With the apparent struggles in today’s economy, panic has begun to set in with business owners and decision makers everywhere. What are the results? Companies have realized that to survive they have to find ways to eliminate waste. This can be accomplished by implementing the Lean Management concept. In short, Lean Management means more production with fewer resources. From a vendor perspective, sellers of supplies and services have had to restructure their sales approach and profit margins based on client’s fears, economic hardships, and general awareness of softening market demand. Conversely, customers have begun demanding more and more value/service for their dollar.
A large portion of customer awareness comes from the evolution of procurement departments inside corporations. These procurement specialists excel in negotiations and cost cutting measures and have begun to hold vendors accountable for maintaining a competitive market value for the supplies or service they provide. This has opened new opportunities for companies to use leverage for better contracts, price guarantees, volume discounts, rebates, and improved service levels. Additionally, “internet” shopping has become the kryptonite for vendors margins. In the click of a mouse, businesses can check to see if they are getting fair market pricing and often switch vendors constantly.
The efficiency a company can pursue comes from the act of optimizing flow throughout the process of the product or service. To start, a company should implement managers meetings to discuss, analyze, and identify the specific areas of waste. Some key areas of waste found within most companies include the following:
-Waste One: Unnecessary Transportation
This is important because goods have a tendency to get damaged or lost when they are in transit. Valuable time and money resources are spent in this process, whether it is human energy or fuel from a fork lift. Un-needed transportation costs that can be included for free if requested in delivery contracts, severely impact company’s cash-flows. Back-hauling, GPS routing/delivery software, and transportation co-opping have been used effectively to reduce transportation waste.The ability to minimize transportation costs will increase company efficiency and always add to the bottom line.
-Waste Two: Over Processing
In this case, over processing occurs when too much time, money, or effort goes into producing a product than what is actually needed. Simplifying SOP’s and streamlining processing protocols have tremendous value for all companies. Transferring manual tasks to automated, or even virtual systems, can restructure human capital towards more revenue generating activities while improving time and costs of production simultaneously.
-Waste Three: Motion
This relates to the placement of machinery with an interest in keeping workers from walking 50 yards and picking up spare parts every hour, thus becoming wasted motion. Additionally, administrative motion waste can be reduced by very simple solutions like moving copier/fax machines, adding machines, or yet again…implementing wireless or virtual technology to maximize efficiencies.
-Waste Four: Inventory
Inventory is a necessity for most companies. However, too many raw materials, finished products, or administrative supplies being held will create problems in cash flow. Constant analysis of a company’s turns ratio of goods is an absolute must. The less time it stays on the shelf while your money is tied up and being charged interest through your LOC, the more profit your company will make. This waste category is the most common issue found within ALL businesses and one of the easiest to address.
-Waste Five: Defects
Defects in product, back-ordering, failed services, etc., are a HUGE drain on profitability. The redundant time and effort of “fixing” the problems on orders that have already been invoiced can be a department unto itself within some companies! Knowing exactly where your business’ flaws are and constantly having data to see where they begin and end are an essential aspect of any business.
-Waste Six: Waiting
The time that companies will waste while they wait for resources to be put into use is very annoying and inefficient. It will affect the flow of productivity and outflow of product. Develop SOP’s not only within your business, but outside as well with your vendors. Create clear guidelines on terms of both service AND time requirements associated with these services. For instance, only allow vendors to deliver products and services between 2pm and 5pm. This reduces interrupted workflow, coordinates the entire office, and will make EVERY company more efficient and profitable.
Clearly there are multiple other areas of waste and tips toward eliminating them in a business. But for the purpose of this blog, understanding what “Lean Management” is, identifying some common areas of waste, and how to eliminate that waste from your business, we hope it helps…
Casey Price –Business Development Executive