December 1, 2014
By Darren Dolcemascolo
As we usually do at the end of the year, we will be talking about preparing for a lean transformation next year in 2015. We have experienced an increased demand over the past few months for lean services; this increase appears to be due to anticipated 2015 growth. How can a lean transformation help companies manage growth?
The effects of lean strategy on an organization can be summarized as follows:
Lead-Time and Inventory Reduction. Lean compresses the value stream. That is, it shortens the time between receiving a customer order and being paid by that customer for the finished product. This results in less inventory and quicker response to the customer. It can also shorten the lead-time to develop products, which results in a competitive advantage.
Productivity Improvement. Lean eliminates waste, activities that consume resources but do not create value for the customer. As wastes such as wasted motion, transportation, and waiting are reduced or eliminated, productivity increases. Increased productivity results in lower costs.
Quality Improvement. Lean thinking forces problems to the surface. As problems are solved to their root causes and eliminated, product quality improves, resulting in lower costs and increased sales.
Reducing lead times and increasing quality typically result in additional growth. Shorter lead times mean better customer service. Better quality also results in higher customer satisfaction; this will inevitably result in additional sales growth. Productivity improvement can help manage the growth.
As productivity improves, organizations are able to handle increased demand with the same number of employees. If they are experiencing high growth, they will not need to hire as many new employees as they otherwise would have. This results in increased profitability and cash flow. This also results in better abilty to manage downturns. Rather than furiously hiring during growth and laying off during downturns, organizations can weather downturns with no layoffs and can manage growth without the cost of hiring and training very large numbers of employees.
As we approach the new year, you might consider what a lean strategy for your organization can accomplish. Are you anticipating growth, or are you needing to develop additional demand. A lean transformation can help in either case.
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