Lean management originated in Japan in the late 1980's. Originally incorporated in manufacturing processes, its aim was to eliminate waste from the production process, build customer value and deliver perfection. Businesses that adopt Lean need to have a very customer centred approach to their business and operations.
Why? Well, customer value is at the very core of Lean management and its five principles: Identify value (from a customer perspective); understand the value stream (i.e. how your product/service is delivered); eliminate waste from the value stream (like waiting or transport and handling); establish “pull” (i.e. have just enough capacity to meet customer demand); and finally pursue perfection. In today's competitive world, this customer centred approach to building successful and sustainable businesses is more important than ever.
The power of technology is enabling upstart entrepreneurs to disrupt just about every industry, eliminating the middlemen and putting the customer in control of how, when and why they consume. Thus, businesses that build strong, yet nimble operations will be the ones that survive this onslaught of new competition. And this is where going Lean can enable your business to become stronger. To see how a Lean approach can be put into practice, I have worked through a real life scenario. I participate in an online men's toiletries product range that ships its product every month. In just the second month, they failed to deliver the product and, after requesting the problem to be fixed, I was sent an alternate product that was different altogether.
To fix this new issue I was sent two months worth of the product I paid for by express post (which is lucky as the third month is now late). To see how Lean could help this business, we can map out this business against the 5 Lean Principles.
1. Identify value
His business delivers value by offering a low-cost alternative to the traditional supermarket product, with the convenience of being delivered to the customer's house as and when they need it.
2. Value stream
Given that this is a small operation, it is likely that there is a significant manual element involved in the mail delivery. The operations will likely include regular but infrequent wholesale shipments of the different products, resulting in a stockpile of inventory and people mailing individual items to customers (resulting in human errors like the ones that I have suffered).
3. Eliminate waste
Of the "Lean" forms of waste, inventory and the rework from human error will be an issue for this business, increasing its operational cost and destroying the perceived value from the customer's perspective. In contrast, the large global competitor has such a strong distribution network, it is always in stock at the right inventory levels in the supermarkets. In an ideal world, each item would be individually packaged as a part of the manufacturing process and direct mailed to the customer, therefore eliminating inventory and hopefully the human error from double handling.
4. Create “pull”
The online business requires exponential growth in its operations to be successful and uses customer advocacy to do just that. Yet its manual handling cannot be scaled to meet this growth, and a poor delivery record means customers are not likely to advocate loudly for the product in question. However, if the business can streamline its customer order delivery operations through minimising the number of hand-offs, and align manufacturing to demand, it could scale rapidly.
5. Pursue perfection
Perfection will inevitably be out-of-reach for most businesses. But when competing with large businesses at low margins, errors are costly. Express posting two months of product, on top of the original errors, has likely eroded several months of profit for this small business. Implementing the above four principles to streamline operations can help the business in its pursuit of perfection.
Going Lean is vital and is not out-of-reach for any business, be they large or small. Embracing a Lean mindset in your business will force you to think about your operations, and how it either creates or destroys value for your customers. The pain points in your operations can even prove to be an area of focus for innovation, bringing out new, untapped value from your existing business. It's time to think Lean. Can you afford not to?