MRO Today - Ask yourself, ‘Why lean?’

Ask yourself, ‘Why lean?’

by Dave Melhus

What does your company want from a lean transformation? Is there a methodology in place to focus the improvement efforts? Are the results and improvement rates better/faster than your competitors? Most struggle to answer “yes” to all of these questions. That’s not to say that lean work isn’t taking place. Rather, the improvements probably aren’t being fully leveraged.

Not asking and quantifying the “why lean?” question is a common first misstep. For example, countless companies work on setup reduction or TPM but fail to capture the
“real nuggets,” such as inventory reduction, increased schedule frequency, enhanced throughput or customer lead time reduction. Why? It’s easy to let the tool become
the goal vs. the improved financial performance (sales, costs or assets).

Fortunately, whether your company is just contemplating a transformation or is knee deep in implementation, it’s not too late to ask, “Why lean?” To get there, ask:
1) What are the top two or three metrics that need improvement?
2) How will the improvement benefit the organization?
By tying the “what” and “how” together, the WIIFTB (what’s in it for the business) will be established.

For example, the benefits may be:
A) lead time reduction to increase sales;
B) lower working capital (inventory/receivables) requirements to allow for growth without borrowing;
C) a lower cost structure to allow for pricing or profitability options;
D) cycle/flow time reduction, leading to less space requirements.

While the relationship isn’t new, the methodology to improve is. How often are you asked to halt spending, lower inventories, delay maintenance expenditures, stop overtime or quote a shorter lead time?

When leadership flexes its muscles, stuff happens. When leadership relaxes, performance reverts to prior levels. The results are short-term, unsustainable results. Sustainable financial performance is earned through enhancements in your
business processes (value streams).

A company can’t simultaneously improve everything. Establishing priorities (by answering “why lean?”) will point to which value streams (demand, delivery, development or support) need the most focus.

Once the priorities are established and the financial model determined (e-mail me for a model worksheet), link the operational metrics. Failure to make this connection is often the second misstep. Without a clear relationship between operational metrics and the company’s financial model, the linkage between lean activities and financial results will be challenged. This often results in fading leadership support.

It sounds easy, but it’s not. Quite often, you get happy talk, “sounds good” metrics or good lean metrics but at an incremental change rate.

Happy talk metrics or programs are most frustrating to employees. You could give examples of slogans or programs within your company. Lean could fall into this category. While the concepts are worth pursuing, lack of definition and measurement results in little meaningful action. People struggle to conceptualize why the change is occurring. Don’t buy happy talk unless the actions are measurable and linked to financial performance.

“Sounds good” metrics are worse. On the surface, it appears that the organization is focused on correct priorities: schedule compliance, quality, productivity and inventory turns. But when you dig into the details, inconsistencies surface, no clear ownership exists and individual improvement plans are non-existent.

Lastly, some companies focus on maintaining or improving the right things, but the change rate is incremental or, worse, held out as world class even though the improvement pace has flat-lined. The method of measurement often leads to this complacency. Think in terms of perfection: 100% schedule compliance, 100% labor performance, etc.

Typically, the metrics will fall into the categories of cost, quality and delivery. Each will influence the financial health of your company. Which ones relate to what your company needs out of lean? Put these metrics under the microscope. Do they tie or closely relate to the financials? Are the metrics clearly understood by the owner of the related value streams? Do they encourage waste elimination? And most important, do the owners know how to improve the metrics?

These few metrics will be how your leadership measures the lean transformation’s success. In deploying the process, more specific value stream segments are identified and the metrics become precise and specific to the particular work group.

With all this in place, you are ready to begin your lean journey.

Dave Melhus, the former vice president of operations for Iowa’s Vermeer Manufacturing, is currently a VP with Simpler Consulting. He can be reached at 641-620-1320 or by e-mailing davem@simpler.com.