June is upon us and the children will be out of school shortly. This means summer vacations at the beach and weekly trips to the pool. Many of us dread swimsuit season as we may not be as “skinny” as we’d like to be. Being physically slim means eating better, eating less, and exercising more. That is my current goal as our July trip to Myrtle Beach is fast approaching!
This got me thinking about getting “lean” when it comes to business. You may have heard of the terms “lean manufacturing” or “lean thinking” in different articles, seminars or books. Lean manufacturing or “lean” is a generic process management philosophy derived primarily from the Toyota Production System (TPS). I know Toyota has run into some major issues recently, so I don’t want you to shut down at this point. The main reason Toyota has run into problems is a lack of focus on the lean principles and total quality efforts that made them so successful in the first place. One of the keys to surviving in this economy is doing more with less, and having a lean mindset in your business will help you achieve this.
Lean is NOT just for manufacturing! These concepts apply to all types of businesses, as well as administrative processes such as finance and human resources. Lean concepts can be applied to everything.
A lean concept is related to the elimination of waste and basically focuses on the concept of “preserving value with less work”. Lean thinking aims to effectively eliminate seven different types of waste in your business processes:
Let’s take a look at these and provide examples of each.
Transport – This implies standard transport from suppliers to customers, as well as internal transport of information. UPS discovered the waste of transportation when it explored the simple concept of its trucks waiting at traffic lights or stop signs to turn left. Significant amounts of time and gas were being wasted waiting to turn left.
UPS rewrites its software programs to maximize the number of right turns when delivering packages. In 2006, this resulted in savings of more than three million gallons of gasoline, increased deliveries per truck, and a reduction in CO2 emissions of 31,000 metric tons.
put off – Debris is everywhere if you look at things differently. Plus, simple concepts can deliver big results. Do not think more than yourself. There is brilliance in simplicity.
Inventory – This involves stocking and maintaining “just in case” inventory versus “just in time” inventory. Inventory that is made or purchased without immediate orders or use limits floor space, increases storage costs, reduces cash flow, etc. In its original model, Dell Computer mastered this. Customer computer orders were placed online or by phone. The computers were then assembled with off-the-shelf parts from the vendor that did not become Dell inventory until they were added to the computer by order.
The customer paid for the computer when it was shipped and then Dell paid the vendors for the parts inventory within 60 days of shipment. How’s that for a cash flow model! Customer payment 60 days before I have to pay my supplier and I have no inventory. Wouldn’t we all love that model?
put off– Think of inventory as a liability, not an asset, and ask yourself the question, “How can I fulfill customer orders with little or no inventory?”
Movement – Think of wasted motion as extra steps employees take based on inefficient design. There is significant waste related to movement in administrative processes. For example, the spending process involves purchasing, receiving, certifying, approving, and paying. Wouldn’t it make sense to have these functions as close to each other as possible and maximize workflow automation?
Many times these functions are on different floors, in different buildings, and are not automated. People walk up and down floors, send emails, drop off paperwork…you get the idea. This translates to approval delays, processing delays, unnecessary meeting scheduling (let’s talk waste!), and increased cycle times.
put off – Better layouts, better process flow design and increased automation eliminate unnecessary movement, reducing waste and increasing productivity. Take the time to think about the unnecessary “movement” going on in your business.
waiting – There’s no real mystery here. Think of idle periods while people or machines wait for the next input. A great example is in the mortgage application process. You complete your application with all supporting information and submit it to the mortgage company. They tell you it will take four to six weeks to process.
In reality, it only takes 15-20 hours of actual work on your application to complete. The rest of the time is wasted waiting. Work waiting for people (backlog), people waiting for work or people waiting for people. A smell test is Solitaire. If people are playing Solitaire then you know they are wasting their time waiting for work.
put off– Look at processes that involve waiting and find ways to eliminate that time. If that’s not possible, add new productive activities that can be done during the waiting period.
Overproduction – This is directly related to inventory and waiting. Overproduction and waiting result in excessive inventory. A client of mine used to manufacture products and then package them into finished products based on the client’s forecast. Many times when orders came in, the customer wanted a different package than intended, so my customer had to open boxes of finished goods, remove the product from the packages, and repackage according to the customer’s request. A waste of time, packaging materials, and warehouse space, as well as the opportunity cost of working on other orders.
In this case, the solution was to manufacture products based on better customer forecasts (push) and then pack and ship based on customer order (pull). This reduced inventory and rework, as well as shipping orders faster.
put off – look for ways to get better information to better forecast needs and discover ways to maximize production efficiency so that finished products can be shipped immediately after completion.
Excess processing – This is usually a problem when one thread is much more efficient than other threads. For example, run the payment processing section for a credit card transaction. He decided to purchase a high-speed envelope opener that opens 60 envelopes per minute. Sounds great, except for the fact that their staff can only process 30 payments per minute. The increased speed in opening cards does not increase performance at the end of the process. The money spent on this machine is wasted if it does not increase the performance of the entire process.
put off – you must look at a whole process and measure it from start to finish. Higher speed in a thread does not necessarily result in better overall results. The performance of a process is only as good as its biggest bottleneck!
Defects – We have all heard the phrase, “do it right the first time” and that is the essence of this element. Defects in outputs (products, documents, deliverables, etc.) that cause the output to be scrapped or need rework result in wasted materials, time, and scheduling, as well as missing customer delivery dates or project due dates. client.
I had a client that had a large department devoted entirely to correcting back office errors based on incomplete or inaccurate data entered by customers via the web. By making some adjustments to the web form that required data to be entered a certain way and by rejecting customer submissions unless they were complete and accurate, we eliminated the “waste” of error correction by eliminating the problem in the source.
put off – Build quality into your processes so you don’t have to rework. Determine the root cause of defects and eliminate the problem at the source and refuse to implement “band-aid” solutions related to symptoms.
I have found that by intentionally looking for debris based on these seven elements, I see debris everywhere. It’s like putting on different glasses and seeing a different world in front of you. For the next week, I challenge you to take the seven elements (the acronym is TIM WOOD for memory purposes) and intentionally look for them in everything you do.
I think you’ll be amazed at how many wasteful things you’ll see over the course of the week and it will inspire you to be more “lean” in everything you do. Different lenses show you different things. Please let me know what you see!