'Lean' Manufacturing Takes Root in U.S.

A century after Henry Ford developed the assembly line production method for the manufacture of Model-T Fords, a Japanese automaker has pioneered the next evolution on the concept – and begun a revolution that is quietly spreading beyond the business world.

It’s called “lean” manufacturing, and analysts say it enables managers to reduce redundancy, increase output and save capital that can be used to hire more workers.

Championed by Toyota in recent decades, the concept centers on bringing together into one workspace all employees associated with a given project – designers, suppliers, even sales and marketing people – and delivering the final product as close as possible to the point of sale. This is known as the “just in time” concept. The technique also places heavy emphasis on keeping the inventories low.

“If you take the Toyota definition, it's really a very holistic system of people, equipment and processes,” said Jeffrey Liker, professor of industrial and operations engineering at the University of Michigan. “And the result is to be competitive by continually reducing the price of goods, giving your customer more for less and developing your employees so they can continuously improve the system.”

General Electric has estimated that its adoption of “lean” techniques has enabled the company to shave up to four direct labor hours, worth about $60, off every refrigerator the company manufactures.

Vice President Biden recognized the company’s embrace of the practice last June when he visited a “lean” GE dishwasher plant. In Louisville, Ky., a third assembly line was retooled with lean techniques and employees operating it on two shifts. “The country that doesn't innovate stagnates,” Biden noted at the time.

Herman Miller, a furniture company based in Zeeland, Mich., has reportedly quadrupled productivity by tailoring the Toyota method to its own system.

“Production is order-driven, with direct materials and components purchased as needed to meet demand,” the company said in a 2007 financial statement. “The standard lead time for the majority of our products is 10 to 20 days. As a result, the rate of our inventory turns is high. These combined factors could cause our inventory levels to appear relatively low in relation to sales volume. ... As a result of this strategy, our manufacturing operations are largely assembly based.”

But experts caution that there are good and bad ways to attain “lean.”

“The Toyota production system – which started quite a long time ago, and there are a number of elements to it – it's actually quite complicated,” said Martin Baily, a senior fellow at the Brookings Institution who formerly served as chairman of the Council of Economic Advisers under President Clinton. “It's not just a matter of making things lean. It's also about incremental improvement. So a big part of their success has been constant improvement.”

Liker drew a contrast between companies that achieve leanness simply by slashing payroll and squeezing more productivity out of remaining workers, and those, like Toyota, that see their employees, even in lean times, as assets that appreciate over time.

“So, for example, during the recession, [Toyota] didn't lay off people, even though their sales were down by about 40 percent. And they used that time to train the people and use them for thinking of ways to reduce waste, to eliminate cost -- called kaizen in lean language. Other companies, like the suppliers, did the same thing.”

Leaders in academia, nonprofits, hospitals and even the U.S. Navy have all now embraced the lean concept, which has even been applied to the production of weapons systems.