How can you tell if your firm is really getting lean — count the future state maps on the walls, calculate the number of kaizen events being run, tally up the money Training has spent on Legos?
Actually, you should check inventory turns. (Divide annual sales by the amount of inventory on hand to support this level of sales. You can use inventory at the end of the year or on average during the year or at any point during the year for the denominator in your turns calculation. Just be sure that you measure inventory the same way every time so you can calculate an accurate trend.)
Turns make a great measure because they clearly show the velocity of product through your business and because every business must periodically count inventory to record on its balance sheet. If inventory turns aren’t on a steady upward path, you aren’t getting leaner.
Here we’ve done some calculations to track the progress of U.S. manufacturing and selected industries toward lean. We’ll update these charts as new data become available. We’ll also add other industries and countries, so please check back.
Note: 2004 is estimated. Sources: Calculated from US Census Bureau data.
Note: 2004 is estimated. Sources: Calculated from US Census Bureau data.
