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Implementing Lean – When and How to Start.

A common question we are asked is when should a business start implementing lean and how should it get started. Many people (particularly fellow consultants and trainers) would say that everyone needs to start to implement lean right away and implement across the whole organisation with a business wide, top down roll out program. However, from experience, this is usually not the answer we find that fits most businesses.

When Do I Start to Implement Lean?

Sometimes the challenge of improving a factory seems overwhelming (as is the case in this Chinese Factory). However committed leadership and a step by step approach starting with the key value stream can deliver dramatic improvement in a relatively short time.

When we talk about implementing lean we are usually talking about minimising waste through establishing robust and efficient business processes, standardising every day tasks and developing the skills to solve problems in order to continuously learn and improve. Ideally these factors should be considerations right from the start of your business. However having seen many small and start up businesses, management has limited resources and therefore the initial focus will be on developing and perfecting the product that you are going to sell, and then marketing and selling this product, while managing scarce cash flow. There will probably be little in the way of formal business processes as the business is likely to be run by a very small number of people who fulfil multiple functions. It is worth reading some lean books. Our list of recommended lean books  provides some good suggestions. However at this point we would recommend that the focus of the business should usually be on business strategy, marketing and growth rather than focusing internally on business processes.

At this point in the business cycle I would suggest that no matter how good your business processes are, if you are not focused on marketing and growth, you wont have a business.

At some point in the growth of your business you will start to feel the complexity of your business grow and find that, as a business owner or manager, you can no longer do everything yourself. In our experience this typically occurs when revenue reaches around $200,000 – $400,000 per month and your business is employing between 15 and 30 staff. At this point the first temptation will be to add more overheads (supervisors and managers) and to try and “automate” processes using better business management software. Unfortunately, unless you improve business processes first, new managers and software will just add cost and more complexity without solving your underlying problems.  Often businesses this size find that poor business processes are actually constraining your growth. This happens in a number of ways:

  • Key leaders in the business (including the owners) spend most of their time on ensuring the business can meet every day delivery requirements to customers (“firefighting”). They therefore have little or no time to focus on  strategy, product development and marketing – the activities that will grow the business in the future.
  • Despite the efforts of managers in “firefighting” to get orders out, the business is likely to be starting to regularly “make mistakes” – late deliveries, quality issues, poorly planned product launches etc.  These impact on customer relationships and reputation and make customers think twice before they buy more.
  • Even if the poor processes do not affect customers, costs will be growing faster than revenue which impacts competitiveness. This is called “dis-economies of scale” and is due to the growth of overheads and, high internal costs of quality  (ie. waste, rework, downtime).

In our experience many businesses never get beyond this stage. They plateau at around this level of sales, occasionally growing (usually opportunistically when a competitor fails) and then shrinking again when their poor process and lack of innovation means those customers look elsewhere. A lot of businesses will then find themselves in serious financial difficulties as their high overheads, poor processes and (in most cases) excessive inventory and working capital mean that they are unable to withstand a fall in sales and quickly run out of cash.

At this point in the business cycle, my comment above is reversed. It doesn’t matter how good your product and marketing is, if you can’t deliver it to the customer on time, on quality and at a competitive cost you wont have a business.

So We Need to Do Lean but When do We start?

I frequently hear comments that “we are not ready for lean”. This is a rather circular and illogical argument, because effectively what the management is saying is that business processes are too bad and therefore it can’t implement improvement. Of course this means that the business will never improve! At TXM we have never seen a business where the processes where too bad to start improving.

There are a couple of reasons to consider delay however. Firstly, if you plan to make significant changes to the key line leadership roles (e.g. hiring a new Plant Manager), then it is better to wait until the new person is in place until you start your lean program. This then provides the new manager the opportunity to be engaged in the program from the start. In smaller organisations, it is also important not to take on too many major projects at once. Usually management can handle a couple of projects at once, but once the load gets beyond this, they tend to lose focus and results can suffer. In prioritising projects, we would suggest that lean should be placed high on the list, since it is likely that it will have a greater business impact than any other operational project you are considering. Implementing lean business processes will also help you clarify what your business REALLY needs and help you plan other projects more effectively. For example, by clearly spelling out how business processes will work in a new business software system, defining the layout and machinery needs in a new factory, or establishing strong basic processes to build a quality system on.

Where to Start the Implementation – Set Specific Goals

In deciding where to start your lean implementation, you need to clarify “Why” you need to implement lean. The driver might be delivery, lead times, quality, cost or a combination of all of these. Your lean program therefore needs to be designed to address these issues directly.

In our experience many companies try to achieve improvement by an indirect route. They embark on a “lean training” course for all their staff, adopt an “out of the box” lean deployment program or train “Lean Six Sigma Black Belts” who are to drive improvement. Another approach is to always “focus on stability first” with lots of 5S and Visual Management. The problem with these approaches is that after a year or more, lots of employee time and company cost have been committed (even taking in to account training subsidies when available), but the core problems facing the business will not have improved.

At TXM we suggest a direct approach. First define, what are your core business issues? Secondly, what is the most important product stream (value stream) that is impacted by these issues? We will then start by mapping this value stream using our “Manufacturing Agility Process®” (MAP). This process will highlight the root causes of your problems and help your team develop a solution and an action plan to address this issue. This action plan should target actions that can be achieved in a maximum 6-9 months (ie. no “Five Year Plans”). The short time frame ensures that the team select goals and actions that are realistic and achievable given the resources available to the business. Once the implementation is underway in the first value stream then it is relatively straightforward to extend it to other value streams. In addition, as the improvements start to take effect, problems will reduce and this will give managers and front line leaders more times to implement further improvements, establishing a “virtuous cycle”

To capitalise on this “virtuous cycle”, it will be usually necessary to build some lean cultural foundations. These include implementing Practical 5S™ to organise and standardise the workplace. We would also introduce Visual Management and Solving Problems Every Day (SPED®). These tools combined with the Lean Daily Leadership Process®  (LDLP) give front line leaders the skills to “improve the standard” their own areas every day and further lock in the gains made. By driving empowerment of front line leaders and teams, LDLP® also frees up Senior Management time to focus once again on innovating the product and growing the market.

Should we do a Pilot or Try to Change the Whole Business at Once?

The answer does depend on the size and complexity of the business and your circumstances. However for most medium to large businesses, a pilot project is a good idea. This enables you (and your lean consultants) to adapt the approach to the particular needs of your business. It also builds confidence in your team that the new approach is right for your business. The argument against a pilot is that it takes too much time. However in our experience launching in to a business wide implementation is costly, risky and can often progress slower than if the ground has been prepared with a successful pilot program.