There is a problem in industry. We have gone into the 21st century with enterprises, organisations and business structures conceived and designed in the 18th and 19th centuries, to perform well in the 20th.

The principles that gave origin to industry as we know it today were conceived back in 1776 by the British economist Adam Smith, perfected by Frederick W. Taylor at the beginning of last century, and operationally deployed first by Henry Ford and then by Alfred P. Sloan, general manager of General Motors, in the 1930s. The main features of the first industrial revolution included division of labour, organisational structures based on "functions", and roles, hierarchical organisation, planning and control. This model had its heyday between the 1950s and 1960s. Unfortunately, it is still the model for much of today's industry, a model which is no longer adequate. A real breakthrough was reached in the 1980s with the famous Toyota production system - creating the revolution in manufacturing with just-in-time flow production and allied disciplines. Their common-base principles? Exactly the opposite of those preached by Smith and Taylor.

Based on localised "efficiency" associated with mass production and economies of scale, the old system overlooked or completely ignored the "fat" between "points of efficiency", around and above them. All the non-value-adding activities, such as handling, moving, transporting, storing, parking, stockpiling, controlling, inspecting, searching and idling, as well as all the non-value-adding activities in the very "points of efficiency", such as making mistakes or producing defects, machinery breaking down, idling or stopping, or lines or machines being set-up for production. There is also the fat associated with the governing structure: management waste, such as waste in supervision, control, inadequate or unnecessary planning, bureaucracy, paperwork, and in meetings.

By systematically eliminating waste and perfecting/enhancing value-adding activities, the Japanese first and then Western manufacturers achieved great successes. These include productivity improvements above 100 per cent, zero defects in the quality domain, zero breakdowns in the plant/machinery area, almost zero set-up time, tremendous reduction in lead-times and dramatically enhanced responsiveness to clients' needs and expectations, astonishing reductions in product development times, elimination of the division of labour principle, replaced by the multi-skill/multi-function principle, much higher involvement of personnel at all levels and incredibly higher levels of job satisfaction, and drastically reduced supervision.

There is a name for this new, revolutionary approach: lean manufacturing, or manufacturing with no waste (where waste is the "fat" in the system). Lean manufacturing has proved over the years to work very well: the Smith/Taylor era has been shut-down, at least in the manufacturing operations sector.

And the other industrial sectors? Unfortunately, they have been much, much slower than manufacturers.

Take the project/construction sector, for instance. This industry is in some ways not completely shifted from craft to mass production - much less to lean production. On the other hand, the industry has followed the mass production model in its extensive division of labour and hierarchy-based management. The consequences are cost overruns, delays on schedules, ultimately, waste. Nine out of 10 projects show cost overrun (of up to 50 per cent, and even more). Overrun is found in over 30 nations on five continents, and have been constant for the past 70 years.

Delays on completion are typical features of most project works. Waste is in many cases of astronomical proportions. Wasted labour can amount up to 70 per cent of the total labour content. These consequences are strictly interlinked and have a common denominator: an inadequate organisational system and an inadequate style of thinking.

The service industry and public sector are on similar lines. The level of wasted manpower is immeasurable. The level of poor service found in airlines, airports, banks, insurance companies, hospitals, hotels and any other service provider is often excessive and, unfortunately, on the increase - worldwide, with few exceptions. Banks still make mistakes and let you queue indefinitely. Insurance claims get settled (when they do get settled) after a long, painful struggle. Hospitals still feature room shortages and long waiting times for an intervention. Luggage still gets lost by airlines and delays on scheduled departures are chronic. The list could go on forever.

This is where lean thinking comes to the rescue. LT focuses on the removal of waste from the entire value chain. It aims to maximise value to clients, to eliminate waste drastically in all processes that generate value for customers, as well as eliminating or drastic re-dimensioning of all those processes and functions that do not contribute to generate value to customers. LT also aims for zero defects, errors and non-conformities.

How are these achieved? In practice: flattening of organisational structures - thorough re-engineering of the organisation "per process" and not "per function" - insertion of multi-skill/multi-function employees in value-generating processes, which they self-control and for which they are accountable - continuous, uninterrupted flow (of the necessary value-adding activities) triggered and "pulled" by the customers - continuous aim at lean excellence, by eliminating the residual, inherent or surrounding waste. This is done by deploying operationally a number of "lean" tools: for identifying the waste, measuring and mapping the waste, as well as removing it.

Obviously, disciplines are disciplines, and tools are tools. They can be learnt, and purchased. Culture cannot. Modern, industrial lean culture can only be "fabricated" in-house, within the organisation by those concerned, starting from top management.

This is the hardest and trickiest part of the transition to "lean": changing culture. Unfortunately, the Smith & Taylor heritage is very heavy. It has taken generations to digest and implement the principles of the first industrial revolution. It will take years or decades to digest those of the second one.

We'll need to transform managers into coaches, creating a new mentality where people are driven by value principles and not by "job" principles; people dedicated to reconceive, improve and perfect the processes they handle, which they can understand, and for which they are responsible; people who enjoy working and producing value, and draw satisfaction from it; people who can think: lean. This will take time.

Lean practices are being deployed in many areas other than manufacturing operations - project works, the health sector, retail sector, insurance companies, and, obviously, in all office-based processes, to mention just a few. And there are lean examples even in the public sector. The results are astonishing and very, very encouraging.

There is hope to make this world of ours function in a better, leaner, value-based way.

Carlo Scodanibbio will present a three-day workshop on July 3, 8 and 10. The Lean Enterprise is organised by the Malta Federation of Industry. For more information call the FOI directly on 2122 2074/2123 4428 or visit www.scodanibbio.com.

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