The concept of lean manufacturing originated on the shop floor at Toyota. Since then it has expanded into many other areas, including but not limited to lean healthcare, lean administration, lean logistics, lean services, lean hotel, lean military, lean banking, or any lean whatever topic. There is even a lean government, albeit I am somehow skeptical on that one. Even so, most practitioners of lean work in manufacturing. Hence it comes as no surprise that most lean efforts are focused on the shop floor. However, while there is usually much improvement potential on any given shop floor, it is not necessarily the area you most want to improve.
What Else is There Besides Manufacturing?
The key question is, where is your biggest priority in your industry? Where can you generate the most bang for the buck with your improvement efforts? It may not necessarily be the shop floor. In a worst case scenario, your efforts may be for naught simply because you’re working in an area that isn’t relevant to the company’s success. I learned this the hard way through working on different shop floor improvement projects for companies where manufacturing did not matter. Management attention was somewhere else. While my projects discovered significant potential for improvement and made good plans for obtaining these benefits, they failed in implementation simply because nobody higher up cared about manufacturing in that company. Yes, you read that right: There are companies where manufacturing is simply not important for their overall success. Naturally, in a company producing goods, it has to be done, but in terms of priority, it may rank next to tech support or site security. Sure, you do need it, but as long as it works, management doesn’t care about the details. Here are a few examples of other areas which may be more important.
Depending on your company, logistic processes may have a much larger impact on the company’s success. For example, I had one key experience at a food manufacturer. The production plant mixed ingredients, filled them into retail containers, and sterilized the product. The plant had quite large improvement potentials. With a few changes, we could have improved plant efficiency by over 10%. However, with food manufacturing, the focus is not on production but on distribution. The product has to go to the customer while it’s still fresh. New products have to be released continent-wide simultaneously. Most of the assets were tied up in the supply chain. Hence, improving the distribution of the goods had a much higher priority than actually producing them.
Or let’s take an even more extreme example I have seen: Production of technical gases. For many gases, the production process is about as simple as it can be: Open the window and cool the air until the different components become liquid. Bottle these, and your production process is done. But then the real challenge starts: getting these gases to the customer. Furthermore, after these gases have been used, you want your gas cylinder back. Unfortunately, not all customers are keen on returning these, and somehow lost (or, to be honest, mostly stolen) gas cylinders are a large part of the company’s expense. Overall, a technical gas company is, at its core, more of a logistics company than a manufacturing company, and their improvement focus should be accordingly.
Construction, Research, and Development
Other companies I have worked with created their value for the customer through construction, research, and development. Key example here are machine tool makers. While a few machine tool makers produce generic tools, most customize their machine for the customer. Hence, designing the product is much more important to the success of the company than making it. I personally had projects at different machine tool makers, from cutting-edge technology products to decades-old technologies. In all of the companies, construction, research, and development were more important than the actual production. Don’t get me wrong, production was still complex and expensive, but it was not the selling point for the customer. For high-tech machine tool makers, the customer wanted the latest and best model possible, paying a premium for having a machine that was better than the competition’s. For low-tech machine tools, there wasn’t so much research and development, but the customer wanted a machine that—while using decades-old technology—matched their product needs exactly. Manufacturing was merely a necessary step in the process, but the money was somewhere else.
Other companies sell their products through marketing. There are numerous examples of general consumer products that are virtually identical except for the packaging, brand name, or marketing. Some goods even come from the same production line with the same raw materials, production techniques, and workers, but merely have a different packaging. Even so, the customer is willing to pay a premium for fancy advertising. Key examples are many food products or spare car parts.
In some cases, this marketing impact can be next to hilarious. In 1975 there was a pet rock craze—you could buy a simple, ordinary rock in a box at a premium price as a pet. The product was no different than any other rock you could pick up off the street, yet 1.5 million of them were sold. This is quite an extreme example where production is nothing and marketing is everything.
Another aspect that may be very important to customers is service. There are certain products where, for example, the up-time is highly significant. An example of this is web site hosting for businesses. Installing (or, so to say, producing) the hardware is a minor aspect of the value for the customer. Much more significant is that the system is up and running around the clock. If there is any problem, the customer wants a technician to fix the problem immediately, and the customer doesn’t care if it is 4:00 a.m. on Christmas morning. Again, manufacturing has to be done, but other than it being done, it is otherwise of little significance compared to other aspects of the business.
To sum it up …
Overall, before you start any improvement project, you need to find out what really matters for your business. It may be manufacturing. In fact, manufacturing is quite important for many businesses. However, it may also be something else. As shown above, there are many examples where other areas are much more significant than manufacturing. In reality, it is usually a mix for most companies. The key point is that you should be aware of your company’s priorities and invest your improvement effort where you can get the most benefit for your business. Take a minute and think about what your customers value most in your company. Now, go out and improve your industry!
2 thoughts on “Know Your Priorities!”
Great article! but what do you do if your company is non-profit and the company’s culture is hide its’ problems (might be because of belief that revealing problems might decrease chance of promotion). In other words, how can you encourage people to work smarter when everyone are perfectly fine the way it is (and there is no chance of getting fired), and management doesn’t raise red flags?
Hello Boris, in general changes work best if there is an urgent need to change (i.e. the company going bust). Also, in general hiding problems is widespread in industry, because the believe that having problems decreases the chance of promotion is unfortunately all too often true. As far as I understand your situation you have to work with the people that actually do the work, build up trust, and convince them with improvement projects.
Toyota does not have an excellent production system. It has excellent management, which leads to excellent production. The same can’t be said for most western companies.