Lean Manufacturing: Outsourcing Production, Ensuring Quality, and Eliminating Waste

February 12, 2019
Abstract / Synopsis: 

Increasing costs are a stark reality for today’s cannabis manufacturer. Companies can address those increasing costs and create a more competitive marketplace by implementing and managing “lean manufacturing” practices. This tutorial offers a broad overview of lean manufacturing.

Outsourcing your production can be an excruciating experience. However, selecting a contract manufacturer (“supplier”) for your production with a strong lean culture and proven lean systems, is your best insurance for avoiding price increases. Also, it helps to ensure that your cost and quality objectives are met and will continue to be met.

There are lean programs and lean definitions, but the sole purpose of lean involves driving waste from all aspects of the business. Lean manufacturing, a Japanese philosophy, is simply the elimination of waste through continuous improvement.

Developing the Scope of Work

Planning and creating clear expectations are the key to successful outsourcing for your product’s manufacturing all the way through to the final packaging. Develop a thorough, exact set of specifications or requirements that paint a clear picture of your desired outcome. Include everything from the supplier’s vendor selection, product and packaging design, date and method of shipment, and everything in between. Milestones are critical during the supplier planning and approval phase, the launch phase, and during production. Developing the initial contract is the most important step in the outsourcing process, although it’s not the only critical step.

Values and Culture

Subcontractors may not necessarily share your values, or they may not have a culture that is conducive to continuous improvement. Your supplier evaluation should include a review of the subcontractor’s philosophy, employee morale, housekeeping, teamwork, and their commitment to continuous improvement. Underutilized human potential (the ninth form of waste) is essential to a successful outsourced project. This is often overlooked, and it encompasses the greatest opportunity for achieving production cost, quality, and delivery objectives.

Managing the Scope of Work

Buyers who have their own set of requirements or needs may negotiate your production contract. While the production, sales, and quality teams may all have different expectations or needs from that of the buyer. This is a recipe for a very difficult customer and supplier relationship. This is the time to focus on common goals to ensure that all the needs of the affected teams are met. An experienced program manager will ensure the scope of the work is clear to all parties, from the negotiation stage to completion. A competent program manager will also ensure the scope of work is met, while educating customers and suppliers of the documented agreement. You should get what you agreed to pay for! Defining that in the beginning and managing those expectations is crucial to a successful outsourced product.

A responsibility, accountability, consultation, and information (RACI) matrix is an effective tool for clarifying and ultimately managing the scope of work. RACI defines who is responsible for which deliverables: planning setup, reporting, delivery, transportation, and so forth.

Supply Chain Management

The scope of work needs to define responsibilities for not only your supplier, but also for your supplier’s responsibility to manage their supply base. For example, you don’t want an ingredient substituted for in your finished product, not be told about that change, and subsequently not have it identified on the product’s label. Substitutions are not uncommon, and many times occur somewhere in the supply chain. Any substitution needs to be identified and properly addressed.

Lean Manufacturing Principles

Specific expectations should be spelled out in the scope of the work for continuous improvement, in adherence to the lean manufacturing principles outlined below.

Assessing Lean Capabilities

The easiest and most telling place to start assessing a supplier’s lean capabilities is in housekeeping. This area is critical to eliminating waste and to the overall quality of your manufactured product. The supplier’s work areas, warehouse, and office should be organized, labeled, and in showroom condition. The supplier should ensure that only those things required for the work area are present in that area. Everything in the work area should be labeled, have a home, a purpose, and always be accessible to the operator.