Lean Distribution no 02: The Dark Side of Companies

In this series of articles, we will examine the various aspects of Lean Distribution and the way in which a modern Enterprise Resource Planning (ERP) system can help implement such a method successfully.

The Lean Method: big changes across the entire company, or almost…

When we think of retooling for the Lean approach, we immediately think of production floors or warehouses. Every detail of the production process is analyzed to identify loss or waste and try to eliminate or at least reduce it. Value Stream mapping is performed in order to keep only the work activities that provide added value to our customers.

Cycle times for each operation (the normal run time of an activity) are measured, all manner of tools are implemented to streamline operations, and the production environment is often completely redesigned, machinery replaced, staff retrained… In short, it’s a small revolution.

Yet, often, all this effort stops at the factory or warehouse doors.

The Forgotten department

If there is one department in a company that can benefit from the Lean Approach, without requiring heavy investments such as production floor redesigns or machinery changes, it is the administrative department.

Indeed, the value stream starts way before an order reaches production. From the first contact with a customer, and sometimes even before, costs and delays are incurred. These costs always end up being passed on to the customer, and delays increase the sales cycle time.

How many companies still function with what we call the “travelling folder”, i.e. the physical sales or production folder that travels from one pile on a desk to another pile on another desk, sitting for a few hours or days at each desk, until the required person has time to work on it?

How many companies still pay employees to manually enter the same information into different systems and software, only to pay yet more employees to check this same information? How many employees waste time looking for the right folder, or the right paper, in the different piles that accumulate on their desk?

How many companies continue to operate this way simply because “it’s how we’ve always done things”?

Invisible waste

Since administrative departments are often considered as a fixed cost, or overhead, the waste that they create isn’t as attention-grabbing as waste on a production floor. Among the eight types of waste defined by the Lean Methodology, here are four that are often found in administrative-type departments, with a description of how a modern ERP system can help eliminate them:

Transportation: Just like the transportation of materials and people, information transportation is also a source of waste to be eliminated. Be it the travelling folder we were describing earlier, or a department waiting for a report from another department because information is kept in silos, this kind of waste can be greatly reduced by an ERP System. When the entire company can work at the same time on the same projects and everyone has access to the same information in real time, information-transportation waste can be completely eliminated.

Waiting: Often closely related to information-transportation issues, waiting is also a source of waste that brings no added value to the customer. Indeed, for the customer, the overall lead time starts when the first contact takes place, not just when an order has reached the production stage. An integrated information system can eliminate the need for double and sometimes triple entry of information and thus greatly reduce delays, not to mention risks of errors.

Defects: Everyone agrees that redoing work that wasn’t properly done the first time is a definite waste. An ERP system lets you automate many manual administrative processes and eliminate human error. Never mind redoing the work, just having to check the work already done constitutes a source of waste. It is always best to build quality into the process rather than to control for quality after the fact. This is the difference between Quality Assurance and Quality Control.

Under-utilization of skills: Machines greatly outperform humans when it comes to repetitive, easily-parameterized tasks. An ERP system, with its process automation functions, lets you free your employees from mindless, repetitive tasks, and use their skills in areas where they vastly outperform computers, in tasks requiring analysis and flexibility. Employees then have more time to accomplish tasks such as in-depth data analysis, assessing new initiatives to increase productivity, reengineering processes to better meet customer needs, etc.

Before you start to redesign your production floor or warehouse, and before you start shopping for new machinery, try to apply the Lean approach throughout your company’s administrative departments, by taking advantage of the possibilities offered by your ERP system.

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