Lean Considered A Poor Investment

Earlier this week, I saw an article titled, “Lean Manufacturing Program Seen As Poor Investment For Most Companies.

The article gives statistics as to how companies did with meeting their cost savings/reduction.

Most large manufacturers last year failed to reach their cost-savings targets, despite significant investments in lean manufacturing, Six Sigma, and other productivity programs as part of their overall retrenchment efforts in this tepid economy. Nearly 70 percent of manufacturing executives say that their manufacturing-improvement efforts led to a reduction in manufacturing costs of less than 5 percent, the typical minimum threshold for successful productivity programs. That’s according to a survey of manufacturing executives conducted in May and June 2011 by AlixPartners, the global business-advisory firm.

There are a lot of companies trying to implement lean.  Some are doing a nice job while others seem to be L.A.M.E., as coined by Mark Graban (Lean As Misguidely Executed).  So it shouldn’t be surprising that some companies think lean is not delivering what people say it will.

The article even mentions Shingo Prize winners and their results.

According to AlixPartners’ research, winners of The Shingo Prize for Operational Excellence have, after three years’ time, generated revenue growth and gross profits just on par with, or even weaker than, their peers’.

That does cause an eyebrow to be raised.  The Shingo Prize has recognized how it use to grade organizations.  In the last couple of years, they have revamped their criteria and awarded more on process, results, and thinking.  Were these companies awarded the Shingo Prize under the new system or the old system?  I don’t know.

“Most continuous improvement initiatives focus too much on implementing a particular ‘checklist’ of program tools and processes, rather than on basic execution,” says Steve Maurer, managing director and leader of AlixPartners’ manufacturing practice. “Many traditional lean and Six Sigma programs also tend to fail to institutionalize the improvements that they do generate. As a result, the cost benefits often aren’t sustainable. That was reflected in our survey, where some 60 percent of the respondents believe that half of the savings that they generated last year will be unsustainable. Only 13 percent said they could sustain more than three-quarters of the identified savings.”

I would have to say the company is practicing L.A.M.E. if results are not sustaining.  A lean company values standardized work and when  are made the results have a much higher chance of sustaining.  If a company is focusing on implementing a checklist of tools and processes then they are not understanding lean to be about the thinking.  The companies are trying to copy and paste solutions that will not fit their needs.  When that happens there is no reason to believe the results will be sustainable.

Steve Pfeiffer does hit on a few very good points.

“What’s good about lean and Six Sigma manufacturing is the emphasis on process control, defect prevention, and the elimination of waste,” says Steve Pfeiffer, director in AlixPartners’ manufacturing practice. “But such programs come up short when companies decide to implement techniques without the prerequisite process discipline. And, companies that have relied too heavily on investing their capital in automation find that such projects are often expensive and slow to implement.”

Lean and Six Sigma are focused on process control.  If you don’t have it before an improvement is made then you can’t expect the improvement to be sustainable or even know if you made an improvement.  Steve also speaks to creativity over capital because capital investments take too long to implement and are expensive.

I don’t believe the article was intended to attack lean or Six Sigma.  I think it highlights the misconception that companies still believe lean is about implementing tools and concepts and not about the thinking and understanding of their own business and how it applies to them.

As a lean community we still have a long way to go to help the masses see lean how it is intended.

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Posted on October 5, 2011, in Culture, Leadership, Principles, Tools and tagged , , , , , , , . Bookmark the permalink. 1 Comment.

  1. Oh good, I’ll just stop doing what I’m doing now.

    I think plenty of us have DIRECT experience with the benefits of lean. I’ll take that evidence over a survey with poorly designed questions any day.

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