Agenda

Why Lean Doesn’t Resonate with Marketing, Top Executives, Investors, General Public—and What To Do About It
Richard Schonberger

The focus of this session will be about LEAN in accounting.  It will show the process TC Industries’ accounting department went through, and still going through (improvements never end), from getting the people involved in Lean to using some of the Lean tools such as 5-S, value stream mapping and visual measurements in the department.  It will look at Accounts Payable, Accounts Receivable and Payroll and show some of the improvements that have been made.

Lean tends easily to die out, or come and go, or never get started (a clear finding from Richard Schonberger’s “leanness studies.”) It doesn’t help that lean tends to be seen—upstairs and in the investment community—as a lower, operations-level pursuit. A general explanation for that relates to lean’s common definition as an attack on waste. To gain traction, lean needs to be presented in terms of its higher order effects, namely, providing quicker, more flexible, higher-value response to the customer—with waste reduction seen as a valued enabler. 

Contributing to lean’s under-appreciation are costing vagaries that give comfort to the tendency for lean to concern itself mainly with factory operations. Course correction shifts attention to three issues: (1) the larger, customer-serving potential of shrinking distribution lead times, (2) providing marketing with razor-sharp pricing, hence more profitable orders and greater share, and (3) appreciating the importance of staying the lean course over the long term. More specifically, those three issues call for addressing:

• Balance-sheet gamesmanship. Far more potential lean benefits reside in supply chains than in factories. But inter-company inventory is a hot potato, neither party wanting it on its books. Corrective action requires (1) clarification of the issue, (2) collaborative attack, and (3) ignoring cost/balance-sheet metrics that push inventory ownership on the other party.

• Transport cost vs. storage cost fallacy. Companies are conflicted about lean/just-in-time deliveries because consultants and academics claim transport is more costly than storage. However, they underestimate storage costs 2 to 4 fold, because of (a) lowball carrying cost rates, and (b) failure to consider cost/revenue impacts of slow response to customers.

• Under-estimating the Value of Continuous, Long-term Lean Improvements. Lean’s typical erratic application is owed in part to failure to see the compounding cash flow and compounding customer allegiance that comes with many-year lean improvement trends. 

Dr. Schonberger’s presentation highlights these topics while also reviewing: (a) the confused, evolving global state of lean and (b) troublesome tendencies to manage indirectly with goals and metrics more than directly with process data.

Read an article by Richard titled...
"LEAN PERFORMANCE MANAGEMENT (METRICS DON'T ADD UP)"