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Business Breakthrough consultants are former business executives and each has at least twenty years of consulting and operations management experience in areas such as: Procurement and Supply Chain, Warehouse Management,
Lean Manufacturing...
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Source : Business Breakthrough Inc.
The Next R(E)volution of Lean
Lean is also known as :
Meaning Of Lean,
Lean Tools,
Lean Manufacturing,
Lean Software Development,
Lean.Org ,
Lean Enterprise Institute,
Lean Production,
What Is Lean,
Lean Advisors Lean Manufacturing,
Lean Six Sigma,
Lean Management,
Six Sigma,
Lean Thinking,
Lean Innovations,
Lean Enterprise Academy,
Leveraging Lean Manufacturing Techniques And Tools,
Lean Times,
Lean Process Management,
Lean Mfg Simulation Kit,
Industrial Trailers,
Lean Thinking,
Implementing Lean,
Tbm Lean Manufacturing,
Lean Manufacturing How-To,
Lean Velocity,
Rapid Lean,
Lean Manufacturing Solutions,
Building A Lean Enterprise,
Lean Maintenance,
Lean Production,
Lean Six Sigma Online,
Lean Standardized Work,
Lean Continuous Improvement,
Lean Value Stream Mapping,
Henry Ford Lean,
Lean Problem Solving,
Seven Wastes Lean,
Lean Toyota Production System,
Lean Process Design,
What Is Lean Production?,
Lean Sigma Programs,
Lean Production Simplified,
Applying Lean Production.
Lean Works! For some…
Lean Manufacturing as a management tool has taken the manufacturing
industry by storm, and companies around the globe have adopted Lean
methods in many forms and by many names. Large enterprise companies like
Toyota, Dell Computer, and Pratt & Whitney have achieved dramatic
reductions in delivery time and lowered inventory levels, while increasing
responsiveness to customer demand and improving cash flow.
As evidenced in
thousands of organizations, in many different industries, "Lean Enterprise"
is one of the most promoted and competitive business models in use today.
Published case studies provide one example after another of companies that
have substantially reduced waste and associated costs. There are countless
testimonials describing how companies rose to leaders in their respective
industries by becoming "world class" in Lean. There are documented results
of compressing order lead-times by more than 80%, reducing work-in-process
inventories by 90%, improving quality to a Six Sigma level, and freeing up
60% of resources. And, the successes aren't limited to only large and
well-known organizations"there are also many small company examples.
The
good news is that these Lean concepts and tools are not highly complex, and
can be easily learned by people of all levels of education and job
responsibility. Lean "tools" include 5S, Value Stream Mapping, and
concepts/terms like kaizens and kanbans. A search on the Internet or in the
advertising section of almost any business magazine will identify hundreds of
individuals and consulting firms who tout successful Lean facilitations or
who offer education courses to help companies successfully implement Lean.
The bad news is that even as the trend of Lean adoption continues, the
success rate is low"less than 20% of companies are successful with Lean.
Why do so many companies fail in their Lean initiatives? If the results are
so obvious, and best practices available in the form of published success
stories, what's the problem? With thousands of consulting experts and just as
many training courses available, why aren't the majority of companies
successful with Lean, and why isn't everyone using this incredibly profitable
management strategy?
Good questions.
The typical approaches used by most
companies today do not provide an optimal return on investment to
companies. The "missing link" between Lean goals and successful projects that
produce the intended result is a strategy for Lean. For companies to reach
their desired destination of success with Lean, they must first plan the
journey"but many start off with the wrong perspective of success.
Starting Incorrectly"Lack of Strategic Approach
The fact is that people often struggle with the most basic of problems
when implementing Lean" where to begin. Where and how people start a Lean
initiative is critical to the success of the first Lean project. If the first
project isn't successful, there is a good chance that there won't even be a
second effort, and the first project won't be successful if there is no
measurable impact to the bottom line or to strategic objectives.
Unfortunately, most Lean efforts begin with a tactical approach, rather than
a strategic one. This is a key factor in the high percentage of failed
Lean programs. Ironically, a tactical approach is advised by most Lean
consultants. This is because Lean has evolved from operational
improvements outward, and that Lean consultants are either not familiar with
strategy creation or are not ready to apply Lean beyond manufacturing.
Also, a tactical approach quickly uncovers "low hanging fruit," and
consultants are striving for quick wins and immediate credibility. They're
not in it for the long haul with a particular client, and more often than
not they're content with a hit-and run effort.
