The Lean Company Management Strategy

Give the client what he wants, exactly where he wants it, and with an appealing price tag – this is just part of a successful business plan. The second half of your success hinges on efficient execution – without unnecessary waste in time and resources. If we want to optimise our business process, the Lean Six Sigma methodology may be helpful, but only if we put in a considerable effort in its implementation and maintenance.

Recent years have seen a worldwide fad, even a craze, for foreign methodologies of production and quality management. Many companies decide to implement these methods, aiming for more order in their processes and higher work efficiency. What do we get from implementing these methodologies and is this another fad, or maybe the road towards a strategic transformation of the entire company? It is worth investigating why today everyone wants to be lean and what this inconspicuous term actually means, bringing together the perfectionism of the Far East with the principles of production and quality optimisation.

Nearly thirty years ago the American industrial complex was faced with strong pressure from its Japanese competitors. The latter used effective practices of assuring high production efficiency, such as kaizen (a constant improvement process). Ultimately, many American firms were able to win this competition by imitating their Asian peers – by learning to use the tools and practices of the so-called lean manufacturing system, which was first implemented by Toyota. The group of tools known as the Toyota Production System (TPS) is a process innovation which led to many methods of improving the operational efficiency of companies. Their principles are: constant attention to detail, experimenting based on the data gathered and encouraging workers to constantly increase efficiency and eliminate waste at their workstations. Eradicating any waste and excess action came to be known by the common term of lean, which was coined by the 1990 book by James Womack, Daniel Jones and Daniel Roos, „The Machine that Changed the World”.

The currently most popular methodology of Lean Six Sigma(LSS) is a combination of two approaches to improvement. The aim of the lean methodology is making the organisation slimmer and more flexible and speeding up processes, while Six Sigma leads to decreasing numbers of defects, to a number of 3.4 defects per million. In the past it was believed that processes of 3 sigma were acceptable (67,000 defects per million), but now it is possible to reduce errors and process variability up to a level of 6 sigma. Together, both these methodologies are a great tool for large multinationals, providing multi-million dollar savings for companies such as General Electric, Motorola, Bank of America, Citigroup, Boeing.

Although much has been written about the Lean methodology, it is still fairly rare in practice. Meanwhile, it is not only the methodology itself, but the entire „Lean culture”, that can be characterised by thinking in terms of efficiency, and this can lead to a company’s success on the market. The example of the construction material producer Isola Group is a perfect illustration of this point. Instead of closing an unprofitable factory, a decision was taken to restructure it, beginning with the production floor, which was extremely untidy, littered by products which couldn’t be sold on the market, while bottlenecks delayed the production of the products which were constantly in short supply. The analysis by hired consultants pointed to the main operational problems and identified the causes behind such waste. All these findings were written down in detail. As part of improving efficiency, workers tidied up the production floor, using the „five S” lean tool (sort, systematise, shine, standardise, self discipline) and they also presented their own ideas for improving work efficiency – around 800 ideas on improvements, which in their majority were immediately implemented. The factory was re-painted in an imaginative way, and managers finally began to wear working clothes and safety glasses. Even the Director transformed his workplace into a „project office”, encouraging idea sharing, which led to a more frequent reporting of suggestions from workers. Worker meetings began to be held in order to talk about problems, analyse their causes and to search for solutions. Thanks to daily meetings on production losses workers gained instant feedback on the initiatives which they should put in place. Work productivity and efficiency indicators were defined, based on workers’ self-assessment, which were then placed on the project board, so that anyone could easily access them. This led to shorter cycle times and the eradication of work-in-progress inventory. The factory’s results drastically improved. The hitherto negative EBIDTA (profits before interest, tax and amortisation payments) turned positive. The factory started generating profits, with a key role of the management, open to any worker idea, which in turn positively impacted staff morale and production process improvement.

Although lean is best suited for large corporations, it can also be successfully employed in smaller firms, both in the industrial and service sector. However, fully implementing lean requires cooperation with an expert (e.g. an LSS Black Belt level consultant), who has the knowledge necessary to root out waste. Small and medium companies can also become leaner on their own – they can achieve higher efficiency and minimise waste, but this requires a fundamental rethink of practices usually considered the basic criteria of adequate management:

What are my goals? Does the organisation support the achievement of long-term aims by setting difficult but feasible short-term efficiency standards?

What are the incentives? Does the company offer promotions and bonuses for the most efficient workers, simultaneously training or moving to other posts the people who don’t achieve satisfactory results?

How does results monitoring work? Does the organisation gather and analyse data on efficiency in a systematic way, in order to find opportunities for improvement?

 If we have defined processes for these practices, we can then commence with the “slimming” operation. Firstly, neighbouring stages of a process should be brought closer together. For example, if staff is divided functionally, and the workers receiving merchandise and those who service it work on different floors, it often may reach the other floor the next day after delivery. But if they work closer together, the process of merchandise handover can be reduced to a couple of minutes, and workers will realise that they are an important element of the organisation. Secondly, procedures should be standardised. Paradoxically, less freedom of choosing the methods employed at work brings about more transparency and increases efficiency. If every desk has a specified place for keeping paper clips, any worker will know where to find them should they run out at one workstation. Thirdly, defining a common work pace is very important, i.e. quantifying and adjusting the pace at which work is done to client expectations in order to satisfy demand. This consists of determining at the outset how much time each action performed by every single person may take, for the case of a person conducting this process for the first time. Subsequently, with repetitions, the time intervals should become shorter until a replicable average time is achieved, which allows calculating the minimum number of workers required to successfully conduct all tasks required. Fourth, an even distribution of workload is needed, which guarantees the smooth handing over of work from one optimally burdened worker to another without unnecessary delays. Fifth, dividing tasks according to their complexity level. Anyone who has ever been to the post office wanting to quickly send a parcel knows how much time is wasted when staff members are with another client, who needs a more complicated service. A lean division of labour provides results when operations of similar complexity levels can be grouped together into separate groups, each having their own efficiency criteria. Sixth, presenting the results of work efficiency in such a way that anyone can find out why, when and where efficiency loss occurred. If everyone is assessed using verifiable measures, the „I’m not interested in the work of others” attitude, well known in bureaucracies, will be eliminated. We should also remember to fight recurring relapses, reversing processes to their state before lean culture implementation. If we let this happen, the lean experience will turn out to be only a costly exercise.

 Sometimes the problem of defining waste appears – after all, first it has to be identified, which isn’t always easy, because people are used to its continued existence. A simple tool developed by the Toyota management, which helps pinpoint waste, is 5W (the five “whys”). Its main idea is conducting the so-called waste walk – going through the entire process from beginning to end and searching for inefficiencies by poising subsequent questions, until the root cause behind conducting every task and the value it provides to the organisation is understood. Why am I at this meeting? Why are so many people attending? Why is the agenda so extensive? And so on. When you know how to, you can search for both big and small pockets of waste and inefficiency.

The idea of lean is becoming increasingly popular, because the science of management is evolving. Today Lean Thinking is the opportunity to both optimise processes and change worker mentality and engagement. This is due to the fact that if individual workers can influence work on improvements, they feel valued, motivated and responsible for how their processes change. You should nevertheless remember, that an organisation can only be as innovative as their leaders, and this is why they have to be consistent and persevering advocates of the idea of lean operations.

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