Eliminating Wastes Is Not Just About Cost Reductions
Recently Leanovations met with a company who felt they were doing lean pretty well. So when we asked them to tell us how they were doing it, they spoke about their Labor cost reductions programs over the last few years by focusing on eliminating wastes, including some employee layoffs. It must be asked, is this company really doing lean pretty well?
So how many of you reading this article right now feels your company is doing Lean well because you are focused on labor cost reductions? Or better yet, how many of you are part of a company which is focusing on your lost revenue opportunities because you are not attacking your wastes. I ask this question a lot; my experiences lead me to believe that probably less than 5% of companies focus their Lean efforts on "lost revenue opportunities" versus focusing on labor cost reductions.
Labor is one element of your total capacity in your company, and capacity is your total time today to produce something, which includes the value added time and non-value added time (or wastes) in your processes. The cost of capacity can be calculated in various ways depending on the company's financial philosophies and operational situation. Some may count just the cost of labor and/or overhead costs. Others will look at the impact on inventory, and still others may count the impact on output (growth opportunities). Some may look at a combination of the 3. In addition to these tangible or quantifiable costs, there will be other, intangible costs. The biggest among these is likely to be the ability to provide the new profitable service levels your customers demand.
At Leanovations we recommend companies look at reducing any non-value/wastes as "Lost Revenue Generating Opportunities" along with minimizing asset risk - such as inventory, rather than a straight labor cost reduction program. We promote Lean as a "Growth Strategy", not a "Cut and Slice" cost reduction process. Organizations need to develop a culture that wants to attack wastes to create new capacities and employee skills to grow profitably, not to reduce labor costs. In order to create new capacities and skills we teach organizations how to identify and eliminate waste from the total value stream. By doing so we promote the revenue generating opportunities a company has created with this new capacity and the ability to "work on" the business by eliminating wastes, therefore we do not make the focus on labor cost reductions.
We teach companies that on average a manufacturing company charges anywhere from 3-5 cents a second for manufacturing time (which equates to $108 - $180 / Hour) and we teach that for every second we can save by eliminating wastes provides opportunities to grow the business. We also teach that if a company takes this additional capacity to go after new business, the only cost to generate new profits is basically material cost as the employees, equipment and facility costs are already on the financial books.
Those companies, who are utilizing Lean as a cost reduction program and not a revenue generating opportunity, do not understand Lean or the importance of engaging the employees to create employment stability. Companies focused on cost reductions will quickly lose the employee involvement required to create new capacities to grow and to develop a Lean Learning Culture throughout the organization. Employees usually relate cost reduction programs to potential layoffs, rather than companies who see Lean as a cultural process where the employees are engaged to eliminate wastes to free up capacity to grow the business profitably ensuring employment stability.
If you are interested in improving profitable growth and employee morale please contact Leanovations at info@leanovations.com or visit our website at: www.leanovations.com .
Sunday, March 13, 2011
Small Business Owners/Leaders Must Sell Their Passion to Create Profitable Growth
Leanovations has worked with many family owned manufacturing companies, with sales in the range of $5-$50 million annually, to implement Lean in their companies. One of the first tasks we usually embark upon is how to promote the owners' passion for the business, and desire to grow to their employees. This entails coaching the business owners and the staff on how to teach and apply Lean principals to the workforce to meet their objectives. At Leanovations, we believe that to enjoy continuous improvements at your company, you must apply "Constant Gentle Pressure" to a "Plan, Do, Check, Act" process through Lean Kaizen Workshops.
Promoting and selling a passion and vision about Lean to create profitable growth is the most important job of a business owner and leader. The Business Owner must fuel the fire of passion through leadership within every employee, and turn employees into advocates, and advocates into the disciples who promote your vision. Leadership is the key in building a spirit of co-operation, which means interacting frequently with the employees, expecting them to improve continually, reaching for a higher standard and inspiring them with a brighter future. Lean Kaizen Workshops provide employees a new level of teamwork, which will improve productivity and make profitable growth easier.
