Enterprise Ireland on a drive to make Irish companies adopt Lean principles

Japanese management philosophy’s core principle is creating value by reducing waste and unnecessary risk

The Japanese are renowned worldwide for their car production where the concept of the management philosophy Lean derives from. It all began at Toyota when the car manufacturers discovered a new, more efficient method of producing cars valued by customers all over the world. The principles learned at Toyota became known as Lean which is claimed can be applied to almost any business. The core principle is creating value by reducing waste and unnecessary risk.

Enterprise Ireland launched the Lean Business offer in 2010 with a view to work in partnership with its client companies to develop a sustainable competitive advantage leading to a significant increase in profitable sales, exports and employment. Since then Enterprise Ireland has supported almost 500 companies with Lean business initiatives. The offer is designed to encourage clients to adopt Lean business principles in their organisation to increase competitiveness. Lean tools and techniques help companies to address competitiveness issues within their business, building the capability of their people to identify issues and improve their operations.

It’s part of a national effort to help Irish businesses become more efficient and effective in the provision of their services and products whether for the domestic or international market which increase competitiveness. The Lean Business offer is available at three different levels lean plus, lean start and lean transform - based on the ability and level of the company.

Richard Keegan, Manager of the Competitiveness Department in Enterprise Ireland became a proponent of Lean after meeting Carl Klemm, President of the Board of Toyota Manufacturing Poland, seven years ago.

“There was a clear identification on our part (Enterprise Ireland) that if we were serious about manufacturing we would have to meet Toyota, the best manufacturers in the world.” Over the years more and more Irish managers through Enterprise Ireland, took the opportunity to visit Toyota’s facilities and see Lean in action. Keegan says the list of companies that have adopted Lean read like a “who’s who of Irish business” citing Kepak Group, Dairygold, Diageo, Openet, Glanbia, Kraft Foods and Kerry Group.

Keegan says there is an opportunity for Irish companies no matter how good they are, to improve. “Whether that’s in the office, logistic, manufacturing floor.”

Keegan admits that there was some initial scepticism when Lean was first introduced. “Lean is not about cutting to the bone, it’s about building the capabilities and capacity of people and processes. Many of the companies that adopted Lean have seen an increase in employment as they build competitiveness and free up capital.” Keegan is confident that the Lean movement will go from strength to strength as more companies extol the benefits: “We want companies to realise that they need to invest in this in the future and continue improving. It’s a marathon, not a sprint. It all goes back to continuous improvement and were always saying, what’s next.”

Keegan says that companies are making savings from adopting the Lean process.

“At Lean start level the average impact is a €76,000 saving for a €6300 investment, and the state pays 80 per cent of that which is great for small companies. On lean plus the average impact is €169,000 and at transform level, the most challenging, companies are reporting hundreds of thousands, up to millions of euro. The savings are annualised and booked to the bottom line, they will recur the next year and the year after,” says Keegan.

Carl Klemm, President of the Board of Toyota Motor Manufacturing Poland echoes that continuous improvement or ‘Kaizen’ is central to Lean. Toyota is known as the “Father of Lean” and Mr Klemm notes how Toyota benchmark themselves constantly, are always looking to see what the standards of competitors are and how well the compare against them.

Kaizen is central to everything he does Klemm explains: “Toyota is constantly working and striving to be better. One of our fundamental principles is that of challenge - trying to be better today than we were yesterday.” Klemm says that the need for competitiveness has “never been stronger” and that it is essential for companies and members to develop simultaneously.

Klemm is adamant that the market sets the price. “The customer doesn’t want to pay more for the product so all you need to do is make sure you’re costs are the minimum they can be. The more you reduce your costs the more you can free up your capital and the more you can invest. This is the cycle that any business wants; without increasing the cost to the customers they can get even more business.”

Klemm says the problem with many industries is that management try to improve everything on their own, whereas Lean inverts the power pyramid. “When you implement Lean - automatically the people who work on office or manufacturing floor suddenly find there is an expectation and some training and tools to allow them to fix some of the problems they are facing. When they fix some of the problems they reduce the costs - every time they fix a problem costs go down.”

Klemm says companies are now facing competition on a whole new scale than before, citing Korea as a new force. He says that companies need to use the power of all of the people in the workplace to increase their competitiveness in order to confront the new threats.

“Previously you would put a new line in, and engineers would spend six months taking all the problems out so it runs smoothly but with Lean you put that new line in and everyone’s fixing the problem. So then, you’re up and running in two weeks or a month or in the case of Japan one day!” says Klemm.

Hans Kostwein president of Austrian company Kostwein which has 800 employees and a planned turnover of €150 million this year, adapted Lean principles after seeing the world class manufacturing facility at Toyota. Kostwein’s philospophy is to be the best machine building contractor in the world. The company was awarded most efficient production plant in Austria and best family business in 2012. “The spirit of continuous development is never ending,” says Kostwein. A group of fifty senior managers, part of the Kostwein World Class Circle, from Austria, Germany, Sweden and Italy visited Ireland to see Lean practice in action and to discuss it with Irish companies.

Noel Hennessy, C.I Director with Lake Region Medical, a medical technology company, says they have been on the “Lean journey” for ten years. “Our transformation has been phenomenal, the bottom line is we wouldn’t be in business today only for the Lean transformation. We have seen great improvements in every key performance indicator; customer delivery, efficiency, quality, employee development and moral.”

“We became the first company in Ireland to achieve Shingo accreditation bronze award and first medical device company in Europe to do so. Shingo has been described by Business week as the Nobel Prize for operational excellence. It’s a huge benchmark because only six organisations worldwide have achieved it,” adds Hennessy.