In today’s economy, the clear benefits of a lean organization are lower costs and survival.

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 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?
• Does one or more department 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. 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.

Related: A Lean Case Study

David Rubin is a J.H. Cohn principal and co-director of J.H. Cohn’s Performance Consulting group. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or 877-704-3500.