Leanovations utilizes Lean Kaizen Workshops to engage employees and teach them the importance of Lean and innovations to provide a competitive advantage and to enjoy employment stability with opportunities in the future. A Lean Kaizen Workshop is normally 5 days in length with a focused approach that brings critical resources together and empowers participants to identify problems, determine a solution, and implement the change wherever the opportunity to improve exists.
As the organization gains knowledge, experience and confidence in lean and the Lean Kaizen Workshops, it is encouraged by Leanovations to begin conducting their own internal lean training/workshops. Essentially, the role of Leanovations should be to teach, coach and challenge an organization as a whole to attain higher improvement goals, and to be a resource for further learning. If you are interested in learning more about Leanovations contact us at info@leanovations.com or call us at (860) 479-0293.
Leanovations has worked with many family owned manufacturing companies, with sales in the range of $5-$50 million annually, to implement Lean in their companies. One of the first tasks we usually embark upon is how to promote the owners' passion for the business, and desire to grow to their employees. This entails coaching the business owners and the staff on how to teach and apply Lean principals to the workforce to meet their objectives. At Leanovations, we believe that to enjoy continuous improvements at your company, you must apply "Constant Gentle Pressure" to a "Plan, Do, Check, Act" process through Lean Kaizen Workshops.
Promoting and selling a passion and vision about Lean to create profitable growth is the most important job of a business owner and leader. The Business Owner must fuel the fire of passion through leadership within every employee, and turn employees into advocates, and advocates into the disciples who promote your vision. Leadership is the key in building a spirit of co-operation, which means interacting frequently with the employees, expecting them to improve continually, reaching for a higher standard and inspiring them with a brighter future. Lean Kaizen Workshops provide employees a new level of teamwork, which will improve productivity and make profitable growth easier.
Leanovations utilizes Lean Kaizen Workshops to engage employees and teach them the importance of Lean and innovations to provide a competitive advantage and to enjoy employment stability with opportunities in the future. A Lean Kaizen Workshop is normally 5 days in length with a focused approach that brings critical resources together and empowers participants to identify problems, determine a solution, and implement the change wherever the opportunity to improve exists.
As the organization gains knowledge, experience and confidence in lean and the Lean Kaizen Workshops, it is encouraged by Leanovations to begin conducting their own internal lean training/workshops. Essentially, the role of Leanovations should be to teach, coach and challenge an organization as a whole to attain higher improvement goals, and to be a resource for further learning. If you are interested in learning more about Leanovations contact us at info@leanovations.com or call us at (860) 479-0293.
Lean is a Growth Strategy Not a Cut and Slice Process
When Lean is applied properly it creates profitable growth opportunities for a company. Lean is a dynamic and constantly improving process dependent on the understanding, involvement and engagement of all the company's employees.
At Leanovations we teach, coach and promote Lean as a "Growth Strategy", not a "Cut and Slice" cost reduction process. We help organizations develop a culture that wants to create new capacities and skills to grow profitably. In order to create new capacities and skills we teach organizations how to identify and eliminate waste from the total value stream. By doing so we promote the revenue generating opportunities a company has created by eliminating wastes, and we do not make the focus on cost reductions. Those companies, who are utilizing Lean as a cost reduction program and not a revenue generating opportunity, just do not understand Lean and will quickly lose the employee involvement required to create a Lean Learning Culture. We believe for a successful implementation of a Lean Learning Culture, it requires that all employees be trained to identify and eliminate wastes from their day to day work processes at all levels in the organization.
The best way for individuals to learn how to eliminate waste is through participating on a one week "Kaizen Team", which emphasizes employee participation on a cross functional team focused on a single subject/area. Through a Kaizen Team event participants learn by doing, developing a culture of teamwork while achieving greater productivity. Repeatedly, Lean demonstrates it works, as many companies that embrace Lean can gain 15%+ year after year growth, while the US GDP increases at a rate of 3-5% year after year. Lean is about changing principles and attacking waste in your value streams. It means totally changing the way you look at things, but once you learn how to see waste, you can eliminate it and become competitive.
