The Lean Enterprise: A business tool for Waste Elimination
Creating or adding value is an important focus of any operations management process in business. A business culture that is hinged on a continuous improvement paradigm will be more responsive in delivering value to its customers either in the form of a service, product or a hybrid of both. Value delivery or value adding is done within the sphere of operational competitive priorities of cost, quality, speed, efficiency, flexibility, and innovation. This is where lean enterprise becomes useful even though its implementation is fraught with challenges. The efficient utilisation of available resources is the hallmark of customer-centric organisations as such organisations have higher value proposition to deliver to their customers.
Lean Enterprise as a value-add
Lean enterprise involves the use of fewer resources to obtain more output by eliminating wastes inherent in a process flow. The aim is to deliver value to the customer with a tandem improvement in areas of cost and efficiency. A school of thought argues that some aspects of the lean methodology such as JIT and pull system of production are not feasible in a developing country like Nigeria, because of infrastructural challenges and policy instability; albeit, some aspects of the lean enterprise are still germane to process improvement in business organisations locally and globally. Another school of thought believes that lean enterprise is no longer relevant; proponents of this reason opine that lean as an improvement technique has become obsolete as a function of time, not relevance. An important goal of many organisations is cost efficiency, and this ultimately translates to a value-add for its customers and other stakeholders. This value-add can be achieved by minimising waste and effectively utilising. Consequently, in an evolving economy where competition, digitisation, and innovation are the rules of the game; efficiency, cost, flexibility, and continuous improvement would become key business differentiators – these differentiators are embedded in eight buckets of wastes in most organisations. Lean enterprise has categorised these buckets of wastes using an acronym: DOWNTIME
Defective product or service: This is a situation where an organisation provides a defective product or service to its customer. A defective product or service is not a value-add to the customer and is therefore regarded as a loss. It is very likely that such a customer will be disappointed and lose interest in the organisation. The reputational risk in this situation is high, and this is a daily occurrence in many businesses today.
Over-processing: This is an operational situation where unnecessary time and resources are channeled into the making of a service or product at a higher cost with no or little value-add to the customer. This situation abounds in many Nigerian businesses, where customers experience undue delays due to operational bottle-necks which an application of lean enterprise would have resolved.
Waiting: This is another non-value-add situation where a business customer waits endlessly for a service or product delivery. It represents a high degree of wasted effort and time that could be spent on other value-added activities.
Non-utilisation/Underutilisation of Employee talent: This is a situation where the talent of an employee is deployed in a low value-added activity or process in an organisation. In many cases, it is difficult to assign a price tag to the opportunity cost regarding the human capital potential being wasted.
Transportation: Transportation waste entails unplanned delivery or process flow bottle-neck resulting in higher transportation cost for which the business customer is neither supposed to nor willing to pay for. Apart from poor infrastructural challenges, unplanned and unnecessary transportation bottle-necks exist in inter-departmental and inter-process flows in some organisations.
Inventory: Inventory in its various forms (raw, work-in-progress, finished goods, supplies) constitute the backbone of any business organisation. However, inventory that is in excess or not being processed effectively is a form of waste. Inventory waste is a very common operational dilemma in most Nigerian business organisations, either in the manufacturing or service sector.
Motion: A non-value-add motion is classified as waste in the form of repetitive process flow or activity that does not add value to the end service or product but attracts additional cost. It causes undue wear and tear in a business process flow.
Excessive Production: It is an aspect of waste that is linked to inventory, transportation, and motion. Symptoms of this type of waste are inherent in the reworking of products or reprocessing of service flow.
Waste is a huge source of business loss and operational underperformance in most Nigerian businesses. An application of lean enterprise can cure this operational malaise and provide value to the customer in a cost-efficient manner.
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Dr Marvel Ogah teaches Operations Management at Lagos Business School
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