The Business Case for Lean

Five Lean East case studies that show the benefits of Lean Thinking

The Lean East team is focused on teaching and applying proven Lean Six Sigma principles and tools to develop high performing organizations. We focus specifically on organizations that provide customers with a service (i.e. healthcare, government, financial, insurance, education, construction, repairs, etc.) rather than a product.

Lean Six Sigma has a long track record of success in manufacturing, but only recently became embraced by service-based industries. Some of our clients use Lean thinking as a strategic differentiator – far surpassing their previous results (and their competition).

Some of our clients select us because of our expertise in Lean Six Sigma methodology. Other clients have “no idea what this Lean stuff is about.” Our goal in this post is to share a few examples of our Lean engagements and the difference they made to the organizations we worked with.

No idea what Lean is

 

Lean focuses on increasing customer value and eliminating waste

Lean East was hired to support a services company that had experienced sustained growth in revenues for the past ten years. Each stage of growth required additional staff, more variation in the sales and production processes, and pressures on profitability. The company had just experienced a year with approximately 20% growth in revenue but flat profits.

Our team worked with the leaders and employees to map out the customer fulfillment process. We then held an off-site meeting with all involved employees to understand what customers valued (and would pay for) and compare this to the actual process. The team identified many areas of waste in the current process along with new practices that would increase customer value.

Lean East ended the meeting with a discussion of pricing and a business finance 101 topic:

Customers will pay more money for more value. We set a goal to implement changes that would increase value while reducing wastes (direct costs and overhead costs). Importantly, we then charged a higher price for the increased value.

The results one year later were impressive. The company again grew revenues by 25-30%. But instead of profits remaining flat, they nearly tripled! The team loved the return on investment, and we expect the results will be maintained in future years.

Profits nearly tripled

 

Lean improvements involve employees in the solution for lasting change

One of the great benefits of Lean thinking is the involvement of every employee in the process improvement. This was made very clear when the Lean East team was asked to rescue a process improvement project in a governmental services organization.

The project involved implementing an expensive software solution for the department. Lean East worked with the team to go back to the beginning and understand the team goals and current problems. The team soon realized that the new software was too complex a solution for the current problems. The government employees worked together to develop a much simpler (and internally developed) solution that would better meet the overall objectives.

Lean East visited with team members a year later and learned that the team was still happy with their changes (and using the process). We soon began a new project to help the original software vendor (still under contract) develop a solution built upon the department’s new process.

 

Lean improvements identify and address root cause problems

A Director of Materials Management wanting to reduce costs for supplies used in the hospital surgical services department hired Lean Healthcare East to lead a Lean project team and make improvements. The team began by reviewing background data on inventory stocking levels, replenishment times, lead times, and costs. We then worked together with the cross-functional members of the team (including a Surgeon, Nurse, Scrub Technician, Sterilization Coordinator, Nursing Director, and Materials Management Buyer) to value stream map the process of ordering, stocking, consuming, and replenishing surgical supplies. Background data showed that 34% of stocked items had no usage in the past year while 31% of the items were stocked at levels higher than the established maximum levels in the system. Canceled cases were only avoided due to several employees making herculean efforts to keep surgeons in business and overcome the failing process.

The team identified additional improvement goals and the root causes of issues. A new process was mapped out to convert the paper-based inventory charging system to an online system, allowing material replenishment and billing to be done more quickly and accurately. Most importantly, the “super nurses” on the team who would regularly correct the mistakes (and hide the process problems) instead began to address root causes.

The operating rooms converted to the new system and actively decreased the obsolete and inactive items. The team reduced inventory by over $100,000 in the first three months, reduced the lead time for replenishment by 24 hours, and also reduced nursing and materials management staffing required for ordering and stocking.

Solve the root causes

 

Servant leadership: setting expectations and holding teams accountable

The Lean East mission is to bring out the best in organizations by bringing out the best in the people. The Lean East team helps develop leaders that treat their employees and other people with respect. The best leaders surround themselves with the best people. Everyone is continually learning and growing. Performance expectations can be set very high, with the CEO responsible for setting the vision and breaking down barriers.

A retail sales client recently made significant organizational changes by establishing an executive leadership team that improved decision making. The Owner/CEO was struggling with too much of the decision-making and responsibility for results at the top, and essentially micro-managing a large percentage of the company.

We worked together as a management team to first define the current-state organizational reporting structure. It was clearly out of balance, with the CEO personally responsible for many processes.

We identified the value-creating processes in the company and people responsible for those processes. We then met as a team to agree upon key goals for each process. Responsibility for achieving the goals was divided amongst the managers on the team. Managers were eager to step-up and help clearly define expectations and desired results. A key performance indicator dashboard was established. Monthly dashboard review meetings were scheduled so the team could work together to identify and address problems.

The team is now using the new dashboard and beginning to see early results. Results for the previous year set company records for revenue and profitability. The Owner/CEO is less involved in the day-to-day operations and has time to work on the vision and strategic initiatives. Key employees in the company have embraced the increased responsibilities and are working together as a Lead Team.

 

Improved process results using Key Performance Indicators (KPIs)

Our final Lean East business case covers performance measurement. We help all of our clients better define the customer value they provide and ways to measure this value. We understand and apply best-practices when selecting and communicating KPIs.

One Lean East client was a large governmental services organization. The group had many employees broken into over twenty separate workgroups. Each workgroup had a manager and team responsible for their part of the overall government service. Unfortunately, each team focused their daily efforts on work that would not draw any attention to their group from management.

Lean East worked with the COO of the organization to setup Key Performance Indicators for each team and a process for sharing the KPIs. The teams each tracked their KPIs on a display board in the area. Each employee learned about the key metrics and how to track them. Leaders helped set improvement targets. Finally, regular visits by management and team leaders to other KPI boards helped break down some of the silos and share best practices.

 

The return on investment of Lean thinking

Lean East develops high performing organizations. We partner with our clients and help their processes become more effective, not necessarily more efficient. We strive for a 10-X return on all of our projects – we want the long-term benefits of our work to make back ten times the initial cost. Please connect with us for a discussion about your organization to see if Lean can help you.

 

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