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The Power of Lean Part I: Finding Value for Your Customers

30/01/2014


Lean is a proven and powerful methodology for improving business performance. It is also the subject of much discussion and debate as public and private sector organizations consider the applicability of Lean and how best to get started.

This four-part blog series will present insight garnered from our hands-on experience in helping organizations develop a clearer understanding of what Lean is (and isn’t) and how to prepare to move down the Lean path of performance improvement.

What is Lean?
Lean can be defined as:
A business philosophy with the primary objective of eliminating waste, where waste is defined as any activity that does not add value to the product or service delivered to the customer.

Let’s walk through this seemingly simple statement in more detail and explore what it really means.

Lean starts with the end goal in mind, which is the delivery of value to customers. The customer may be your co-worker down the hall or the person working beside you on the production line, but it may also be the shopper at the local mall or a business or government located on a different continent. Regardless, the objective is the same: to clearly understand who your customer is and what they value, then find a way to deliver this value in the most efficient and effective manner possible. This is simple in concept, but more challenging in application.

Value is in the eye of the customer
When we talk about value, we are referring to the attributes and characteristics of the product or service being delivered to your customer. If your “product” is information you are providing to a co-worker so they can complete their daily work, they likely value completeness, accuracy, timeliness and clarity. Sending them a confusing drawing or spreadsheet that is missing key information and is delivered late might meet the objective of “information delivered,” but clearly the customer in this instance has not received much in the way of value.

Everyday business processes provide countless examples of products and services being pushed onto customers that don’t fully, or even closely, deliver the desired level of value. This is the opportunity waiting to be exploited.

Waste be gone
Speaking of delivering value, many of our value-delivery processes are filled with waste, including waiting time, rework, backlogs (inventory), excessive moving and transportation and other similar activity that, as common as it is, does not contribute to delivering the value our customers desire. The key question to ask at every step in the value-delivery process is, “Is my customer willing to pay me for this activity?” The answer, frequently, is no.

One of the most common forms of waste, particularly in office and service organizations, is waiting time. For example, if a purchase requisition takes five days to be processed into a purchase order, yet the actual hands-on, value-added work to approve the requisition and create the purchase order requires just two hours, there are well over four days of non-value-added wait time and a huge opportunity to streamline this process. The potential benefit is not just faster turnaround times for purchase orders. Taking up to four days of waiting time out of this process requires that it be highly efficient, which in turn leads to higher levels of productivity and, often, increased capacity.

Of course, while it may be relatively easy to identify the various forms of waste in a process — wait time, rework and so on — the real challenge is to find ways to eliminate this waste and create processes where value continuously flows to the customer. Lean delivers a full toolbox of process improvement tactics that provide the means to identify and eliminate waste and to balance capacity and demand so that work flows in a more streamlined and consistent manner.

Stay tuned for the next entry in this blog series, where we’ll take a closer look at Lean’s focus on continuous improvement.