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10 Lean Steps for Surviving the Recession

11/20/2001
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I have just read in the papers that it's official: We're in a recession that started as early as March of 2001. (Has anyone in manufacturing doubted this?) In addition, the world situation continues to be turbulent -- despite military successes and robust (but profitless) car sales -- and it is likely to be nine months to a year before the economy turns up.

So...it's time for lean thinkers to think leaner to get through the recession and secure a strong position for the upturn. In a previous letter, I listed six simple steps. Now I would like to provide an action plan with a bit more detail:

  • Identify all of your product families and give someone clear responsibility as the value stream manager for the performance of each product family value stream.
  • Tell the functions to help your value stream managers, rather than optimizing their own assets. No customer is interested in full utilization of your engineers or plants, only in the price, quality, performance, and delivery of their specific product.
  • Map the current-state value stream for every product family and envision a future state. Do this within a few days!
  • Achieve a first future state for every product family. Do this and stabilize value stream performance within three months!
  • Introduce truly continuous flow in every value stream wherever you can. This means implementing properly designed cells with twice the productivity, half the footprint, and one-tenth the throughput time of the typical cell in operation today.
  • Introduce leveled pull between areas of continuous flow. This means untangling information on orders and production forecasts in your MRP from clear signals from the next down-stream process on what is actually needed now. Install simple shop-floor pull systems that actually control production and eliminate expediting, while leaving your MRP free for capacity planning.
  • Calculate simple financial numbers for the savings in your future; state value streams so Operations, Engineering, and Finance can have an intelligent discussion about the benefits of a lean conversion.
  • As you get value to flow in your engineering and operational areas, turn to your support functions. Appointing value stream managers, drawing value stream maps, and achieving future states in the office can produce savings equal to or greater than those in your plants.
  • Master the art of change management by learning to lead lean improvement projects that mesh with corporate strategy and the emerging value stream organizational structure.
  • Extend your new value stream perspective for all of your product families up and down the value stream to customers and suppliers. Instead of focusing on each other's margins (if any), focus on the waste created by your collective behavior and create waste-free future and ideal states for entire value streams.

None of this is easy of course. But there can be no doubt that it's possible. Just look at Toyota's continuing brilliant performance in the current recession. (They have just reported record profits for the first half of their 2002 fiscal year.) Thus Toyota continues to be our ideal lean company.

But perhaps you need some focused help to make your company perform like Toyota? That's the objective of our "Leaner Thinking for Harder Times" Conference in Orlando, December 6-7. We will offer full-day break-outs showing you in detail how to tackle every step I've mentioned above. And I will sum up the entire action plan in my plenary talks to lead off and wrap up.

P.S. In my next letter I will share some thoughts on how our new awareness of instability in the world can spur thinking about "value stream compression," a vital but so far overlooked dimension of lean thinking.

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