Taking lean to extremes

Employed correctly, lean processes can help companies to improve efficiency and eliminate unnecessary waste, including the reduction or removal of processes or the elimination of overheads that do not add value to the customer. Processes are streamlined and the onus is on working towards a scenario based on customer pull.

But why, given the intrinsic benefits, have some companies that have followed lean to the letter not fared as well as could reasonably have been expected?

The answer is that they have quite possibly taken lean too far. Even in a downturn, processes should not be stripped back so brutally that a company finds itself unable to respond to a change in the status quo.

Getting the balance right between cost-cutting and responsiveness is key to successful lean implementation. Staff redundancies, often high on the agenda when companies are looking to reduce overheads, should always be a last resort.

Having fewer staff might save costs initially, but problems arise when key personnel are let go without a sufficient handover period to the employee who will be taking on his/her role.

Companies might find that the redundant employee is the only person in the building who knows how to use a particular type of software or knows the idiosyncrasies of a piece of equipment, which, out of necessity, is being pushed beyond its natural life. This can lead to business disruption and potential loss of orders, thus cancelling out any savings.

Fewer staff also means that processes are less resilient. An organisation might find itself in difficulties when a major order with a tight deadline is placed. In a situation like this there is, of course, the option to recruit temporary staff, but temporary staff often require training and just one bodged order could spell disaster.

Suppliers and their selection are critical to lean procurement. Just as companies need to future-proof their own business, they should ensure that their suppliers are flexible in terms of delivering goods to meet demand. Some larger companies have their own business continuity management systems in place to help guard against the unexpected. However, as a rule, suppliers with long lead times should be avoided wherever possible as they will not be quick to respond to a sudden surge in demand.

Supplier performance should be measured on a regular basis. In addition, companies should make regular checks to ensure that their suppliers are creditworthy. This also applies to companies that they may have been dealing with for a substantial amount of time. Poor credit ratings can affect their ability to deliver the products/services ordered and this, in turn, could jeopardise your own operation.

Using a single supplier can, of course, bring its own rewards in terms of favourable rates, but in doing this you are making your own company susceptible if that supplier goes to the wall. If you cannot deliver a product or service to a customer on time as a result, it will colour the customer’s confidence in your own business.

This is a buyer’s market and there are plenty of other companies just ready and waiting to step into your shoes. Similarly, if you have trimmed back your stock levels to a point where you are unable to respond quickly to fluctuations in demand, you could also land yourself in hot water.
So, how can an organisation ensure that the lean processes it has adopted are fit for the job and safeguard itself against potential pitfalls?
Companies considering lean should always have business resilience at the forefront of their minds. What does your company depend on? The risks of your dependencies need to be evaluated.

Ask yourself what would be the potential outcome of your being let down by a supplier or business partner. How resilient are they? Imagining potential worst-case scenarios allows you to prioritise your concerns and develop action plans to minimise business interruption.

For the critical supply chains, carry out a risk assessment and ensure that all foreseeable breaks in the supply chain, that could lead to supply interruption at either end of the chain, have realistic contingencies built in. Value stream mapping exercises to identify areas of waste resources will also put companies in better shape to deal with an economic upturn or downturn, or the effects of a force majeure, such as a fire.
Putting contingency plans in place as a result of this type of exercise inspires confidence in customers and suppliers alike, since, unless they are highly robust, supply chains are susceptible to the domino effect.

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