June is upon us and the children will be leaving school shortly. This means summer beach vacations and weekly trips to the pool. Many of us dread swimwear season because we may not be as “skinny” as we would like. Getting slimmer means eating better, eating less, and exercising more. That’s my current goal as our July trip to Myrtle Beach is fast approaching!
This made me think of “losing weight” when it comes to business. You may have heard of the terms “lean manufacturing” or “lean thinking” in different articles, seminars, or books. Lean or “lean” manufacturing is a generic process management philosophy derived primarily from the Toyota Production System (TPS). I know Toyota has run into some major issues recently, so I don’t want it to mentally shut down at this point. The main reason Toyota has run into problems is a lack of focus on lean principles and the total quality efforts that made them so successful in the first place. One of the keys to surviving in this economy is doing more with less, and having a lean mindset in your business will help you get there.
Lean is NOT just for manufacturing! These concepts apply to all types of businesses, as well as back office processes such as finance and human resources. Lean concepts can be applied to everything.
A lean concept relates to the elimination of waste and basically focuses on the concept of “preserving value with less work”. Lean thinking aims at effectively eliminating seven different types of waste in your business processes:
1. Transportation
2. Inventory
3. Movement
4. Waiting
5. Overproduction
6. Over-processing
7. Defects
Let’s take a look at these and provide examples of each.
Transport – It involves the standard transport of suppliers and customers, as well as the internal transport of information. UPS discovered the waste involved in transportation when it explored the simple concept of its trucks waiting at traffic lights or stop signs to turn left. A significant amount of time and gas was wasted waiting to turn left.
UPS rewrote its software programs to maximize the number of right turns when delivering packages. In 2006, this resulted in a savings of more than three million gallons of gasoline, an increase in truck deliveries and a reduction in CO2 emissions by 31,000 metric tons.
Remove – waste is everywhere if you look at things differently. Plus, simple concepts can deliver great results. Don’t think about yourself anymore. There is brilliance in simplicity.
Inventory – This involves storing and maintaining inventory “just in case” versus “just-in-time” inventory. Inventory that is made or purchased without immediate orders or use limits floor space, increases storage costs, reduces cash flow, etc. In its original model, Dell Computer dominated it. The customer’s computer orders were placed online or over the phone. The computers were then bundled with available vendor parts that did not become Dell’s inventory until they were added to the computer on order.
The customer paid for the computer when it was shipped, and then Dell paid vendors for the parts inventory within 60 days of shipment. How about that for a cash flow model! Customer payment 60 days before I have to pay my supplier and I have no inventory. Wouldn’t we all love that model?
RemoveThink of inventory as a liability, not an asset, and ask yourself, “How can I fulfill customer orders with little or no inventory?”
Movement – Think of wasted movement as extra steps taken by employees based on inefficient design. There is significant waste related to movement in administrative processes. For example, the expense process involves purchasing, receiving, guaranteeing, approving, and paying. Wouldn’t it make sense to have these functions as close to each other as possible, as well as maximize workflow automation?
Many times these functions are located on different floors, in different buildings and are not automated. People go up and down floors, send emails, deliver paperwork … you get the idea. This results in approval delays, processing delays, unnecessary meeting scheduling (talk waste!), And increases in cycle times.
Remove – Better designs, better process flow design, and increased automation eliminate unnecessary movement, reducing waste and increasing productivity. Take the time to think about the unnecessary “movement” that occurs in your business.
Waiting – There is no real mystery here. Think of periods of inactivity while people or machines wait for the next entry. A great example is the mortgage application process. Fill out your application with all the supporting information and submit it to the mortgage company. They tell you that the process will take four to six weeks.
In reality, it only takes 15-20 hours of actual work on your application to complete. The rest of the time is wasted waiting. I work waiting for people (arrears), people waiting for work or people waiting for people. One scent test is Solitaire. If people are playing solitaire then they know they are wasting time waiting for work.
Remove– Observe the processes that involve waiting and look for ways to eliminate that time. If that’s not possible, add new productive activities that can be done during the waiting period.
Overproduction – This is directly related to inventory and waiting. Overproduction and waiting result in excess inventory. A client of mine used to manufacture the product and then package it into finished products according to the client’s forecast. Many times when orders came in, the customer wanted different packaging than expected, so my customer had to open the boxes of finished goods, remove the product from the packages, and repackage them according to the customer’s request. A waste of time, packing materials, and warehouse space, as well as the opportunity cost of working on other orders.
In this case, the solution was to manufacture products based on better customer forecasts (push) and then package and ship them according to the customer’s order (pull). This reduced inventory and rework, as well as faster shipping orders.
Remove – look for ways to get better information to better forecast needs and discover ways to maximize production efficiency so that finished products can be shipped immediately after completion.
Excess processing – This is usually a problem when one thread is much more efficient than other threads. For example, you run the payment processing section for a credit card transaction. You decided to buy a high speed envelope opener that opens 60 envelopes per minute. Sounds great, except for the fact that your staff can only process 30 payments per minute. The increased speed in opening letters does not increase performance at the end of the process. Money spent on this machine is wasted if you don’t increase the performance of the whole process.
Remove – You must look at a complete process and measure it from start to finish. Higher speed on a thread does not necessarily result in better overall results. The performance of a process is only as good as its biggest bottleneck!
Defects – We have all heard the phrase “get it right the first time” and that is the essence of this element. Defects in outputs (products, documents, deliverables, etc.) that cause the output to be removed or needs to be reprocessed result in wasted materials, time, and scheduling, as well as missing delivery dates or customer expiration dates.
I had a client who had a large department dedicated entirely to correcting back office errors based on incomplete or inaccurate data entered by clients via the web. By making some adjustments to the web form that required data to be entered in a certain way and rejecting customer submissions unless they were complete and accurate, we eliminated the “waste” of bug fixes by eliminating the problem at the source .
Remove – Incorporate quality into your processes so you don’t have to rework. Determine the root cause of the defects and eliminate the problem at the source and refuse to implement “band-aid” solutions related to the symptoms.
I found that by intentionally searching for debris based on these seven elements, I see debris everywhere. It’s like putting on different glasses and seeing a different world in front of you. Over the next week, I challenge you to take all seven elements (the acronym is TIM WOOD for memory purposes) and intentionally look for them in everything you do.
I think you will be amazed at the amount of waste you see throughout the week and this will inspire you to become “slimmer” in everything you do. Different lenses show you different things. Let me know what you see!