The more common approaches
to Lean are straightforward, tactical at best, and mostly focused on
manufacturing or a specific operational process. While there is a growing
recognition that the opportunities for Lean exist at an enterprise level,
the lack of adoption indicates that companies are starting their Lean efforts
incorrectly, with the wrong focus.
Many organizations begin with "how", and
applying a specific technique (e.g., 5S) or perhaps with "what" to start
first (identifying "kaizens") Others may focus on "who" and provide training
for selected individuals or teams, while some begin with "where" and begin
building Value Stream Maps.
Let's explore these further.
5S
Many companies begin Lean by employing a technique called 5S, or Workplace
Organization. The "5" and "S" come from the five Japanese words; seiri,
seiton, seiso, seiketsu, and shitsuke. The English equivalents (keeping the
"5S" theme in mind) are: sort, set, shine, standardize, and sustain.
Essentially, this is a method for organizing a work area, focused on
improving efficiency, safety, layout, and flow.
5S efforts produce some
immediate and visible results. Workplaces are indeed better organized.
Tools and materials are now maintained in well defined locations, making them
easier to find and more quickly accessible for use. Operators notice that
their jobs require less effort than before. Supervisors find that it's
simpler to identify problems such as inefficiencies, excess inventory, and
misplaced equipment. There may be a marginal increase in productivity, even
if 5S is used in isolation from other Lean strategies or tools.
But the
direct bottom line benefits of a stand-alone 5S program are difficult to
measure, and even so, the improvements tend to be isolated. Improved value
in the overall system and the impact on throughput is difficult to quantify.
Kanbans
The word kanban means visible record in Japanese. In Lean lexicon, it is
essentially a signal to produce or move product. A kanban may be an
electronic signal, an empty bin, a card, a pallet, or a defined area to hold
inventory. Kanbans are used to manage inventory"quantity and flow.
In
the ideal Lean world, product is "pulled" towards the customer, through the
factory, from the supplier in quantities of one"hence the term one piece-
flow. However, in many circumstances, it's impractical to produce and move
product one piece at a time. So kanbans serve as the "acceptable"
compromise; allowing the company to move small, controlled batches of
material in a "pull" environment.
The use of kanbans can dramatically
reduce total inventory. Since lead-time is almost directly proportional to
work-in-process (WIP) inventory, kanbans can provide a significant
improvement in production lead-time.
But, there can be problems. Using
kanbans without other coordinated improvements (such as reducing equipment
changeover times) can backfire, resulting in degradation in equipment
utilization and even increases in the number of late shipments. Also, note
that since kanbans are a compromise to true one-piece-flow, companies that
have implemented effective kanban systems sometimes become complacent and do
not address the root causes that created the various needs to maintain
inventory, such as long changeover times, imbalanced processes, long
distances between work centers, quality problems, and lack of operator
cross-training.
Kaizens
Also, known as kaizen blitz. This may be the most
common starting point for a Lean initiative in US manufacturing companies.
Kaizen is the Japanese word for continuous improvement. This approach
involves empowering work teams to rapidly (hence, the word blitz) improve
specific problems within their areas of responsibility.
On the surface,
this seems like a very good idea, and it can generate immediate and
measurable benefits. The use of kaizens, especially if championed by
management, finally proves to the workforce that the company is interested in
listening to and supporting their improvement suggestions. Some of the more
common targets for kaizens include; solving an equipment downtime problem,
combining two or more machines into a work cell, setting up a kanban,
reducing equipment changeover time, and implementing point-of-use storage for
supplies (maintaining storage where the supplies are actually used).
But, this program can fall prey to a phenomenon known as "drive-by kaizens""improvements
are implemented stand-alone, without prioritization, and without
understanding how changes in one part of the facility might negatively impact
other business functions, resources, suppliers, or customers. Other
critical problems with this approach are that it tends to overlook consensus,
and there is little time taken to actually identify and eliminate root
causes"there is more focus on speed of execution than there is on planning or
results.
Value-Stream Mapping (VSM)
It's important to note that value stream mapping is a relatively recent
addition to the slate of Lean tools. A value stream is defined as all
activities and events (both value-added and non-value added) that a product
or service passes through on its way from supplier to customer. In a
manufacturing facility these activities include shipping, waiting (in
inventory, in a queue to be processed, or even in an oven waiting for
adhesives to cure), packaging, inspection, rework, and both manual and
automated processing. A VSM includes both the flow of product and
information.
