Holistic Lean system thinking approach for business profitability

Holistic
Lean System Thinking approach
for
Business Profitability

www.winningmindssolutions.com
Objective of this presentation :
To create awareness on
Why is your business sales growth stagnant?
Why is your profitability fluctuating or eroding over a period?
Solution approach for sustainable business profitability
Case study examples of business turn around / profitability Improvement

Contents
•Typical challenges for SME CEO
•Changes in External and Internal environment
•Reality in SME organizations
•Reason for slow growth and fluctuating profitability
•Solution approach as “ Lean System Thinking”
•Introduction to Lean System Thinking
•How lean system thinking helps your business growth (Turnover & Profitability
Perspective)
•Typical wastes in business and operational process
•Typical Lean Tools and Techniques
•Why does some SME organization find difficult to implement effective lean system thinking
approach?
•Turnaround case studies using Lean system thinking

Typical key challenges for SME CEO :
Managing the balance
Between
Growth and Survival

Changes in External scenario

 Globalization
 Competition
 Technology
 Increase in Variants
 On time delivery
 No inventory
 Speed & Flexibility
Taken granted
Zero defects
 Customer awareness
Social media

Internal Organizational challenges..

Challenges in internal organization …
Reduce
Cost
Improve
Quality
“Cheaper”“Faster”
Reduce
Lead Time
“Better”
Net Margin
We need to deliver all , at the same time!
Scaling up
“Bigger”
Employee
Engagement
“Higher”

But, in reality….

Typical Scenario in SME organizations..
• Value added ratio : less than 1 % over total through put time
• Delivery Lead time is in DAYS whereas actual Throughput time is in Min /Hrs…
• WIP / Queue helps to manage the operations ..
• Overall Plant Effectiveness less than 50 % ,but taken granted
• Focus on local optimization than overall cost efficiency
• People are busy in “managing the problem” than “solving the root cause”
• More focus on Individual / Functional focus than Organizational Growth
Leads to missing sales target, lower profitability, sustainable issues , Not able to
attract high value customers

Solution approach : Holistic Lean System Thinking

Understanding Lean System Thinking

What is Lean ?
Lean is achieving “More with LESS”.
It means
 achieving more with given resources or
 achieving more with less resources .
Mainly it is elimination or reduction of waste in the entire value chain .

What is Lean Manufacturing ?
Lean manufacturing system can be understood by relating to the human body. If the
person appears “lean”, then general assumption is that he/she is free from unnecessary
FAT in the body, hence free from unnecessary side effects like BP, Pain in joints, laziness
etc. And the person is perceived as healthy, more flexible, active etc..
The same way ,Lean manufacturing means , manufacturing system is free from
unnecessary fats like high inventory, high rejection, high breakdowns or line stoppages
factors etc which leads to more flexible in delivery, less lead time, first time right , low
cost of manufacturing and free flow of communication etc .

What is Lean System Thinking ?
Similarly, Lean System or Lean Organization means free from unnecessary waste in
the entire value chain starting from extended supply chain system to customer,
even after sales service system .
Lean system Thinking is more than application of Tools and Techniques.
It is a culture of continuous improvement or a way of working or winning mindset
of everyone working for the organization.

Misconception about Lean system thinking ?
There are some misunderstandings about lean and its application .Some of the misconception
about lean are
•Lean means cost cutting
No.Cost cutting means cutting down the expenses whether it is essentially required or not .Lean
is focusing more on cutting down the waste or unnecessary expenses, which is not adding value
to customer ,in turn to business.
•Lean is for manpower productivity
Partially true. Lean is focusing on waste elimination or reduction in any form like man, machine,
material, and method. By eliminating or reducing wasteful activities in format, manpower,
material, machine, or process efficiency is improved. Hence, it is not only on manpower
productivity alone. but for all factors of manufacturing.
•Lean is applicable for manufacturing organization only
No.As said, lean is all about waste elimination. As long as activities are there in any organization,
waste will be present .Wherever waste is there, Lean is applicable. It is applicable for any
organization.

•Lean can be implemented only in large organization
No. One of the assumptions is that implementing lean requires investment and only large
organization can afford .Actually, understanding the lean concept, tools, and techniques is
easy and does not require investment. Lean thinking and practices can be implemented in
any size of the organization. In fact, Lean can be easily implementable in small and medium
scale organization because of its size and activities involved.
•Lean is all about 5S and Visual Boards
No. Most of the people think that doing Housekeeping (5S) and putting display boards is
lean manufacturing. Of course fundamental requirement for waste elimination is
housekeeping , i.e. keeping the workplace in order ,but that alone is not constituting Lean
system. Lean is beyond implementing housekeeping practices. Similarly visual management
is one of the elements of lean system in which display and control boards are part of it.
Hence, Lean is beyond 5S and visual boards or even it is beyond any lean tools and
techniques. It is philosophy and way of conducting daily management.