Economic cycles will always mean there will be difficulties, such as the U.S. economy has experienced since mid-2008, and we will always be at the mercy of economic forces. However, those companies that are running Lean have an extra insurance policy. In a rough economy or recession, companies that are Lean will fare better than those companies who are not.
Leanovations can share a number of compelling cases of how Lean initiatives have really paid off by insulating many of the companies we are working with from economic troubles. For many the recession has actually provided new market shares from their competitors, who continue to lay off workers reducing their capacity and capabilities. The majority of the companies Leanovations is working with increased employment and sales through organic growth and now find themselves in a position to create new growth through acquisitions. Their ability to stay strong through the recession with Lean as a growth strategy has placed them in a position to acquire weaker competitors who may have used Lean tools as a cost reduction program (thus eliminating employees and capabilities to respond).
When properly applied, Lean helps to bring products to market faster which allows companies to capture more of a market share and it results in better asset velocity, which drives cash cycle conversion, and we know that in all business cycles, "cash is king." If you are interested in learning how Leanovations can assist your company, please go to www.leanovations.com .
When Lean is applied properly it creates profitable growth opportunities for a company. Lean is a dynamic and constantly improving process dependent on the understanding, involvement and engagement of all the company's employees.
At Leanovations we teach, coach and promote Lean as a "Growth Strategy", not a "Cut and Slice" cost reduction process. We help organizations develop a culture that wants to create new capacities and skills to grow profitably. In order to create new capacities and skills we teach organizations how to identify and eliminate waste from the total value stream. By doing so we promote the revenue generating opportunities a company has created by eliminating wastes, and we do not make the focus on cost reductions. Those companies, who are utilizing Lean as a cost reduction program and not a revenue generating opportunity, just do not understand Lean and will quickly lose the employee involvement required to create a Lean Learning Culture. We believe for a successful implementation of a Lean Learning Culture, it requires that all employees be trained to identify and eliminate wastes from their day to day work processes at all levels in the organization.
The best way for individuals to learn how to eliminate waste is through participating on a one week "Kaizen Team", which emphasizes employee participation on a cross functional team focused on a single subject/area. Through a Kaizen Team event participants learn by doing, developing a culture of teamwork while achieving greater productivity. Repeatedly, Lean demonstrates it works, as many companies that embrace Lean can gain 15%+ year after year growth, while the US GDP increases at a rate of 3-5% year after year. Lean is about changing principles and attacking waste in your value streams. It means totally changing the way you look at things, but once you learn how to see waste, you can eliminate it and become competitive.
Economic cycles will always mean there will be difficulties, such as the U.S. economy has experienced since mid-2008, and we will always be at the mercy of economic forces. However, those companies that are running Lean have an extra insurance policy. In a rough economy or recession, companies that are Lean will fare better than those companies who are not.
Leanovations can share a number of compelling cases of how Lean initiatives have really paid off by insulating many of the companies we are working with from economic troubles. For many the recession has actually provided new market shares from their competitors, who continue to lay off workers reducing their capacity and capabilities. The majority of the companies Leanovations is working with increased employment and sales through organic growth and now find themselves in a position to create new growth through acquisitions. Their ability to stay strong through the recession with Lean as a growth strategy has placed them in a position to acquire weaker competitors who may have used Lean tools as a cost reduction program (thus eliminating employees and capabilities to respond).
When properly applied, Lean helps to bring products to market faster which allows companies to capture more of a market share and it results in better asset velocity, which drives cash cycle conversion, and we know that in all business cycles, "cash is king." If you are interested in learning how Leanovations can assist your company, please go to www.leanovations.com .
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