A quick guide to thinking lean
Getting leaner is a major hidden opportunity in most businesses. That’s because 75% to 95% of the work in a typical company doesn’t add value—it increases costs without increasing value for customers.
That’s according to Patrick Choquette, a Senior Business Advisor with BDC’s Advisory Services and an industrial engineer, who specializes in coaching companies on operational efficiency.
Choquette’s answer for these companies is lean thinking.
What is lean in simple terms?
Lean (also called lean manufacturing or lean enterprise) is a structured approach for improving operational efficiency, with a specific focus on reducing non-value-added activity in a business. It can help lower costs, make customers and employees happier, and reduce errors, accidents and delays.
The approach applies to any kind of business—manufacturing, services, distribution.
It’s also not about cutting jobs or replacing employees with automation or robots. Rather, it’s a systematic approach for eliminating waste. That includes wasted resources, wasted movement of employees or equipment, wasted space—anything a customer doesn’t give you money for.
There's always a company hidden inside the company. If only 25% of what we do is value-added and we can eliminate two-thirds of the waste, you’ve basically got another company in there.
When Choquette starts working with a company to get leaner, he always says the same thing. He’ll buy them pizza if more than 5% of the work in the business is value-added. It rarely is.
“It’s a big revelation for them,” he says, noting that he still pays for the pizza as a reward for the company’s efficiency efforts. “People realize a lot of what they’ve been doing for the last 10 years was not value-added. They’re often shocked. This is when the paradigm shift begins.”
Examples of lean improvements
A lean manufacturing exercise could include:
- reorganizing a manufacturing facility to reduce the time employees spend getting raw material or equipment, or to cut unnecessary movement of work in process
- cleaning up workplaces to decrease time searching for tools or information
- increasing machine maintenance to lessen idle time or accidents
In a service business, a lean exercise could include reorganizing an office space or optimizing the quoting process, project management or production planning.
You will see a world of opportunities of things you can change.
“There’s always a company hidden inside the company,” Choquette says. “If only 25% of what we do is value-added and we can eliminate two-thirds of the waste, you’ve basically got another company in there.”
The exercise can be transformative for a business, revealing previously unseen opportunities to build a stronger company. “You will see a world of opportunities of things you can change,” Choquette says. “The success stories from lean manufacturing make it obvious that the same relentless search for waste elimination in business processes needs to take place in office work.”
The lean approach involves three steps, five principles and many possible tools.
3 steps to implementing lean thinking
1. Go and see
The first step is to go on the floor and observe how work is done. The goal is to identify waste, which can be broken down into eight categories:
- Overproduction: Producing sooner than expected or in greater quantity than required.
- Waiting: Employees waiting or equipment idling.
- Transportation: Excessive movement of materials or products.
- Inefficient operations: Unnecessary or non-optimal operations that don’t add value.
- Inventory: More inventory than required.
- Motion: Unnecessary employee movement or activities. Searching for information
- Poor design: Poorly designed products (or services) that take more time to produce (or deliver) than originally planned.
- Poor quality: Inefficiencies resulting in rework due to suboptimal product or service. Taking the wrong decision based on incorrect or missing information.
It’s important to closely observe every work process and all the tasks that make up each one, from beginning to end. Don’t just assume you know how employees do their work or go by documentation.
“There’s what we think is happening, and then there’s what is actually happening,” Choquette says. “You need to stop looking at the screen and go on the floor to observe what is really happening. The information is not in the head office. Our systems often do not tell us enough about what’s value-added what’s not.”
Ask yourselves if clients are willing to pay us to do this or not. Usually, they are not.
Especially take note of bottlenecks—places where work is interrupted. For example, an employee may have to stop working to fix a broken machine, correct a documentation error or look for a supervisor to get a countersignature. “All this work does not contribute value for the customer,” Choquette says. “These are patches put in place for weak processes. Around bottlenecks we usually see an accumulation of waiting people or material, such as a lineup of employees, or dollies with orders on them.”
Such types of waste often multiply unnoticeably in a business as it grows, cobbling on new processes, machines and employees in an ad hoc way. “Most of it doesn’t add value, and we don’t question it. We simply accept it as normal” Choquette says.
2. Ask why
The second step is to ask why a process or task is done in a certain way. This means breaking down each process into all its composite tasks, and reflecting on each one.
“Ask yourselves if clients are willing to pay us to do this or not,” Choquette says. “If they are, super! That means it contributes to the top line. Usually, they are not. It just contributes costs, so we have to ask how we can eliminate the task completely or reduce it significantly.
“What you’re really asking is, ‘How can I please my client even more and at the same time reduce my cost?’”
Be willing to step outside your usual paradigms. “People rationalize what they do as essential and value-added,” Choquette says. “They’re comfortable in that zone. What we’re doing as lean leaders is saying, ‘No, let’s be uncomfortable and look at how we could do it.’ The mindset is that we need to stop doing it this way because there’s so much waste involved.”
3. Involve your team
Finally, it’s crucial to show respect for your team by involving them in the reflections, planning changes and implementation.
“Who knows more than the people doing the job on a daily basis talking to the client and touching the product that the client will be using?” Choquette sasks. “It’s very important to involve your team instead of just deciding for them. They’re going to live it. Not using your team’s thinking is also a form of waste.”