The primary purpose of a VSM, specifically a "current state
map," is to highlight areas where one-piece-flow breaks down"these points
suggest opportunities for improvement (i.e., kaizens). Other purposes of
mapping include; measuring the total cycle time, identifying inventory
locations and balances, and determining points in the process where signals
to produce arise.
Once a current state map is created, one or more
"future state maps" are developed from it, showing where various kaizen
events might eliminate root causes for stoppages in flow. The two reasons for
creating multiple future state maps are; (1) certain improvements might be
logistically-, technologically-, or cost-prohibitive, and (2) there is no
single correct future state. The VSM approach is significantly more effective
than the other approaches because it prioritizes the improvement efforts.
This technique, like the others, has its drawbacks. One issue is that it
involves those individuals who will be impacted by the change much later in
the improvement cycle than the 5S and Kaizen techniques"this late
involvement of stakeholders tends to create resistance to change.
Value
Stream Maps also have an inherent weakness in their inability to capture the
dynamic nature of a process, since the measures are often only a snapshot
in time. Seasonality, variability in demand and fluctuations in supply and
associated lead times are not easily captured or measured in a VSM.
Perhaps the most significant shortcoming with the way VSM is done today is
that it tends to ignore the impacts on or impacts from "competing value
streams" and support functions. In most organizations there exists more than
one value stream"more than one product line, or one product line that
produces two or more different items. These different value streams
frequently compete for resources; equipment, people, materials, suppliers,
etc. Additionally, all organizations have departments that support the
operations or production department"accounting, purchasing, quality,
maintenance, engineering, etc. If the value stream changes without
understanding how it impacts a competing value stream or a support function,
this may negatively impact the overall organization.
Training
Many companies start with large-scale Lean training before selecting any
specific approach or defining a specific project. The training curriculum
for Lean can include not only the previously-mentioned topics of 5S, Kaizens,
Kanbans and Value Stream Mapping but also topics like Workcell Design,
Conflict Management, Project Management, Metrics/Measurements and
Teamwork.
Training is a favorite strategy for consultants"it provides high
daily revenues, is risk-free and there's no pressure to deliver any result
other than a trained audience.
The value of training is that it's
broad-based, provides value to the individuals involved and sends a
message that management is serious about implementing Lean. The techniques
themselves are relatively easy to learn, and training is primarily
techniques-based. Training supports the afore-mentioned strategies of
starting at a tactical level, which is where most organizations start
Lean.
However, unless the training is carefully coordinated, there is a
risk of the learned skills not being applied on a project quickly, resulting
in wasted training time and investments. Unless the training is provided
to teams that have a clear mandate to provide a solution in a specific area,
the training will not produce measurable business results. Training alone
does not provide measurable benefits to the bottom line, and is therefore
a weak starting point.
Lean Failure Factors
To summarize the challenges, there are many approaches to Lean, some more
successful than others.
- Organizations may choose to begin with a
tool/technique approach to Lean, applying 5S to a broad cross-section of the
business, or identifying a specific problem area for a "kaizen" event as
an attempt in "do it yourself" Lean.
- Organizations and instructional
companies who offer Lean training and certification programs insist (no
surprise) that organizations must learn all about Lean before starting,
and that training is the way to best leverage Lean.
- Consultants with
specific subject-matter expertise or experience in other similar
industries advise that companies begin with the creation of a "current state"
Value Stream Map on a selected product line or business area, circling
back to apply specific techniques in areas of weakness. This usually
results in incremental improvements, visible within that specific area.
- Other consultants advise that a "clean slate" approach be used to envision
the future "perfect world" and ideal business model without being
encumbered by analysis of the existing value streams.
Each of the above
approaches is effective to some extent. Unfortunately, there are even more
stories about how Lean doesn't work"according to most studies, less than 20%
of Lean initiatives accomplish the desired goal or result in a Lean centric
organization.
This seems to be a paradox, in that while Lean is an
effective management tool and there are many Lean "experts" and books
available to help guide the journey, most companies fail in the effort.
The pragmatic and honest articles and books on Lean talk about project
pitfalls, resistance to change, and the lack of return on the investment.
Many Lean consultants begin their sales presentations with warnings about how
complex Lean is. Managers who resist adoption talk about how Lean doesn't
fit their business model or apply to their industry.
