The Lean route to sustainable profitability

BUSINESSES, and especially successful businesses, are adopting Lean as a tool for achieving sustainable long-term progress. Lean is the philosophy of an organisation intent on providing perfect customer value while increasing efficiency and minimising waste – that is, doing more with less. It is based on the ideas of “continuous incremental improvement” and “respect for people”.

A customer may be someone internal, like a work colleague, or someone external, like a purchaser of goods or services.

A Lean-focused business understands that to increase value, a business and its components must work together as an integrated system so an improvement or change in one area benefits the whole.

For Lean to be successful, it is fundamental that the business understand what “value” means for its customers. But many businesses do not. Most think they have an idea of what this may be but instead of listening to the voice of the customer, they address “value” based on their own perception of what the customer needs.

History is, and continues to be, littered with countless examples, one of which is online purchasing or social media. Customer needs and expectations are forever changing and businesses need to respond appropriately and quickly if they are to succeed.

Once the voice of the customer has been heard and his wants understood, a set of tools applicable both to production and service environments expose the waste within the organisation. Once identified, these can be systematically eliminated.

There are eight types of waste – defects, overproduction, waiting time, non-utilised talent, transportation, inventory, motion and extra processing.

A wasteful activity is one that is deemed not to be working towards achieving the goal of perfecting customer value – like standing in a queue at a check-out counter, or responding to e-mail.

Listening to the voice of the customer, focusing on the business as a system, identifying, exposing and eliminating waste are difficult to achieve unless the business has a continuous culture of improvement and operates as an integrated system of people, processes and equipment.

Align effort with value

If the culture is not right, not only will results tend to be fleeting, they will also be unsustainable.

Key to improvement is aligning effort with value to eliminate or minimise those activities that do not add value – value seen from the customer’s perspective.

To improve on value consistently requires a philosophy of continuous improvement, complemented by the required conceptual frameworks, in turn complemented by the improvement tools.

Lean methodology provides a robust framework, as well as tools that have been developed over millennia. Lean is much more than an approach to cost-effective manufacturing; it is the philosophy of continuous improvement.

Classic project management courses teach that with quality, cost and time, only one can be optimised at the detriment of one or both of the other parameters. As the saying goes: “You can have it fast and cheap, but it won’t be good; or you can have it fast and good, but it will cost you.”

A Lean mindset, in contrast, makes it possible to optimise all three. One view of the interplay is that improving the quality of time, quality of cost and quality of product will lead to increased value without detracting from the other parameters.

Value from the customer or end-user’s point of view is what he willing to pay versus value-offering. The customer does not consider walking up and down to collect components within the manufacturing process as a value-adding activity.

In short, Lean is at the very heart of improvement, whether it is explicitly stated or intuitively implied.

To embed continuous improvement, Lean needs to ascend from a concept to a philosophy – a state of mind.

Lean applies in every business and every process. It is not a tactic or a cost reduction programme but a way of thinking and acting for an entire organisation.

The term Lean was coined for Toyota’s business during the late 1980s by Jim Womack’s research team at MIT’s International Motor Vehicle Programme.