Integrating Emerging Technologies Into the Lean Enterprise

The various technologies included under the umbrella of Industry 4.0 should not be tools to simply cut labor costs, but rather to respect people, eliminate waste, and add value.

At the core of lean,when based on the Toyota Production System, is respect for people. Any organization that does not respect and develop its people is not lean, regardless of how many tools it may be using or how its leaders describe it.

Remember GM CEO Roger Smith’s concept of the “lights out” factory from the 1980s? He — and even some CEOs of today’s factory automation manufacturers pursued the goal of eliminating people from manufacturing operations. This concept is the antithesis of lean and an unworkable concept.

As leaders, we should focus on removing processes that require meaningless work rather than concentrating on eliminating labor costs. The nature of work will and should change. However, humans are integral to success, and that is not changing in our lifetimes.

The chase for cheap labor, which led to outsourcing to countries with low wage rates, has had negative effects. First, we now suffer a shortage of skilled labor because managers shipped those jobs out. Those workers then had to learn new skills and switch careers and, in the process, spread the word that manufacturing in North America was dying. Managers with no better ideas about how to increase their company’s competitiveness than to pay low wages were killing the industry.

Another negative consequence was that it allowed companies to ignore opportunities to increase labor productivity through improved processes and an up skilled work-force — again, the antithesis of lean.Locating near suppliers or customers is one thing; chasing cheap labor is quite another.

And now we have Industry 4.0. Is it just another effort to eliminate people?

Any company serious about lean is not focused on eliminating people. In fact, lean carries amazing capabilities to propel labor productivity and make jobs increasingly meaningful.

Will the technologies of Industry 4.0 eliminate jobs? Yes, they will. Just as electricity, the steam engine, and email did.They are part of advancing the quality of life and building healthier economies. Numerous new jobs are being created, and importantly, current jobs are becoming much easier to do well and safely.

This article will review a few of the technologies included in the term Industry 4.0 and how they can be completely integrated with respect for people, eliminating waste and adding value (i. e. , lean).

The Cloud

What it is and what it isn’t. “The cloud” simply refers to using servers housed else-where that are available through the Internet. Many of you likely operate software moved from in house servers to cloud servers owned and maintained by someone else. Amazon Web Services is one of several providers of cloud services. When we think of Industry 4.0, it is easy to overlook the importance of the cloud in its execution.

Businesss uses. Companies that use Dropbox or backup services like Carbonite are using the cloud. But for this article,my focus is on timely and always-on con-trolled access to data stored in the cloud.For example, in 2018 I stood in the supply chain control tower room of the North American headquarters of a large global manufacturing company. Five professionals were in the room facing forward, each with a desktop computer handy. In front of them was a large screen surrounded by about six other normal-sized screens.

The large screen showed a map of the continental United States with jeopardized shipments to customers indicated by a small light.Surrounding screens included the Weather Channel, news-oriented broadcasts, and updates from their transportation partner.In the top center of the main screen were the bottom rows of a spreadsheet that listed the prioritized problem orders. As problems were solved, rows rolled off the screen and were replaced by the next highest priority orders.

Two years prior, the company had decided to change from promised ship dates to promised delivery dates and needed to grasp the status of all due shipments to be successful. The transportation partner could see the troubled orders and interact with the professionals in the room to resolve transportation problems. Company professionals also interacted with inventory at all their facilities to consider and act upon expediting alternatives. The screen data were automatically updated in real time to reflect current situations.This system would not have been possible without the cloud.

Lean integration. The group of supply chain professionals described here was no doubt smaller than the number of expeditors working previously, and the transportation partner likely replaced traditional dispatch duties in this process.

Lean is not about maximizing the number of people employed. It focuses more on building and leveraging skillsets and giving people the information they need when and where they need it to be effective. This cloud- based process obviously had that impact.

Use of the cloud is “non-lean” if the people who held the jobs that are no longer needed were fired. However, if they were upskilled into other needed roles, it is very lean. That decision is one made by leader-ship, not by advancing technology.

Industrial Internet of Things

What it is and what it isn’t. The Internet of Things (IoT) is in widespread use today and expanding rapidly. A simple example: A smartphone is a “thing” that via the Internet can connect with other “things.” Those things could be your home lighting, HVAC systems, or car door.

While we frequently use the term IoT when discussing Industry 4.0, the term “Industrial Internet of Things” (IIoT) is more specific. Typically, IoT refers to consumer use, while IIoT refers to industrial data.

Businesss uses. The business uses of IIoT are limited only by our imagination. While many look first to internal applications, don’t overlook the many potential customer-facing use cases.

GE and Rolls Royce have realized the power of data not only in improving the performance of their aviation engines, but also in the business model of selling subscription services that data enable. People don’t want shovels, they want holes. Pilots don’t want jet engines, they want thrust.

We can now understand exactly what forces, speeds, maintenance, and wear a specific engine has experienced. Are you willing to pay more for fuel efficiency and uptime? No problem. Simply subscribe to those services, and the manufacturers will use the data to maximize performance in those areas.
In putting numerous sensors on their installed base and in development models, these two companies are demonstrating how collecting and analyzing data can drastically impact product design and performance. It is happening in industry after industry.

If you have a modern car, the manufacturer may well be collecting data about how you use it and how it deteriorates with use. By capturing that data, the manufacturer can improve fuel efficiency, reliability, and performance of new vehicles. And your insurance company can track your driving habits to better assess risk when assigning premiums.

From an internal perspective, do you have equipment that has unplanned down- time? This is often the initial use case for a manufacturer piloting IIoT. By putting sensors on the equipment to measure temperature, vibration, fluid viscosity, or other factors believed important, data analysis can support predictive maintenance that can reduce unplanned downtime.

