Many people who work in a manufacturing environment will be familiar with the term “lean manufacturing” and its drive to improve profits by driving down waste, yet relatively few realise that the same approaches can be used to drive down waste in management and administration. One of the reasons for this is that many managers do not see management as a process as such and another is that the waste in management and administrative systems is not recognised as such.
Cynics will cheerfully tell you that most attempts at lean management fail. There are several reasons for this. One is lack of commitment to drive the processes fully through. Another is to attempt short cuts to reduce the time involved and yet another is the failure of managers to empower their workforce to fully engage with the initiatives. Those who do successfully engage often quietly reap the benefits and hope their competitors do not catch on!
At first sight Lean Management appears to be a difficult and daunting journey but once the structure and processes have been understood, the rest tends to fall into place.
Traditional management thinking dictates that you set your sale price by calculating your cost and adding on a profit. However, in today’s economic climate this is not always viable as there is always someone ready to undercut you. The “Lean” concept evolved out of Toyota’s cost reduction philosophy. In that approach, market conditions (i.e. customers) set the selling price and cost and profit become variables. This focuses management on reducing internal costs. Using the cost reduction approach, you determine the price customers are willing to pay and subtract your cost to determine your profit at that cost level. This means that in order to increase profits you must reduce costs.
Often the largest, and usually least visible, cost in any business is waste which is why the Lean philosophy focuses on reducing waste as the primary method of maximising profits. The ultimate target of Lean is the total elimination of waste. In Lean terms, waste is anything that adds cost or time without adding value. It is something being done that has no value to customers even though it may be included in the overall cost.
Most people, when thinking of waste, think in terms of reducing manufacturing waste and today most successful manufacturing organisations have adopted “Lean Manufacturing” to a greater or lesser degree. Few think of waste in terms of inefficient management or administration systems where the true costs are often more deeply hidden, even though they might be just as great or even greater!
Lean Management can be applied to any size of organisation in any sector. The cost savings will be significant.