Leading In Lean Times

'Lean' has been predominantly used in the manufacturing, service and business circles. Almost every industry seems to be interested in the concept. With increased competition, maintaining costs has become an area of competitive advantage. Consequently, only companies that are able to manufacture at the least cost, while meeting customer expectations are surviving in the market. The rest are rapidly fading out of. For instance, in the PC industry, Dell a well-known implementer of the lean concept, has been able to remain profitable by minimising costs. Almost all other PC manufacturers have been recording losses. Lean, which started as a production system in the automobile industry in Japan, has today become a global concept. Though most organisations have been adopting lean there are still many who haven't, as they still consider themselves protected from the forces of competition. They need to begin soon lest they be outsmarted by their counterpart's world over.

Understanding Lean

Every organisation as a rule creates wastes. Taiichi Ohno, one of the main formulators of the Lean system categorised these wastes into seven broad areas (A few other areas were added later).

The seven broad areas categorised as wastage in TPS are identified as

• Man-hours due to non- value added processes.
• Man-hours due to non- value added movements of employees.
• Man-hours by employees spending time waiting for resources.
• Resources and man hours in trying to rectify mistakes
• Resources and man hours through producing in excess
• Resources through holding excess inventory
• Resources and man-hours through transportation of excess inventory.

Also, known as the Toyota Production System (TPS), Lean was first developed at Toyota in Japan. Organisations have implemented the lean system either in its entirety or in its essence. The TPS is also referred to as Just In Time Inventory, Agile manufacturing, Flexible manufacturing, Kaizen, Pull system, Flow manufacturing and the like.

Lean manufacturing aims at eliminating wastes through some focused improvements in work place, inventory and process management. In inventory, lean has led to the development of the Just-In-Time(JIT) concept, wherein the inventory is made available only when required. In terms of managing work place, lean has led to a focus on creating proper layout, providing detailed work instructions and training, working in cells and teams and so on. It also came out with efficient ways to process information to make all this possible. These approaches to eliminate waste are no longer confined to the manufacturing plants. They are applicable to administrative and office environments too.

Transforming To Lean

One of the most important elements in any organisation is its leadership. The importance of leadership is felt most in times of transformation. An organisation wanting to transform to lean will essentially need exceptional leadership. Lean and normal operations do not just differ in terms of degrees. They are different in their very essence. Lean organisations differ in their very constitution and management. Transforming to lean requires a change right from the production line to the board- room of the organisation.

Transformation effort fails in many organisations because their leadership often fails to:

• Convey the need and importance of moving fast through the transformation.
• Be united in their efforts towards the transformation
• Provide a clear vision
• Communicate the message effectively and appropriately
• Eliminate problems that hinder goal realisation
• Make systematic long term and short term plans.
• Persistently pursue the organisation's vision
• Make necessary changes in culture to facilitate the transformation.

A major hurdle in the transformation to lean is in the top leadership's perception of its performance in these areas. They mistakenly believe they have done well. In most organisations that have tried to implement lean, there is a large gap in the way workers perceive the organisation's performance in the key areas compared to that of the top leadership. While the top leadership is quite content with the performance in the key areas, employees feel that they are lagging way behind. That's a mismatch.

The degree of difference in the perceptions of the top leadership and their workers/ employees is a cause for concern. This is true even in organisations that claim to be strongly implementing lean in their manufacturing plants. Any progress these organisations make in terms of implementing lean is dependent on the top leadership realising its failure in the key areas and focussing on them. The top leadership will otherwise continue to believe that it is progressing well and become complacent. Thus, it will not only lose out financially but also be overtaken by its competitors adopting lean.

Magnifying The Focus

Another drawback of the top leadership in their implementing lean is their focus on the big picture while failing to consider the small aspects. Every organisation is involved in different activities. These could be classified into manufacturing, purchasing, supply chain etc. Generally, the top leadership looks at the big picture in terms of revenues generated, costs incurred and profits made. They measure their success by measuring improvements made in these fronts. However, they fail to realise that the improvements happen only when they are made in the minor activities that add up to improvements in the larger front.

A group of minor activities together form a macro activity. The improvements made in the minor activities like setting up a machine, accessing tools, moving components or for that matter preparing a purchase order are therefore important. The macro processes include producing a product, new product development, recruitment and so on. While it may be easy to measure the macro processes or activities they can in no way reflect the efficiency of the minor processes. Similarly, the big picture like overall profits, sales and so on do not give an appropriate indication of the efficiency of the macro and micro processes. Often what happens is that the management is pleased to see improvements in profits or sales for a period, only to find them slump down a little later. This is because the big picture provides only a blanket view of all the macro and minor activities. It is only an averaged indicator of the past performance . The figures can be misleading because the company may have managed to do well because of some external reasons like favourable market conditions, unforeseen demand and so on. Thus, when things begin to go down it takes time for the management to realise and act on it. By the time the figures provide a warning, the company is half way down hill. The management cannot therefore, rely on the quarterly and year end results to make improvements in the efficiency and performance of the company. They need to have a more effective way to manage those results.

