By Jay Arthur
Global warming, oil spills and other environment disasters seem to be on everyone’s mind. Business magazines write about “green” businesses. Movie stars drive hybrid cars to look “green”. But most companies overlook the single biggest opportunity they have to go green by simplifying, streamlining and optimizing their internal operations.
Since most businesses, even profitable ones, spend a third or more of their budget on waste, scrap and rework, isn’t it reasonable to assume that eliminating that waste would reduce various planetary problems? Reducing and eliminating waste is the goal of Lean production.
Reduction in waste will reduce consumption, which will reduce the energy required to produce the stuff in the first place. Less energy use means less warming. Less waste means a greener planet.
Leaning the Business
Most of us grew up learning about Henry Ford and mass production. Mass production led to economies of scale that reduced costs…as long as the company was making a single model with no options. Today, customers demand a customized product whether it’s a new car or a burger at the local restaurant.
Then along came Lean (a.k.a., the Toyota Production System). Lean focuses on eliminating unnecessary delays and movement. It creates economies of speed that not only reduce costs and boost profits, but also minimize environmental impacts. Where mass production focuses on big batches, Lean focuses on small batches and quick change over. With mass production it’s easy to commit the sin of overproduction that creates inventory that has to be warehoused and managed. Lean only creates a small batch when a customer requests it resulting in no unnecessary production or inventory. There’s nothing to warehouse. You make it; you ship it.
It no longer makes sense to make a thousand units of a product quickly if customers want a product customized to their needs. A business can easily end up with thousands of units that no one wants. All of the energy and materials used to create these products is wasted. And it takes energy and landfills to recycle or dispose of the stuff. And when the economy slides into recession, mass production can keep making more and more inventory that has to be stored and managed.
Imagine for a moment the environmental impacts of the shift from mass production to Lean production. If a company only produces enough products or services to meet customer demand, it doesn’t have to inventory, store or manage a lot of raw materials or finished goods. This prevents unnecessary movement of inventory, reduces storage costs, and reduces overtime.
One chemical company had $200 million in finished goods sitting in rail and shipping yards all over the planet. Managing that inventory cost a fortune. One metal fabricator recycled a million pounds of finished, but flawed product every month. It had to be chopped up and fed back into the furnaces. Saving the energy used to chop and melt the recycled metal could help save the planet.
A magazine printer had high-speed presses that could print a million magazines in a day, but the bindery could only handle 200,000. The other 800,000 had to be stored where they could be gored or toppled by forklifts over the next five days. Simple solution: print 250,000 the first day and 200,000 every day after. This made the production schedule more flexible, which allowed more jobs and less rework and less overtime.
Applying Lean to Service Businesses
The methods of Lean work equally well in service businesses. Ever been to a hospital emergency room? The average time a patient will spend in the emergency room is four hours! One hospital used the tools of Lean to reduce average time to 38 minutes for a discharged patient and 90 minutes for an admitted one. How? By eliminating the delays between registration, triage, exam, testing and discharge.
Tip: Make the product (or patient) faster, not your people. Employees only work on the product or service for three minutes out of every hour. Eliminate the other 57 minutes of delay.
The Tools of Lean
To maximize the value of Lean, reduce delays and unnecessary movement of people or materials. The two main tools are Value Stream Mapping (VSM) and Spaghetti Diagramming. To create either one, use sticky notes and a flipchart. Value Stream Maps, much like a flowchart, show the workflow from a time perspective. Spaghetti Diagrams show the movement of people and materials through a workspace.
On a Value Stream Map, the arrows between steps are where the product or service spends most of its time. Eliminate the delays between steps to increase productivity, reduce errors and maximize profits.
On a Spaghetti Diagram, calculate the distance an employee or a work product moves through the space. Often, workspaces are poorly designed leading to lots of unnecessary movement.
Jay Arthur, the KnowWare Man, is author of “Double Your Profits: Plug the Leaks in Your Cash Flow.” He has spent the last 20 years helping companies maximize revenue through the “Lean Six Sigma System,” a collection of audio, video, books and software. Jay is also the author of “Lean Six Sigma Demystified” and created the “QI Macros SPC Software” for Excel. To plug the leaks in your cash flow, sign up for free lessons online at: http://www.qimacros.com/excel-spc-software.html or call (888)468-1537.