The Demerger Example - Lean Manufacturing at Work

 

The Demerger Example is a case study on the application of Lean Manufacturing principles to a manufacturing and service company. The report examines the Demerger cycle, which is a key element of Lean manufacturing and describes how this cycle should be restructured to improve quality and shorten cycle times. This company is exploring the possibilities of incorporating Lean principles into its manufacturing process to provide customer-centric manufacturing processes that meet individual customer requirements rather than having to perform generic work orders. In this paper, we present the Demerger Example and then discuss some of the advantages of Lean principles.

Lean manufacturing focuses on improving the speed and accuracy of production and eliminating waste. The Demerger example shows that Lean can not only improve quality but also speed-up the production of a product. It is based upon the theory that the entire life cycle of a product should be considered, from manufacturing until it is sold. The cycle should be maximized to produce the most quality goods at the lowest cost. By following this strategy, any company would gain the advantages of shorter cycle times, thus allowing for increased profitability.

Lean focuses on the flow of information throughout the supply chain, from raw materials to finished goods to services. This results in reduced cycle times because suppliers can meet their deadlines and get their supplies of materials or finished goods sooner than usual. When a company buys raw materials or labour and pays for production facilities, the company does not have to keep track of when these resources have been depleted. Lean emphasizes that companies should evaluate all functions of their organization to determine whether there are opportunities to cut costs and improve efficiency. In the Demerger example, the reduction of waste in the production phase of the company's process can translate directly to saving money in the form of work orders.

Because fewer work orders result in fewer hours of downtime, the company will experience less labour cost. The Demerger example also shows that when work orders are eliminated, the effect on the company's revenue stream is immediate. Eliminating unnecessary work through lean manufacturing strategies reduces the demand for raw materials, which results in lower operation and maintenance costs and a corresponding reduction in overhead expenses.

Demerger also shows how a company may make use of its direct financial resources to improve efficiency by streamlining processes and reducing cycle times. When there are fewer work orders, a company can eliminate the need for purchasing additional raw materials, freeing up cash for other uses. Because fewer work orders mean a reduced need for skilled labour, the company may establish a point system to designate skill level positions within the production and warehouse departments. This could reduce the direct costs of employing workers with a lower level of skill sets. Similarly, the use of machinery that automatically places work orders and other tasks onto a waiting list may free up cash that can be allocated to employees with a higher level of skill.

By implementing the most appropriate lean manufacturing strategies, a company has the potential to save on overhead costs, boost profit margins, and reduce the number of work orders it must handle. However, to fully utilize the potential of a Demerger example, a company must first establish and develop the right lean manufacturing culture. If a company adopts the right lean strategies early on, however, it is highly unlikely that these strategies will need to be changed as a result of current business realities. In this sense, the Demerger example proves that lean manufacturing strategies are not rigid entities that must be implemented at the onset.

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