This column is all about Lean, yet here I am saying don’t? Have I lost my mind? No, I haven’t. Let me explain.
Much too often I’ll hear about a company who is “doing Lean” or “going Lean” or “becoming Lean” and I always have the same reaction: I ask, “Why?” Why is this company doing, going, becoming Lean? Oftentimes I never get a response, or I don’t get a response that makes any sense nor one that answers my question.
Companies – actually, company executives – make a decision to do/go/become Lean without really understanding why they’re embarking on this journey and without this understanding they have no idea how to go about it. When challenged, it sometimes becomes a game to try to get to the real reason, or at least some facsimile of a reason, of why they’re “doing” Lean.
If you don’t know the answer to the question of why you’re doing/going/becoming Lean, then don’t do/go/become Lean.
“So don’t ask me no questions, and I won’t tell you no lies”
– Ronnie Van Zant & Gary Robert Rossington
Why not, you ask? It’s because Lean requires not only resources, resources that I’m sure are in short supply and stretched beyond limits, but also a relentless commitment to a never ending quest for perfection. If you don’t know the answer to why you’re about to provide these resources and to make this commitment then how can you possibly begin to answer the questions that will inevitably arise from your employees? Why are they being asked to take on this seemingly daunting challenge? If you can’t answer them, don’t lie. They’ll see it coming a mile away and smell it for ten. If you’re not prepared to answer the question, stop what you’re doing and find the answer.
What are you doing this for? What’s your objective? Those are the first questions that you need to be prepared to answer. If your answer is to save money, stop. Don’t pass go. Don’t collect $200. Saving money is not the primary objective of a Lean organization and companies that embark on a Lean journey with cost savings as their primary (and sometimes only!) objective are doomed to fail.
By only cutting costs without digging deep into the root causes behind why you need to cut costs you’re only putting a bandage over the wound. It may or it may not stop the bleeding.
What’s happening in your business that has lead you to the decision to do/go/become Lean? Is it a cash flow issue? Then cutting costs (usually headcount) doesn’t help you. You need to dig into the reasons why you’re low on cash. The first culprit is usually inventories. Here’s a quick and easy exercise for you. Count up the square footage that your entire inventory occupies and divide that into the total square footage of your building. Now do the same for your equipment, which is where you make your money. I’ll bet you’ll be surprised. That inventory is money, cash, which you’ve spent and haven’t recovered. Why is that inventory there? What was it purchased for in the first place? What controls are in place to ensure that materials are not ordered over and above that which is really needed to convert customer orders? When was the last time you updated your estimating standards? Are you ordering extra materials because you’re wasting too much during setups? Cutting costs by cutting headcount doesn’t correct any of these.
What about shipping costs? Are you expediting materials, both incoming and outgoing? That doesn’t come cheap. Why are you expediting materials? Are you constantly behind due to unplanned equipment breakdowns? What’s the cost of some preventive maintenance versus the cost of the expedited freight, overtime and the intangible cost of an upset customer?
Now take a look at your receivables. Are you collecting your cash as quickly as you possibly can? If not, why? Could it be that your invoices are the culprit? One client estimated that 50 percent of their invoices required a correction of some kind. Fifty percent, and that’s on 300 orders each day! If you’re not invoicing correctly you’re not going to collect your cash when you should, and that’s obviously going to cause you cash flow problems. This particular client was able to trace the root cause of their invoicing problems back to inconsistent order entry methods and a lack of standard work for order entry and naming conventions.
There are many reasons for doing/going/becoming Lean but cutting costs isn’t a reason. Dig deep into the real root causes of your money troubles and eliminate the wastes that are draining your cash. Know why you’re embarking on this journey so that you can guide your efforts and explain them to your employees, shareholders, suppliers and customers.
Tom Southworth is a Lean consultant with CONNSTEP, Connecticut’s Manufacturing Extension Partnership. He is a Senior Member of ASQ, a senior member of the Society of Manufacturing Engineers, SME Lean Bronze Certified, and a certified TWI Job Instruction and Job Relations Trainer. He can be reached by email at firstname.lastname@example.org.