How to Maximize Margins by Operating with a Lean Philosophy

Written by Carol Coughlin. Posted in Business Leadership

Renowned animator and Oscar winner Brad Bird (those with children might recognize his credits – The Incredibles and Ratatouille) once said that organizations that spread and sustain excellence are infused with “relentless restlessness.” Good enough is not good enough; the drive to continually improve, innovate, and grow is wired in the DNA of these companies. Lean philosophy dovetails perfectly with a “relentless restlessness” mentality. There is always – always – something to improve, which allows you to maximize margins.

What’s Lean?

This definition from the EPA sums it up:

Lean manufacturing is a business model and collection of tactical methods that emphasize eliminating non-value added activities (waste) while delivering quality products on time at least cost with greater efficiency.

Lean is getting rid of waste, minimizing cost, and putting out quality products (or services) efficiently. That’s it.

Toyota: Lean Machines

Toyota is famous for its lean processes. The auto manufacturer continually searches out ways to reduce raw inventory needs, make work processes more streamlined, decrease wait time, and produce parts more efficiently. A great testimony to their success comes not from the factory – but from a soup kitchen.

The Food Bank of New York City depends on generous donations from large companies, but instead of money, Toyota donated some engineers, who reorganized spaces and revamped the Food Bank’s processes.

They were able to cut the wait time for dinner at one kitchen from 90 minutes to 18. At a pantry, they helped staff cut time filling bags from 11 minutes to six; and at a warehouse, the engineers helped volunteers shave 8 seconds off their time filling relief boxes for Hurricane Sandy victims. Less time + greater efficiency = more people served.

The president of the Food Ban, Margarette Purvis, said Toyota “revolutionized the way we serve our community.” They did it with kaizen, or continuous improvement and the drive for “innovation and evolution.” One of the ways Toyota accomplishes this is to constantly seek out inefficiencies and develop the most streamlined processes possible. As you can see, it applies to more than manufacturing!

Your Own Version of Kaizen

Many of our clients are not big enough to maintain a full-fledged lean process. It’s simply too expensive. That doesn’t mean they can’t benefit from the philosophy and the emphasis on efficiency. We help them take a practical approach that fits the scale of their businesses.

How do we start? By looking at what doesn’t work. Where are the points of failure? To determine this, we interview clients, employees, and perhaps even vendors. Are clients on-boarded improperly? Does it take too long? Are there service issues? We sniff out problems on the operational side and examine the processes responsible to improve efficiency.

One of the most common inefficiencies that we find is billing. How can we get bills out the door quicker? The faster we get the bill out, the faster we can get paid! Days in accounts receivable go down, and cash flow improves.

In considering ways to make the entire process more streamlined, we might look at their time management process, emailing bills versus sending them via snail mail, or taking some people out of the loop because they’re stopping up the works! Billing is certainly an area where we can get some good traction in terms of cash flow.

Lean is not a philosophy limited to manufacturing or restricted to companies with big budgets. Any organization can benefit from continually – and relentlessly – seeking out ways to improve, cut back, and operate more efficiently.

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Carol Coughlin

Carol Coughlin founded BottomLine Growth Strategies, Inc., in 2006 as a way for small and medium-sized businesses to access the same high-level financial and operational expertise that gives large companies a distinct advantage. Using her own extensive corporate experience and willingness to sit in the hot seat as a catalyst, Carol helps BottomLine Growth clients climb to the summit of their success.
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