Faced with the massive disruptions, manufacturers have done their best to rise to the occasion with ingenuity, creativity, and resourcefulness.
But here's a takeaway that's worth underlining: A lot of the resilience that allowed manufacturers to survive these shocks was thanks to the lean manufacturing processes and technologies that many companies already had in place — which gave them the manoeuvrability they needed to turn on a dime, and the intelligence to act on the key signals from both customers and suppliers to determine the best next steps to take.
In the wake of COVID and lingering supply chain shocks, some have wondered whether Lean manufacturing process is still the smartest strategy. Could Lean manufacturing processes have left manufacturers more vulnerable, with too little stock to weather spikes in demand, and overly dependent on distant suppliers?
These are reasonable questions to ask — and there's no doubt manufacturers can adjust, including having more safety stock on hand, for example, or developing sources of materials closer to home.
But in general, Lean manufacturing process is still the lodestar for charting a course that's future proof. After all, the ability to respond to unpredictable circumstances – or resilience – is at the heart of the Lean philosophy.
And in the current environment, it’s the combination of Lean manufacturing principles with Industry 4.0 technologies that forms the strongest recipe for success. In fact, a recent annual survey by McKinsey found that a key factor in determining how successful manufacturing companies were at navigating the rough waters of the pandemic was whether they had already embraced Industry 4.0. Companies that had already adopted Industry 4.0 technologies "found themselves better positioned to respond to the crisis."
To understand why this is the case, let's start with a little background. The transformative insights that sprang from an earlier era of unpredictability and disruption for manufacturers can help light the path forward.
The philosophy that eventually came to be known as Lean manufacturing began to flower in the 1930s and 40s, with the development of the Toyota Production System.
In post-World War II Japan, manufacturers were dealing with a scarcity of resources, cash and space. Manufacturers needed a system that was flexible and responsive to changing circumstances. Eliminating waste and inconsistency was critical. Part of the answer turned out to be smaller factories, where only the materials that were needed for current work were kept on hand. Keeping inventory levels low and turning around resources quickly kept the flow moving.
Originally known as Just-In-Time Production (JIT), and eventually rebranded as Lean Manufacturing in the late 80s and 90s, these ideas gradually caught on and spread.
In 1996, in their book “Lean Thinking,” James Womack and Daniel Jones defined Lean as "a way to do more with less and less" and identified five key principles:
One of the key inspirations for the Toyota Production System was the American supermarket. As shoppers take just the right number of items from the shelves as they need them, the empty shelf becomes the trigger to restock a given item with just the right amount of product to replenish.
Toyota realized that this approach could work in a factory, as well. This light-bulb moment eventually led to the creation of the Kanban system, where physical cards were used as messages to track and manage production within a factory.
Kanban is an example of a pull system, where signals of demand determine the amount of supply needed and help regulate the flow of production. In contrast to push systems, where products are produced — sometimes in greater quantities than the market actually needs or wants — and then pushed through the channel, a pull system is more agile and less wasteful.
Of course, in the 21st century, Kanban has gone digital like everything else and is incorporated into modern ERP software. But its essence remains the same.
Call it the Power of the Pull: The elegance of this approach is more relevant than ever in a post-COVID world, where real-time responsiveness to customer demand is a critical advantage. Pull-based systems allow manufacturers to make decisions based on actual demand instead of projections and whittle the time it takes to react when the winds shift.
Here are a few examples of how Industry 4.0 technologies can supercharge manufacturers' ability to pull through in tough times by using the Power of the Pull. — Consider Lean manufacturing principles like those below for making value flow without interruption, allowing the customer to pull value from the producer, and managing toward perfection.
Much of this can be accomplished using Microsoft's Dynamics 365 Supply Chain Management, which provides an array of tools for managing and refining Lean production processes — including the ability to model manufacturing and logistics processes as production flows, and to set up and manage the rules for a Lean manufacturing pull system using tools like Kanban. Among other things, its features allow you to:
Digital Twins are another cutting-edge technology that can be deployed for valuable insights into decision-making. For example, you might create a digital twin of your supply chain and then test it with a variety of scenarios for unexpected events, using what you learn to develop solid strategies for responding to crises.
Digital Twins can also allow for faster and more efficient product development, so you can respond more quickly to new customer demands and market opportunities. By creating digital twins of existing products, you can access data and insights that enable a more-or-less continuous cycle of product improvement.
For more on this, check out Microsoft's Azure Digital Twins, which is available as part of its suite of Azure offerings.