Getting lean with a LASER's precision
William Atkinson -- Purchasing, 6/3/2004 2:00:00 AM
When Bausch & Lomb Pharmaceuticals (Rochester, N.Y) was looking to better manage costs four years ago, the company decided to focus on inventory reduction strategies. By the time Quentin L. Roach arrived at the company in May 2002 as head of corporate, commercial and cataract/refractive purchasing, its inventory reduction initiative was already well underway. One year later, when Roach was named to his current position as vice president, global supply chain, the company had succeeded in picking most of the low-hanging fruit from the inventory management program and decided it was time to dig deeper.
"At that time, our executive vice president embarked on an initiative involving lean manufacturing strategies as a way to continue managing costs better," says Roach. The lean initiative was designed to improve the company's operations and inventory positions, both from a finished goods and work-in-process standpoint.
The program was dubbed LASER (Lean Agile Supply chain for Excellent Results) and began as an initiative within the global supply chain organization to introduce lean manufacturing concepts, techniques and skills into the organization. The goal was to reduce cycle times in global inventory to prevent overproduction, stockpiling, and prevent shortages. The initiative leveraged forecast data to prepare for demand and supply variability, which would, in turn, reduce idle capacity within the manufacturing network and ensure a balanced inventory, leveraging optimal distribution for faster cycle turns. It would also help identify appropriate levels of safety stock, and prioritize mission-critical products into capacity management and reduction plans.
"A year ago, we began training our employees on the concepts of lean manufacturing," explains Roach. "We also set up pilot projects at our key manufacturing facilities to use lean manufacturing techniques to improve our inventory position and the rest of our value chain for production, including suppliers, operations, and distribution centers. We engaged an outside consulting firm to help us train our people and act as a facilitator of our initial lean manufacturing pilot projects."
The company rolled the LASER program out globally, but segmented its 27 manufacturing locations around the world into two tiers, one for training and the other deployment. All 12 of the first tier (key) facilities and about half of the 15 facilities in the second tier have now been through the training and pilot programs.
"The results of the pilot projects are still being assessed, but we know that they have met or exceeded our original goals and objectives," says Roach. "As a result, we are now in the process of implementing projects that will impact velocity and throughput. We have also seen a dramatic decrease in inventory levels, cutting inventory levels in half. This includes raw material components, works in process, and finished goods inventories."
Bausch & Lomb management knew that introducing lean manufacturing into its international organization would be a formidable task for two primary reasons. The first challenge was the translation and language barriers in implementing tools and training processes around the world. "Many of the management teams speak English, but not all of the employees do," explains Roach. "As such, we needed to provide all of the training tools and other documentation in their native languages." The other challenge was just the sheer volume of training that needed to occur, given the size of the company.
Keys to success
To better manage these challenges, Bausch & Lomb identified a number of keys to success, the first of which was to begin small. While there are several components to a lean manufacturing strategy, Bausch & Lomb elected to implement lean strategies one at a time to avoid biting off more than it could chew and becoming overwhelmed.
The first lean component selected was 5S, a methodology for organizing, cleaning, developing and sustaining a productive work environment. The individual components of the 5S plan are: Sort (get rid of clutter), set in order (organize work area), shine (clean the work area), standardize (make all work areas similar in terms of procedures) and sustain (establish schedules and methods for continued sorting and cleaning). 5S is designed to improve on-time delivery, quality, productivity, and safety; and reduce leadtimes, waste, inventory, changeover times and equipment downtime.
The next component involved identifying and training site champions to ultimately manage all of the lean activities. These people serve as the point for training, pilot project implementation, and questions.
Another important key to success has been creating clear, objective, and aggressive, but realistic, metrics to measure progress. "Once everyone knows what is expected, we are good at challenging ourselves to reach those goals," Roach explains.
A final key has been good communication on what LASER means and how the company is making progress to keep stakeholders engaged. The company developed an intranet site that loads inventory reduction strategies and cycle time reductions. "More importantly, the site contains 'lessons learned' and best practice documentation that can be shared globally," adds Roach.
Results
To date, the company has been able to reduce finished goods and works-in-progress inventory (measured in weeks on hand) throughout its entire supply chain including factories, distribution centers, and even consigned material at customer locations.
For example, in terms of quality, from January, 2003 to April, 2004, the parts-per-million measurement of incoming supplier quality performance in its U.S. Surgical Division has been cut by 67%, a direct result of lean manufacturing initiatives as well as quality initiatives entered into with suppliers. In terms of leadtimes, one of its medical equipment facilities has taken a product that once had a 29-day cycle time and has been able to reduce that to one week.
"We have measured our performance in terms of the number of sites that have adopted the strategies, and also the reduction of cycle time or velocity of products through the facilities," Roach says. Currently, the company is starting to implement some cost savings measures (actual dollars saved) via improved quality, reduced scrap levels, leadtime reductions, etc. "Over time, we will begin to look at some other lean manufacturing tools, such as first-time quality levels, scrap levels, floor space reduction calculations, etc., and then decide which ones we want to adopt."
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