How to Find Substantial Savings Beyond Lean
by Patricia Moody

When manufacturing managers first experimented with kaizen more than 15 years ago, they targeted only a few areas for improvement-set-up time reduction and changeovers and shop floor inventory. The methods and results were so impressive and revolutionary that the kaizen campaigns grew and morphed into a whole lean manufacturing approach.

But the limits of lean showed themselves when teams dug deeper into layers of complex global supply networks. Although kaizen, and later lean teams, achieved dramatic and substantial double-digit improvements, these impressive gains did not always translate into bottom-line financial returns. Indeed, sometimes they were isolated spots of improvement not supported by on-time and high quality supplier deliveries. Kaizen teams took months to identify and attack problem areas and even longer to instill a philosophy-driven approach based on culture change.

Stories abound about companies that have had difficulty sustaining the gains, such as quick learners multiple-Shingo Award winner Delphi and Boeing that had picked up the rudiments of lean manufacturing quickly but still had problems. There is plenty of gold to be mined in the industrial heartland. Call it lean, call it strategic sourcing, but call it first of all real savings-quick cash to fuel new products, new plants, and new employees. If your operation needs to find faster sources of immediate pay back, look for the ordinary, overlooked opportunity areas.

Everyone likes to save money, especially when savings don't require new capital equipment or personnel. Yet, every day, companies leave millions of dollars on the table-money they simply didn't know they had! We created a blog to gather savings ideas of ten percent or better, and we were overwhelmed with the response from real-world experts at companies such as Dell, Motorola, Ford, Harley-Davidson, Clarke American, Waste Management, and others. Many of the ideas will work in small and medium-sized companies with none of them requiring any capital investment.

One area to look for savings involves trains, ships, and planes. Logistics represent nearly $1 trillion worth of costs every year. Transportation/logistics, packaging, and distribution are neglected functions relegated to areas we don't understand and would prefer not to manage. But with so much material moving globally, especially in and out of China, it makes sense to take a second, or even a third look, at all the potential profits being spent to keep trains, ships, and planes in constant motion.

When the blog entries started coming in, we were delighted to see the value of transportation/logistics and distribution underscored. For small and medium-sized businesses, manufacturing and purchasing alike, these areas offer great untouched opportunities.

Blog examples from the book, The Big Squeeze, illustrate the opportunities to achieve savings.

• Milk runs. [Such] runs save transportation money and build more consistency into your supply network. If you are a small company, consider buddying up-consolidating-with another small company with similar needs, and the two of you will save money.
• Keep that driver moving. Carriers want to do business with "easier or friendly freight"-easy delivery, easier pickups that don't tie up the driver, and no last minute changes. Freeing up a driver's time is paramount...
• Electronic interchange. Only do business with providers who are reliable and provide electronic interchange. When you tender a load to them, do they accept electronically? Do they follow through on that commitment and then provide status [reports] along the life cycle? Do they report once the shipment has been delivered in a timely way?
• Drop-trailer. Another moneysaving solution is the drop-trailer program enabling the driver to come in, pick up a pre loaded trailer, and move on.
• Order picking. Pickers spend more time traveling, whether walking or riding a vehicle, going up or down than they spend doing everything else combined, including handling products, referring to paperwork, using a computer, and scanning. So if you're going to do one specific thing in your distribution center to reduce your costs, attack order pickers' travel.
• Packaging. You can cut transportation costs in half if you make the package half the size.
• Substitute plastic for cardboard. Cardboard is not a world-class material. Have suppliers use plastic totes for transporting inside the plant. Cardboard is expensive, and it is the number one cause of dust and some quality issues in plants. The initial investment for plastic will pay for itself.

The blog-inspired savings ideas on packaging, logistics, and transportation are enormous, and there is no shortage of improvement ideas. Degree of difficulty ranges from the very simple-substitute returnable totes for disposable cardboard-to the more challenging, creating a network simulation and optimizing production and shipping schedules with modes and rates.

We also learned from the avalanche of blog suggestions that small and medium-sized producers have plenty of help finding better, cheaper ways to handle goods. It's simply a matter of asking.

-Patricia E. Moody, consultant and writer, is the author of The Big Squeeze: Ten Ways to Cut Your Company's Expenses 10% Right Now!, If you found this article helpful, you'll definitely want a copy of her book. Click on the title for more information.

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