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Lean thinking can improve profitability

The implementation of “lean” thinking and management concepts helps companies adopt a culture of minimizing waste and maximizing value.

One example of “waste” that we all experience is waiting time. As you fall in line at the bank teller, or renew your passport or driver’s license, you end up with unproductive time. This could lead to some customers turning away and choosing your competitor instead.

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We asked Michael Sibayan, who has a Six Sigma Black Belt certification, for his insights into how lean thinking and management could improve profitability.

First, a distinction: Lean concepts focus on providing “value” to the customer by reducing process/turnaround time, costs, complexity, and waste in operational processes. Six Sigma, on the other hand, aims to reduce defects and improve/reduce variances.

The first step in lean management is to complete your process documentation, after which you can go through your process maps and walk through each activity. You will be surprised to see a lot of improvement opportunities by identifying which activity adds or does not add value to the customer. The direct benefits of lean thinking are reduced process turnaround times, because non value-added steps are removed leading to reduced operating costs.

Here are other concepts of lean thinking which help reduce operating costs and improve profitability:

Zero tolerance for waste

Wastes are elements of the process flow that add no value to the product or service and only add cost and time. In a proper lean process, everything that we do are of value to the customer and the customer is willing to pay for it.

Do “more” with “less”

With lean thinking, everyone in the organization is involved as the aim is to improve each process that each person is working on, without any duplication. The goal of lean processes is fast and consistent output.

The “pull” of the customers drives production/operations

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It is better to let customers “pull” the products or services from you as they need it, instead of you trying to “push” products or services that may be unwanted by your customers. Excessive pushing of products and services to the customer leads to higher cost and even possibly less revenue.

In summary, by applying lean thinking and management, you end up with lower product and/or service cost, faster process/transactions, improved quality, improved productivity, improved service to the customer, and increased capacity all leading to improved profit margins.

Sibayan will facilitate a course on “Lean Thinking and Management: Eliminating Waste and Adding Value” on Sept. 4.

The Inquirer Academy is at 4168 Don Chino Roces Ave. corner Ponte St., Makati City. For more information, you may e-mail [email protected], call (632) 834-1557 or 771-2715 and look for Jerald Miguel or Judy Bondoc. Visit www.inquireracademy.com

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TAGS: Business, profitability
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