Once employees understand lean, they stop thinking of themselves as just operators. They start to see themselves as business people.
Involving your team also leads to a cultural shift in your company toward awareness of what is value-added and engagement with solutions. “As we do this on a daily basis with them, they start to see the benefits,” Choquette says.
A side benefit is that lean tends to improve talent attraction and retention. “We create an aura around the organization of respect for its people,” Choquette says. “You get employees really caring about the organization, getting interested in revenues and costs, and looking forward to strategic plans and new objectives.”
Lean also helps to cultivate future leaders in the team. “Once employees understand lean, they stop thinking of themselves as just operators. They start to see themselves as business people and can clearly understand their role and impact on the finance of the organization.”
5 principles of lean
1. Value: Lean is laser-focused on value for customers. Anything that does not add value must be questioned, removed or reduced as much as possible.
2. Flow: Businesses should strive for a continuous, efficient flow of activities, material and information. “We want to invest our energy on resolving bottlenecks where flow has been interrupted or isn’t happening at the right pace, which indicates idle capacity,” Choquette says.
3. Pull: Pull is the idea that the rhythm of production, also known as “cycle time,” should match customers’ purchasing rhythm, which is known as takt time (from the German word for “beat” or “pulse”). A mismatch can lead to under- or overproduction, both of which are costly.
Things can always be improved. The ultimate goal is doing baby steps every day.
4. Value stream: The focus of lean is looking for waste in the entirety of every value stream in the business—from supplier to client and everything in between.
5. Perfection: The job is never done. Seeking perfection means continually looking for new waste to eliminate. “Lean thinking is aiming for that obsession throughout the team for finding new ways of eliminating waste tomorrow,” Choquette says. “So people actually do two jobs in the same eight hours. They do the job for the client, but they’re also thinking, ‘How can I do this faster or with less waste?’ Things can always be improved.”
Improvements can be incremental; they don’t have to radically change the organization. “The ultimate goal is doing baby steps every day.”
Lean solutions don’t have to be complex. They can be simplified and customized for entrepreneurs depending on their needs. Here are some common lean tools or approaches used today. They apply to any industry, including manufacturing and services.
Benchmarking is measuring your performance (for example, calculating employee productivity metrics) and comparing it to peer businesses.
One way is to use BDC’s free productivity benchmarking tool, which allows you to compare yourself using five indicators: overall level of productivity, revenue per employee, profit per employee, labour productivity and capital productivity.
A Gemba walk is a structured way to “go and see”—i.e. observe and record what is happening in the workplace.
Root cause analysis
Root cause analysis (for example, a fishbone or ishikawa diagram) is a methodical way to study the underlying causes of bottlenecks and other problems.
Pareto analysis, named after Italian economist Vilfredo Pareto, is based on the 80/20 rule, which states that 80% of problems can be traced to 20% of causes. Pareto analysis allows a business to prioritize efficiency efforts as productively as possible to address the root causes responsible for the most problems.
Six Sigma, or Lean Six Sigma, is a process to improve quality control that also focuses on reducing costs and boosting customer satisfaction. It started as a tool to reduce production variability so that errors are limited to six standard deviations, or no more than 3.4 errors per million units.
The tool has evolved to focus on quality control for all business processes. It is based on six main steps to solving business problems: define, measure, analyze, approve, implement and control. Lean Six Sigma is a variation on the method that combines the ideas of lean and Six Sigma to reduce waste.
5S is a method of organizing and cleaning up workspaces so they are more productive. 5S stands for:
- Sort (classify material and tools)
- Straighten (store objects functionally)
- Shine (keep everything clean)
- Standardize (establish rules and defined work standards)
- Sustain (audit your processes to ensure practices are kept up)
Investing in digital and automation technology can help you get leaner. For example, digital technology (sometimes called Industry 4.0) can allow you to:
- Collect data on your efficiency
- Monitor efficiency improvement efforts
- Go paperless
- Monitor and control machinery
- Optimize processes
- Integrate computer networks
To increase ROI on any technology project simplification of processes is the first step to take (for manufacturing and office processes)
To devise and implement more complex or disruptive projects, some businesses use the Kaizen method. Kaizen is a way of bringing together multiple departments to focus intently on a specific problem or goal, build consensus on transformative solutions and implement them in a short timeframe.
The approach uses the same three steps as lean (also sometimes called the three pillars of Kaizen): go and see; ask why; and involve your team.
5S Kaizen is a variant of the approach that combines Kaizen and 5S to organize and clean a workplace in a quick blitz.
What are the benefits of lean?
By thinking lean, you can push your company to be more productive in a competitive environment. When implementing a lean approach, you can expect:
- productivity increases
- quicker detection of errors and quality problems
- a lower risk of obsolescence
- reduced space requirements and shorter travel distances
- increased ability to get to market faster
- reduced order processing errors
- better customer service
This should lead to:
- significant cost savings in reduced inventory costs
- less handling damage and lower material handling costs
- reduced set-up time and response time
- reduced turnover and costs of attrition
- less paperwork
Take the next step and download our free guide on operational efficiency to learn more about creating a leaner, more profitable business.