Specifically, the
following are some of the more common reasons cited for Lean failures:
- Lack of management support
- Resistance to change (lack of buy-in) from
supervision and workforce
- Poor metrics
- Not enough training
- Little
or no impact on profitability
- Ineffective communications
- Not able to
sustain initial efforts
- Not expanding improvement from the initial
efforts to other departments
- Improvements in one area seemed to have
negative impacts in others
How do business leaders resolve this
contradictory information and multitude of approaches? Do the companies and
individuals who have been successful know something others don't know? Is
there a skill set that's only available to a select few? Does Lean really
only apply to certain types of industries, organizations, or even more
narrowly to very specific process or product families within manufacturing
facilities? And, even if a manager has evidence (or faith) that Lean is
worth trying, how can he or she avoid being one of the many failed case
studies?
Key Observations
Over the past several years, we've personally witnessed many effective and
ineffective Lean initiatives. In the book, "The Machine that Changed the
World," Womack, et. al., made the case for a Lean enterprise"employing the
principles identified and developed by Toyota. And, US companies, primarily
the manufacturing sector, accepted the challenge. However, organizations
weren't prepared for the aforementioned obstacles and set-backs,
especially since their Lean projects were most often started at an
operational level with little or no consideration of strategic objectives.
In order to address the paradox that Lean works, but not for most businesses,
we decided to focus the research and thinking not on Lean failures, and
not even solely on Lean successes. Instead, we chose to study best practices
in strategic initiatives and try to identify the common threads among the
various Lean successes and failures. The first observation is that the issues
noted as "failure factors" appear to be pervasive conditions and not
explicit reasons or root causes. Rather than explaining why the Lean
enterprise effort failed, these tend to simply be part of the existing
company culture. In other words, these circumstances are not specific to
Lean, but would be stumbling blocks to any strategic implementation that
the company might undertake. Conversely, those organizations that have
overcome these issues during other major initiatives have a much higher
probability of being successful with Lean.
The second observation is
rather obvious"there's nothing unusual about why companies choose the
typical approaches to Lean as defined earlier. The marketing hype around
Lean, from articles, books and consulting organizations focuses on a
tactical beginning. Also, the tools and techniques are relatively easy to
learn and apply in specific areas or to specific problems. Companies are
under enormous pressure to increase their efficiencies and reduce costs, and
there is a sense of urgency to get started with Lean. Since the tactical
or operational approaches are the ones commonly recommended, readily
available, and easily understood, it's the logical (not necessarily
correct) starting point for Lean.
Finally, the third key observation, perhaps
the most important, is that the typical approaches to Lean are for the
most part too narrow in their focus and all too often used as stand-alone
tactics. The results are sub-optimal improvements that either have too small
of an impact on throughput, no measurable bottom line value, or take much
longer than they should to achieve the original purpose of adopting Lean.
What's Necessary to Succeed
The conclusion is that Lean initiatives that are successful on a large
scale have something in place that failed efforts do not"a Lean strategy, a
different way of thinking and a unique strategic focus. Organizations that
are dramatically successful with Lean take a much broader view of
processes, stakeholders, and business objectives.
A strategic foundation has
many components, including principles of development and rules of
communication. Development of this roadmap is a dynamic and iterative
process, since a business strategy must adapt to changing external
pressures, and a framework for Lean must be as agile as a company's
customers, suppliers, and outside influences demand.
Seldom, if ever, are
"big" problems (such as the ones being tackled by Lean) limited to only one
business area, department, or product line" multiple departments and dozens
or even hundreds of business processes are linked together in value
streams, and there are a myriad of interdependencies and interactions across
and between all of these. If these are not understood, the impacts are
discovered too late, and proposed or implemented changes suffer, as do the
people involved
Every combination of people, processes, culture,
industry, and drive is unique, and some organizations and leaders simply seem
to understand how to define and execute a strategy, while others do not.
Executing a Lean strategy is similar in many respects to implementing a
total
quality management (TQM) strategy or a Six Sigma program across the
enterprise. These programs have been implemented successfully in many
organizations. The difference seems to be that Lean is more likely than TQM
or Six Sigma to be initiated without a "top-down" approach or clear
business objectives.
The key tool that is missing in the strategic arsenal
for Lean is a framework for strategic planning and tactical selection of
business processes for the application of Lean. In order to create an optimal
strategy, we considered that first there must a way to visualize the business
units or "process areas" that might be impacted in a Lean initiative, and
that this might help organizations to create an effective business strategy
for Lean"this spurred the development of the following framework.
