There is a widespread belief that the primary benefit of a lean business system is lower costs. And there's no doubt that lean methodologies can help a company get costs under control. The perception that lean means cost cutting is often reinforced because many companies turn to lean when they're in financial trouble and need to reduce costs in order to survive.
But the most significant economic benefit of lean is that it acts as a powerful enabler of profitable growth. The ultimate objective of a lean business system is the elimination of waste from all business activities and processes. Eliminating waste creates new available production capacity by reducing the time spent on non-productive, non-value-adding activites. More importantly, this "new" capacity is essentially free because you're already paying for the resources that provide it.
Think of what you could do if you were given a significant about of new production capacity that essentially costs you nothing. Work that you've always avoided because it was unprofitable now may look very profitable. And customers that you were never able to do business with because of cost issues suddenly come back on the radar screen. In short, having production capacity that's essentially free greatly expands your opportunities for generating new revenues.
So, yes, lean can help you control costs. But lean is much more about enabling profitable growth than about cutting costs.
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Discussion
By max on Aug 25, 2008
Yep. One of the first cost cutting ideas they try is web-to-print.
"I can't afford to pay my sales staff, so I will be selling business cards online!"
Yeah, right :-)
On the other hand I see a number of new customers who knock on our door precisely for that reason - to cut costs. They are in for a long run and I'm sure they will do better than many others even in lean times.
By Michael Josefowicz on Aug 25, 2008
Isn't this what "going green" means on the ground?
"The ultimate objective of a lean business system is the elimination of waste from all business activities and processes. Eliminating waste creates new available production capacity by reducing the time spent on non-productive, non-value-adding activities"
By Tom Stodola on Aug 25, 2008
Green and Lean are being discussed as interchangeable. IMHO, Lean is all technically "green." Anything more efficient will reduce the use of resources and energy over time. Green, however, is not all about cost or time savings but the reduction of climate change.
Sort of like "All rectangles are squares, but not all squares are rectangles."
By Michael Josefowicz on Aug 25, 2008
In the sense of "green" being about climate change, does it really make sense for a private firm, whose purpose is to make a profit, to have green drive business decisions?
IMHO, the best answer is no. If they try to, they get caught between a rock and hard place.
On the other hand, if lean decisions are made within the context of minimum risk sustainablity - not the quarterly report or next months payroll - then doing well by doing good has a much better chance of going mainstream.
Asking public corporations to judge their investment of resources by the standard of doing good creates too many conflicting incentives.
One outcome of that conflict is greenwashing. Another one is investing in stuff that sounds good at the moment without measuring it against the sustainability standard. Slower but maybe much better decisions are often the result.
My take, is that it's government's job to set the rules. It's businesses' job to play by the rules and make a sustainable profit.
Discussion
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