Impact on lean implementation at Bodyline

Bodyline (Pvt) Ltd. was placed second runners-up at the CIMA Case Study Awards 2011 for its case study on the topic ‘Business Process Excellence’.

The CIMA Case Study Awards is a competition where leading corporates in a variety of industries analysed and documented the learning they gained from their past, and shared that learning with the wider business community by using the business analytical skills and knowledge of CIMA graduates within their companies.

Introduction

Due to the challenges faced by the garment manufacturing industry in Sri Lanka as a result of low cost apparel manufacturers in the world, it is now seeking options and tools to stay competitive with the challenging market conditions.

The economic growth in the country has resulted in high cost of maintenance for companies, specifically challenged in managing the operational costs of the business. Therefore, once a competitive advantage ‘price per unit’ in the industry in Sri Lanka is no longer able to attract more volumes as countries such as China, Vietnam and Bangladesh being able to offer better pricing options. Therefore, the need to differentiate has been seen as the go forward strategy where the industry is analysing ways and means of staying competitive.

With this in mind many large organisations in the country have looked at the use of Lean Manufacturing as a valuable tool to promote new strategic positioning where it’s said to be allowing being more creative in its innovations, enhancing employee motivation and still offer solutions to the brand owners at a competitive price. The concept is said to be:

(a)Providing the organisation a long term focus (looking at the big picture)

(b)Driving the change towards systematic waste elimination.

(c)Creating a unique value proposition.

(d)Fast and flexible production environment

(e)Providing a competitive advantage.

However, industry in Sri Lanka has not analysed the specific changes lean has made in day to day operations in manufacturing hence the opportunity was available to conduct a formal research study to reveal the details behind the changes caused by lean implementation.

The industry of apparel exports in Sri Lanka is of utmost importance to the economy as a significant source of foreign currency inflows whist maintaining a high rank in provision of employment. Today, this competitive strength has not been able to sustain the total business where the industry continues in putting further price pressure for better quality and innovations.

The reality in Sri Lanka had been that the total manufacturing base of 600 apparel factories five years back has now reduced to 200 factories who had sustained the dynamics in the environment. Therefore it’s vital that the existing players in the industry focus on tools such as lean to create process excellence hence the case study become important for the country.

Objectives

There are two main areas of focus which were selected by concentrating on the most impacted and valuable aspects of an apparel manufacturing company.

(a)Investigate the impact on operations for a garment manufacturing plant.

(b)The impact on the financial performance of the company.

We considered the global economy and its influence on the apparel manufacturing industry as macro factors. Reactions to such changes are then viewed with the objective of what organisations would embrace in staying competitive while sustaining the business. Then to evaluate the reality we collected primary data while cross checking the findings through interviews and observations.

Findings and observations

In unfolding the overall findings, theoretical concepts were critically reviewed as impacts on lean in an organisation considering the qualitative information gathered.

a.Focusing on the ‘big picture’

It is evident that the company’s overall focus on its long term existence and continue to strategise its plans to be competitive in the eyes of the brand owners. However observation was such that there are constraints which influence these decisions.

Shareholders’ influence the overall strategies with the objective of maximising share holder value in short term. It was also noticed that benefits from lean is mainly seen in operations but not in supporting functions. Speed of change has created incremental resource requirements in supporting functions even though lean has managed to control this in operational environments.

b.Systematic elimination of waste

This has lead most organisations to have benefited in operations. There is a major contribution on an organisations working capital from its raw material sourcing and stock holding. Many companies in the industry have originated from mass manufacturing hence stock holding days averaged at 85 to 65 days. With lean implementation they have managed to reduce stock holding to an average between 20 to 40 days, which creates a positive contribution towards working capital management.  The approach has resulted in changing mindsets of operational team to look at operations differently from mass production to small batch production. This leads to value stream mapping where the overall process of the organisation is mapped in order to identify non value adding processes and convert focus on creation of value.

c.Creating a unique value proposition

In order for an organisation to create a unique value proposition there should be continuous improvement and learning where upstream communication and value creation should be encouraged. The culture of learning and understanding of lean is not encouraged at all levels nor are all levels involved in creative thinking. Therefore, only a selected team (lean champions) continue to drive the thought process for change. This is a weakness in implementing lean and sustaining lean in such environments, will not be possible.

d.Fast and flexible production

With lean implementation there is a clear benefit for process speed when moving from mass production to one piece flow. Even thought one piece flow is a successful implementation in the automobile industry, one must understand that it was not practical to do so in apparel manufacturing.  Lean KPIs indicates under figure 2 confirms that implementation of lean creates speed and flexibility in production.

e.Lean: contribution to financial performance.

Theoretically elimination of waste should create incremental bottom-line at constant price points. It was noticed that price pressure from customers have been intensified even while shareholder returns were at an acceptable level.

In contrary what we observed was that formation of process wise teams resulted in incremental demand for manning and it created an imbalance workload distribution. Therefore focus should be on overall organisational value creation instead of trying to create value in specific silos.

f.Creating competitive advantage

When all levels in organisations starts focusing on learning, innovating (process and product) and continuous improvement with a mission in mind that the company should be able to learn innovate and lead in the industry. But specific outcomes were not gathered, however noticed that mission and enthusiasm to learn and lead was not seen at all levels. Theoretically this sounds acceptable, however under lean this may not lead to a learning organisation.

Learning and recommendations

We should draw attention on few critical observations when analysing the impact of lean for an organisation. The use of different tools in lean may deliver different results based on how it’s been used. Organisations should maintain focus on the overall process whilst continuous improvements are introduced for its sub processes. If not a saving on one operational improvement could lead to a backlog in overall operation resulting cost of failure.

People play a significant role in change management where they act as change agents in an organisation. Therefore involvement at all levels and educating them on the concept is vital before lean tools been put into practice. Lack of knowledge can result in misunderstanding and misinterpreting the usage whilst failing in sustaining lean culture and creating a learning organisation.  Finance feed-back on information and continues connections with operations may help the company to drive initiatives in such a way that it improves the bottom line. Disconnect between finance and operations may result in surprises at the yearend if frequent reviews are not available.

The mindset you create with the clean culture creates incremental benefit for employees of the organisation individually and operationally. The culture for problem identification rectification and error proofing enables logical problem solving which adds value.

It is recommended that an organisation consider the following points before it implements lean manufacturing:

• The leadership and the senior management should first act as change agents and align the organisation towards making benefits through lean manufacturing.
• One should be careful in coping already implemented processes of lean from one company to another and or between sub processes.
• It’s important that an organisation conducts substantial trials before rolling a change within its value change.
• Last but not least an organisation should get the full team involvement while they are empowered to make decisions and communicate suggestions for improvements. It is not the tools that makes the change but people.