Should “Lean” operating principles be applied in small business?

          By Walt Brittle

ABSOLUTELY! Small business can become much more effective by going LEAN.

Lean principles can be traced back to the early 1900s with The Principles of Scientific Management by Frederick Taylor and the mass production techniques first implemented by Henry Ford to make the Model T.  A “Lean Operation” is defined as an economical and efficient business─ a business or project that uses the minimum resources and number of people required for success.

Of course, most small businesses are not in manufacturing, they are mostly retail, B2B, and service providers. But they all have one thing in common, they all have processes that must add value or they can’t stay in business. At first blush we could mistakenly believe that most small businesses are “Lean” because they don’t have the resources to be anything but lean. But that is not the case, Lean is not simply doing with less. Operating Lean is accomplished by analyzing business processes, writing “best way” standard operating procedures and creating a culture of continuous improvement.  Having a cost effective quality system is an essential element of continuous improvement.
The AberdeenGroup © 2006 conducted a study in 2006 and published a white paper titled the Lean Benchmarking Report; Closing the Reality Gap , 300 companies, from various industries, participated in the study. As you can see from the following; the study found going lean delivered benefits when applied to customer related processes, distribution processes, supply processes─ not just manufacturing. The findings:
     • Competitive advantage in price and service was cited by 45% of respondents among their top three Lean drivers. However, since Lean is prevalent in many industries, today the question of competitive advantage is more about being at a disadvantage if companies are not operating a Lean operation.

     • The third most important driver cited by 44% of respondents, customers demanding shorter order cycle times, is particularly common for those companies whose products ultimately serve the consumer.

     • Companies that are ultimately most successful with their Lean initiatives begin the process with a “blue sky” attitude unencumbered by current constraints. Cross-functional teams start with a white board (either physical or virtual) and collaboratively define and design their ideal “to be” processes beginning with the customer and moving back through production to the supplier.

     • Pushing Lean beyond the four walls of manufacturing leads to dramatic results; best-in-class Lean organizations are exceeding expectations more frequently than would be competitors.

     • Measuring and monitoring key business processes daily or more often are enabling best-in-class companies to outperform their competitors.

One Lean technique that would reap benefit for even the one person small business is “5S”. It is a great place to start. 5S stands for sort, set in order, shine, standardize, sustain.

1. SORT
Start with a clean slate! Going through your workplace can be quite a daunting task. If your workspace has gotten so out of control that you don't know where to start, sorting is your first task. You will need some time to sort through everything so do it during non-work hours. This is typically a good Saturday morning project. Your goal is to get rid of as much as possible. Create three piles and label them:

     1) things I need and use every day,
     2) things I occasionally need, and
     3) things I haven't touched in over three months and have no need for

If you haven't used an item recently and have no real reason to keep it, get rid of it (if it has value sell it on Ebay, Craig’s List [easiest], or donate it). The remaining items will have to be stored appropriately.

2. SET IN ORDER
We should all be thinking green these days and make every effort go as paperless as possible. Do you print out emails or keep files? Try filing them electronically instead. The intent here is to create a system that allows you to find and retrieve items quickly, identify required actions and understand where things belong.

Create an electronic filing system on a hard drive. An external drive can be used so all documents can be kept in one place in a universal format such as “PDF” which can be generated using free add-in applets like CutePDF writer. Or you can  purchasing software such as Nitro PDF or the original PDF writer Adobe Acrobat. No doubt you already have Adobe Reader on all your computers, but that software will only read PDF files, it will not write them.

It is almost impossible to go totally paperless. So scan paper based documents and save them electronically. Many of the small office three in one printers (print/scan/fax) come with software that will automatically save scanned documents and faxes to PDF (For example, the Brother DCP-7040 3-in-1 Monochrome Laser Multi-Function Center with Print, Copy and Scan  functions, it does a great job and is available for as little as $165.00).

Spend a little time defining the structure of your filing system to make it as intuitive as possible in order to keep the need for verbal or written instructions to a minimum. But make sure everything has a defined "home" location, to ensure that organization will be kept up.  Physical or virtual items that are used every day should be stored within easy reach. This includes active files, equipment or information. Items with occasional use can be put away in less than ideal locations such as external hard drives, storage closets or high shelves. Make sure you label everything so there is no guessing later on.

3. SHINE
As the word indicates shining is about cleaning up. Purge out unnecessary files that are bogging down your hard drives, clean out dusty CPU’s and wipe down the work area. As you’re doing this look for anything that may be broken and either fix it, replace it or get rid of it. Make it a habit to go through mail and make the decision on what to do with it. A) trash it, B) if it requires action at a later date put it in a designated action pile, C) all other goes in the trash right then.

4. STANDARDIZE
You will need to develop the rules and checklists to maintaining the first three S's and ensure that the requirements are as intuitive as possible. Consider how you use productivity tools such as MS Outlook and MS One Note. Do you send yourself reminders and task schedules? Can you develop a color coding system for these reminders and tasks that indicates priorities or other important information?

5. SUSTAIN
This is perhaps the hardest function as it requires discipline to keep all area organized. A good idea is to schedule a 5S day each month. Give kudos when someone comes up with a creative way to make 5S a daily habit. Develop a regularly scheduled 5S audit. Commercial software is available for 5S auditing, but it isn’t necessary. You can download forms for free from the internet. Regardless of the method, the business leader must hold all accountable to get it done, even if you are just a one man band then hold yourself accountable is key.

As you can see 5S is all about organization. Start the 5S process in your work area and others will notice, then talk it up and it will soon spread throughout the company. You will be amazed at how 5S improves productivity levels and makes clutter a thing of the past. Don't wait, get started today!

In summary, Lean operating principles (adapted from Lean Thinking by James P. Womack and Daniel T. Jones) are built on the following, they apply to small as well as large businesses:

     • Specifying value from the customer’s perspective as expressed in terms of a specific product or solution that meets the customer’s needs at a specific price at a specific time.

     • Identifying the value stream or set of actions required to bring product or solution to the customer; from concept to product launch, from order-to-delivery, and from raw materials to finished product.

     • Making it flow by converting from departments and batches to product teams that redefine the work of departments, so each employee can make a positive contribution to the value stream (concept to launch, sale to delivery, raw material to customer).

     • “Pulling” from the customer back by making exactly what the customer wants just when the customer wants it; let the customer “pull” the product as needed rather than pushing product, often unwanted, into inventory.

     • Striving toward perfection is an ongoing process of reducing effort, time, space, cost, and mistakes while offering a product which is in every way, exactly what the customer actually wants.
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About the author
Walt Brittle specializes in Business Improvement Engineering. He is managing partner at FDA Compliance Help Desk, Inc., Chapel Hill, NC. www.FDAcomplianceHelp.com He also serves in the Chapel Hill Carrboro SCORE chapter. SCORE, counselors to America’s Small Business.