Going Lean in the New Year

Peter Schubilske, CPA, Auditing & Accounting Senior Manager   email
December 2010

The new year is just around the corner and many people have already started to make a list of new year's resolutions. Everyone knows the common ones: quit smoking, make more time for golf, get out of debt, volunteer more and get back in shape. These are all common, but have you ever considered making a new year's resolution for your business? How about getting your business back in shape or, as it's more commonly referred to, "getting lean."

You may be asking yourself, "Why go lean when my line of credit is maxed out, my inventory is high and my customers want to pay less?" Well, the answer is simple.  Going lean can lead to your business reducing its debt and inventory. Businesses that have successfully gone lean have significantly reduced inventory, waste, floor space and downtime, while they increased quality, throughput and, most importantly, cash flow. 

It may be hard to believe, but all of those results are achieved by following five basic lean principles:

1. Define value through internal and external customers.
2. Identify the value stream and the waste within it.
3. Make the process flow.
4. Implement "pull" to the process.
5. Apply continuous improvement.

Like any other good new year's resolution, you have to commit to the resolution and stick with it. The same principle applies for implementing lean in your organization. Before you can even start you'll need management from across your organization to commit to going lean. For lean to be successful it needs to be a part of your culture and thus needs to come from the top. Once you get management's buy in, you'll need to determine if you'll need a lean consultant to guide you through the process or if you think you can manage on your own.  Before hiring an expensive consultant, you may want to try implementing the following steps.

1. Identify the process in your organization that you feel has the most room for improvement. Consider the following symptoms: high cost, slow cycle time, excess inventory, high levels of scrap and rework, lots of downtime, unpredictable outputs, and inconsistent quality.
2. Identify all the people involved at each stage and level of the process from the lowest level person to the highest.
3. Develop a lean project team, which includes a representative from each stage and level of the process.
4. Have the project team, as a group, develop a value stream map of the process.
5. Break up the process into stages or phases (e.g., purchasing, assembly and shipping).
6. Evaluate each stage or phase of the process by determining what problems or potential problems occur within that stage.
7. Determine potential causes for each problem and recommend solutions to address it.
8. Evaluate the feasibility and cost benefits of each solution, and implement as determined appropriate.
9. Monitor the new process and evaluate the results to determine the effectiveness of the implemented solutions.
10. Update the value stream map and repeat steps 5-10.

The concepts and steps above are simple to implement and primarily require one key resource: time. As with many things, what you get out of going lean is what you put into it. If you're able to put in the time and thought that it requires to obtain a true understanding of your process - and the customers and wastes within it - you'll be able to find ways to improve it. Then maybe next New Year's Eve, you'll be able work on that resolution to play more golf. If you have any questions or would like more information, please contact Peter Schubilske at pschubilske@KolbCo.com or 262/754-9400.