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How Multinationals Stay Lean

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It’s safe to say that Kasra Ferdows hates waste.

The Georgetown McDonough professor and Heisley Family Chair of Global Manufacturing has spent more than three decades studying and consulting with multinational corporations. He focuses on lean production systems, manufacturing principles, and techniques that increase productivity and profits by eliminating waste in activities at factories and throughout supply chains.

“Companies constantly must be thinking about how to reduce waste,” Ferdows insists. “Lean brings together certain principles that are essentially new organizational routines that everyone should do. These days, you can hardly find any company not doing lean — from heavy manufacturing to health care — but it’s a question of how serious they are and how much energy they are putting toward it.”

Ferdows has worked with numerous companies, in­cluding Apple, Eli Lilly, and General Electric. Recently, he and Torbjørn Netland, a senior researcher at the Norwegian research organization SINTEF who spent a year at ­Georgetown McDonough on a Fulbright­ ­scholarship, conducted an exhaustive lean-production study with The Volvo Group.

Headquartered in Gothenburg, Sweden, the maker of heavy vehicles — trucks, buses, and construction equipment (it sold Volvo Cars in 1999) — introduced the Volvo Production System (VPS) in 2007 and since has been implementing it in its 67 factories in 19 countries. The two examined the history of VPS, visited 44 plants, and interviewed 200 managers, Ferdows reports. The study’s findings were published in the June issue of MIT Sloan Management Review. Another paper based on this research was the finalist for the 2014 Applied Research Competition of Production and Operations Management Society.

"Lean brings together certain principles that are essentially new organizational routines that everyone should do."

Their research revealed four distinct stages of change in the rate of performance improvement, as well as recommendations for senior managers involved in lean implementation. It offers management lessons that apply not only to manufacturers, but also to the growing number of organizations using lean systems.

Stage 1: Beginner
The rate of improvement is low at the start, but grows gradually. There may be resistance from employees in adopting new methods and principles, so senior managers’ roles are critical. “They should remain active and visible in promoting the lean system,” Ferdows says. “That might mean allocating funds for improvement projects or assigning dedicated implementation teams. They must demonstrate their personal commitment.”

Stage 2: In Transition
The rate of change is high and growing as the company introduces a new culture of continuous performance improvement. Completing simple projects promotes buy-in among employees. “Yet management must avoid complacency at this stage, and certainly not interpret increased productivity as a reason to lay off workers or middle managers. Senior managers should in fact set significantly higher targets that will boost morale and build momentum.”

Stage 3: Advanced
The rate of improvement remains high, but begins to decrease. Projects that drive change require more resources and deeper management commitment. “Upper management must be aware of that slower rate while continuing to allocate sufficient resources to carry out increasingly complex projects. They should empower middle managers to initiate and execute their own improvement projects.”

Stage 4: Cutting Edge
The rate of improvement is low and grows at a decreasing rate because the new systems have been widely implemented and projects have become bigger and more expensive. “Senior managers may question the wisdom of making such investments, yet must realize that the benefits could create significant advantages to the company, both internally and externally.”

While he continues to examine lean production systems, Ferdows also is incorporating the concept in his classroom curriculum. “I’m going to assign the Volvo study to one of my GEMBA classes that I teach in Brazil,” he says, referring to the Georgetown-ESADE Global Executive MBA program. Appropriately, he’s not wasting any opportunity to share his knowledge.

Bob Woods

 

Published in Georgetown Business magazine, Fall 2014