Lean Economy – How to address it per Jim Womack

“[R]ecessions can be great spurs to lean transformations, the necessities that mother innovations. Toyota only decided to comprehensively embrace lean enterprise after the bust of the Japanese economy brought the company to the brink of bankruptcy in 1950. And in 1990-91 Lantech (Chapter 6 in Lean Thinking) and Wiremold (Chapter 7) embraced lean thinking as the economy foundered. A ‘creative crisis’ was handed to managers ready to seize the opportunity and they made the most of it. So perhaps some good will come form the present recession as new lean enterprises emerge.



“The problem with a recession is that it challenges lean organizations as they try to protect their problem-solving employees. It also challenges them as they try to defend the problem solving relationships built over time with downstream customers and upstream suppliers. The temptation in any crisis, of course, is to go back to point optimization in which it is every person and every firm for itself.



“So how does a lean enterprise think about protecting itself and its people? Here is a short list of ideas:

Rethink recruitment policies to create a pool of entry-level temporaries who can be a buffer in severe downturns (defined as those where the survival of the enterprise dictates lay offs.) Gradually convert temporaries to permanent employees -- who can be protected through practically any conceivable downturn -- as they prove their fit with the organization’s problem solving methods and as they prove their commitment to the organization. The alternative is to fire people in some random way, often starting with higher-paid employees with more seniority. This sends the message that loyalty doesn’t count and squanders valuable team skills.

Create company-wide bonuses for all employees, based on profitability, to adjust wages through the economic cycle and defend core employees from layoffs. Most firms still have all or nothing compensation for everyone except the executives on a bonus plan. This gives no flexibility in downturns, meaning compensation is constant for those who stay and zero for those who are let go. With variable compensation it is more likely that everyone can stay.

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“I realize that these steps work best if taken well before the bubble bursts. So what do lean enterprises that have recently transformed themselves but not taken these steps do to get through the current crisis?”



“Take back work from suppliers that are not going to be part of the core supply group going forward. This can defend jobs in the company and increase the level of understanding of what goes on in the supply base. And it need not disrupt relations with the remaining suppliers if it is clear that the firm will be working on a continuing basis with fewer but more talented suppliers in the future.

Look at every product to ask how it can be offered more effectively.

Look at every product and its value stream to see how it can be offered more efficiently by leaving out wasted steps and unnecessary expense. The hope, of course, is that careful targeting of waste can support price reductions to customers that will capture additional sales, so there will be no need to reduce the number of employees.

“The very last thing to consider is the one thing managers seem to embrace most readily: cost cutting. This means leaving out steps and features that actually create value from the perspective of the customer and removing employees who are actually needed to get the job done right using the current process. The hope, usually wrong, is that the customer won't notice.



“This last expedient is the one I most fear, because it is likely to be justified in the name of ‘lean’. Every recession seems to produce a major cost-cutting campaign sold by traditional consultants. Their key promise is rapid financial payback, even within one quarter, and the only practical way to achieve this is layoffs. I truly hope that the recession of 2009 will not be known to history as the ‘lean’ recession and everyone in the Lean Community should vow to avoid the cost cutting urge in their own organization.



“To avoid the need for cost cutting, I hope that every would-be lean enterprise will assign someone …. to develop a set of countermeasures that can protect the organization and its people through the current recession while laying the ground work for a sustainable lean enterprise in the future.”



Source: James P. Womack, Lean Newsletter, Nov. 13, 2008 download a pdf version of Jim's article



To his suggestions I would add these ideas for dealing with the economy:

Reconnect with your customers. Value stream together to determine what redundancies exist and attack waste through defining rules of release. Listen a lot and look for ways to help them provide more value to their customers.

Invest in training. In construction we never have time to train – now make the time. We will come out of the recession and someone will get the work. Put yourself in a position to perform even better. Training is an investment that will payoff down the road.

Short Videos to see

A good quick summary of the Toyota Way – made in Canada:

More ways to reduce inventory

Inventory is one of the most challenging wastes because everyone sees it as needed; and most think of it critical to avoid the waste of waiting. Maybe having a zero inventory is not practical or possible, but it should be pursued. Here are some ways to reduce inventory:

Reduce demand variability (level the crews installation rate.)

