Cash is lying around everywhere in companies. It's in warehouses and on shelves, hiding in plain sight as inventory. It litters administrative offices, disguised as incorrect invoices, late billings, sloppy requests from salespeople. It sits in company lobbies waiting for sales calls to start. All that cash is retrievable - available for re-investment. Turn Waste into Wealth will help you get that cash by turning your organization into a Lean company.
Mark DeLuzio, principle architect of the vaunted Danaher Business System that has led companies to world-class performance, presents hard-hitting advice and numerous case histories that will help you make your company Lean. You'll learn: Why Lean is the modern way to run any organization; What you must do to insure a successful Lean transformation; Lean accounting practices that promote Lean behaviors; How to identify and deal with Lean naysayers; Why LEAN does not mean "Less Employees Are Needed"; What and why to benchmark; The Lean formula for setting prices; How to deploy strategy in a Lean environment.
Great companies continuously improve everything they do to increase shareholder returns. If you're new to lean or already using Lean practices, Turn Waste into Wealth will help you make your company great.
|Publisher:||Maven House Press|
|Product dimensions:||5.20(w) x 7.70(h) x 0.70(d)|
|Age Range:||18 Years|
About the Author
Mark DeLuzio is the CEO of Lean Horizons Consulting. Prior to founding Lean Horizons, he was Corporate Vice-President of the Danaher Corporation, where he was the principle architect of the vaunted Danaher Business System, the primary reason for that company's decades-long, world-class performance. Mark is the pre-eminent thought leader in the Lean industry, noted for numerous Lean innovations. In 2007 he was inducted as a Life Member of the Shingo Prize Academy (the Lean Hall of Fame). He is a popular speaker sought by corporations, conferences, and noted higher-learning institutions.
Jeffrey J. Fox is the author of twelve books, including the bestsellers How to Become a Rainmaker and How to Become CEO. Founder of Fox and Company, he works with companies such as General Electric, IBM, and Ametek, among others. He is a graduate of Harvard Business School.
Read an Excerpt
FROM CHAPTER 6: THE NEW COST REDUCTION FRONTIER
Using Lean to Cut Administrative Waste
Although widely accepted for improving procedures on the factory floor, the fact that Lean can dramatically reduce waste in administrative functions is less well known. Administrative costs dwarf manufacturing costs. As a percentage of revenues, administrative costs are two to ten times greater than direct production costs. (Production can be manufacturing a part, making a TV commercial, baking donuts, harvesting apples, and so on).
Consider administrative costs to be any cost not associated with marketing, selling, or manufacturing. Thus, accounting, clerical, legal, tax, insurance, utilities, management salaries, order processing, document processing, IT, human resources, and so on are all administrative costs.
Administration has various names: front office, back office, central office, white collar, bureaucracy, overhead, and G&A (general and admin costs). Administrative functions, unlike production processes such as turning a lathe, are typically invisible. Transactions and improper direction may lie deep within databases, policies, or software. For example, the root cause of late shipments may be due to a poorly engineered customer demand oversight process. Flaws in product design, weak forecasting, cumbersome forms, redundant paperwork, endless approval systems are examples of administrative waste.
Lean administration reduces waste, errors, processing time, and back office delays. Back office problems are particularly common in an organization's accounting and finance functions. Back office problems are endemic in insurance, banking, and paperwork-generating industries such as residential real estate sales. Every company is undoubtedly losing money in its back office, or whatever the administrative function is called.
Mis-billing, late billing, and non-billing cost industry millions of dollars a day.
Late ordering of fresh seafood robs $1,000 from the restaurant's evening revenues. Mis-ordering the correct grade of cement delays the building completion by two days, causing $200,000 in lost time. Mis-forecasting part requirements triggers a line shutdown or expensive, expedited emergency shipments. Mis-handling insurance escrow accounts costs the mortgage bank millions of dollars a month in redundant mailings, overnight express mailings, unnecessary interest payments.
Getting it right the first time, and every time, is the most worthy of wealth-creating missions.
White collar waste is the white whale of opportunity for companies that deploy Lean administration.
