Lean is a tool for increased efficiency and doing more with less use type of resource. Lean is a proven way to cut costs and increase profitability. In the economic downturn, manufacturers have used lean principles to improve overall performance. As the economy continued to spiral downward, manufacturers went from lean to skinny, often cutting deeper than the organization could fully sustain in the long term. Organizations have gone into starvation-mode in an attempt to remain viable. These manufacturers who have most effectively managed the downturn, have done so by significant process refinement and discipline. As the manufacturing economy has roared back, we should consider how best to apply lean principles in the upturn. Below are the top tips to hit the ground running through lean processes when the economy turns around.
Remember that Lean isn't Exclusively a 'Bad Economy' Tool
The typical focus of lean is cost reduction through higher system efficiently – which translates nicely into a tool for economic downturns. As the manufacturing sector's recovery continues, having come back very rapidly in many segments, we now have trouble recruiting and training enough qualified personnel for our manufacturing organizations. In the upturn, just like the downturn, we need to do more with even less resources. If we stay true to our lean journey, we can improve process, reduce waste, and make our resources more efficient (whether the resource in question is our personnel, our machinery, or our loading docks). The upturn, aside from the obvious financial benefit, provides a secondary benefit worth noting: process stress. This process stress highlights bottlenecks and rough spots in our processes. It also spotlights areas where our processes aren’t robust enough to handle increased production volumes and market demand.
In the Upturn, Focus on Scaling Effective Processes
All too often, once procurement restrictions are lifted and job requisitions are approved, managers within manufacturers discard the lean processes from a downturn and ramp up headcount to the way things were in the last positive economic cycle. This creates a bimodal situation for the manufacturing firm: lean and disciplined during downturns and expansive (and expensive) recruitment and staffing during upturns. This sinusoidal cycle causes a loss of process discipline and ultimately, forfeiture of the gains from the lean journey previously earned through process re-engineering. The addition of personnel in a haphazard way during the upturn creates a de facto process redefinition. This distorts (or completely corrupts) the technical and commercial processes within the manufacturer, creating an out of control situation for the next downturn.
An example we see frequently is a purchasing department and the addition of "expediters." During the downturn, purchasing agents (or Buyers) at small to midsize manufacturers manage their purchases from request for quote through delivery and quality approval. When an upturn occurs, they become exceptionally busy and, rather than scaling the procurement process with more buyers, the manufacturer will in many cases add expediters to follow up on orders placed with suppliers. In an economic downturn, those expediters are removed from the organization. Had the manufacturer scaled their process (shifting from five to ten Buyers, for instance), the top performing personnel could have been retained through the downturn and ultimately, the organization’s average buying competency would be increased.
Use Cash Generated in the Upturn to Continue the Lean Journey
During the downturn, it was easier for individuals within manufacturing operations to devote time to strategic operational thinking, value-stream mapping, and other lean activities. Now that the upturn has begun, operations managers should plan to trust the analysis they conducted over the past several years and invest (emotionally and financially) in the operational improvements that are necessary for sustained lean development and competitive advantage. It is important however, that these managers consider the variable resources required to operate any of the improvements that are purchased and whether they bear fruit in the event of another downturn. Managers should re-evaluate the process improvement opportunities that were recognized during the downturn and invest accordingly.
It's Time for People Development
During the downturn, training budgets were slashed. For the past several years, professional growth of individuals and organizations has been sidelined due to cash restrictions and layers of bureaucratic approval for expenditures. Looking ahead to the next downturn, managers should consider what capabilities their staff needs to develop (either individually or collectively) to better handle economic fluctuations in the manufacturing environment. Some considerations might be change management, technical training to make personnel more robust and able to be cross-trained, development of leadership skills, and advanced problem solving skills like Six Sigma training. With these skills, the effective manufacturing executive will have a better team with which to face changing economic and market conditions in the future.
In the end, managing an economic upturn can be as difficult as (if not more difficult than) a downturn. The key is strict process discipline and continuance of the lean journey.
Jason Piatt is president of Praestar Technology Corp., a provider of consulting and training services to manufacturers in the Mid-Atlantic region specializing in Lean, Six Sigma & Strategy Formation.