Get Lean, Save Money

By Tom Dossenbach 

As we leave behind the boom years of the 90s, every manufacturer – regardless of size — needs to understand what it means to become “lean.” Rapid globalization in the furniture industry and its supply chain is creating greater competition in a time when business has turned soft. If a company is not engaged in eliminating every activity in its organization that adds no value to its products or services, it may be destined to fall well behind competition.

At a time like this, I am compelled to repeat the warning I made two years ago when I wrote about what I call The Titanic Syndrome. (See Management Matters’ Archives, January and February 1999) The warning is that every furniture manufacturer, wood products supplier, millwork factory or anyone reading this column should perform a critical review of their company every two to three years to identify and eliminate weakness and waste, or face the competition unprepared.

The Titanic Syndrome is when a company feels that it is unsinkable or invincible. Yes, even if it hits an iceberg along the way and compartments flood, a company with the Titanic Syndrome keeps steaming ahead, confident that it can survive without sinking or making any alterations in its course. After all, management exclaims, it has been doing business this way since the 1970s and has weathered all the ups and downs — until now.

How to Define: ‘Lean’
Earlier definitions of lean suggested the lack of excessive employees in a company. Today, a company has attained lean status if it has eliminated as many of the activities as possible that do not add value to its products or services.

All activities cost money. Even no activity sometimes adds cost. Walking through a factory and observing inventory can uncover an example of this. A store fixture manufacturer on the West Coast was making 70 kiosks for a mall in San Francisco scheduled to ship on September 15. The laminate was delivered July 25 and the particleboard was delivered on July 27.

At first glance, one might say that someone had done a good job of planning materials delivery so that the materials would be in-house to complete this order on time. However, some of the materials sat on the floor collecting dust for weeks and got damaged. Would the customer like to pay for these damages or the interest on the money tied up in that inventory? Of course not, no more than they would pay to have the kiosks delivered four weeks early. Thus, the activity of excessive inventory sitting in storage (in the way) is a waste and therefore not a part of “lean.”

How to Get Into Lean Thinking
Management can give themselves an excellent lesson in lean thinking by conducting a self-analysis in the plant. In fact, this is a good way for management to get started toward lean manufacturing.

First, pick a product or product family such as a nightstand, a double hung wood window, or a kiosk. Take a walk through the factory, looking at all of the activities involved between order entry and shipping that product. Notice that I said activities — not operations. It is important to look at more than the operations that change the appearance of the product. In fact, managers should specifically look for activities that do not add anything to the product as seen through customers’ eyes. Document what is found and later create a “process map” or a “value stream map” that will graphically record the activities observed step-by-step.

During a walk-through, ask the question: Is that activity adding value to the product? If the answer is yes, the next questions should be: Is this the best way to perform the activity (or to obtain these results)? There will be activities that definitely add value but are just not the most cost-efficient way to do it. Make a note of the activity and analyze it thoroughly. Then eliminate or modify that activity to attain the value-added results in the most efficient way possible. After this, the company can claim that activity to be lean.

In a walk-through of the factory, there will be many activities that do not add value to the product or service being investigated. One may wish this were not the case, but the truth is there are some activities that just do not add any value to the product — but are nonetheless necessary. An example might be unloading and moving plywood from a flat bed truck to the storage area. Moving the plywood does nothing to add value to the plywood or the kiosk, but this activity is necessary if the company is going to manufacture the products itself.

Navigate this chart for each activity and become a Lean Manufacturer!

If the activity does not add value but is necessary, it behooves us to ask the same question as above — is it the best way to unload the trucks? There is always a better way to do an activity in less time, etc. For example, suppose a fork truck driver had to stop and look for 4 by 4s when he got ready to stack the plywood. This is a waste of time.

The most critical aspect of reaching lean will be the analysis of each activity to find a way to do it better and at a lower cost. In this case, the activity of unloading the plywood needs to be modified by building a simple rack and attaching it safely on the fork truck to hold a small supply of 4 by 4s so the operator will not have to hunt for them when placing his load. Having gone through this exercise, a company has taken a non- value-added activity and made it less costly in terms of wasted time. This is a simple example of the thousands of lean opportunities that await a company.

The process of striving to reach “lean” is the essence of a continuous improvement process that has been highlighted in this column in several previous issues. If a manager admits that an activity is not the best way to achieve a desired result, and offers no alternative — that activity is not lean.

No matter what a company does or makes, the chart offered here can guide it through the lean thinking process. If you can get the top management of the company thinking this way, the company can get lean.

Give it a try. The company has everything to lose if you don't.