A question was posed to me recently that I have addressed many times, and it is one that is alluded to in every article I write. The question is, “Why lean?” It’s a simple question, and it deserves a simple response, but the question isn’t as simple as it appears.
I could respond that lean makes good business sense, but that only captures the intent, not the dynamics of the lean business philosophy. Maybe the best response can be found in my new, soon to be released book, “Testaments to Lean – Cases for Change.” It was shared with me by a businessman whose career spanned all areas of the furniture industry’s organizational structure in both manufacturing and retail. Here’s what he said:
Of all of the options that are intended to make a company more competitive and profitable, why are so many executives turning to lean? There are a number of philosophical reasons why lean is important, such as the elimination of waste and non-value-adding activity, the creation of flow that links demand with delivery capability, tapping into the creativity and innovation of the workforce, increasing margin and profit, maximizing existing resources, and positioning the company for growth, but the fact of the matter is, when Lean is properly applied it will increase stakeholder value.
Increasing stakeholder value requires two primary business strategies:
1. Productivity strategy
2. Growth strategy
Lean contributes significantly to these strategies, specifically:
1. Lean increases productivity by:
a. Improving the cost structure
b. Increasing asset utilization
2. Lean creates growth in a company by:
a. Expanding revenue opportunities
b. Enhancing customer value
Lean increases stakeholder value through increased profit by:
1. Increasing the agility of company staff to respond to customer expectations
2. Increasing production flexibility to handle the complexity of multiple product lines
3. Increasing visibility across the supply chain to accurately track raw materials, work-in-process, and finished goods.
Optimizing plant operations for maximum cash flow and return on investment requires the business leader to improve all production-impinging processes. Gaining better control of these processes will help him simplify complexity, manage cash flow, avoid over-producing or under-producing, and compress manufacturing cycle times. These improvements lead directly to a higher return on assets employed and enhanced customer value.
Lean builds long-term stakeholder value by improving cost structure and increasing asset utilization. Similarly, because every dollar not lost to labor, equipment, facilities, or inventory can be used to generate revenue, lean expands revenue opportunities and enhances customer value. Aren’t these values and objectives exactly the results you are trying to achieve?
Not only will lean enhance and improve your company’s financial position, but Lean will position your company competitively as well. Your company, regardless of its size and business segment, is not alone in its struggle against domestic and global competition in today’s marketplace.
Competition from the Pacific Rim and from around the corner are encroaching on every industry that’s perceived as a profitable center of activity and where market penetration is relatively easy. The playing field in this flattening world is becoming far from level. Unfortunately, many domestic managers and executives are so immersed in the daily survival mode that they can’t focus the attention necessary to retain competitive advantage as the playing field levels around them. Decisively embracing the lean business philosophy is the only way for domestic manufacturers to once again become dominant players in the marketplace.
There is no reason why that status cannot be attained at your company, regardless of its size. The only things that are missing are your commitment to changing the way you do business and your willingness to unleash the bottled-up creativity and innovation that resides in every one of your employees.
I’m sure the emphatic references to how lean “will enhance” and “will position” your company to be more profitable and more competitive seem like bold statements, but they are true. It has been my experience that every business that is led by executives who are committed to lean and staffed by an empowered and actively engaged workforce has enhanced profits and positioned the company for growth, regardless of the economic climate.
Maybe the answer to the question, “Why lean?” is so simple that it seems too easy to be true. If that’s how you perceive it, you’re right. The answer is very simple, but the primary reason why so many executives and business leaders are side-stepping lean is because they are either unwilling to make the necessary commitment to change or they don’t understand what that commitment entails.
You don’t have to stay in that group of business leaders. If what you are doing today isn’t delivering the desired results then it’s time to turn from your current business practices and embrace lean thinking. If you are wondering what a “commitment to change” entails just pick up the phone and dial 616-295-8077 and ask for Jim. You’ll be glad you did.
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