Lean Manufacturing Topic of the Day:  What Does Lean Mean to Top Management?

Lean Manufacturing Topic of the Day:  What Does Lean Mean to Top Management?

A Lean Synopsis for the CEO

Top managers are always stressed for time.  So here is a capsulized summary of how a “Lean Manufacturing” philosophy can provide a critical positive transformation for your company.

1) If you are not, currently, a “lean” enterprise, the transition can provide a Cash Windfall.

Inventory ties up cash and space.  Both could be more productively utilized.

A fundamental requirement of the transition to lean is a dramatic reduction of inventory.  This has multiple consequences, not the least of which is the generation of large amounts of up front tax-free cash.

To date, we have worked with three companies that have generated in excess of $150,000,000 (Yes, One hundred fifty million dollars) in cash within the first two years of transitioning to lean.
Even small companies have generated millions.  This upfront cash generation has never failed to far exceed the total cost of the lean transition, usually within the first few months.  Transitioning to lean is more than self-funding!

The reduction of inventory generates tax-free cash and a considerable amount of space.

2) Another basic feature of a good lean process is that it not only encourages Continuous Improvement, It demands it!

A couple basic, company-wide, measurements provide the mechanism to drive a culture of continuous improvement.   Goal curves, combined with accountability, assure that improvements are sustained and continue.   And, they provide you and your management team with on-going progress status.   No surprises. Just rapid, tangible, company wide results.

3) An additional benefit of a Lean transition is the rapid improvement in Responsiveness.

There is an inverse correlation between inventory and responsiveness. Driving inventory down shortens lead times.  You can think of inventory as items waiting in line for their turn.  Fewer items mean shorter waiting time.
Quick response times, i.e. shorter lead times, often provide a significant competitive advantage.

4) One greatly under-emphasized benefit of a valid Lean initiative is the attainment of near perfect delivery performance.

A critical component of continuous improvement is the elimination of any disruption that causes us to miss a commitment.  We used the mantra: “The day ends when the schedule is completed.  Not the other way around.”
A quantum improvement in delivery performance is often generated within a few months of beginning the transition.  In most companies, the primary requirement for dramatically improved delivery performance is deciding to do it.  We can help.

5) Lean also has a dramatic impact on product Quality.

Reductions of inventory mean fewer defects if one is found.  Shorter lead times mean quicker discovery of a defect when one does occur.  And, quicker discovery means an improved probability of finding the true root cause.
It is not uncommon for our clients to experience an order of magnitude improvement in overall yield within the first 12 months of their lean transition.

6) Last, but not least, is the impact on Profitability.

Continuous improvement reduces waste.  Reduced inventory and improved yields mean less scrap and rework.  Better responsiveness and near perfect delivery performance means increased sales.

Bottom line: Revenues increase while expenses decrease.  Profitability spikes upward.

Note: A few of the above Lean Manufacturing Concepts are illustrated in the brief overview video on our home page.  Many of our clients use it as an introduction to lean for their people.

Additional articles that you might find informative address the High Cost of Complexity, How to Optimize Your Entire Plant, a re-look at your Make-Buy Criteria, increasing your market share by Leveraging Lean in the Marketplace, and Making a Case for Multiple Shifts.   And, if your business includes some Job Shop features, you’ll definitely find this article of interest.

Already pursuing the transition to Lean?   If you’re not thrilled with your rate of progress, you might want to check out these common process flaws.

If you would like additional discussion as to the application of our approach to a Lean Transformation to your specific situation, drop us a note and we’ll set up a conference call.   There’s no charge, and I guarantee you’ll find the time spent “value adding.”

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