Lean in a Growing Economy

January 22, 2018
By Darren Dolcemascolo

We had written several newsletters throughout the "leaner" years in which we wrote about how to think Lean in a "lean" economy. Since the economy is no longer "lean," we are going to talk about utilizing Lean thinking in a higher growth economy.  "But isn't Lean more useful when you need to cut costs rather than grow?"  Not at all.  Adopting a Lean strategy can help a company grow even faster.

If a company takes a Lean approach, it can build a distinct competitive advantage. The benefits of lean include things like faster lead times or turnaround times, higher productivity and lower costs, better quality, and less inventory.  As demand increases, a Lean organization can adapt much faster because it is constantly working to improve its abiity to meet customer demand.  Let's look at how a growing company might adopt a Lean strategy.

Suppose XYZ Corporation expects to grow its sales by 20% this year.  Early in the year, they work on Strategy Deployment (Hoshin Kanri).  This is a methodology by which the company develops specific initiatives and goals associated with key metrics.  The goals and initiatives are cascaded down through the organization.  In this case, sales and marketing need to develop a plan to gain 20% in revenue.  Operations needs to determine how to meet the growing demand largely through productivity improvements.  The resulting plan has all parts of the organization rowing in the same direction.

As the plan is executed through some projects, kaizen events, and daily continuous improvement activities; key metrics are improving.  The company is developing new products at a faster rate through Lean Product Development.  Manufacturing is able to produce more with the same resources.  Sales is able to sell more through better customer engagement strategies.  Each function of the organization is constantly improving with the same goal in mind.

Becoming a Lean organization makes sense in any economy.  Certainly, if the economy isn't good, a Lean Strategy can help weather the storm and create competitive advantages to grow market share while keeping costs low.  If the economy is good as it is now, a Lean Strategy can be even more beneficial.

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