Lean Manufacturing Provides Transformational Value: Part 1

I’ve got this friend who’s made a few million (I think) in business software development.  He’s a smart guy and we have fun discussions about business and politics (we think a lot alike on both).

sum of partsRecently , he was onto something that I actually took notes on.  He used an illustration:  Let’s say one guy knows how to make chocolate and sell it and does a great job at it.  Another guy knows how to make peanut butter and he does a great job, too.  Then there’s a third person…this guy doesn’t make anything but he has this idea as to how the chocolate and the peanut butter can be combined to make a product that nobody ever saw before and that everyone will love.  Which of the three stands to add the most value to shareholders, to the employees of the two companies, to society?  Why it’s that guy with the idea, right?  My friend referred to this as the idea that provides transformational value.

The problem with lean is, that ability to transform is obscured by a bunch of tactics, tools, and methods that seem only to improve what’s already there.    Too often, lean gets implemented with all the drive and energy of a bunch of teenagers who’ve been commanded to help mom get the house straightened up before company comes.  Lean is seen merely as making the chocolate maker more “efficient” or helping the peanut butter maker cut her costs. I hear this in my own work: if the company is interested in being more efficient, it should let us go back to work rather than sitting here in this meeting…if the company is so interested in cutting costs, why have we hired an outside consultant to tell us what we pretty much already know how to do?  And it’s not just the supervisors and their direct reports.  No accountant thinks his or her job is being done until he or she has insisted that lean show, to the penny, what it has saved the company and whence those savings have come.

Much of the literature on lean isn’t helpful in this matter.  We’ve all read articles and texts that sang the virtues of cell creation, takt time monitoring, and line balancing that led to…huzzah!…taking a worker out of the cell!  Reduced waste!

The primary objective of lean manufacturing isn’t to do what we already do for a few pennies less.  The primary objective of lean is do be able to do things we can’t do now.  In other words, the primary objective of lean isn’t to reduce or cut away, it’s to build and create.  (One of the reasons I don’t like the term “lean manufacturing” is that it points more readily to reducing than to building and creating.)

I’ve told a story many times (and may have told it here) about a process mapping exercise I facilitated at the steel mill I used to work for.  I had some engineers in the room who had been having a bit of a hard time grasping the import of lean concepts and methods.  I asked the team, “When we get an order, what lead time do we quote?”  “Ten to twelve weeks,” came the reply.  “And we hit that target all the time, right?” I asked.  Sardonic laughter.  “The typical delivery time is fourteen to sixteen weeks and it wouldn’t be unusual if it were twenty weeks.” So, I asked the team, “If we could hit that ten to twelve week lead time and didn’t lower costs a penny, would that make a difference to the business?”  They told me that it would materially and positively impact the number of orders we’d get.  “So, let’s go a bit further; suppose, through our lean initiative, we could consistently hit an eight week lead time, still assuming we didn’t reduce costs at all?”

“We’d control the market.”

The purpose of lean, then, isn’t simply to…get lean, i.e., cost cutting and waste removal.  It’s to create and develop capabilities the organization doesn’t currently have.  It’s to create capacity that the organization doesn’t currently have.  These new capabilities and capacities should compel the organization to use that new capability and to fill that new capacity with.  I say “should” because it doesn’t always happen that way.  But I’ll talk about that in my next post.

So, I’ll end, for now, with this:  The purpose of lean manufacturing isn’t to be able to do the things you do now, better. It’s to be able to do things you can’t now do at all.