The Lean Business Model is for Everyone: How To Avoid Undoing Continuous Improvement Progress
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Managing a company using the Lean approach requires everybody at every level of the organization to think about time all the time. Lean enthusiasts think about ‘lead-time, ‘wait-time, ‘through-put time’, ‘on-time delivery’, ‘takt-time’, ‘set-up time’, ‘down-time’, etc.

It is also about time that someone addresses how the Lean approach can be applied to any business model.

There is no shortage of case studies about lean transformations from large companies like Toyota and John Deere, but let’s face it, most companies are not of that nature. The Small Business Administration (SBA) data shows that 99 percent of manufacturing businesses in America employ less than 500 people.  Does lean (Operational Excellence) apply to Oregon’s small manufacturers, food processors, and beverage makers, as well as the Toyota’s of the world?  Absolutely.

A savvy restaurateur would not cook a weeks’ worth of steaks ahead of time simply because they have determined that that is the number of steaks they sell during that period. They cook each steak to order, only after the order is placed. This is how most businesses operate – they seldom build to stock.

Most businesses do not make the same product or deliver the same exact service every day.

Their customers all have unique needs and requirements. In most cases, there is no way to predict what kind of service will be required until the client or customer calls or comes through the door.

Trying to force-fit or overlay an Original Equipment Manufacturer solution within make-to-order businesses can have counter-productive effects. Like wearing a shoe that is too small, ‘make to order’ organizations who are told to apply the Toyota model exactly as done at large auto manufacturers will likely and quickly reject a ‘one-size-fits-all’ approach.

However, there are many universally applicable tools in the Lean toolbelt.

The concept of value-added is one such principle. We are all customers, and as such, we are willing to pay someone for the time they spend providing us a needed product or service. We do not want to pay for time wasted or for mistakes and rework. We view mistakes and wasted time as non-value-added.

Our customers are also unwilling to compensate us for forms of waste that are generated in our process; so it comes right off our bottom line.

We must develop eyes that recognize waste, and everyone on our team should be able and expected to eliminate non-value-added activities.  The mantra “See Something Say Something” comes to mind.  We do not want silent witnesses to any of the following wastes:

  1. Transportation
  2. Inventory
  3. Motion
  4. Waiting
  5. Over Production
  6. Over Processing
  7. Defects
  8. Underutilized talent.

Zero Sum

Poker is a zero-sum game.  If someone wins a hand, someone else loses.  This is a simple mathematic principle. The same principle applies in business.  If one company is awarded a contract, there is a great likelihood that a competing firm lost the contract.

The reality is that there is always someone else waiting on our client’s doorstep, quite happy to make the product or deliver a service that we have been providing if, for some reason, they perceive that we are less capable of meeting their requirements related to price, quality, or delivery speed.

We need to be on the right side of the table during this Zero Sum game. We make the same kind of ‘make-versus-buy’ choices as our customers make.  We need to create a waste-free process that makes it unnecessary for our customers to consider shopping around for an alternative supplier.

We want them to be completely satisfied (and even excited) to be our customers.

As companies grow, they sometimes move away from lean thinking.  Many start-up operations begin ‘lean’ by default.  They do not have excessive funds laying around to support excess inventory and other forms of waste.

In a perfect world, companies would create a clearly defined growth and action plan based on Lean principles as they grow. Realistically however, growth opportunities and acquisitions are often dropped in our laps unexpectedly and we do not have the luxury of time that would allow for applying the ‘ideal’ application of world-class techniques.

The evolution away from being ‘lean by default’ often begins the day after a growth spurt.

New equipment is added with little or no consideration for travel distances or handling.  “Put it wherever there is room, or power, or water, or whatever makes economic sense that day.” Then we often end up living with a poor layout, until one day we wake up to realize that we have become very un-lean.

No one sets out to design an un-lean process. It just happens slowly and quietly.

Maybe you begin to notice more quality issues with your product. Perhaps you find that your team is struggling to keep up with orders and you have the feeling of constant firefighting. Or, maybe it just takes you longer than you’d like to set up for production or schedule work. Thankfully, realizing that your process is laden with waste is not an irreversible situation.

After decades of applying continuous improvement tools and techniques (collectively referred to as Lean), I have gathered an abundance of empirical data to confirm that regardless of industry or sector, there are figurative cures for the diseases that manifest themselves in the eight forms of waste.

Once you are aware of them, you can best select and apply the correct intervention technique to each waste, realizing real-life and real-time benefits within your company. The more you practice, the more you can equip your teams to avoid serious problems caused by knee-jerk reactions that lead to poor decisions during periods of organizational growth.

Identify Root Causes

If you think about waste as being preventable, you can begin to look for root causes. The eight forms of waste listed above are not the disease.  They are symptoms of the disease. The true disease in most operations is a collective lack of attention, awareness, or urgency in identifying and eliminating non-value-added activities from their process.

The responsibility of each business leader is to help teams look past the symptoms, identify the root cause, and apply the correct cure in the right amount for their individual organizations.

If you hope to find the root cause of problems in a business enterprise, you may do well to take a few critical measurements as well. One of our favorites is something called the ‘Value Added Ratio’.

Studies indicate that when you examine lead time among a cross-section of organizations, you will find that only about 5% of the time a work order is in the office or being processed value (as defined by the customer) is being added. The rest of the time, (95%) the customer client or patient (or information) is just lying around.

Use this information to your advantage as you consider each type of waste. Get curious about why things are the way they are, and encourage your team to do so. No matter your size or type of products produced, you will be well on your way to identifying a solution when you consider the universal tools available to you in Lean.

OMEP applies Lean principles to business models of all types. LEARN MORE >

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