February 2005 - The Logging and Sawmilling Journal
Canadian sawmills and added-value operations are being encouraged to think “lean” by industry research organization Forintek, and focus on reviewing overhead and material costs to achieve savings.
By Tony Kryzanowski
If your forest products business is finding it hard to compete with cheaper imports or your company is suffering because of the rising Canadian dollar, then perhaps it’s time you learned more about the system that made Toyota the most successful automobile manufacturer in the world. The system is called lean manufacturing, and Canada’s wood products research institute, Forintek, is trying to provide industry with a better understanding of this concept. Forintek’s members produce 70 per cent of Canada’s forest products.
Forintek industry advisor Phil Ginter is a strong believer in the lean manufacturing system. He says it’s hard to argue with the success that companies like Toyota and aircraft manufacturer Boeing have seen when fully implementing this manufacturing system. “Today, Toyota is the richest automaker in the world,” he says. “They have enough money in the bank to buy all three American automakers for cash. Why? Because they looked at the lean manufacturing concept in the late 1970s and ran with it.”
Lean manufacturing was developed over 30 years ago by American academic W Edward Demming, and then further developed by Toyota. Yet Ginter says no Canadian forest product manufacturers have fully implemented this highly successful approach. “We are trying to get the attention of primary lumber manufacturers right through to the value-added industries, saying to them ‘other industries are doing this and we’re not’,” says Ginter. “It’s only been in the last two years that consultants have really gone after the forest sector with respect to lean manufacturing.”
Put simply, lean manufacturing is the absolute elimination of waste in a continuous flow process that delivers products that define value in the eyes of the customer on a just-in-time basis. It is both a corporate mindset and a manufacturing method. It is an alternative to the batch-and-queue mode of operation. Tim P Mitchell, an industrial technology advisor with the National Research Council (NRC), says in his document, Principles of Lean Thinking – Tools & Techniques for Advanced Manufacturing, the batch-and-queue mode of operation “encourages large-batch processing and focuses on the efficiency of individual machines and workers.”
Alternatively, he states that lean manufacturing emphasizes optimizing and integrating systems of people, machines, materials, and facilities, which can lead to significant improvements in quality, cost, on-time delivery, and performance through continuous, one-piece flow. To help the forest industry learn more about lean manufacturing, Forintek has taken a two-pronged approach. It is presenting information sessions about the concept at seminars and workshops. It has also developed an eight-module, lean manufacturing workshop series. The first eight-week series started at the end of October in Saskatchewan, with more planned for other regions of the country.
Ginter says any business can implement and benefit from lean manufacturing concepts. “It’s applicable to any size plant because it looks at every step in your process, whether you are a $100 million operation or a $1 million operation,” he says. “It looks at eliminating waste within, and that is waste right from the sales department down to the floor sweeper in the back room, and finds ways to add more value at less cost.” According to Mitchell, a key premise of the lean manufacturing evaluation process is that if an activity or process does not add value, it is eliminated.
He points out, however, that over the past two decades, many non-lean manufacturers have mistakenly focused on reducing direct labour costs. Typically, these costs are only between five and 15 per cent of total manufacturing costs, he states. At the same time, plant overhead costs range from 30 to 40 per cent with materials making up the other 50 to 60 per cent. “Yet, continually the efforts of the manufacturing and industrial engineers have been directed at reducing labour costs—or automating them out of existence,” Mitchell writes. “The larger targets of material and overhead have not received the attention they warrant.” Lean manufacturing’s approach is to take direct aim at reducing overhead and material costs.
Ginter says lean manufacturing’s emphasis on eliminating overhead and material waste runs counter to the common excuse used by Canadian manufacturers that the main reason they can’t compete with foreign competitors is because those manufacturers benefit from the use of cheap labour. “We need to look at other areas,” he says. “If we really look at some sectors of the Japanese wood product industry, they are not using cheap labour, although there is cheap labour overseas. They have built state-of-the-art plants that would blow people’s minds away. That’s what we need to drive home. It’s far, far more than just the labour factor. It’s a mindset.”
Furthermore, he says the extra income Canadian manufacturers have gained due to Canada’s lower exchange rate when exporting products to the United States have made them complacent about adopting new manufacturing concepts that improve their ability to compete. “Throughout the 1990s we were living on the exchange rate,” he says. “That was our profit, really. We didn’t care if we were selling our products at cost. If we added on the exchange, we were making money.” Now, with a stronger Canadian dollar, and the continued uncertainty of American tariffs on Canadian softwood lumber, companies are finally waking up to the fact that in order to stay in business, they need to find new ways to remain competitive.
Ginter believes that the lean manufacturing concept offers Canadian wood product manufacturers that opportunity. By committing to lean thinking and manufacturing, Ginter says that companies can expect to experience both instantaneous and long-term results. The most immediate impact will be waste reduction. Larger gains will take two to five years. “By working hard at it for five years, I would expect to see some companies’ profits double,” says Ginter.
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