A friend of mine works for a company that’s always been in the consumer goods arena. It hopes to expand its B2B portfolio. The company is striving to respond consistently to Requests For Quotes (RFQ) within two weeks. It predicts that it will be able to nearly double its B2B portfolio when it’s able to meet that target.
On the other hand, I recently read an article about a metal fabricator that is able to ship products in the evening for which it received an RFQ that morning.
We can’t say that the metal fabricator is “leaner” than my friend’s employer. But we’d certainly say that the metal fabricator is more agile. We can imagine that the metal fabricator’s ability to respond so quickly to an RFQ allows it to acquire sales it might otherwise miss. We might also imagine that the metal fabricator is able to command a premium for its work, given that it can get the product to a customer that might be desperate for a quick turnaround.
In both cases, then, improved agility, not “leanness,” is associated with improved business results.
Several years ago, I was working with a team at a steelmaking firm here in Cleveland. An engineer on the team said, “Before we get started, I’ve never really heard a good explanation as to what lean manufacturing is all about. Can you help me with that?”
I responded, “Lean is about being able to do things that our competitors can’t do. It’s about creating capabilities within our own company that our competitors can’t easily copy. ”
I asked, “For example, when a customer orders steel, what lead time do we quote?”
“Twelve weeks, give or take, depending on the application and the chemistry. ”
“And how often do we hit that 120-week target?”
The engineer chuckled, “Pretty much never. We’re usually between 16 and 20 weeks and have been as far out as 30 weeks. ”
“OK. If we were able to hit that 12-week target, even if we didn’t take a nickel out of our production costs, would it make a difference to our business?”
“Sure. We’d increase our sales significantly. ”
“Let me take it one step further. If we, through continuous improvement and innovation, get that down to a consistent eight weeks, even if we still didn’t take a nickel out of our production costs, what difference would that make?”
“We’d control the market. ”
Even if we didn’t take a nickel out of our production costs.
My point with these examples isn’t that agility is better than “lean.” Rather, it’s that organizations sometimes go into a lean initiative with the wrong vision. Too often, lean is seen as “cutting away” rather than “creating. ” It’s seen primarily as a cost-reduction tactic rather than a market building strategy.
The primary focus of any lean initiative should be building capabilities. Core capabilities of innovation, collaboration, and, in particular, agility, will serve as the foundations for adding new customers and building new markets. As we saw in the examples above, agility enables organizations to respond quickly and effectively to customer demands and needs. It also enables companies to bring successful new products to market faster. Finally, it enables companies to respond more quickly to sudden changes in the environment—changes like oil shocks, the loss of major customers, and worldwide pandemics. Simply “being lean” doesn’t assure any of this.
The good news is that the methods and concepts that provide the foundation of a lean initiative are much the same as those needed to be successful in building agility. Workplace organization allows operators and supervisors to see, at a glance, whether processes are in control or not. When they aren’t in control, visual management enables employees to spot and address problems quickly. Analysis and continuous improvement of processes leads to reduced cycle times. Identification and elimination of delays, waste, and errors builds capacity.
Most important, increasing employee engagement leads to innovative ideas that enhance everything from product design to logistics. When employees trust that management is genuinely committed to including them in important problem solving and decision-making, they apply themselves in ways that can’t easily be measured.
My friend’s company has been working to implement lean methods for a couple of years. During a recent conversation, he reported that the spirit of engagement that has developed during the initiative served them well as the company responded to the COVID-19 crisis. He indicated that the teamwork and innovation exhibited by all members of the organization has been remarkable and unusual in the company’s history. The company hasn’t “reduced costs” much yet. On the other hand, its newfound agility, built on employee engagement, is enabling it to respond effectively to a chaotic environment. A core capability of agility is proving to be a foundation for the company’s survival.
