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Action Plan for Hard Times

10/23/2001
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Last week I pointed out that the big leaps in applying lean thinking have all been made in hard times. I therefore urged everyone to seize the opportunity forced on us by the recession. But just what should you do?

Here's my advice, based on careful observation of the two previous recessions (1981-82 and 1991-92):

- Make someone responsible for each product family's value stream. Tell this person to map the stream and quickly implement a future state with lower costs, less inventory, and better customer response that can sustain sales. Do not settle for "point interventions" that improve only one small part of the stream without benefit for the end customer or your bottom line.

- Give your value stream managers full support by removing obstacles to smoother flow, including sacred facilities, balky internal functions, and out-of-date relationships with suppliers. Remember: If the future state looks only a little better than the current state, your firm may not have a future!

- Consider pulling activities for each value stream back from suppliers to compress throughput time and take out even more cost while defending your people.

- Remove all of the excess inventories, space, machines and people from each value stream as quickly as possible. Then, when growth resumes, figure out how to increase output without more inventories, space, machines or people. This is how permanent gains are secured.

- Make a choice whether you need cash or profits. If you need cash, eliminate inventory and sell assets immediately. If you need to improve your profitability, remove the inventory and assets from the value stream to reduce costs but defer disposition until later.

- Tell your people the truth about what needs to be done and do it quickly. People can stand the truth. What they hate are lies, drip torture, and managers with no believable plan for the future. (I'll soon pass along my thoughts on the human side of harder times.)

These rules are simple and they work. The question is whether you and your higher management can and will implement them in time.

P.S. Times seem particularly hard along the Mexican border where every firm has grown steadily during the 1990s with little thought to fundamental productivity. Now costs count and just throwing cheap labor at stagnant, spaghetti-like value streams doesn't work. I hope firms in this area will take advantage of our LEI workshops - including the launch of "Learning to See" in Spanish. 
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