Why Lean Manufacturing Principles Often Don’t Work

Many businesses love cutting waste and costs for profits by using lean manufacturing principles, but many global manufacturers have failed.

The companies used the popular Six Sigma, Kaizen and Value Stream Mapping.

All of this was reported in a 2011 study by the consulting firm, AlixPartners in New York.

ID-100266361 stockimagesThe industries were principally aerospace, automotive, consumer products, chemicals, electronics and industrial.

Most companies made $500 million or more in revenue.

About 66 percent are in the U.S.

Surprising results

Here are the surprising results:

— The majority of respondents reported cutting 1 to 4 percent in costs, which is generally believed substandard.

— Thirty percent of respondents realized 5 percent or more in savings.

— About 14 percent didn’t know how much they saved.

— About 60 percent aren’t optimistic – they forecast their failure to continue to achieve at least 50 percent of their attained saving

Lean programs have been used widely in the past four decades, as a catalyst for cost-cutting and continuous improvement. Original adopters included General Electric, Motorola and Toyota.

So what’s the problem?

Apparently, the answer is rudimentary. The companies weren’t fully applying the principles to achieve a strong return, according to AlixPartners Managing Director Steve Maurer.

In essence, he suggested: Businesses need to establish vigorous goals.

They should apply the lean principles culturally company-wide, not just as a narrow list of tactics in a limited fashion.

My sense is that he’s right.

Don’t be dissuaded by the results of the study. In an uncertain 24/7 global economy, lean methods are needed more than ever. They do work if fully implemented.

When properly implemented, historically, lean programs have led to increased profitability and market share.

But a company’s entire culture must be changed for a customer-based focus. And that takes a strong administrator or outside participant to coordinate and implement the cultural makeover.

AlixPartners’ site: www.alixpartners.com

From the Coach’s Corner, you might wish to consider these links:

Why Kaizen Philosophy Works in Lean Principles for Business and Public Sector — Lean thinking has become imperative for business and government. Budgets are strained, but pressure continues to mount for better customer service. The bottom-line: Both the private and public sectors need to save time and money while providing exemplary service – with existing resources.

18 Leadership Strategies to Earn Employee Respect — Even though Wall Street gets ecstatic over productivity growth, merely slashing costs and jobs to create profit is not sustainable for profits. I know investors mistakenly believe the earnings for such publicly held companies are good, but it will not last. Workers are realizing they’re not sharing in the wealth.

20 Tell-Tale Signs – You’re Under-Performing as a Manager — Managers can often struggle whether they’re new or experienced. Poor management, of course, leads to poor performance. As red flags, underperforming managers share one of two common traits with ineffective employees. Such managers aren’t fully aware of their shortcomings. Even if they are aware of deficiencies, they’re afraid to admit it.

If Mergers & Acquisitions Tempt You, Consult HR Pros First — If you’re contemplating a merger, be very careful about your human capital – whether you’re in government, a small business or a global company. Investment bankers will probably salivate over the prospect of new mergers when economic conditions improve, but senior finance executives need to listen to human resources experts to insure success.

 “There is nothing so useless as doing efficiently that which should not be done at all.”

-Peter F. Drucker


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Image courtesy of stockimages www.freedigitalphotos.net

Seattle business consultant Terry Corbell provides high-performance management services and strategies.