FROM CHAPTER 28: SHE WALKED FROM SAN DIEGO TO ST. LOUIS IN ONE YEAR AND NEVER LEFT THE FACTORY FLOOR
The company makes electrical components. The machine operator is a woman who spends her workday assembling parts. Let's call her Kay. Prior to a Lean solution Kay routinely walked from here to there to fetch parts, to bring the parts to her assembly machines, to deliver the parts to the next operation, to find tools and maintenance supplies.
Kay walked and walked. Based on careful pedometer readings, measuring her every step in a ten-day test period, Kay walked 1,549 miles in one year. San Diego is 1,549 miles from Saint Louis.
Kay walked close to three quarters of a mile every hour (1,549 miles divided by an annual 2,000 work hours). Even if she ran at Olympic gold medal speeds, Kay spent seventy minutes a day, every day, walking and not working. Every second she walked was a second she did not make a part, and every unmade part was unmade money.
If Kay's total direct cost was $30 an hour, then her employer, the electronics-part maker, paid her $35 every day just to walk around. If Kay worked 250 days a year, her endless wandering to find things cost her employer a wasted $8,750 per year.
The machines were moved. The necessary parts were placed adjacent to Kay's work bench. The tools were labeled and organized for instant access and usage. The parts were now in an economically efficient, continuous, one-piece flow.
Kay's walk time was reduced by 98%. Instead of walking five to six miles a day, she now walks about 100 feet a day. Her production rate is up 75% per day. Based on the selling price of her company's products, Kay's cell now generates an additional $1,200 in revenue per day.
Kay's operation is immensely more profitable and truly lean.
But poor Kay. She had to join a gym.
Table of Contents
Foreword by Jeffrey J. Fox
Part One: Lean Purpose
1. Mountains of Money
3. The Lean Journey
4. The Lean Transformation
5. Lean's Good Numbers
6. The New Cost Reduction Frontier: Using Lean to Cut Administrative Waste
7. How to Enhance Your Culture with Lean
8. Change from Problem Hiding to Problem Solving
9. The 10%-80%-10% Population Rule
10. How to Identify a Naysayer
11. Ours Not to Reason Why, Ours But to Waste and Die
Part Two: Lean Principles
12. The Eight Deadly Sins of Waste
13. The Leadership Rules of Lean
14. Lean Transformations Are Not Pain Free
15. LEAN Does Not Mean "Less Employees Are Needed"
16. Never Tie Headcount Reductions to Lean
17. Continuously Grow with Continuous Flow
18. Customer Will Not Pay for Non-Value Activity
19. Accounting for Lean
20. How Traditional Accounting Promotes Accounting Waste and Costly Behaviors
21. Don't Employ Purchase Price Variance
22. New Lean Rules for Capital Expenditures
23. You Can Teach an Old Dog New Tricks
24. What and Why to Benchmark
Part Three: Lean Process
25. The Five Whys: Too Much Pigeon Poop
26. Standard Work is the Gold Standard
27. TAKT Time is Money Time
28. She Walked from San Diego to St. Louis in One Year and Never Left the Factory Floor
29. The Blue Parts Cart: Or, Minutes Mean Big Money
30. Don't Blame Manufacturing: Three Days Process Time, Eighteen Weeks Lead Time
31. A Hospital Without Waste
32. Don't Cherry-Pick Lean Tools
34. Kaizen Event Rules
35. Lean Trumps Six Sigma
36. The Problems with Kanban
Part Four: Lean Profits
37. The Lean Profit Formula
38. Lean Distribution
39. The Wallet
40. The High Cost of Carrying Inventory
41. Cross-Functional or Dysfunctional: There is No Choice
42. Waste Mapping: Where to Deploy Value Streams
43. Strategy Deployment
44. Using Strategy Deployment to Save the Shad (a Metaphor)
45. The Difference Between Strategy Deployment and Policy Deployment . . . And Why It Matters!
46. The "Dees" and "Rees"
Appendix A. The Lean Horizons Lean Sustainability System (LSS)
Appendix B. The Lean Horizons Wealth Creation Process
Appendix C. Lean Horizons Benchmarking
About the Author