U.S. Businesses Use Lean Programs to Cut Costs

New survey shows majority of companies credit operational improvement initiatives for helping them respond to the market downturn over the past six months.

Thursday, April 09, 2009
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In response to sharp revenue declines, U.S. operations managers are overwhelmingly focused on cutting costs, according to a new survey of over 500 operations leaders conducted by Stiles Associates, LLC, an executive recruiting firm.

"Cutting costs will keep the lights on," says Jake Stiles, president of Stiles Associates. "But it has to be about more than survival. The results of this survey show that effective performance improvement programs can provide a critical advantage, especially in times like today."

Over half of study's participants reported annual sales of more than $500 million, and a quarter report sales in excess of $5 billion.

Highlights include:

• Over 90% of companies report that their operational improvement initiatives have helped them respond to the market downturn over the past six months.
• More than two thirds of firms are still hiring or maintaining the current staff levels of their operational improvement teams.
• Spending on improvement initiatives is down at roughly one third of companies, but holding steady or increasing at the remaining two thirds.
• As pressure increases on the top line, corporate visibility of efficiency improvement initiatives has intensified at almost half of companies.

Operations managers blamed the U.S. auto companies for their cash-flow predicament, and offered a variety of ideas for returning the companies to profitability. Top of the list: "Consolidate and eliminate vehicle makes."

Here are their top five recommendations in descending order:

• Consolidate and eliminate declining vehicle makes.
• Renegotiate labor contracts.
• Slash bloated bureaucracy.
• Bring newer, more fuel efficient vehicles to market.
• Eliminate legacy retiree and healthcare cost burdens.

"It's unfortunate that the Big Three haven't been able to more deeply adopt the management practices that have worked so well for archrivals Toyota and Honda," says Stiles. "Ironically, there are some very good lean thinkers in their ranks but the environment hasn't always supported their efforts."

To view the study click here.

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