Thursday, September 18, 2008

Beware the Slippery Slope along the Lean Manufacturing Path

In Lean 101, the lean approach is concisely stated as the elimination of waste in our processes. While waste elimination gets to the core of the lean approach, it is just one key aspect within the lean journey. The most notably result of waste elimination is cost reduction. If asked, cost reduction easily jumps to the top of any upper management’s list of major benefits in following the lean approach.

But somewhere on the lean path, we can start to slide down the slippery slope and fall off the path. Our cost reductions turns to cost cutting and we quickly fall into the mode of cutting corners. Delay a machine repair. Reduce or eliminate our Total Productive Maintenance program. Cut back on building maintenance. Let racks and fixture degrade. Forget the daily 5S, just make more products. Cut a little more and cut a little deeper, why not…we are still pushing out our products, right?

At first everything looks great at the bottom line but that is just a short term benefit. It doesn’t take much time until the destructive nature of cutting corners starts to make its presence known.

All our previous gains suddenly evaporate. Overtime goes up, machine breakdowns increase, deliveries are missed and quality problems are popping up all over the place. Chaos reins. We must regain control. Time to drop this lean approach and we jump into our past-proven, all-hands-on-deck firefighting mode.

Here is a simple example of cutting corners. Most of us drive cars and it is recommended that we change our oil every 3,000 miles. At a cost of about $35 to get our oil change and estimating our typical annual mileage at 20,000 miles, it costs us $210 a year.

But what if we only change our oil every 6,000 miles? Our costs are cut in half. But what if we go 12,000 miles before we change our oil? We can save 75% of our annual oil change cost!

But are we really saving anything in the long run? Factor in the reduced life of our car, increased downtime and repair bills to come and we learn first hand what is meant by the old saying “pay me now or pay me later”. And the “pay me later” ends up costing us more, sometimes a lot more. We now can begin to see that our cutting corners approach is not a good approach from a total cost standpoint in the long run.

As we look to our own lean journey and at the “improvements” within our own organizations, are we focused on reducing wastes or are we really just cutting corners?

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