Want to Be Lean? Improve Customer Value

So many companies have bought into the Lean philosophy, which can be downright silly at times.

Not that the idea of streamlined operations is silly. Not at all. When I think of all the money companies have wasted over the years with bloated operations and “that’s the way we’ve always done it thinking,” I imagine we could have solved world hunger with all that money.

But when some companies practice Lean, what they really mean is that they’re just now getting efficient. They realized they can practice just-in-time manufacturing, or at least not storing a year’s worth of small parts in their warehouse.

They started measuring their different processes and found out where the problems actually stemmed from and solved those, rather than just trying to fix the outcome. (We used to have nearly 40 –50 percent of our invoices sent back to us because we got something wrong on our end. Fixing that saved us millions of dollars per year.)

Or they did a Pareto analysis of their entire catalog and stopped selling the bottom 10 – 20 percent of products because they were barely making any money from them. Instead, they bought them from another supplier or referred them directly to the supplier.

And they embraced digital manufacturing and got rid of some of the ancient machines that still required coal fires to operate. (I’m only slightly exaggerating, of course.)

Improve Your Processes by Focusing on Your Customers First

A factory worker checks his equipment for problems. By focusing on customer value, you can run a lean manufacturing operation.Here’s the secret to creating a Lean manufacturing environment: Focus on everything that will help the customer. Improve the value to the customer and only do the things that will help the customer.

Of course, that will mean looking at your processes and products, and maybe even your customer list, and making changes and cuts where needed (including your customer list).

Southwest Airlines has always tried to be one of the lowest-priced airlines in the U.S. and will do what they can to improve their customer value, but without ever-increasing their costs. A flight attendant once asked one of their executives if she could inject a little humor into the pre-flight safety announcement. The executive told her that, since it didn’t cost the airline anything but could make the customers happy, she could do it.

That became one of their operating philosophies: If they could find a way to make the customers happy without spending any money, they could do it.

That’s what it means to focus on your customers: Do you have a confusing number of options and choices in your product line? For example, do you sell 15 versions of the same product? Would your customers appreciate it if you cut down the number of choices to, say, three?

Are your customers happy with your delivery time? If not, what would it take to cut that time by a third? Think beyond “Work faster, drive faster.” Look at the bottlenecks and logjams in your process and see where there might be room for improvement. Do it because it improves customer value, and you’ll create a lean process.

Do you have customers who take up a lot of your time but are some of the lowest-profitable ones on your roster? Are you spending more time on that customer for the least amount of money? If you were to drop that customer, would your profits improve? So drop them. Drop them completely. Sometimes improving customer value means improving the value of your customers, not just to your customers.

Are your products a commodity and you’re constantly fighting with your competitors over the price? What are the things you can provide to your customer to increase your value to them? Can you offer seminars and training? Are there add-on services you can provide? Maybe you could provide installation or improved delivery or maybe there’s a whole new market segment you haven’t tapped yet, and you need to find your blue ocean.

Earlier, when I mentioned the problem with the invoices and the debit memos? We were seeing as many as half of our invoices returned to us because of an error. Customers weren’t happy about the errors, and we were in danger of losing several of them just because we couldn’t get the orders right, the parts right, and the invoices right. We were billing them for things they didn’t order, sending them invoices for the wrong parts numbers, and so on.

So we figured out what was causing the problem, because we knew it was one of the best ways to keep the customers happy.

And if I’m being honest, we also knew it would solve a lot of our cash flow problems on our end. But we also knew that if customers were unhappy and complaining, they would soon go somewhere else. So we focused on the customers’ complaints, fixed the problem, and made them happy. We also saved millions of dollars each year, but that happened because we focused on improving our value (or reducing our pain) to our customers.

Being Lean means being efficient. And the best way to find your efficiencies is to look at every step of the process and ask yourself: Does this serve the customer? Does it benefit them? How can I improve this to make my customer happier? If you can do that, you’ll become more efficient and streamlined.

Let everyone else call it Lean: We know what it really is.

I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business, including pivoting within their industry. If you would like more information, please visit my website and connect with me on Twitter, Facebook, or LinkedIn.

Photo credit: Jotoler (Pixabay, Creative Commons 0)

Author: David Marshall
I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business. If you would like more information, please visit my website and connect with me on Twitter or LinkedIn.