Starting with a Broader Context
One of the "failure factors" of Lean (or any other major change
initiative) is the lack of buy-in, resulting in disruptive resistance to
change. People are the problem or the solution, depending on their level
of involvement in the beginning and planning of a project. By thinking about
the implications and strategic goals of Lean, and by ensuring that as many
stakeholder groups are represented as possible, companies can greatly
increase the probability of cooperation and the rate of adoption of Lean.
The Business Value System Framework' (Figure 1) represents the entire
business in a single model, and applies to most, if not all,
organizations. The BVS Framework' provides a guide that can help
organizations visualize and confirm the "value path" through the business for
products, services and information. By identifying all of the process owners
and participants in the value stream, organizations can ensure that these
people are involved early in the Lean effort, thereby greatly reducing the
resistance issue.
Using this framework will also reduce the risk of an
overly limited view of the problem areas, or a lack of alignment with an
overall business strategy. A standard tactical approach to starting Lean
would limit the scope to the Product Process Areas at best, and more likely
to the Assemble / Manufacture process itself. The risk is suboptimal
improvement that may or may not have a resulting increase in throughput or
profitability. And, if there's no bottom line value, the Lean effort will
likely stall.
By reviewing the Business Value System Framework', however,
Lean project owners can easily see that most end-to-end value streams will
include components of all four types of Process Areas: Management Oversight,
Customer, Product and Support. It's important to note that most, if not
all, business transactions cross process boundaries. Consider that Customer
Service occurs most often after Delivery, which only occurs after Sales, only
possibly after Assemble/Manufacture, which can't proceed without R&D and
Supplier Management, which only occurred because of Marketing promotions,
and all this only because there was Leadership and Planning with a decision
to take the product to market!
It is also easy to see that the Support
Process Areas can either make or break the success of the business
depending on their provision of necessary resources and assets. Reviewing the
Process Areas that are involved in the flow of a product helps to ensure that
all of the relevant stakeholders are represented in any Lean project.
This
ability to visualize the larger context of the problem area will by nature
result in much broader scope for a Lean effort. The Business Value System
Framework' will, if considered during the early discussions of Lean, promote
representation from each of the Process Areas involved in each value
stream.
Companies Focus the Lean Strategy on the Wrong Thing
Tools like the Business Value System Framework will help to drive a
broader view of value, but this will be useful only if done as part of an
effective strategy when starting Lean. Most Lean strategies are
insufficient and tactical in nature, rather than being truly strategic. As
shown in Figure 2 below, a recent study by the AberdeenGroup shows that
66% of best-in-class companies believed that "cost reduction in
manufacturing and the supply chain" was the key target for a Lean initiative.
The other actions are operational, cultural, and quality focused.
The most
surprising observation is not on these "strategic" actions themselves, which
are certainly valid at a tactical and operational level. The most striking
fact is the absence of even one strategic action that addresses
profitability, return-on-investment, or shareholder value. Lean is being
viewed as a cost-reduction strategy, not as a market domination one, by the
majority of companies. Business Process Reengineering (BPR)
was
misconstrued as a cost-reduction and downsizing strategy, resulting in a
death-knell for BPR as a management strategy. If companies continue to
focus on Lean as a cost reducer, rather than a growth-enabler, it is only
necessary to look back at the "death" and ineffectiveness of BPR as a
prediction of what might happen to Lean. A change in perspective is required.
Breakthrough Lean Thinking
An observation of successful Lean implementations indicates the presence
of "breakthrough thinking" principles in both the development of the
initial objectives and in application of the various tools and techniques,
even though the organizations were not necessarily aware they were using
them.
In their book "Breakthrough Thinking: The Seven Principles of
Creative Problem Solving," Nadler and Hibino describe their research and
utilization of seven key principles for a "comprehensible reasoning
approach""a radically different philosophy for creating solutions. Some of
these principles are:
- Uniqueness. Since no two situations can ever be
alike, one should logically consider a unique approach to solving the
problem.
- Purposes. No situation or problem exists as it's initially
described. When people look at issues in a broader context (by identifying
higher level purposes), more comprehensive solutions become available.
- Systems. All organizations are complex systems, containing many
interconnected facets. Improving or changing one part of such a system
will invariably impact other parts, usually in ways organizations do not
anticipate.
