Lean principles traditionally have helped manufacturing companies survive economic crises without necessarily having to lay people off. But can the Lean philosophy be successfully applied to other sectors to help them get through the current downturn? Mike Thackray reports
Successful organisations share one common trait that helps them get through the tough times. They do not panic and lay people off, cut funding, or reduce investment in core parts of the business, including people. Apple is a case in point. “We’ve had one of these before, when the dot-com bubble burst. What I told our company was that we were just going to invest our way through the downturn, that we weren’t going to lay off people, that we’d taken a tremendous amount of effort to get them into Apple in the first place – the last thing we were going to do is lay them off. And we were going to keep funding. In fact, we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over. And that’s exactly what we did. And it worked. And that’s exactly what we’ll do this time,” said Steve Jobs, CEO of Apple, in reference to the current downturn in the US.
Organisations that have truly adopted the management philosophy of Lean, provide an understanding that jobs will not be cut. Toyota, whose name is synonymous with Lean, also successfully applied this philosophy following the economic downturn that followed 9/11. Whilst acknowledging that its workforce was too large for the market conditions at the time, Toyota chose not to make job cuts. Staff in the production department were instead seconded to a service improvement team working on projects that would improve efficiency once demand picked up again. When the upturn came, staff were moved back over to production who found themselves in a much improved position as a result of the commitment made to improvement. Unsurprisingly, as of 2007 this particular part of Toyota had a six month waiting list for staff wanting to work there.
What is Lean?
Lean management is usually attributed to Toyota and its production system (TPS). Perhaps because of its manufacturing roots, many people struggle to see how a system developed in a Japanese factory can successfully be applied elsewhere. But if you can get beyond the smattering of Japanese phrases and sort out your Muda from your Kanban, you will discover that the Lean philosophy pulls together three fundamentals that any organisation, regardless of which sector you’re operating in, should be committed to:
1. The drive to ensure you understand your customers’ needs.
2. The drive to do whatever you do with as little waste as possible.
3. The drive to ensure your employees are engaged in their work.
One of the more common misconceptions around Lean (not helped by its rhyming with ‘mean’) is that it results in lay-offs. The recent introduction of supposed Lean principles into the HM Revenue & Customs and the Department for Work and Pensions actually resulted in proposed strike action. Comments from stakeholders included:
“There is just one purpose to Lean, and that is to make the jobs as basic, small and narrow as possible, so they can be done as cheaply and efficiently as possible.”
“Lean involves breaking up skilled jobs into less skilled jobs and increased monitoring of work.”
“The introduction of Lean is likely to reduce workers’ control over their jobs.”
If these are the perceptions of what was being introduced, it can safely be said that it was not Lean. The techniques themselves are designed to improve efficiency, and therefore could be used to make cuts, but we must be careful to separate the tool from its uses, and techniques from philosophies. Using Lean techniques to make job cuts actually destroys one of its most fundamental tenets – that employees must be committed to continuous improvement and make tasks as efficient as possible. So if you apply Lean to make job cuts, you sacrifice any future attempt to involve employees in the drive to remove waste. The memory of how management reacts during difficult times will be remembered in the cultural stories of an organisation long after specific individuals have moved on. Nevertheless, misconceptions like these must be dealt with first if Lean is to be successfully introduced in your organisation.
The basic principles of Lean have resulted in success for many non-manufacturing settings, in environments as diverse as insurance companies, academia and the NHS, when properly applied. Key to the Lean philosophy is the idea that ‘waste’ is prevalent throughout most work processes, which can be removed to focus on more value-adding activities. Manufacturing waste may not be directly applicable to the service or public sector, but there are equivalents that are found in any office or administration process, such as retrieving or storing files, moving paperwork, duplication, mistakes, rework, and doing more ‘just in case’ it is required.
To highlight a more subtle type of waste let’s take another example of over-production where Lean can help us challenge our ‘old way of thinking’. Take a hypothetical bookstore ‘Jim’s’, which has at least three ‘promotions’ running at any one time. Jim does this because it attracts customers, and his suppliers are often keen to give him ‘unmissable’ deals on certain product lines. Each promotion that Jim runs involves a huge number of steps from agreeing terms with suppliers, preparing stock for delivery at the central warehouse, shipping unsold stock back to the supplier, merchandising promotional areas and so on. Mapping out the process alone would highlight two things. Firstly, that it takes a lot of time and effort to run a promotion and it had better be a good one for it to be successful. Secondly, that there are lots of steps within the process that would be classed as ‘waste’. Good retailers have made inroads into reducing waste and making promotions more efficient, by doing things such as removing the need for pricing each individual item, and integrating the two systems so that stock does not have to be processed upon delivery to store. But a truly Lean approach, by putting the end customer at the heart of any process, raises a question we might not even consider, namely: ‘Who is the promotion for?’
Do people suddenly want a specific book that they didn’t want yesterday? ‘3 for 2’ offers can be very tempting, but the demand for each product in its own right does not actually change. True value for the customer would be the book they actually want being reduced in price, and not the book that they only want if it is cheap enough to tempt them. A true pull strategy would involve books being printed only when people wanted them. Excessive inventory at suppliers would be removed, thus removing the need for suppliers to offer ‘unmissable deals’ to get rid of stock, thus removing the need for a ‘3 for 2’ promotion. The result would be huge time and labour savings that would allow Jim’s employees to concentrate on true customer service and help people find and discover books they actually wanted.
In short, applying Lean principles will help you to identify where efficiencies can be made, so you can refocus efforts to help you survive the current downturn and prepare for the future. It will also help you to put the customer’s needs at the heart of the operation and regain that competitive edge, whichever sector you’re operating in.
Lean Enterprise
The main 5 components of a Lean enterprise:
- Specify value – What does the end customer actually want or need? Take a customer who is setting out to buy a drill, for example. Isn’t what they really want a ‘hole’?
- Identify the value stream – This involves mapping out the total of all the steps currently involved in delivering the value for the customer, and highlights areas of waste that serve as the target for any improvement programme.
- Create flow – Focuses on making one part of the value stream flow seamlessly into another, ensuring that tasks, inventory and waiting times are kept to a minimum.
- Customer pull – Ensuring that no function upstream should do or produce anything until someone has actually requested it. It demands flexibility and reducing tasks that are done ‘just in case’ someone requires it. In an office environment, it is best highlighted by the ‘waste’ generated by huge numbers of e-mails being sent to all and sundry ‘in case’ it is of interest.
- Pursue perfection – The continuous process by which people question, redefine, alter, improve the processes to reduce waste, add value or reduce the time taken to perform any of the steps.
For more information, contact:
Mike.Thackray@erconsultants.co.uk
© er consultants Topics Issue 2, 2008