Sensors can be applied to prevent accidents, aid in mistake-proofing, and measure ambient temperature and humidity of pro- duct. IIoT is about capturing data that will support targeted improvements and allow us to learn more than we currently know.

The supply chain control tower described previously relies on data generated by GPS and sensors on shipping containers and pallets. Some companies leverage geofencing to enable or disable certain capabilities. The marketing uses are legion, but so are the operational capabilities that can be supported by these sensor-based technologies.

Lean integration. IIoT generates data that are then used to better understand conditions, trends, and correlations. However, the ability to capture, understand, and take action may well not be resident in an organization when it begins down this road. Perhaps current employees can be upskilled or supplemented by external expertise, or new employees may be required.

These capabilities can reduce meaningless work and the number of “drop everything” emergencies, and increase value add provided to suppliers, employees, and customers. Sounds pretty lean to me.


What it is and what it isn’t. Blockchain is a distributed ledger ( recording of trans- actions that exist identically on multiple computers) database that requires verification of ever y “block” of information to be added before adding it. And the blocks of data are chained one to the next through some fancy math to ensure that it is in- disputable and immutable. It is near impossible for anyone to edit a block. When errors are made in a transaction, a block is added to correct it. There is no erasing and correcting.

The big idea behind blockchain, which is not the same thing as bitcoin, is trust, or the lack thereof. Blockchain offers a reliable verified record of events. There is a point where establishing initial trust is integral, but otherwise verification happens through confirming mathematics.

Blockchain is fairly simple application programming but is not easy to design and implement. And it brings value only when relationships have a small set of specific attributes. It is a hammer that should not be used on screws, C-clamps or other types of fasteners — just nails. But those nails come in many shapes and sizes.

Business uses. The potential for block- chain to add value and eliminate waste is exciting. Both banking and insurance, especially outside North America, have begun using this technology extensively. In the United States, state governments have begun to examine blockchain for recording vehicle and home titles. Montana has used blockchain for voting by military residents stationed elsewhere.

Many of you are accountable for assuring no conflict minerals are used in your products. All too frequently that amounts to asking suppliers to promise that is true. With some caveats, blockchain can contain the ownership and physical history with complete traceability.

Yes, every company suffers from the monumental waste emanating from lack of trust, but you do not need a howitzer to kill a fly. The fol lowing examples explain when blockchain might make sense for your organization.

You are considering buying a two-carat diamond but want to be sure it’s not a blood diamond. That means knowing with certainty exactly which mine in the world is the source of that diamond and how it has been handled since. That means 100 percent transparency.

Everledger is an Australian company that developed the blockchain application used by the diamond industry to ensure 100 percent transparency from mine to consumer. Blockchain houses the digital tracking of the physical asset.

There has to be some way to immutably link your specific diamond to all the data about it. In diamonds, there is an inherent physical marker in the unmined rock that makes it possible to do so. Because processing is not simple, Everledger interacts with machine visioning to ensure that the diamond being machined is your exact diamond. And with IIoT data, that is secured via blockchain.

Many ask about blockchain for metal parts. Yes, it can be done, but the bigger issue is how can we link that specific part to its original source? Simply put, we can’t. As metal goes through processing , its characteristics are changed in ways that cause it to lose identification. That’s why Everledger is working with diamonds and not gold. When gold is smelted, it loses its original characteristics. Gold would have to be traced from that point on, if it’s important to have surety that a specific piece of gold is what the transaction is reporting.

The question of where we can place that initial trust has to be resolved for gold, metals, food, and any other item that is not inherently uniquely identifiable.

Remember not long ago when the U. S. government recommended the entire country stop eating romaine lettuce because no one knew where the tainted heads were grown? We want to identify the source and recall with certainty all potentially affected product within seconds. Block chain enables that.
Several large food growers, processers, and retailers are working together to test blockchain for those purposes. Initial efforts have proven very effective. The element of trust has to be placed on the initial introduction of the specific product into the blockchain.

With a diamond, we can tell which rock and mine it came from, but how can we tell with a head of broccoli? Basically, we have to trust the initial source of the data. This box/pallet/truck was definitively grown on these acres of this farm. From that point on, it can be traced. Get that starting point wrong, and all the blockchain data lead to the wrong source.

Lean integration

Some assets have much simpler lives than the previous examples. Ohio is beginning to examine the potential for auto titles via blockchain. That would save amazing amounts of time and resources for everyone involved — the owner, the seller, the lender, the insurance company, and more. Banks are already using blockchain for loan application and processing; real estate and insurance are quickly moving toward blockchain record keeping. Customs and financial aspects of international trade can be stream-lined with blockchain.

The list goes on. Service, manufacturing, distribution, and more will benefit greatly from blockchain. Even if they don’t know what waste is, blockchain will eliminate much of it.


The catchall term Industry 4.0 also includes technologies like virtual and augmented reality, big data, machine learning, artificial intelligence, and additive manufacturing (otherwise known as 3D printing). There is so much to learn and consider that only the largest organizations can move on all fronts at once. Small and mid-sized organizations should learn enough about each technology to prioritize those that seem to offer value. Sitting still and wishing it all would go away won’t help.

Will every company that implements aspects of Industry 4.0 do it to increase speed, quality, value, or safety, and reduce waste? For some, the intent will still be to use technology to eliminate people. That’s not the fault of technology, but of leadership.

Economies cannot grow and countries cannot thrive with massive unemployment. And cutting your way to the bottom is never a good strategy, nor is ignoring the amazing potential afforded us by advancing technologies. I hope this article reduces any anxiety and inspires you to analyze what Industry 4.0 means for your organization.