Take a moment and do a web search on the term “lean goals.” Go ahead—it’ll just take a moment. Do you see all those articles headlined, “The Three/Four/Five Goals of Lean”? If you take another moment to scan some of those articles, you’ll see that they point to a number of laudable goals: reduce waste, improve quality, reduce cycle time, reduce costs, improve processes, improve efficiency and establish flow. No one, least of all the authors, would argue that these aims aren’t important or that lean isn’t relevant to achieving them.
We do wonder, though, if advocating for a variety of goals confuses the issue. Can they all be achieved at the same time? Are different methods needed for different goals? Are some goals more important than others? Must we pursue them all or can we go after some but not others? And what if some of the goals don’t seem relevant to my business or industry?
Sadly, amidst this confusion, too many managers land on the least apt goal for their lean efforts: reduce costs. We’ve seen too many lean efforts fail when managers attempted to implement lean with their only purpose was bringing the costs of goods sold down. We feel that fewer managers would make this mistake if they weren’t inundated with the myriad of goals we see after our web search.
There’s just one goal for any lean initiative: improving the value delivered to the customer. That’s it. All the other factors, e.g., waste reduction, process improvement, cycle time reduction, enhancing flow, and so on enable the organization as it pursues that goal of improving the value realized by the customer. They are the means to the salubrious end of greater customer value. The organization achieves this end when it reduces waste, enhances flow, etc., but those aren’t and shouldn’t be the ultimate ends. Lean is a top-line rather than a bottom-line strategy; as the organization improves its sales, engineering, development, production, and delivery processes so that customers get what they want, where they want it, how they want it, when they want it and at the cost that they want, revenues and market share improve.
But what about cost reduction as a goal? Is it really so wrong? We contend that it is, but here’s the thing … lean achieves greater value for the customer and reduced costs. The happy paradox at the center of lean is that, as customer-focused processes are improved, costs go down. And this keeps happening in a virtuous cycle of increasing customer satisfaction and lower costs via employee engagement in continual improvement of customer-facing processes.
Ron once worked for an organization that manufactured and marketed collectible dolls and accessories. Many of these dolls became and were family heirlooms, having been passed from generation to generation. They were worth insurable sums of money and had fond memories for those customers who owned them. The company fell on hard times and had declared bankruptcy and ultimately re-started after filing. Subsequently, it found itself struggling with a serious cash shortage; suppliers had the company on a COD basis for all materials.
The company had once done a good business repairing and refurbishing dolls that had seen their better days. That business, called the Doll Hospital, had suffered especially as the processes for receiving, tracking, repairing and shipping dolls in need of repair deteriorated significantly.
Imagine that you are an owner of one of these collectible dolls and that you sent it into the OEM for repair to its original state of creation. The doll you sent is worth thousands of dollars, perhaps tens of thousands. You have a receipt showing that the doll was received three days after you shipped it. It has been six months since you’ve heard anything further. Calls to Customer Service to learn the status of the repair of your property go unanswered at first. When you finally do get someone to answer, you are told only that, yes, your doll arrived and that it is simply “here somewhere.” The fact is that your doll has been resting for those six months in a dark warehouse in the unopened box in which you shipped it. Clearly, the company is providing a less-than -satisfactory experience to you and other customers.
Ron tackled the problem by engaging his colleagues in finding and reducing sources of process variation, improving flow, and reducing cycle time. Those customers who were waiting six months or more for doll repairs had been promised a three-week turnaround. Further investigation found that received dolls were simply tossed into an unmarked bin, whichever one that wasn’t full to overflowing at the moment. There was no orderly first in, first out practice in place. No inventory was kept, so there was no notion as to how many dolls were in the repair queue at any given time. Ten or more dolls were being received each day while, at best, only two or three repaired dolls were being shipped daily.
First, the team organized the inventory of dolls needing repair by customer name, then color-coded as per the date of receipt. Then the team “triaged” the dolls according to the extent of the needed repairs.
In the next step, the team mapped the current repair process and found that a large amount of travel around the facility would be needed to obtain needed parts from various locations. This work led to the relocation of both the repair area and parts storage. The team decided to put the repair area next to the customer service department to facilitate interaction between production artists and customer service/project management.
These changes led to an immediate increase in output from two to six dolls a day; a marked improvement, but the mountain of unrepaired inventory was still growing. Through continual improvement of the process, output increased to eighteen repaired dolls each day and the backlog was eliminated within eight weeks. Subsequently, the shop was able to sustain a five-day turnaround for repairs.
Did this strong focus on improving customer satisfaction cause Ron to forgo cost reductions? Not at all. The same process variation that so negatively impacted customer experience also created waste and unnecessary cost for the company. Dozens of hours of technician time were spent looking for dolls among the mountains of inventory. Dozens more hours were spent looking for components and parts all over the facility for the repairs to be completed. Multiply those lost labor hours by the number of dolls repaired, and it should be apparent that significant productivity improvement occurred as the process was improved. Happily, then, eliminating process variation that impedes the customer’s satisfaction also reduces costs.
It's important to emphasize the last point: a strong focus on improving the value realized by the customer doesn’t push other benefits to the background. In fact, it enhances the possibility that those other benefits will be achieved. If you focus strictly on improving the customer’s experience, your chances of seeing improvements in efficiency and throughput along with reductions in cost are increased. If you focus strictly on cost reductions, your chances of achieving any of your goals is decreased.
Ron Jacques is a 35-year veteran within the lean, manufacturing and consulting arenas. He is a Certified Lean Practitioner who has delivered hundreds of kaizen and transformational solutions to clients and companies within the Pharma, Medical Device, Automotive, Food/Beverage, Electronics, Military Defense, Personal Care, Consumer Durables and Capital Equipment industries.
Rick Bohan, principal, Chagrin River Consulting LLC, has more than 25 years of experience in designing and implementing performance improvement initiatives in a variety of industrial and service sectors. He is also co-author of People Make the Difference: Prescriptions and Profiles for High Performance.
