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Lean and the Current Financial CrisisNovember 1, 2008 As I write this article, most of the television, internet, and print media are focused on the financial crisis. The Dow Jones Industrials is a virtual roller-coaster, and most financial experts are referring to this time as one of a “credit crunch” or a “liquidity crisis.” Credit is very difficult for businesses to obtain. Without the availability of cash, businesses will have difficulty making payroll, purchasing inventory, and growing in general. Thus, people will lose their jobs. The result could be a deep and long-lasting recession. I have been asked many times over the past few weeks how lean relates to the current financial crisis. Can businesses use lean principles to help them navigate this difficult time? The five principles of lean as defined by Womack and Jones (Lean Thinking, 1996):
What are the results of applying these principles? I believe the effects of lean implementation can be summarized as follows:
All of these effects have the benefit of increased cash flow. As an organization applies lean principles, it is able to realize a net decrease in inventory. This results in a net increase in cash. As a company improves product quality, it will be able to outsell its competitors. As a company improves productivity, it will be able to support additional sales with the same size workforce. Lean principles will enable any organization to navigate the credit crunch by freeing up cash, improving product quality, and reducing costs while growing as a company. In short, it will help a company become self-reliant in its growth and less reliant on the availability of credit from financial institutions. Click here to subscribe to our free e-newsletter Learning to Lean and receive three articles like this one each month. About the Author Darren Dolcemascolo is an internationally recognized lecturer, author, and consultant. As Sr. Partner and co-founder of EMS Consulting Group, he specializes in productivity and quality improvement through lean manufacturing. Mr. Dolcemascolo has written the book Improving the Extended Value Stream: Lean for the Entire Supply Chain, published by Productivity Press in 2006. He has also been published in several manufacturing publications and has spoken at such venues as the Lean Management Solutions Conference, Outsourcing World Summit, Biophex, APICS, and ASQ. He has a BS in Industrial Engineering from Columbia University and an MBA with Graduate Honors from San Diego State University. | |||||||||||||||||
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