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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