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Why Lean Fails

March 13, 2012

Lean desperately needs a political advisor.

Political campaigns are difficult because the candidate must become the person that provides a vision for a wide range of issues to a broad base of constituents. When candidates get into the details, people get lost, bored or they begin hearing things they don’t like.

As a result, successful campaigns limit themselves to one message that is used over and over again. “Hope and Change” and  “I like Ike” are two that come to mind.

If I were to shrink Lean’s message into a few words today, I think most would agree it is:

Eliminate Waste

It has all the trappings of success: It is short. It is easy to act on. Everyone wants to remove waste from their process. Unfortunately for Lean, removing waste from a process doesn’t necessarily add up to business success.

Lean has a classic campaign problem. Lean has a broad range of concepts, tools and metrics required to be successful. But it only has a short window to communicate to a wide variety of people and an even shorter amount of time to demonstrate success.

So what sound-bite is most frequently absorbed from an introduction to Lean? “Eliminate waste.” In fact, to make sure they don’t forget this goal, management will post the Seven Wastes of Lean on the wall. Kaizens are held and 5S efforts are not far behind.

No surprise at the outcome of this effort. Waste is identified and removed.

“Let the sales team know! We can produce more with no additional labor, equipment or overhead required. Costs are dropping. Finally, we can price aggressively and still make a profit. We’ll finally wipe out those pesky low-cost competitors.”

All is good.

Good, that is, until the competition reacts. They drop their prices to meet yours.

At that point, volume begins dropping. With all this extra capacity, idle people and machines stick out like sore thumbs. I don’t have to tell you what happens next.

Is it any wonder many people consider Lean a failed methodology? It results in lay-offs and shrinks the revenue opportunity. It is now harder to survive than before Lean was introduced.

While reducing waste is a great objective and simple message, there is a fundamental problem with it. It doesn’t tell people what to do with that extra capacity. As a result, some companies will inadvertently have it work against them.

Now for those of you itching to let me know all the other things that should have been done in conjunction with the reduction of waste, I’ll refer you back to the first couple of paragraphs in this blog. Requiring a re-engineering of your entire business practice in order to implement continuous improvement is not realistic.

If I were Lean’s campaign advisor, this would be the new campaign message:

Reduce Lead Time

I can still use the basic tools such as kaizen, 5S and even hang a poster. The difference is I am only going to focus on those things that will reduce lead time. More importantly, I know what to do with any gains that I earn: Reduce lead time.

This is important for three reasons: It works with existing metrics, shorter lead times are a sustainable competitive advantage. Finally, companies can cash that buffer, time, in for a wide variety of benefits. Let’s look at this in more detail.

First, reducing lead times will work with the current metrics in place at any company.  Have a Lean related success? Change the lead time on the master data screen in your ERP system. Every other metric will continue to work. If you are not willing to change the lead time then it doesn’t count as a success.

Second, Start quoting shorter lead times rather than reducing prices. Give your customer that time as an additional value. They will hungrily chew it up with their own inefficiency or use it to make themselves more competitive. And you will still get the satisfaction of nailing the competition. When they have to meet your lead time or lose an order, the competition will use overtime and premium freight to overcome their inefficiencies. Fists will start thumping on tables because both are immediate red flags. Management knows profits or volume will soon fall but no answer is in sight.

Third, a shorter lead time gives you more options to manage your business. Removing waste scatters benefits throughout the plant making it difficult to cash in. A shorter lead time puts all the efficiencies in one place: time at the tail end of the process. If increased volume isn’t your goal, you can cash that time in for a wide variety of benefits. For example, move overseas operations closer to your customers. This will allow you create jobs at higher wages because you can eliminate logistics costs. Enter new markets with no capital investment. Get rid of that last bit of Overtime and Premium freight. Or invest the time back into more improvements.

Lean for President!

 

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