When managers find the performance going down they look for some means to fix it up. They look for some new technology or market to prop up the company and lead it into renewed performance. After all that's what they are paid for by the shareholders. They are therefore, looking for a breakthrough plan to make substantial and large improvement. The idea is to get quick fix solutions leading to large and long-term gains. A substantial amount of the top managements time is spent in finding and implementing such breakthrough plans. The middle managers, on the other hand, are unable to spend so much time in the breakthrough plans as they are bogged down with routine issues that demand their attention.

Sometimes managers may even find such a plan and quickly implement it. After implementation however, the results are contrary to expectations. While they expect large long-term improvements, what actually happens is that there may be improvements but they last only for sometime. In a short while companies find their performance levels going down once again. The management finds that the improvements made do not justify the amount spent in achieving it. Thus they find themselves in a difficult situation having to answer shareholders, who now think the best solution is to dispose the present management in favour of a new team. The cycle then starts all over again. The breakthrough plans that most management try to implement may not be faulty as such. They may even be appropriate for the industry and company. While they may result in some improvements they need to be under girded by improvements on a more micro level.

Without this, the improvements may not always result in a long-term competitive edge either. This is because, once the competitors realise the reason for a companies better performance, they are quick to adopt it. Thus, after some time the breakthrough plan does not remain a source of differentiation from competition. Apart from this, new technologies and innovations seem to be constantly coming up. These ultimately make the breakthrough plans irrelevant. As a consequence companies are constantly on the lookout for new breakthrough plans to be implemented. This is more out of fear of being overtaken by the competition with a new opportunity. Such a constant seeking for breakthroughs causes companies to invest lots of time and money in many seemingly good plans. In the bargain the company is constantly churned up and could end up losing money and resources investing in wrong technologies.

Solution

The solution lies in companies embracing the concept and principles of lean in all their day-to-day activities. Today, almost every manager is aware of the concept of lean. Many have heard it in conferences and seminars or read it in magazines and books. However, most of them have some how failed to bridge the gap between knowing what is lean to knowing how to make an organisation lean.

Therefore they have had to face failure and frustration in their efforts to make lean a reality in their organisation at one level or another. Lean is however a simple yet profound concept. It is in a sense a breakthrough principle that many companies need to implement before looking for other breakthrough plans. Lean is about creating a culture and system where every one is seeking ways to make improvements in whatever they involve in. When people start looking for ways to eliminate waste and make improvements in all the innumerable minor activities they involve in, the results can be astounding. The improvements made in small activities will add up to big results. In fact, the real differentiator between top class companies and others is just this. Now, in the process of making improvements in the minor activities, if management is able to implement other breakthrough plans it will find itself in a real and long lasting competitive position.

Almost any company can implement a breakthrough plan. If they don't discover the breakthrough plan themselves they will at least copy it. This however cannot be done with a lean system. The experience of Implementing lean is unique to every company. The combination of activities differs from company to company. Each company has its own unique set of resources, people and issues. It is something like a family. There may be two families having the same composition or combination of members. However, the people are different, their problems are unique, the kind of activities they involve in are also different. Therefore, though the principles are the same the approach to each family is different. The same holds for companies. The principles of lean are common for all organisations. However, the way it gets implemented will always differ from company to company. No wonder a company that has become lean is ever willing to allow others to study its system. What many are looking for is a quick fix. There isn't any. Implementing lean is sheer hard work. There is no substitute for it.

The difference between a company that has implemented lean and a normal company is that, the lean company is able to benefit more from a new breakthrough idea. This is because a lean organisation can better leverage a new breakthrough initiative. In a company that is focusing on being lean, the workers and employees can focus on continuous improvement in the basic operations while the management can keep looking out for the appropriate breakthrough to be implemented. Once the fundamentals of a company from the micro level up are right, it cannot but successfully implement a break through.

Implementing Lean

One of the most important aspects to implement lean principles in an organisation is having the right kind systems and leadership. The leadership has to be able to provide the eight elements as mentioned earlier for a successful transformation effort in an organisation. The systems on the other hand should have the necessary resources and organisational structure to back it. The organisation may even have to undergo a restructuring to incorporate lean concepts. It will have to provide room for continuous improvement efforts, daily review meetings, and employee ownership among others. The system should also provide the framework through which the various levels of managers and overseers can be trained on the lean principles and concepts. The managers and overseers should in turn be able to guide their work force under them in the implementation of lean. The workers and employees need to be properly educated on what lean means and why and how the organisation can implement lean. The efforts towards lean need to be persisted to bear fruit. Kaizan, Just In Time, Six Sigma, TPM, Poka Yoke, DOE, 5S, SMED, Gain Sharing, process reengineering, Kanban, Constraint Management, and Demand Flow Technology are some of the methodologies of lean on which managers and employees can be trained on. Measurements are an integral part of the lean implementation. It is through continuous measurements and review that the organisation can make continuous improvement.

Conclusion

Becoming lean is not a destination but a continuous process . There are no well-defined formulae, which can result in a lean organisation. It has to be implemented respective to the intricacies and uniqueness of each organisation. Lean requires the right systems to be in place and should be driven by the right kind of leadership. Above all lean needs to be sustained over a period of time to bring about meaningful results.