🥇 Morale Improvement System: Lean and Finance

The article focuses on a common problem related to evaluating financial benefits from Lean actions implementation. The author draws attention to the need to determine expected financial benefits before starting Lean system implementation, emphasizing that this approach often encounters difficulties due to deep differences in management assumptions.

The dominant approach is the orthodox return on investment (ROI) indicator, which in practice is difficult to properly estimate. The alternative approach assumes that certain processes must work correctly, regardless of their impact on the ROI indicator, creating value in the long term. Unfortunately, many Lean initiatives are evaluated based on ROI, leading to implementation problems.

The author proposes a third approach, assuming that efficiency and process are closely linked. He emphasizes that Lean thinking requires training in mentally linking efficiency and process during Lean initiatives implementation. The article lists four main links: quality and sales, production method and cost, lead time and cash, and kaizen and capital expenditures.

Quality and sales are particularly important because higher product quality translates to better sales results. The author gives an example comparing Cadillac and Lexus car quality, pointing to the importance of minor quality issues. Lean surpasses other management approaches because product quality results from process excellence, meaning additional customer value comes from a lean process, not competitors' extra costs.

The next important aspect is single-piece flow aligned with takt time, which translates to costs by building quality into the process, leveling processes, and removing waste. The author also highlights the relationship between inventories and cash, pointing to the need to reduce lead time, which directly impacts cash availability.

Lean thinking is also oriented toward using ideas rather than money, meaning existing processes must work without additional capital expenditures, leading to numerous kaizens. The author emphasizes that kaizen-based thinking leads to evolutionary improvement and equipment development as well as developing smarter technical solutions.

The article also provides practical operational indicators that can help track Lean action efficiency, such as the number of defective parts delivered to the customer, accident rate, number of employee suggestions, or total equipment effectiveness (OEE). The author emphasizes that the key to success is consensus between finance, Lean office, and operational management.

The article ends with a call to action, emphasizing that Lean leaders are responsible for convincing others of Lean's value by learning the financial language and linking shop floor conditions to company financial results. The author appeals to the Lean community to take up the challenge and share their experiences.