ThisreportcontainsinformationthatisconfidentialandproprietarytoMcKinsey&CompanyandissolelyfortheuseofMcKinsey&Companypersonnel.Nopartofitmaybeused,circulated,quoted,orreproducedfordistributionoutsideMcKinsey&Company.Ifyouarenottheintendedrecipientofthisreport,youareherebynotifiedthattheuse,circulation,quoting,orreproducingofthisreportisstrictlyprohibitedandmaybeunlawful.DevelopingaNextGenerationApproachtoImprovingPerformance:LeaninMetalsandMiningCONFIDENTIALRevisedFebruary17,2000PRACTICERESEARCHKEYINSIGHTS1.LeanappliesinMetals&Mining!2.Significantbenefits•UptodoubleROI•Newvaluepropositionandtruedifferentiation3.Mainsourcesofbreakthrough•Variabilityreductionacrossseparatestepsofvaluechain•Improvedflowandequipmentavailability•Smallerlotsizesanddecreasedinventories•Performancefocusandparticipation4.McKinseyhasdemonstrateditsabilitytohelpclientsapplyingleaninMetals&MiningOVERVIEWWhatarewetalkingabout:whatislean?Whyshouldourclientscare:whatarethebenefits?Whatdoesitlooklike?Howcanourclientsapplythis?LEANTHINKINGASASYSTEMLEANTHINKINGASASYSTEM“TheMachinethatChangedtheWorld”“TheMachinethatChangedtheWorld”MITresearcherscoinedtheterm“leanmanufacturing”inthis1990booktodescribetheToyotaProductionSystem“ThisisthemanufacturingsystemdevelopedbyToyotawhichpursuesoptimumstreamliningthroughouttheentiresystemthroughthethorougheliminationofMuda(waste),andaimstobuildqualityinatthemanufacturingprocesswhilerecognizingtheprincipleofcostreduction.Italsoincludesalltheaccompanyingtechnologynecessarytoaccomplishthoseaims”TaichiiOhno8KINDSOFWASTE–ANYTHINGTHATDOESNOTADDVALUE1.Overproduction2.Transportation3.Inventory4.Motion5.Rework6.Process7.Waiting8.IntellectTypeofwasteDefinitionProducingtoomuchortoosoonAnynonessentialtransportationwasteAnymorethanminimumrequiredAnymotionthatdoesnotaddvalueAnyrepairOverprocessingWaitingforanythingFailuretoutilizetalentExampleProcessingcustomerorderstooearly,buildingtoomuchinventoryMovingproductmultipletimesbetweenstoragelocationsExcessWIPinventorybetweenmillsSearchingforproductthroughouttheplanttoschedulefornextprocessRepicklingcoilstoeliminatestreaksRerunningproductthroughreducingmillmorethannecessarySlowchangeoversNoprocess,time,orstructuretoengageemployeesinconstructiveproblemsolving“Whileitsbusinessesareverysolid,itisDanaher’ssuperiormanagementsystemthathasproducedsuchspectacularresultsyearinandyearoutandgivesthecompanyitssustainablecompetitiveadvantage”LehmanBrothersJuly1998DollarsTOTALRETURNTOSHAREHOLDERSFORSAMPLELEANCOMPANIESValueof$100invested5yearsago“FirstCompanytowinMalcolmBaldridge’sNationalQualityAwardtwiceintheaward’s11yearhistory”QualityMagazineApril,1999“OneofIndustryWeekMagazine’sBestAmericanPlants”IndustryWeekOctober19,1998“AftertheAlcoaProductionSystemwasexplainedtoGoldmanSachs,theyweresoimpressedthattheyimmediatelyupgradedAlcoastock.APSgivesAlcoaanadvantagecompetitorswouldbehard-pressedtomatch”KnightRidderAugust13,1999“’Tier1’status(is)theHolyGrail.Today,DanaiseitherTier1orTier2inmostmarkets”Ward’sAutoWorldMay1997“Danarecentlypaiditsshareholdersthe240thconsecutivedividendsince1936”IndustryWeekMarch2,1998AlcoaAluminumcompetitors234113Dana155135S&P1500AutopartsDanaherCompetitors292575SolectronS&P1500ElectricalCom-ponentIndex1,568399PRINCIPLESOFLEANPRODUCTIONSpecificproductswithspecificcapabilitiesofferedatspecific...
