LEAN MANAGEMENT

Like many other clichéd management techniques, lean management has come to mean different things to different people.  Some associate it with efficiency and low-cost.  Being lean is about efficiency and also effectiveness in delivering value to customers.

In this article, lean management is focused on ‘delivering customer value without waste’.  Without customer, there is only cost.  Since the customers is the person who parts with their earnings to acquire ownership of a company’s product.  In delivering a range of products, there are 3 core groups involved:

Transaction processing

Risk management

Decision support

In the book, ‘Lean Solutions’, Womack and Jones set out 6 principles of lean consumption that provide a definition of value:

1.       Solve any problem completely

2.       Don’t waste my time

3.       Provide exactly what I want

4.       Deliver value where I want it

5.       Deliver value when I want it

6.       Reduce the number of decisions I must make to solve my problems

In the book ‘Lean Thinking’, Womack and Jones describe waste as any human activity that absorbs resources but creates no value.  They listed 8 categories of waste where 7 of them are from Toyota’s executive, Taiichi Ohno:

1.       Defects (in products)

2.       Over production of goods not needed

3.       Inventories of goods awaiting further processing or consumption

4.       Unnecessary processing

5.       Unnecessary movement of people

6.       Unnecessary transport of goods

7.       Waiting (by employees for processes equipment to finish its work or an upstream activity to be completed)

8.       Design of goods and services do not meet the needs of customers

They went on to summarize lean thinking into 5 principles:

1.       Precisely specify value by each particular product

2.       Identify the ‘value stream’ for each

3.       Make value flow without interruption

4.       Let the customers pull value from the producer

5.       Pursue perfection

Some suggestions to improve the ability to ‘deliver customers value without waste’ are:

1.       Manage the scope by focusing on products where benchmarking shows high costs for relatively little value

2.       Understand who the customers of the products are, talk to them and establish their definition of value

3.       Assign clear process ownership for the value stream that produces the product

4.       Establish clear and frequent measurement of the process’s effectiveness and efficiency

5.       Build a culture of continuous improvement by aiming small, regular and highly visible gains that involve many colleagues and are appreciated by the management

6.       Use this as a foundation for more transformational change

Shared from article by:

Peter Coote and Stathis Gould

Management and Accounting

Accountants Today

June 2006