‘A penny saved is a penny earned’ is an adage that every business owner will be familiar with, but often that penny can be very difficult to save. Many decision-makers see saving as synonymous with radical cost-cutting measures such as salary reductions, lay-offs, restructuring and downsizing facilities, However, this approach often overlooks smarter strategies, such as adopting the lean agile methodology, which focuses on eliminating waste without compromising productivity or skill sets.
Firstly, drastic cost-cutting is rarely the solution for high cost-per-unit or cost-per-acquisition businesses. Cutting too deep into the “muscle and bone” of an organisation can reduce productivity and weaken its cumulative skillset, making it more challenging—and expensive—to deliver a product or service effectively.
Secondly, the real causes of high costs often run deeper within the organisation. These hidden inefficiencies cannot be solved by simply reducing employee pay or facility expenses. By applying the lean agile methodology, businesses can uncover these underlying issues and address them intelligently.
Lean Agile Methodology - Delivering Solutions to Your Organisation's Challenges
A new approach to cost reduction
At OE Partners, we believe there are smarter and more effective ways to achieve cost reductions—central to this is the lean agile methodology.
Lean methodology is an approach derived predominantly from the legendary Toyota Production System which took the Japanese auto-manufacturer from a small organisation to the international market leader. While originally focused on manufacturing and logistics processes, its principles can be applied broadly. Core to the system is the identifying and removal of various forms of waste (muda in the original Japanese) that drain productivity and profitability.
The lean management methodology has become so widely used because it provides businesses with the lens needed to see clearly and identify the impediments to their success. Even modern, data-driven businesses frequently leave decision-makers with incomplete pictures of what’s really happening on the shop floor, leading to best guesses and trial-and-error approaches to problem-solving that often do more harm than good.
Lean breaks with this, providing a clear schema for decision-makers to follow to help them identify what’s really affecting their profitability. While there’s no step-by-step guide to growing your business’ revenue, lean does help to identify common areas of systemic wastage that cumulatively affect the business’ ability to perform at its very best.
Categorising organisational waste
The original Toyota Production System identified eight forms of waste:
- Transport – movement of products in excess of what is required to perform processing.
- Inventory – failing to process raw materials, works in progress, or components into a finished and saleable product.
- Motion – Employees move or walk excessively, such as travelling too far between workstations.
- Waiting – waiting for the next production step, or interruptions to production such as shift changes.
- Overproduction – Businesses producing more than they can sell at a given time, leading to waste (similar to inventory).
- Over-processing – using overly complex or expensive processes or parts that exceed what is needed to meet market expectations.
- Defects – the resources and effort wasted on defective products, including their disposal and the time spent inspecting and fixing them.
- Space - space is a limited commodity and comes at a high price in rent and overheads. Holding excess stock, work in progress, laying processes out inefficiently, all take up excess space and add to overheads.
Various experts propose additional concepts as the ninth form of waste. These include the under-utilisation of skills, uncertainty about responsibilities, goals, or processes, and improper use of computers. Other examples are working to incorrect metrics and producing products that do not meet market demands or customer specifications.
Implementing Change
Once decision-makers identify sources of waste in the current system, they should take a broad approach to redesigning processes. Core processes should be simplified as much as possible to ensure total understanding on the part of the workforce. Streamlining workflows allows businesses to decrease cycle time and increase productivity. This helps make better use of resources and reduces the time it takes to sell a product and generate profit.
Additionally, no business perfectly embodies all of these principles, and there is always room for improvement.
To learn more about implementing the lean agile methodology in your organisation, get in touch with us.
