The document discusses how implementing lean management processes can help businesses reduce costs and improve productivity during difficult economic times. It describes how examining business processes to identify and eliminate waste, such as excess inventory, bottlenecks, and defects, can dramatically improve efficiency. The concepts of lean originated from the Toyota Production System and focus on intelligently working to add value and eliminate waste. The document argues that applying lean methodology through tools like a SIPOC analysis and value stream mapping can help companies properly identify process improvement opportunities. This can result in lower costs, better information and decision making, and a more cost-effective organization even after an economic recovery.

1. Reduce costs, scrutinize expenditures, batten down
the hatches, manage liquidity—these are the mantras
of business today. Most businesses are struggling to
find ways to reduce costs, maintain profitability, and
work through these difficult times. Predictions
abound that the economy has bottomed out. But for
most senior managers, it sure doesn’t feel that way.
Without a crystal ball, it is impossible to say with
any certainty when the recession will really end and
how deep it will cut, making revenue forecasting
difficult at best.
As a senior decision maker, you’ve probably already
eliminated many of your unnecessary costs and put
increased controls on discretionary spending. You
may have even implemented layoffs, payroll cutbacks,
reduced schedules, or plant shutdowns, and you’re
almost certainly pushing suppliers for lower prices.
But once you’ve exhausted those avenues, where will
you go next to cut costs, protect profits, and preserve
that oh-so precious cash? One frequently overlooked
area: your business processes.
Through the lean management process, you can
identify your improvement potential and then leverage
those opportunities to improve productivity and
permanently remove waste. Simply put, if you examine
all of the steps in your business processes, the only
steps that matter are the ones that add value for your
customer or protect your assets. Everything else
should be questioned. The basic tenets of waste hold
true for companies in all industries and include:
Excess inventory or excess labor;
Workflow or production bottlenecks;
Physical movement of materials, paper, or people;
Excessive or inefficient controls;
Rework or defects; and
Organizational process boundaries.
The results of process re-engineering through lean
methodologies can be dramatic. Knowing this, it
seems natural that companies would do more to
remove business process waste; but the reality is,
most companies are stuck in the mire of their own
inefficient processes. Management spends so much
time dealing with the day-to-day operations that they
don’t have the time to focus on process improvement.
We refer to this as the tornado syndrome, because the
tornado picks you up in one place when you arrive in
the morning and then puts you down someplace else
at day’s end. Armed with the proper tools, you may
be able to mine your process opportunity.
The Origin of Lean
The Toyota Production System, developed by one of
the largest automakers in the world, serves as a major
precursor to the basic principles of lean. According
to some accounts, Toyota’s inspiration came from its
management team visiting the United States in the
1950s and observing how a particular supermarket
was able to reorder and restock goods only after
they’d been bought by customers. Toyota then
applied the lesson by reducing its inventory to a level
that its employees would need for only a short period
of time. While low inventory levels were a key outcome
of this system, the more general philosophy embraced
by Toyota was to work intelligently, eliminate waste,
and add value to the organization.
Overall, the system led to less effort, lower investment,
and time savings, as well as fewer suppliers and
product defects. Management also witnessed improved
process orientation and customer satisfaction; better
Creating a Lean Management Process
Can Unlock Hidden Potential
PERFORMANCE
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2. How Are You Managing?SM
understanding of customer needs; and more
profitability, cash flow, and return on assets.
Is Lean Right for You?
Although lean concepts were developed with the
manufacturing floor in mind, lean can be applied
anywhere there are processes within an organization,
including operations, accounting and finance,
administration, IT, sales, and Sarbanes-Oxley. But,
you may ask, how do I know if lean is right for my
company? Simply put, if you want to dramatically
reduce your business costs and increase your service
levels, lean is right for your company. If you need
more reasons, follow the checklist below to
help form an educated answer:
Are your business processes documented?
Do departments complain about the quality or
timeliness of information they receive from others?
Do you devote too much time and resources to
processing transactions and fighting fires?
Do too many transactions seem like one of a
kind transactions?
Do you have a focus on process discipline and
business process improvement?
When was the last time you reduced the number
of steps in one of your business processes?
Are you leveraging your investment in technology
to drive your business processes?
Would you make better decisions if you had
better information?
What Is Lean Waste?
Identifying the waste in business processes is the
first step to success, but it requires understanding.
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You must know:
The internal or external customer for each process;
How the process is supposed to benefit the customer;
The required inputs and outputs for completion
of the process; and
The suppliers of the inputs.
This is accomplished through the use of a tool called
a SIPOC, which stands for “supplier, input, process,
output, customer” and provides an overview of all
of the components and stakeholders in a process.
Following completion of the SIPOC, a current-state,
value-stream map—that is, a flowchart that identifies
time delays, transaction bottlenecks, manual intervention
issues, losses due to quality rework cycles, and potential
control issues—is developed. In most cases, value
stream maps also clarify where a company is not
properly leveraging its investment in technology. To
properly leverage your process opportunity, it is
important to challenge the status quo and question
every step in the process. Manage toward perfection
so that the number of steps and the amount of time
and information needed to service the customer
continually falls.
In today’s economy, the clear benefits of a lean
organization are lower costs and survival. As the
economy recovers, the added benefit will be the
organization’s ability to remain more cost-effective
and efficient in how it delivers its products and
services. As many companies have learned, it’s
never the wrong time to do the right thing.
David Rubin
Partner
Cohn Consulting Group,
A Division of J.H. Cohn LLP
This article first appeared in the June/July 2009
issue of U.S. Business Review, a Schofield Media
publication. For more information, see
www.schofieldmedia.com