Tuesday, 23 September 2014

Bring back, Lean out, and Serve: How a Lean transformation, servitization and reshoring creates competitiveness

This blog and it’s sequel are a much shortened version of an article published in the September ’14 edition of the Lean Manufacturing Journal. 

The article explores the reshoring of production out of low labour cost sites to a range of Western countries and introduces the servitization of manufacturing companies to deliver advanced services, one form of servitization.  It is seen as a way to competitively address customer’s needs beyond product purchase and so support business growth. It also explains how we can use lean tools to deliver both changes.

What is Servitization and its link to Lean?

An excellent definition of servitization is provided by Baines and Lightfoot of Aston University in their book Made to Serve Servitization is a term given to a transformation. It is about manufacturers increasingly offering services integrated with their products. Of these, some manufacturers choose to servitize by offering an extensive portfolio of relatively conventional services, while others move to deliver advanced services.” (ref Made to Serve,  Baines and Lightfoot, Wiley 2013)

The large players that have embraced this in recent years and grabbed the headlines include Rolls Royce, Caterpillar and Alstom. However a number of SMEs have used it as a way to differentiate themselves from their competition.

I see Servitization as requiring a client to really understand their customers needs and maybe even their customers’ customers’ needs and finding the best way to meet them. This is Value Steam Mapping to a level of depth that goes far beyond delivering products and information, further even than providing spares and repairs. (Refer to Investment Stream Mapping in previous blog posts). Starting from that point and deciding how best to deliver what products and services can lead a client to a true transformation. The aims of that transformation are to provide a competitive offering, reduce wasted resources over the cycle of use, and promote growth.

Reshoring the lean way

Reshoring or onshoring is the process of bringing back production to your “home” country, the opposite of offshoring. The drive to move manufacturing to the Far East, China and India in particular, it is argued by some, being reversed in some cases. The motivations for such a phenomenon are many. Let’s look at a few.

First there is the undeniable stretch in the length of the supply chain from production to customers, with all the issues we know that entails. De-bugging product introduction and new technology has often proven to be costly across time zones and adding to the known risks of sharing sensitive Intellectual property.

Second the increase in off shore labour rates and the cost of transporting goods across the oceans and the pressure of green miles have made these remote sites less competitive.

The decision making process to bring back a manufacturing process may in some ways be more complex and challenging than sending it out there.

That new process does not need to match the existing. The phrase “botshoring” has entered the language, recognizing that the return of a process can be combined with automation or robotics to minimize the labour cost element, which is probably why it went east in the first place!

The transformation, there’s that word again, therefore of your manufacturing and supply chain is therefore a set of decisions about not just where you will produce but also how. How might you invest in what type of capital equipment, how will you treat the reduction of supply chain inventory, what might you do with the reduction in headcount required by the new process, and what might you do with the technical and support staff that were liaising with the off shore plants?


That set of decisions, and the process of delivering them should be an ideal workspace for a lean approach, reducing waste, focusing on right first time, reducing packages of work to minimize lead-times of the transfer all come to mind. These will all be relevant whether a company is a Tier 1 or Tier n supplier, Business to Business or Business to consumer.

Next Blogpost: So, Reshore and Servitize?
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