Executive Briefings

Why Lean Is Losing Momentum in the Executive Suite

Lean is a popular concept with many manufacturers, but it hasn't been widely applied in a coherent fashion that leads to bottom-line benefits. Tony Gorski, chief executive officer of DemandPoint, has some ideas on how companies can rethink their approach to the subject.

Most companies that aim for Lean or continuous improvement are trying to track reductions in cycle time and cost, Gorski says. While they might see some success from those efforts, Lean nevertheless has a tendency to become "a garbage disposal of good things to do." It might encompass processes such as kaizen, cell design and value-stream mapping, but the pieces don't always fit together. What companies end up with, he says, are "random acts of Lean across the supply chain. Lean becomes an end, rather than the means to an end."

Lean got its start in manufacturing, but it's hard to quantify at the supply-chain level. What appears to be an improvement in one area can have negative effects in others. Gorski cites the example of a company that cut its lead times from five weeks to five months, and slashed month-long planning cycles to a single day. In the process, it tripled the amount of finished goods on hand, and doubled raw materials. The culprit was the lack of a cohesive strategy across the supply chain. Sales and marketing wasn't connected to planning and logistics, creating a series of organizational silos.

Another company spent millions of dollars on retooling its assembly line, to be able to respond better to individual orders. The problem, says Gorski, is that no customer had ever ordered fewer than 20 units at a time. So the company ended up with a degree of flexibility that it was never going to need. "How flexible is flexible enough?" asks Gorski. "It comes at a cost. Many times the executive level kind of understands it, but there's no application to understand how [the] supply chain is going to leverage that."

In addition to taking a more holistic view of their supply chains, companies need to assess true customer demand, Gorski says. In some cases, the solutions are less complex than previous methods of determining optimal supply and production levels. Best-in-class companies, he says, "are shutting off complicated advanced planning systems and using simpler intervals or rhythm to connect the supply chain together."

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Most companies that aim for Lean or continuous improvement are trying to track reductions in cycle time and cost, Gorski says. While they might see some success from those efforts, Lean nevertheless has a tendency to become "a garbage disposal of good things to do." It might encompass processes such as kaizen, cell design and value-stream mapping, but the pieces don't always fit together. What companies end up with, he says, are "random acts of Lean across the supply chain. Lean becomes an end, rather than the means to an end."

Lean got its start in manufacturing, but it's hard to quantify at the supply-chain level. What appears to be an improvement in one area can have negative effects in others. Gorski cites the example of a company that cut its lead times from five weeks to five months, and slashed month-long planning cycles to a single day. In the process, it tripled the amount of finished goods on hand, and doubled raw materials. The culprit was the lack of a cohesive strategy across the supply chain. Sales and marketing wasn't connected to planning and logistics, creating a series of organizational silos.

Another company spent millions of dollars on retooling its assembly line, to be able to respond better to individual orders. The problem, says Gorski, is that no customer had ever ordered fewer than 20 units at a time. So the company ended up with a degree of flexibility that it was never going to need. "How flexible is flexible enough?" asks Gorski. "It comes at a cost. Many times the executive level kind of understands it, but there's no application to understand how [the] supply chain is going to leverage that."

In addition to taking a more holistic view of their supply chains, companies need to assess true customer demand, Gorski says. In some cases, the solutions are less complex than previous methods of determining optimal supply and production levels. Best-in-class companies, he says, "are shutting off complicated advanced planning systems and using simpler intervals or rhythm to connect the supply chain together."

To view this video in its entirety, Click Here