- Limited Information Collection. The traditional approach to
solving problems is to collect as much information as possible it, study
the information, and make recommendations. Nadler and Hibino suggest that
since people should be focusing on the solution and not the problem, they
should spend data collection energies in similar fashion"on the solution.
Studying the problem and all the related historical events leading up to
it will not necessarily lead to effective and comprehensive solutions.
- People Design. "The people design principle gets people to work on the change
from the center (themselves) out rather than only from the outside
(others) in." (Nadler & Hibino) Essentially, people resist change when they
are not personally involved in the planning or implementation of the change.
People intuitively know this, but US management still fails to recognize
this basic human need. And, failed strategies are the direct result.
There
is much documented evidence to support the successful marriage of these
principles with other improvement initiatives. Hoffherr & Moran used these
principles in the implementation of Total Quality Management. And, Kilpatrick
& Osborne continue to use them in Lean, strategic planning, process
modeling, project management, and other areas.
Conversely, failed Lean
implementations tend to emphasize; "let's not re-invent the wheel" (lack of
uniqueness), focusing on Lean itself rather than the reasons for implementing
Lean (no understanding of purposes), identifying a place to begin without
evaluating the impact on the overall organization (no concept of the
organization as a system), collecting reams of data (unlimited information
collection), and not involving those individuals who will be the most
impacted by the changes in the initial planning efforts (not using the
people design principle).
Lean as a Growth Strategy
If companies consciously leverage breakthrough thinking and consider the
Business Value System Framework', they will quickly realize that growth
enabling strategies should be the standard approach to a Lean initiative. The
"strategic actions" identified in the AberdeenGroup study are more
tactical than strategic"more short-term operational in nature than focused on
long-term market dominance, proof that organizations are self-limiting in
how they approach Lean.
Rather than viewing Lean primarily as a cost reduction
tool, the best-in-class Strategic Actions of a Lean initiative should contain
two key components: Customer Value and Business Value, combining
"purposes" into a powerful Strategic Action. Some examples:
| Customer Value |
Business Value |
| Decreased cost-per-unit |
to support aggressive sales
strategies |
| Lowered cost of product customization |
to outperform competition at
comparable price points |
| Decreased time-to-market of new products from
concept to release |
to establish market stronghold and "set the bar" for
expectations |
| Decreased time-to-profit for new products though faster
product development |
to produce "on demand" as a competitive advantage |
| Increased throughput, reducing cost-per-unit through higher
productivity/efficiency levels |
to deliver higher revenues with existing
resources |
Strategic action plans for Lean should combine multiple aspects
of the business "system", with a focus on growth and profitability. Each
Strategic action target should be unique to a company's business drivers,
serve a clear purpose for the business, consider the "systems"
interdependencies and involve the people that are key stakeholders"otherwise,
the results of the efforts won't be successful.
Defining a Unique Lean Strategy
Companies should review the Business Value System Framework' and answer
the following Strategic Lean Questions to begin the shift in thinking
that's needed to move from a cost-cutting mindset to one of growth and market
dominance. It is important to note that Operations Performance questions
are the LOWEST in priority when it comes to setting strategic goals and
defining strategic actions.
Priority # 1: Profitability & Revenue
- Are
margins and profits at desired/target levels?
- Are revenues growing?
- Are new sales as profitable as past sales?
- Is cash flow adequate to
reward owners/stockholders, cover expenses, service debt, invest in R&D,
maintain a skilled workforce, and pursue continuous improvement efforts?
Priority # 2: Ability to Compete
- 1. Is the company or business unit in the
top 20% of their industry/niche in the following categories? (If YES, provide
statistics/measures for each. If NO, define targets for each. If there are no
measures, they should be established and captured immediately.)
- Order
fulfillment lead-time
- Customer satisfaction
- On-time delivery
- Time required to develop and introduce new products/features
- Are
products/services price-competitive?
- Is the company gaining on the
competition, or are competitors taking market share or threatening the
customer base?
- Is the company winning as many bids/competitive
situations or closing as many new sales as required/targeted?
Priority #
3: Operations Performance
- Are resources working overtime to meet
customer demand? Are deliveries/services late? Are resources
overworked/stressed?
- Are there process or flow bottlenecks that
regularly or periodically impact the ability to meet customers' service and
product delivery demands and expectations?
- Has there been a
significantly (15% or more) reduction in Cost-Of-Goods-Sold (COGS) or
Cost-of-Services-Delivered (COSD) over the past several quarters?
