Lean Manufacturing

"Lean manufacturing or lean production, which is often known simply as "Lean", is "an initiative focused on eliminating all waste in manufacturing processes." American Society for Quality.

As a Chief Financial Officer for several companies involved in lean, I've defined "lean" as a culture that uses varied principles, methods, and tools to reduce or eliminate activity that does not add value to a process. I use the term "culture" because a successful lean implementation usually requires a paradigm shift in the thinking of the organizations leaders. I also do not use the term "manufacturing" because lean is not limited to a manufacturing process.

• In a “lean” culture, everyone contributes and makes decisions. There are no bosses—only teams and leaders.
• In a “lean” culture, the first reaction when there is a problem is to blame the process, not a person.
• In a “lean” culture, the emphasis is not on optimizing a part or a department, it is to optimize the whole.
  

Develop The Whole Metric.

Measure the results of "lean manufacturing" and "lean culture" by developing metrics that measure the whole rather than the parts. For example, rather than looking at the number of pieces an individual can process, measure the total throughput of the department and of the division and of the company. What good is it if the individual can process 50 when the entire department can only process 35? This situation creates backlog or inventory-whether the product is a widget, insurance claim forms, or electronic transactions.

Examples of Measuring the Whole:

Often a tool called a "box score" is used to measure the whole, that is, measurement of significant elements in a value stream. In order to measure the whole, the entire value stream must be reviewed.

• If set-up time or processing time is reduced, but nothing is done with the additional capacity, where is a saving realized? If only the set-up time or processing time is measured, an organization can delude itself to think there is a savings, when savings do not exist.
• If conversion costs remain the same, but inventory and waste decrease, throughput increases, and customer satisfaction increases, overall operating profits will increase.
  

Expand "Lean" Beyond Manufacturing.

Administration and Customer Service. Some companies apply lean only to the manufacturing floor and forget about the administrative areas. When this happens, all savings are not being realized. Lean is applicable to the whole company. It begins with the first contact with a customer through the collection of the invoice and to the final analysis of the financial results.

Health Care, Government Services and School System. Some think lean is only for manufacturing or the assembly of a product. Lean can and has been applied to health care, governmental agencies, school systems, and all types of service industries.

At an organization I was recently working with, the accounting manager wanted to hire a financial analyst to prepare special request reports. Before approving the request, I suggested that we talk to the users of the reports. When we did this, we discovered that 50% of the reports being distributed were not looked at and that another 10% of the reports could be consolidated so that a single report could be given to multiple users. In addition, most users wanted access to the raw data so that they could prepare their own analysis. Not only did we not have to hire an additional person, but additional capacity became available that was used in another department.

Lean is a journey.
If you start and progress on your journey, others will find it hard
to catch up to you; if you don't start, you might not survive.

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