Many of the manufacturing and distribution teams we speak with are in the process of prioritizing their projects and strategic plans. And many of these enterprises are asking, “why go Lean in 2018?”
“Lean” is a philosophy that is based on the simplification and standardization of business processes, the elimination of waste in all of its forms throughout the organization, and the concept of continuous improvement.
As business process improvement consultants, we note that it is becoming apparent to many that the concepts of Lean apply to much more than just manufacturing.
Not Just for Manufacturers
Much like the shop floor, non-manufacturing organizations that have implemented Lean have eliminated waste, minimized non-value added activities, improved quality, corrected performance issues, integrated disjointed processes and automated required activities.
The only real differences between the shop floor and non-manufacturing are that information is usually being processed instead of actual material components and the product being delivered may be a service or information, not a physical item.
Losing money due to wasted effort, low productivity of knowledge workers, customers lost or upset due to poor practices, mis-information causing chaos and low moral throughout the organization are all symptoms of the need for change. Applying Lean principles can solve many problems and can create a knowledgeable, empowered workforce that can provide a real competitive advantage to the organization.
The Benefits of Lean in 2018
Going Lean in 2018 is very much on the minds of manufacturing, service, retail, professional, healthcare or any organization that delivers something to a customer via a process involving multiple people and activities. These orgaizations can benefit from leaning out their processes, eliminating waste and working to the needs of the customer.
Implementing Lean techniques can help companies improve their operational performance and customer responsiveness and drive positive results to the bottom line. It’s not uncommon to save tens or hundreds of thousands of dollars by implementing Lean techniques.
However, Lean is more than cost savings. It is also about potential revenue generation. Money and time that is saved and capacity recourses that are freed up can be utilized to pursue other revenue generating opportunities, such as creating a new product or additional services. The improved performance to the customer such as better quality or faster, more reliable delivery, may be a premium on the market that is worth a higher price.
Typical returns obtained by companies that have succeeded with Lean include:
• 50% increase in productivity
• 80% reduction in work in process
• 75% reduction in work space required
• 85% improvement in quality
• 95% reduction in lead-time
• 95% improvement in on-time delivery
All of these benefits are very desirable and should catch the eye of any owner or executive looking to go Lean in 2018.
Not a One Time Event
Lean is not a one-time event or project that starts and stops so that those involved can go back to doing their regular jobs.
It is a way of thinking to be applied to the entire organization which often times requires a culture change or paradigm shift. It is a continual process that revisits issues and looks for opportunities every day as part of the general way of doing business (hence the term “continuous improvement”). Those that have accomplished this realize that a Lean approach is a much better way of doing business.
Five Key Principles
Lean focuses on five principles that can be applied to manufacturing and non-manufacturing equally well:
1. Value Definition
2. Business Process Mapping
3. Uninterrupted Flow
4. Customer Pull
5. Pursuit of Perfection
One of the hardest aspects of this approach is to define “value.”
The key here is to think of value in terms of the end customer and determine what it is that the customer is actually willing to pay for. Will the customer place the order without it? Is it directly related to the price that the customer is paying? Could it be listed as an item on the customer’s invoice? If not, it is likely something that is not value added so its elimination may be an opportunity for improvement.
Once value to the customer is understood and defined, Lean techniques can be applied to eliminate the non-value added aspects of the process.
Next Steps to Go Lean in 2018
As ERP selection consultants, Lean concepts are very much on our radar in the year ahead. We’ll be addressing additional topics around Lean methodology in upcoming blog posts.
Read a white paper entitled: “Lean, Six Sigma and ERP: Putting it all Together for Improved Performance.”
Looking to drive a Lean project at your organization? Contact the Ultra team.