- Has
the company been able to significantly (50% or more) improve service,
delivery, product, and/or process quality over the past several quarters?
- Has there been a significant (50% or more) increase in responsiveness to
customer demand over the past several quarters? (Time it takes to respond to
customer requests.)
Evaluating the Lean Strategy (or lack thereof)
If companies are starting or have already started Lean and don't have a
strategy in place, they're at risk of failure at worst, and of
delaying/reducing benefits at best. Reviewing the Business Value System
Framework' and honestly answering the Strategic Action Questions will be of
value. Using the results as input to a Lean strategic planning exercise
will help them craft an approach to Lean that will deliver value to customers
and help to achieve the desired profit/performance goals more quickly.
If there is a Lean strategy, but it is focused on operational improvements
rather than on higher profits and an increased ability to compete, it is an
ineffective strategy. Starting at a tactical level, as most organizations do
with Lean, results in only limited and short-term improvements and a
cost cutting mentality that ensures long-term loss of market share"Ford,
General Motors, Delphi and Iomega come to mind. Companies should consider
the Breakthrough Thinking principles and remember that cost-cutting the way
to prosperity isn't a high probability success strategy. Growth is the
key, and revising the Lean strategy as stated in the previous paragraph is
advised.
By looking at the business as a "value system" for customers,
companies can shift their Lean strategic priorities to growth-oriented
targets, not cost-cutting ones. Instead of trying to squeeze additional
margins to boost the bottom line (and share price), Lean can and SHOULD help
increase sales and response to demand while maintaining and lowering
cost-per-unit, therefore enabling us to lower prices, undercut the
competition, and win more business.
The R(E)volution in Lean isn't complex.
But in order for companies to succeed with Lean, they must shift their
perspective to one of growth and recognize that cost-cutting is a by-product
rather than the key strategy for Lean. A key part of the Lean strategy
must be the expansion of projects to encompass the entire value stream,
rather than limiting efforts to tactical efforts. And finally, strategic
actions that merge customer and business value, focusing on customers, value,
responsiveness and quality. Businesses that thrive in today's changing
environment will capitalize on the R(E)volution, and leverage Lean to do what
Toyota and Dell have done"dominate their markets. To receive a free Lean
Strategy Assessment Tool, call 801.358.5304 or email your request to
info@great-solutions.biz.
References
Womack, James, Daniel Jones, and Daniel Roos. The Machine that Changed the
World. 1st ed. New York: Harper Perennial, 1991.
Pearce, II, John A., and
Richard B. Robinson, Jr. Strategic Management: Implementation,
Formulation, and Control. 9th ed. Boston: McGraw-Hill Irwin, 2005.
Nadler,
Gerald, and Shozo Hibino. Breakthrough Thinking: The Seven Principles of
Creative Problem Solving. 2nd ed. Rocklin: Prima Publishing, 1994.
Zenger, John H., and Joseph Folkman. The Extraordinary Leader: Turning Good
Managers into Great Leaders. 1st ed. New York: McGraw- Hill, 2002.
Biddle, Jane. "The Lean Benchmark Report: Closing the Reality Gap ." March
2006. AberdeenGroup. 20 March 2006 www.aberdeen.com.
Hoffherr, Glen
D., John W. Moran, and Gerald Nadler. Breakthrough Thinking in Total Quality
Management. 1st ed. Elglewood Cliffs: Prentice- Hall, 1993.
About the
Authors
Jerry D. Kilpatrick has worked for three Fortune 500 manufacturing
organizations and has more than 25 years of experience in Lean Manufacturing.
Jerry is a former Manufacturing Extension Partnership executive, and has
been a consultant in the manufacturing sector since 1997, specializing in
business process improvement, executive coaching, business assessments,
strategic planning, and project management. Jerry holds a Masters of
Administration in Industrial Management. He can be reached at
Kilpatrick.Jerry@comcast.net or by phone at 206.339.5457.
Robert Osborne
has worked in the business process and IT industries for over thirty years.
He has held VP positions in sales and professional services for enterprise
software vendors and integrators, provided consultative services for dozens
of US and international clients and trained over 500 professionals in project
management, systems development and business process methodologies and
techniques. Robert is the founder of Business Breakthroughs and the developer
of the Business Value System Framework'. He can be reached at
rosborne@great-solutions.biz or by phone at 801.358.5304.
Lean Strategy Advisement
Executive White Paper
The R(E)volution of Lean by
Jerry Kilpatrick & Robert Osborne