Lean in Distribution (Part 3 of 3): Management Commitment
“Kaizen” is the Japanese word for continuous improvement. Lean challenges employees to think about kaizen every day in every distribution function, training their eyes to spot waste not previously visible.
Lean is a journey well worth taking by every business measure, including ROI, employee satisfaction, customer satisfaction and growth. However, after 20 years of working in continuous improvement, I can state as a fact that lean improvement programs simply cannot succeed without management’s unequivocal, open support. By management, we mean all management ‒ everyone must be on board to proceed. No single factor is more important for determining the success of a program. The good news for management is that giving support can be a relatively simple, non-time-consuming exercise, with returns far greater than any other management activity, including sales!
Let’s break down what management must achieve into three parts:
- Major activities
Mindset is the most important. The lean improvement team should be considered as a solution for every operational decision made by management. There should no shortage of directives from management to the improvement team. The lean team should lead all improvement activities, in conjunction with appropriate functional leaders.
Every member of the management team must convey a positive, go-forward view of lean. One very helpful tool is a pre-determined elevator speech that every member of management must be able to convey to any employee or customer. For example, if an employee asks management, “Do you really think lean is the answer?” management would respond, “Lean is about designing the best possible distribution processes. Lean tools are the best known way to eliminate waste and drive customer value.” This answer or “elevator pitch” should be consistent across all management.
Major Activities are the second of management’s lean responsibilities, which can be broken into three parts: Prioritizing Projects, Approving Projects, and Celebrating Success. Management determines the focus of kaizen events by prioritizing projects according to ROI, customer needs and business needs. For example, a distributor could have problems with picking accuracy, inventory turns, sales and shipping costs. Management would help prioritize by high-level analysis of return and maximum benefits to customers and the overall business.
Areas for lean projects are certainly not just limited to the warehouse. In fact, most of the high return on investment projects are accomplished in the office. Project areas that are touched many times per day can have larger overall benefit. For example, removing just 10 seconds from the order entry transaction can save thousands of dollars per year, because it is done so many times over the course of the year. Below is a list of several major initiative areas. Each of these areas could yield several kaizen events:
- Lean Relationship Management
- Lost Sales
- Sales Growth
- New Products
- Supplier Reliability
- Supplier Relationship Management
- Lead Time and Variability Reduction
- Lean Transportation
- Global Product Movement
- Supplier Defect Reduction
- Inbound and Outbound Logistics Costs
- Packaging Reuse/Reduction
- Shipping Defect Reduction
- Lean Warehousing with Slotting
- Inventory Accuracy
- Picking, Packing and Shipping Time Reduction
- Wireless Warehouse
Once the project areas are selected, the lean kaizen team would discuss appropriate tools, scoping, costs and leaders of the project. Management would give final approval and agree to its support of the project and all related costs.
Management also needs to be an active leader in celebrating success. Personal contact with the team members is imperative. Simply having the CEO or President take the team out for lunch or pizza can give the program a huge lift. Rewarding success will yield success.
Mentoring is the final lean responsibility of management. Leadership needs to assure that the lean leader has all the tools, support and business knowledge that they need to succeed. The finance leader specifically can play a key role in mentoring, giving P&L perspective for project selection and valuing project success.
The lean journey is not an easy one. Lean implementations are filled with mistakes or changes that do not quite live up to expectations. However, turning waste into value is a very rewarding activity. Lean distributors struggle to improve, but they do improve. Epicor business consulting has been working with distributors for over 20 years, and lean business consulting results have averaged 51 percent improved productivity per consulting activity. We believe lean can do more to help distributors than any other single activity.
Posted by Stuart Maxel, Continuous Improvement Manager at Epicor Software