Why Should Leaders Switch from Lean to Hyper-Manufacturing?

In his book The Tesla Way, Michael Valentin reviews the seven principles of teslism, a disruptive organisational system especially observed within Elon Musk’s company, Tesla. One of these principles is that of hyper-manufacturing, inviting companies to consume less albeit produce better, all the while ensuring comfort for the user.

“A factory is not that boring place that people believe. It is a machine building the machine, you need to design it like an integrated system. [1] ”. In his inauguration speech for the first Gigafactory held on the 29th of July 2016, Elon Musk explained his interpretation of the 4th industrial revolution. According to Tesla’s CEO, factories should be designed much like products as integrated systems whose operations can be optimized by applying the basic principles of physics.

While Tesla's news is marked by the project to open a new Gigafactory in Europe, this is not the company’ first attempt: two factories are already operating in the USA and one is under construction in China. The notion of a large-scale factory seems to be a Tesla signature, based on “hyper” thinking. Hyper-frugality, hyper-agility and hyper-personalisation: the Tesla model is based in part on a principle of hyper-manufacturing. Let's take a closer look at its characteristics and how it works.

Tesla Gigafactory, Sparks, Nevada on November 10, 2016 (picture free of rights)

Hyper-manufacturing: the end of lean manufacturing ?

A result of toyotism, lean manufacturing is a principle based on the elimination of waste and the increase of capacity by reducing costs and production time. The Toyota system, whose primary aim is to waste as little as possible, is based on two pillars: “just-in-time” and “do-it-right-the-first-time”, but since the 1990s and the height of toyotism, consumer behaviour and demands have evolved, pushing companies into the 4th industrial revolution. They have had to adopt new organisational systems in order to meet these new challenges and requirements.

Both at Tesla and in other companies, this answer is characterised by an “upgrade” from lean manufacturing. This system makes it possible to maintain two paramount pillars, but can also meet the challenges which, through hyper-manufacturing, have arisen with the 4th industrial revolution.

Just like lean manufacturing, hyper-manufacturing is above all a state of mind. The first of the seven main principles of teslism aims to optimise the use of the various elements and actors in the production chain (that is, labour, machines, available space and raw materials). Hyper-manufacturing therefore requires three other methods – or “hyper”-concepts – such as hyperfrugality, hyper-agility and hyper-personalisation, as well as the notion of collaborative value.

The end of overconsumption: a time for frugality

Simplicity is one of the key principles of teslism: concerned about environmental issues and the hydrocarbons scarcity issue, Elon Musk was inspired by lean manufacturing to develop the principle of frugality in the industry. The objective here was to reduce raw material waste as much as possible, to promote recycling and the circular economy, to create ethical products and, finally, to reduce carbon footprint. In short, the idea is to use data well and not consume too much energy.

This idea of hyper-frugality has attracted many companies (industrial or not), such as Renault, which developed its Dacia Logan following the principles of hyper-frugality, or the State Bank of India.

However, it is important to note that, despite their commitment to responsible and ethical production, consumers are increasingly demanding: they want to be in a position to customise their products down to the last detail, and delivery times must be reduced to a minimum, forcing companies to work in “agile” mode.

Agility: an increase in productivity

The notion of agility refers to toyotism’s “do-it-right-the-first-time” principle – the idea is to avoid sending an element of uncertain quality into the production chain. This approach is in line with the desire not to waste raw materials or manpower. Hyper-agility, combined with hyper-personalisation, makes it possible to respond to all consumer requests for changes in their product’s manufacture by introducing frequent quality controls, hence producing a personalised and operational final product.

This agile method, however, is not characteristic of the industry: it comes from the world of software and has been developed to optimise the creation of customer-centric programmes. This approach has attracted many companies, both in the secondary and tertiary sectors.

From Toyotism’s ‘eight wastes of lean’ to collaborative value creation

While added value was the reference economic indicator for measuring the wealth created by a company, another must now be considered: collaborative value. The latter is created by combining the application of hyper-frugality and hyper-agility to the company's organisation.

Today, consumers are hyper-connected and their requirements are no longer those of the consumers of the 1990s. They are looking for comfort, instantaneity, tailor-made solutions and collaboration.

The creation of collaborative value is therefore a necessity for the company, since consumers are very attentive to the company. But to be able to generate such value, managers must identify and overcome a number of barriers that have an impact on productivity and competitiveness. They correspond to the evolution of the ‘eight wastes’ targeted by toyotism: overconsumption, non-use of data, work in “silos”, indecision, waiting, arduous tasks, discomfort of use and bureaucratic overload.

Breaking silos to increase productivity: the Kimberly Clark case

Kimberly Clark’s industrial site in Toul, France made its organisational change in 2011 by applying the principle of hyper-manufacturing. To gain in productivity and competitiveness, management at Kimberly Clark’s professional branch has understood how necessary it is to constantly adapt and “break silos”: reorganisation of teams and implementation of a consistent jargon, agility training, management restructuring.... All these initiatives have allowed the company to reduce bureaucracy and accelerate decision-making. One of the most eloquent results of this transformation is the substantial reduction in energy costs (6% over 2017).

Conclusion

Hyper-manufacturing is therefore an essential foundation of teslism, which adapts to the challenges of this 4th industrial revolution, but also of our current world. Particular attention is paid to consumption in order to avoid loss of value, whether from a human, material or energy point of view. Today, global manufacturing industry accounts for 20% of CO2 emissions. The environmental issue is a genuine one. With hyper-manufacturing, adapting to this new constraint and to the evolution of consumer behaviour is made possible.

Source: OECD and IEA International Energy Agency