When big data goes lean

The combination of advanced analytics and lean management could be worth tens of billions of dollars in higher earnings for large manufacturers. A few leading companies are showing the way.

he application of larger data sets, faster computational power, and more advanced analytic techniques is spurring progress on a range of lean-management priorities. Sophisticated modeling can help to identify waste, for example, thus empowering workers and opening up new frontiers where lean problem solving can support continuous improvement. Powerful data-driven analytics also can help to solve previously unsolvable (and even unknown) problems that undermine efficiency in complex manufacturing environments: hidden bottlenecks, operational rigidities, and areas of excessive variability. Similarly, the power of data to support improvement efforts in related areas, such as quality and production planning, is growing as companies get better at storing, sharing, integrating, and understanding their data more quickly and easily.

Pioneers in the application of advanced-analytics approaches, some borrowed from risk management and finance, are emerging in industries such as chemicals, electronics, mining and metals, and pharmaceuticals. Many are lean veterans: these companies cut their teeth during the 1990s (when sagging prices hit a range of basic-materials companies hard) and more recently doubled down in response to rising raw-materials prices. The benefits they’re enjoying—an extra two to three percentage points of margin, on top of earlier productivity gains (from conventional lean methods) that often reached 10 to 15 percent—suggest that more big data applications will be finding their way into the lean tool kits of large manufacturers. Indeed, our work suggests that, taken together, the new uses of proven analytical tools could be worth tens of billions of dollars in EBITDA (earnings before interest, taxes, depreciation, and amortization) for manufacturers in the automobile, chemical, consumer-product, and pharmaceutical industries, among others (exhibit).