More than 50 years ago business guru Edward W Deming recognised Quality, Cost and Delivery (QCD) as the three most important elements of any business. If it was important then, it’s absolutely critical now. Driving business improvement and reducing costs in any organisation can be achieved by a commitment to Continuous Improvement and aiming for best practice.
There is a raft of tools and techniques available to support organisations in reducing costs, Lean and Six Sigma are by far the most popular and for very good reason. Companies that have used Lean to drive change have seen up to 30 or even 40 per cent reduction in their costs, significant quality improvements, reduced lead times, greater flexibility and a dramatic increase in job satisfaction. The main premise behind Lean is the focus on increasing value whilst reducing effort.
Lean is a management philosophy derived from Toyota and includes a range of activities that will allow you to understand what elements of your current activity add value to your business and ultimately the end customer; and which do not. It focuses on eliminating waste across all processes, be it time, movement, product or even wasted resource.
“Don’t be put off by some of the Japanese terms” says Ailsa Kaye, Director of Onsite Insights, the National company visit programme. “The techniques are simple, and easy to implement in any organisation. One of the most important features of this approach is that you will develop an understanding of what adds value to your business and what does not. By eliminating the waste, you will work more efficiently, reduce costs and most importantly provide a better service to your customer.”
Reducing costs does not necessarily mean reducing headcount, far from it, some organisations that have embraced Lean and continuous improvement have seen significant increases in staffing levels, but in the right areas. There is also a marked improvement in job satisfaction as working efficiently and effectively is infinitely better for morale. All organisations and processes evolve. Frequently the evolution builds in additional work and over processing, none of which the customer wants to pay for. “By thoroughly understanding your process and where you are adding value to your customer you are able to remove unwanted non-value adding activities.” says Kaye.
So what steps do you need to take to reduce costs and improve productivity:
Create a compelling vision
The starting points for any cost reduction exercise should be to create a compelling vision, one which all members of the team or organisation can buy into. You need to create a Burning Ambition (a step forward from the burning platform). What is important to your business, needs to be understood and believed by all involved.
Create a framework to achieve the vision
If you are familiar with the Toyota House you will appreciate how a simple diagram can communicate a complex framework of activity. To succeed and gain buy-in you need to create your own. ‘Steal with Pride’ – there are many frameworks that can be used as a starting point and remember you don’t need to use all the tools and concepts straight away. Start with the basics of workplace organisation and 7 wastes and add more once you have mastered these.
Train in Problem Solving and Lean
The companies that have achieved the most success in reducing costs have ensured they have put in place structured training in Lean tools and techniques as well as problem solving. There is still government funding available for the Business Improvement Technique NVQs. Contact us if you would like some information on who best to talk too.
Understand what adds value to your customer (and what doesn’t)
One of the key foundations of Lean is to undertake a Value Stream Mapping exercise, where you look at the end to end value chain from order to delivery or even use. Value Stream Mapping is a very useful activity to understand your entire operation, or specific areas within it. If you don’t know what your customer sees as value you can’t understand what is waste. For a great free video on Process Mapping follow this link Process Mapping – Insights Training
Remove the waste
Waste is not just material, it comes in many forms. Once you have understood what in the process adds value to your customer you will be able to focus on removing the waste. Lean uses the term 7 Wastes and the acronym TIM WOODS, which stands for Transport, Inventory, Motion, Waiting, Over Production, Over Processing, Defects and Skills. When looking at your process this is where you should start. The following free video provides useful inspiration Understanding, Identifying and Removing Waste
Standardise processes
Once the waste is eliminated, processes and activities can be standardised, this reduces variation, defects and wasted time. Standard Operating Procedures should be used in all areas of the business from sales, through manufacturing, distribution to invoicing.
Benchmark
To survive in any commercial business you need to strive for best practice in all areas. Benchmarking formally or informally can help with this. Benchmarking is an essential tool in allowing you to understand where you are as an organisation. It will also highlight areas in which you can improve. For a statistical approach there are a number of online tools available one of which is the LeanBenchmark™ . A useful and free resource that can provide some excellent insights into your current performance. For external benchmarking company visits are incredibly valuable to provide insights into how companies have adopted and implemented a wide range of continous improvement activities.
Keep it simple and start small
When starting or re-launching your continuous improvement journey you need to start small. Many organisations fail as they try to dictate at a corporate level new agendas and ambitions. Take one area of the business and use the available tools to ensure it is as efficient as possible. Workplace organisation, Five S, analyse waste in the process and remove it. Once you have done this you can then roll it out to other areas of the business.
Do something
To ensure the focus on cost reduction and Lean does not fall into the bracket of another failed management initiative you need to take action, and create momentum within your organisation for change. When people see the impact of improved processes and reduced costs they will want to be involved. Taking regular action and making continuous improvement a central pillar of your operational strategy is essential.
“There is a misconception that lean principles are only relevant to certain business sectors”, adds Ailsa, “this is a nonsense. Most elements of a Lean system can be utilised in any business. Take for example one of our best practice sites, Double H Nurseries. The company grows orchids and other house plants which are sold through the major supermarkets. Visitors to Double H have come from the public sector, from engineering companies and services. They show so clearly how they have evaluated their production process to eliminate waste and reduce costs.”
Seeing first hand how others have reduced costs is also a powerful tool. The Onsite Insights visit programme allows you to visit some of the UK’s leading companies and see how effective Lean is in action. If you’re not sure whether this approach is right for you why not visit a company and see what is possible. The host companies don’t profess to be perfect but they are on the journey and they are willing to share what they have learned.
Ailsa Carson
Managing Director