to this is to get better marketing information and better pricing agreements with your customer based on actual volumes, which is not easy to do if you are an automotive supplier.
The Lean solution to this is to practice Production Preparation Process (also called 3P) and design equipment that is scalable, flexible (can be quickly changed from one set up to the next and is on wheels and can be moved around to where it is needed quickly) and low cost so that the “step” additions of capacity seen in Figure 4 can be $50k or $100k capital investments to add 5% or 10% capacity rather than 100% capacity in one jump.
What is flexibility for Lean manufacturing? True flexibility should be a measure not of a machining system or an assembly department but of an entire value stream from the end customer through the supply chain and back to the end customer (from request to fulfillment) and this system’s (value stream’s) ability to deliver Every Product Every X with X being months, weeks, days, hours, etc. Planning and building capacity based on forecasts results in false economy of scale thinking, which reinforces customer behavior that volume is cheaper and lead-times are long. Being able to make only what the customer is truly buying right now is a Lean measure of flexibility.