Tuesday, February 18, 2014

Lean is In !

                         LEAN IS IN!

The core idea of lean management is to maximize the customer value and minimize the waste in the complete process of manufacture from production to delivery of the product. The rigorous processes that Starbucks went through to minimize waste and assemble a toy within 16 seconds from over one minute, clearly says a lot about what an organization can do with lean management.

Lean management can be achieved by a five step process as follows:

As shown above the first step in lean management starts with the specification of how value can be created for the customer. Value can be defined as anything that the customer is willing to pay for. Value created for customer is directly proportional to the business or growth achieved by the organization. Anything i.e. is not of value add to the customer is a “waste” to the organization.

 The next step is to identify all the processes that will be add value to the customer and those that create waste of man hours and other resources. Then target for elimination of these processes. For instance, suppose a group of clerks create business value for an organization by entering and processing online, e-mail and fax orders that a company received from its customers. If the fax machine is located far away from the employees (about five hundred) who use it about ten times a day and suppose they waste three minutes a day in walking to the fax machine, the company loses twenty five hours a day which amounts to about nine thousand and fifteen man hours per year. Imagine the enhancement in productivity that would be achieved by eliminating this process and simply moving the fax machine close to the employee. This is the aim in step 2 of the Lean management process.

The third step is to monitor all the processes and tightly bind those processes that create the end product for the customer and adds value to the organization’s business.

The fourth step is again a method to cut out waste and reduce the resources used in storing the inventory. This goal of waste reduction is achieved by the manufacture of goods only when it is “pulled” or wanted by the customer.  The customer drives the production of the end product and only when the customer has sent the signal that he is going to buy an item, the product is started to be put together. This optimizes material costs and labor costs because there is no storage cost for the product.

The last step in the lean management process is to achieve perfection with time in reducing wastage and optimizing cost and time in the production of an item. Achieving perfection is about continually reducing waste until there is no way there could be further reduction in waste.

Reduction in waste is arguably the most important aim of Lean management. The following diagram describes the seven deadly wastes that lean management aims to remove:

Waste or “Muda” according to the Japanese tradition is any activity that does not add value to the end product. In addition to the seven deadly wastes(as shown above) there is another waste that has been identified over the years. This waste is called under-utilization of resources which in most cases are employees or people. This can be described as the situation when the abilities and skills of the employees are not used to the fullest degree.  In my experience, this is one of the big causes of loss in the IT industries. Mostly around 80% of the work is done by 20% of the employees. This is called over-staffing.  Again under-staffing can also lead to wastage of skills because the employees will not be able give their best in any particular task if they are assigned multiple tasks simultaneously. Therefore, striking the right balance between under-staffing and over-staffing becomes very important in such as case.

Typically, in order to do waste management of resources, the following steps can be taken:
1    1)   Cross training people in different functions and technologies so that in case one resource is absent, the other resource has the skill to finish that task.
      2)  Motivating the resources to give their best in their work.
3    3) Appropriate incentives should be given to employees.

While working in IT, I have realized that suddenly applying lean management techniques in the allocation of resources leads to chaos and employee dissatisfaction. This happens because earlier the employees were used to work in a relaxed way, however they do not understand what is the necessity to maximize the amount of work in a minimum amount of time. In a way, it affects the quality of work too. What is the best way to apply lean management techniques in this circumstance?


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