Improve need date accuracy (use the Look-ahead planning tool)

Re-examine inventory levels

Address capacity issues

Reduce shop material order sizes

Reduce supplier lead time

Improve supply reliability

Reduce the variety of parts or material stocked

Reduce batch size for fabrication

Eliminate stashes

Eliminate questionable ordering and installation practices

The Last Planner System *

A Look-ahead plan is more than just tasks and schedule. It is a checklist of actions typically needed to make work ready to be done. In preparing to fly a plane, a pilot must go through a checklist to ensure the actions are taken, things are at the right level (fuel, pressure), in the right position (wings, doors, wheels) and equipment is in working order. All of this prepares the plane so it is ready to take off. Likewise, the look-ahead plan should contain the typical actions that must be set or taken for the task to be ready. These include looking for outstanding change orders or RFI’s; verifying that the material is on site or will be; reviewing any safety issues and prereq work, etc. The common approach to look-ahead planning assumes the superintendent and foreman can remember all this and writing it down is not needed. That’s not possible and the frequent surfacing of surprises and “oops” testify to this incorrect method. Pilots can’t remember everything and neither can we! Our work is not usually life on death related compared to flying a plane, but construction is important to be done right. How effective is your look-ahead planning? How do you know? Do you really measure it or just think it is working? It can be measured simply and accurately and can be improved.



* The Last Planner System is a trademark of the Lean Construction Institute.

Learning Opportunities

You may be interested in attending one of these training seminars:



Feb. 19, 2009 - Eliminating Treasure Hunts– Applying the 5S’s for Lean Construction – Phoenix, AZ – Sponsor: PIPE & 469 JAC, contact Cathy at pipetrust@qwest.net

March 19, 2009 - Job Planning that Really Works – The Last Planner System – Phoenix, AZ – Sponsor: PIPE & 469 JAC, contact Cathy at pipetrust@qwest.net

April 16 & 23, 2009 - Making Meetings Work for You (must attend both session) – Phoenix, AZ – Sponsor: PIPE & 469 JAC, contact Cathy at pipetrust@qwest.net

May 14, 2009 - Problem Solving Lite (No Carbs) - Getting to the Root Cause – Phoenix, AZ – Sponsor: PIPE & 469 JAC, contact Cathy at pipetrust@qwest.net

Sept. 17, 2009 - Customer Loyalty by Design – Phoenix, AZ – Sponsor: PIPE & 469 JAC, contact Cathy at pipetrust@qwest.net

Oct. 15. 2009 - Introduction to Lean in Service – Phoenix, AZ – Sponsor: PIPE & 469 JAC, contact Cathy at pipetrust@qwest.net

Contact Dennis Sowards if you want a tailored workshop exclusively for your company.



Other Lean Construction Learning Opportunities:

· Feb 11 – Nor Cal Lean Construction Institute Chapter Meeting, Rancho Solano Clubhouse, Fairfield, CA - 6:00 PM-9:00 PM - Pacific Time, Contact: Theresa Robinson at trobinson@tcco.com or (916) 554-7944 for details on topic to be covered.

· March 6 - Last Planner Initiative - Lookahead Planning at DPR Construction, Inc., 1450 Veterans Blvd., Redwood City, CA 94063 Sponsored by DRP. For more information and to register see https://www.regonline.com/lookahead <file://localhost/lookahead>

· March 11 – Nor Cal Lean Construction Institute Chapter, Rancho Solano Clubhouse, Fairfield, CA - 6:00 PM-9:00 PM - Pacific Time, Contact: Theresa Robinson at trobinson@tcco.com o r (916) 554-7944 for details on topic to be covered.

A Quick Thought

Toyota Proverb: Stop production so production never has to stop

For more information about Lean applications to construction and especially the 5S’s contact Dennis Sowards at his office at 480-835-1185 or his cell at 602-740-7271 or at his web site: www.YourQSS.com <http://www.YourQSS.com>

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