I used to think that physical
assets – product designs, facilities and equipment, IT
systems, supply chains and distribution channels – are
the biggest constraints to progress with Lean. But not
so. In truth the biggest constraints in most businesses
are the mental models and decision making structures
governing the behaviour of managers.
This is illustrated in their
reactions to this recession. No question that cost
cutting is a necessary response to the severity of this
recession. But beyond that .... what? What I see
happening is managers spending more and more of their
time fire-fighting and taking knee jerk strategic
decisions, like moving production to a low cost
location. We now know this is likely to make things
worse and not better. Why consolidate production of even
more products in one more complicated plant and add
expensive warehousing steps and inventories, instead of
producing a realistic number of products in simpler
plants close to customers in line with demand? So it
goes – in short I continue to see many organisations
continuing to do the wrong things.
Which results in a growing
inability of senior managers to really define the
business problems facing the organisation – there are so
many problems and everything is getting so bewilderingly
complicated! This makes it even more difficult to
correctly focus Lean value stream improvement activities
on doing the right things in the right sequence to solve
these problems. As a result there is a growing gulf
between what managers do and the value stream
improvements that would really make a difference to the
business.
I walked through a plant
recently and saw that it is now producing ten times the
number of marginally different products to ten years
ago. The true capacity of this shared production system
is unclear – no one knows what it really costs to add a
new product to the mix – and no one knows the amount of
cash tied up in inventories, backorders, write-offs etc.
that are a reflection of the way this shared production
and distribution system is run.
During this walk I also
notice only a hand full of people actually making things
on the shop floor – and yet the canteen is full at
lunchtime with all sorts of support staff! What do they
really do? Manage and feed the IT systems they rely on
to cope with this complexity! The predictable result is
that they are constantly revising and changing every
plan all the time instead of letting inventories absorb
the volatility of the market, at least for the core
products. Which in turn guarantees that everyone will
spend most of their time fire-fighting to meet these new
plans. I could go on with example after example in both
manufacturing and services. I am sure you have your
own.
This leads me to conclude
that there is still work to be done to articulate the
business case for a value stream redesign in terms of
increased customer satisfaction, less complexity, lower
costs, cash savings from lower inventories and often
biggest of all the capital saved from not building that
new plant or warehouse.
Turning these into money
saved is one thing, but the most powerful reinforcement
of this message is when the key department heads take a
guided walk together through the whole process to see
the potential for themselves. Seeing the true potential
and turning this into money is the first step towards
seeing and doing the right things on the right processes
to achieve the relay big gains that will underpin the
survival and growth of the
organisation.
Yours
sincerely
Daniel T
Jones
Chairman, Lean Enterprise
Academy
PS. We still have places
available at the Lean
Healthcare Transformation Summit
on Friday July
10th in London where we will be
showing hospital managers how they can see the right
things to do to very significantly improve the
performance of their hospitals, described in our new
workbook Making
Hospitals Work.
PPS. You can now view all the
12 presentations from our previous general Lean Transformation Summit
on 21 November 2008 in London on our web site
www.leanuk.org.
PPPS. Dave Brunt is running
small group coaching sessions on using Value Stream Mapping (Aug
4th), A3
Thinking (Aug 5th) and Creating Level Pull
(Aug 6th) at our offices in Goodrich,
Herefordshire. Please call the office for details on
01600
890590.
