I am bigot. Yes, a bigot. A person that is intolerant and can exhibit animosity towards those with differing opinions. That can be me. When I hear the term LEAN in client interaction, I bristle. My face is easy to read. I would be a BAD poker player. I find that so many companies have attempted LEAN programs with the best of intentions; but have moved backwards. Here I share my two disconnects:
My Two Disconnects
Muda needs Mura. Lean principles spring from supply chain excellence in the Japanese manufacturing industry. The approach of Toyota Production Systems (TPS), one of the most popular approaches, is to focus on the elimination of three types of waste: Muda (non-value added work), Muri (overburden) and Mura (unevenness). I find most companies focus on Muda, sometimes work on Muri, but seldom get to Mura. This is the root of my disconnect. I find that we have the supply chain team designing lean systems assuming that Mura will happen; while sales teams incented to induce more unevenness into the supply chain through sales incentives, price management, promotions, marketing, and trade deals. The issue is that 99% of companies have no demand visibility. They cannot see. Orders are not a good reflection of demand. So the supply-centered processes of source, make and deliver focus on lean, while the sales and marketing processes induce more variability. I find that it spins the organization out of control. What to do? Focus on the design of value
Greater value from Demand Driven. I have experienced many types of lean. So, while I believe in reducing Muda, I have also witnessed magic happen in many very SUCCESSFUL Kaizen events. I value the benefits from value stream mapping, continuous improvement and poka-yoke (error-proofing). So, you might ask, why does Lora bristle when she hears the word LEAN? Lean is frequently applied in manufacturing companies to reduce all the waste that we can see. But what if we cannot see? What if demand volatility is high, and sales processes have done anything but created Mura? In these cases, I believe that we must design for demand variability, improve demand sensing (the time to sense true channel demand), and shape demand based on market conditions. This is my second disconnect. Many clients confuse lean principles as being demand driven. Lean is an enabler of demand-driven; but can only be successful if you first build demand sensing and shaping capabilities FIRST that are market-driven. I find that most companies have sales-driven or marketing-driven programs that are anything BUT market-driven.
Why it Matters
It happens often on one of my typical days. Recently, I visited a major retailer. He asked me “Why can my relationships with my suppliers not be like Toyota Production Systems?” To which I replied, “As long as you incent your suppliers to stuff your warehouse with inventory, take promotional dollars, and forward-buy products to get a lower discount, you will never be able to move a Toyota Production Systems relationship.” He said, “hmmm, I had never thought about it this way.” He implemented a lean program anyway, and I laugh each time that I pass by the out-of-stocks at the shelf.
So, without Mura, we must better manage demand and until we do this, we are not ready for lean. Yes, you may argue that we can apply lean on high volume predictable products. To this, I would agree. However, we cannot broad brush the concepts widely across the supply chain.
Sorry, good analysts are opinionated. We are paid for opinions, and as I sit at the Miami airport after two missed flights on a Friday afternoon, I am full of them. Thanks heavens that it is Friday!
What do you think? Do you also see companies incorrectly applying lean principles? I will be at CSCMP next week in San Diego. Look me up; I look forward to your stories. Until then, I am the supply chain shaman, combing the world of supply chain to find the best stories for you.