Why bosses love 'lean'

When a member of Greg Knight’s Friday morning business group started talking about lean manufacturing, the rest rolled their eyes. Not Knight.

His business Florentines Patisserie, a Tauranga manufacturer and exporter of cakes and desserts, had just moved into a brand new, 20,000 sq ft production facility. Far from reaping the rewards of the move, things seemed to be going backwards.

“All the efficiencies we were meant to gain, we didn’t get. Everything was just bigger. It was almost liked we’d started a whole new business again.”

Knight had never heard of lean manufacturing, lean business or anything lean before, but it sounded like it could solve his problems. He read up on it, then leaped at an opportunity to learn more through an introductory course run by New Zealand Trade and Enterprise (NZTE). 

Learning about lean was like the end of a journey, says Knight. For years he’d looked for templates to improve the way he ran his business. When the business was small he could manage it himself, but now employing nearly 50 people and shipping more than 1000 cakes a day was an entirely different challenge. “I didn’t have enough arms and legs to tell people what to do, so I’d become quite disillusioned with the normal management ways. I looked for help, but everyone kept saying, ‘every company’s different.’ It was very frustrating.”

Lean turned all that on its head. There are templates; they aren’t set in concrete — you need to adapt them to your business, but they help build the foundation from which to grow, says Knight. 

The term lean was coined by US academics in the late ‘80s to describe Toyota’s production system after years of successive growth turned the Japanese car manufacturer into the world’s largest automaker.

Taiichi Ohno, the Toyota engineer credited with introducing Toyota’s radical new manufacturing system, defined it as “the complete and thorough elimination of waste to reduce the timeline from receipt of customer order to delivery.” 

Another convert to lean, Jenkin Timber chief executive Richard Carbines, says, “When you talk about waste, it’s not about picking up a paper bag from the floor it’s about wasting time and wasting materials and eliminating all that. “It’s about a lot of small things that, when put together, make a big difference; that improve efficiencies and so productivity.”

Carbines’ team had been trying to do something similar to lean for some time before he heard the term, but the business lacked the formal processes and underlying know-how to make it stick. “While our heads and our hearts were in the right ‘continuous improvement’ space, we lacked structure, process and a method of measuring the advances.”

Following NZTE’s introductory course, both companies took the facilitator’s advice (and the government’s offer of up to $20,000 to share costs) and hired consultants to help implement lean systems. The result, they say, was a complete cultural overhaul of their businesses.

Instead of ‘dictatorial management practices’, lean coaches managers to teach staff to think for themselves; to be problem solvers. It’s really about empowering staff, says Knight. “That’s one of the reasons people struggle with it. Because one of the biggest problems is staff don’t know how to be empowered and management don’t know how to coach them.”

At first many of Florentines’ staff were reluctant to participate. “People got offended when I said ‘yes, we want experience and skill, but to be honest your attitude to continuous improvement, to sharing ideas and to helping us, as a company, get better is far more important to us’. I wanted their brains not just their hands.” 

Knight admits for some, including some of his most experienced staff members, the changes were too much. They left. But by then Knight’s belief in the programme was so strong he persevered.

Within a year the company had changed the way its workforce thought about its work, the way the factory floor was laid out — on the advice of its now empowered workforce — and the way the business was structured. Production processes were altered to run more smoothly, producing and shipping products tightly to order. 

There were new warehousing systems and accounting systems and even the way the company sold and marketed its products changed. Nearly all the changes were driven by staff themselves. In the first year alone they came up with more than 150 ideas to help grow the business. 

Whiteboards were introduced on the factory floor to capture ideas, thoughts, problems and improvement suggestions and there’s now a room dedicated solely to whiteboards. “The difference is rather than fire fighting we encourage people to look for problems and if we haven’t got enough problems, we’ll stop and start to look for some.” 

Ken Gardiner, NZTE’s lean business programme manager, says the course simplifies the lean philosophy to four steps: how do you make things go faster, how do you make things go better, how do you make things cheaper and how do you make things easier for your staff and for your customers to do business with you. “Lean’s not a great word, because lean can be perceived to rhyme with mean and it’s not that at all. It’s about engaging with your people to improve business performance.”

Jenny Carter, chief financial officer of her family printing firm Soar Printing, admits lean is a big cultural change for any business, but actual practical changes can be as simple as pulling out a table so staff can more easily reach things they need. Jenkin Timber now has lines on the floor so staff know where to stack products and shadow boards so tools can be found when needed. 

“A lot of it is common sense,” says Gardiner. “But you need a structure around how to do these things. If you don’t have a structure people don’t do it and they certainly don’t sustain it.”

Both Soar and Florentines have won sustainability awards, but credit a lot of that success to thinking lean, not green. You can’t be sustainable without implementing lean, but you can implement lean without thinking about sustainability, says long time lean advocate Chris Agius, Soar’s operations manager. “If you really want to make a huge difference to your electrical waste, your material waste, while still producing more in the same time frame, you can’t do that without going lean.”

Lean seems like a no brainer for any business, but most companies that take it on fail, says Knight. “It’s because it’s an ongoing programme. It never stops.” 

Once upon a time management set up a business’s systems and processes and walked away, but lean forces everyone in the organisation to think about improving things continuously. “It’s a lot of work,” Knight admits. 

More than two years since that Friday business group meeting, Florentines staff have never been happier, says Knight. The company has more than doubled its productivity and added a hefty, though not disclosed, chunk to its bottomline. 

Typically companies can expect at least a 20% lift in labour productivity from lean, Gardiner says, but he cites one manufacturing company with a $15 million turnover that managed to add nearly  $1 million to its bottom line less than four years after adopting lean. 

“If you want to remain competitive in such a dynamic market, you really do need to bring in lean,” says Knight. “Lean provides the foundation, the structure from which you can build. It’s just makes really good business sense.”