•Lean is for during lean seasons
One of the most misconception is that lean implementation is for not peak season as
everyone is busy with activities and lean is for during lean season. Lean is nothing do with
the busyness of people either peak or lean period. In fact, implementing and practicing
lean concepts during peak period may give more savings.
•Lean can be useful during recession
Same as above assumption. There is no right time as recession or booming economic
environment. In fact, if Lean is understood well and lean thinking is implemented
internally, external factors will not affect the organization much.

•Lean is only for automobile and ancillary organizations
No. As said, Lean is not specific to any industries. Wherever there are activities involved, Lean
can be implementable. It is popular in auto and ancillary industries, because the lean concept
was evolved and tested first in auto industries.
•Lean implementation is time bound
No. No organization can claim that they implemented lean system thinking ,because
fundamental of lean is zero waste, zero accident , zero defects and it is impossible to achieve
and thus it calls for continuous improvement or excellence journey .Lean implementation is a
process or journey .. It is not a destination.

Application of Lean System Thinking in Organization ….

Even though Lean System Thinking is applicable organization wide , we focus more on
SME with Operations which typically includes Manufacturing , Quality assurance,
Supply chain, Engineering Support Services , Planning , Maintenance and Logistics etc

How lean system thinking helps your business growth ?
(Turnover and Profitability Perspective)

Sales Turnover Perspective :
Q1 Q4
Lead time =3 Months
Sales Turnover : 10 Cr
Q2 Q3
Total Sales Turnover Capability : 40 Cr
What will be sales turnover capability if we reduce lead time by 50 % ?????

Profitability Perspective :
Materia
l cost
Proces
s Cost
Factory
Fixed
cost
Quality
Cost
Factory
Non
Fixed
Cost
Logisti
cs Cost
TAX Profit MRP
Rs 500 Rs 350 Rs 2500Rs 300Rs 250 Rs 200 Rs 100 Rs 300 Rs 500
Typically 40~65% Value Chain Cost –under Operations Control
Typical Value Chain in Manufacturing setup
What will be the profit or MRP if you reduce 5 % cost in your controlled area ???

Customer - ask
for Product /
Service
Customer - get
Product / ServiceLead Time =Money
Customer to Customer Process
• Wherever there is process, there must be WASTE available
• Lean System thinking is all about continuously identifying the waste, eliminating it , if not
reducing it from existing level.

Typical wastes in Operations..

Lean concepts , tools & techniques for waste elimination / reduction
Housekeeping and
Visual management
Structured problem
solving methods
and tools
Flow Improvements
/ Line Balancing
Quick Changeover
Techniques (SMED)
Workplace design
and Ergonomics
Build in Quality
Machine care
Techniques
Employee
Engagement
Initiatives

Results achieved
in our Client Organizations
through Lean System Thinking approach

Some Turn around case examples in our clients business
Industry Results delivered
Casting and Machining •Business turnover increase by 45%, From loss making to
profitability;
•Customer service improvement from 60 % to > 85%
Auto component machining •Manufacturing cost reduction by 7 %
•Inventory reduction by 50 %
Auto Vehicle manufacturing 40 % reduction in delivery lead time
Casting and Machining 35 % growth in sales turnover
Auto chain manufacturing 15 % increase in plant output in 4 months
Casting and machining Profitability increase by 3 times
Machined comp manufacturing Increase in profitability by 2% despite sales volume drop

Why does some organization find difficult to practice Lean System
Thinking ?
Lack of CEO and Top Management involvement
Not Educating or creating awareness about Lean and its purpose
Delegation to down without support
Changing priority based on the production volume
Not understanding the Big Picture of organizational problem
Keen on technical knowhow of tools and not on implementation
Lack of people involvement or engagement
No In-depth implementation of tools
Lack of facilitation and patience
Aversion to experimentation and trial

Thank you for your Interest
To understand more about its relevance to your business, please mail us to
ganesh@winningmindssolutions.com
mobile : +91 90259 33666
For Business and Life Excellence articles and case studies
please visit website : www.winningmindssolutions.com

Holistic Lean system thinking approach for business profitability

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