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Turn Waste into Wealth

How to Find Cash in Every Corner of the


Company
Mark C. DeLuzio
Maven House Press 2015
168 pages
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Rating Take-Aways

8
8 Applicability The purpose of lean management is to find problems that plague an organization and to
create solutions that increase profits.
7 Innovation
8 Style Much of a firms wealth hides in everyday waste.
Lean practices can reveal where waste occurs, such as in longstanding practices that
need rethinking.

Focus Use the Japanese kaizen production system to find new ways to improve. Create regular
kaizen events.

Leadership & Management Make sure all employees understand and apply lean tools and practices.
Strategy
Sales & Marketing
Many workers misunderstand lean strategies to mean a reduction of staff.
Finance Leans continuous flow process serves marketing because product supply always meets
Human Resources demand.
IT, Production & Logistics
Pricing-to-value means identifying your profit by subtracting the cost of production
Career & Self-Development
from your products current market price.
Small Business
Economics & Politics Lean experts estimate that storing inventory costs 20% to 40% of the inventorys value.
Industries
The lean concept requires a long-term commitment to ensure continued results.
Global Business
Concepts & Trends

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Relevance
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What You Will Learn
In this summary, you will learn:r1) What the lean approach means, 2) How to create a lean culture and 3) How to
implement lean practices.
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Review
Consultant Mark DeLuzio explains where to find hidden value in your organization as he teaches the principles of
lean management. The concept of lean calls for improving both as a person and a business. Exemplifying the lean
philosophy, DeLuzio presents its fundamental principles and processes in brief chapters that explain a new concept,
and offer an action checklist and a case study. DeLuzio covers how to use lean as a philosophy for embracing change,
increasing revenue and solving problems. getAbstract recommends this to-the-point manual to executives, managers,
consultants and small-business owners who want to know more about lean concepts.
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Summary
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Becoming a Lean Company
The purpose of lean management is to find problems that plague an organization and create
solutions that increase profits. Lean is not a fad, and it wont provide wealth if you treat it
like a passing trend. Consider 11 factors that contribute to a positive lean culture:

1. Leader participation Every manager must believe in the lean process for it to succeed.
2. External review Contract for an external assessment so you can see your overall
getabstract situation. A consultant can guide a company on the path to becoming more lean.
Problems are money- 3. Communication After accepting a lean plan for change, communicate the new
making opportunities.
getabstract strategy for success to every employee.
4. Lean language Introduce all company staff to lean terminology.
5. Fresh leadership Lean leaders help build a lean culture. Train current managers and
hire new managers who understand it.
6. Individual ownership Urge employees to take responsibility for their work so they
feel a personal sense of engagement, support each other and help your firm compete.
7. Ongoing information Provide regular updates about the lean philosophy and the
progress of implementation.
8. Procedures Establish processes and routines to create performance improvement.
getabstract 9. Measurements Regularly assess the progress of ongoing procedures. Check that your
Standard work is a processes continue to work as repeating practices over the long term.
lean tool that details
the process in each
10.Respect Acknowledge your colleagues and show respect so they will have pride in
value-adding step and their work.
ensures that each step 11. Rewards Recognize success, hard work and innovation.
is performed the best
way and exactly the
same way every single In any company that adopts lean, 10% of people support this transformation, 80% follow
time.
getabstract the leading voice and 10% reject it. Some people fear change and claim that the lean system
will eliminate employees or compel them to face wrenching, painful change. Instead of
finding solutions to problems, some opponents seem to prefer keeping the problems they
know. Because complainers are influential, leaders must be the louder and more persuasive
voice. People who refuse to cooperate may need to be moved or fired, because negativity
derails success.

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Wise Leadership
The corporate transformation from waste and dysfunctional behavior to wealth requires a
shared lean mind-set. Find supportive leaders in every department and at any level. Instead
of being managers; they could be employees who observe the causes of daily problems and
getabstract understand how to solve them. Find out what staff, materials and programs they need to
All good management
teams use strategy implement lean practices.
deployment to rocket
their enterprises from
waste to wealth. Personal responsibility is fundamental to the lean system. As a leader, you own the success
getabstract or failure of the effort to create a lean company. Your engagement reinforces the message
to employees that they also are personally responsible for the success of lean processes in
their jobs and departments.

As your company implements lean, evaluate each situation empirically. Seek data and
evidence. Dont disparage unsuccessful attempts at change; congratulate the attempt. Offer
incentives for creative solutions to current deficiencies. Update everyone on the companys
progress: every success, every dollar saved.
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Leadership must Using Kaizen
introduce employee-
retention policies that The term kaizen, which means continuous improvement, comes from two Japanese
are consistent with the words: kai and zen meaning change and for the better. This philosophy recognizes
people-first tenet of
lean. that problems exist and that solutions occur when change becomes part of an organizations
getabstract process. Improvement requires participation at all levels. Hold regular kaizen events
throughout your organization to ensure that employees have opportunities to share their
ideas. Follow 14 rules to make sure that your kaizen event succeeds:

1. Kaizen gatherings work best when leaders participate.


2. Most kaizen events take five days.
3. Assess your results by comparing yourself to the best firms, even beyond your industry.
4. Participants should respect each other and work to understand new ideas.
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5. Brainstorm new ways of doing your work, thinking and acting.
Push people to think 6. Be willing to change. Listen for unusual possibilities.
and take initiative
to change things, to
7. Ignore excuses since they distract from solutions.
improve [and] to get rid 8. Dont wait for a perfect answer. A good solution now might help the firm progress to
of waste. better solutions later.
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9. When your team finds an error, acknowledge it and fix it promptly.
10.Money is not always the solution. When something doesnt work, use creative thinking.
Dont try to buy a substitute that may cost more than fixing the problem.
11. Problems are opportunities. Identifying a problem is the best way to improve. Not
finding problems rarely means they dont exist.
12.Asking why five times can reveal the root cause of a mistake or problem, why it recurs,
why nothing youve tried solves it, why no one noticed and why time is a factor.
13.During a kaizen event, everyone is equal.
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14.Firmly believe that you have unlimited opportunities to bring about continuous
Cross-functional improvement in your company.
teams are essential
to a successful lean
transformation. Kaizen is crucial to lean success. Kaizen events can reveal the problems that generate waste
getabstract and block wealth creation. For example, when the Washington Monument needed repairs,
probing its structural issues with the five whys revealed that harsh cleaning solutions
had damaged the building. The staff used these chemicals because nothing else effectively
removed pigeon droppings. Pigeons flocked to the monument because they fed on the
spiders that ate the gnats there. Gnats liked the artificial light on the monument as the sun

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set. Waiting until dark to light the monument eliminated the chain reaction that required
using damaging cleaning products.

Identify and Avoid Waste


getabstract The first and most important aspect of lean is learning to identify and avoid waste. Be on
Being better than your
competitors is not good the lookout for these common practices:
enough. You need to
be as good as the best,
regardless of industry. Wasteful activity Streamline each step of a job process to place all the necessary
getabstract components near each other. Locate machines and parts near the worker who uses them.
Consider whether you need to modify machines to accelerate their production pace.
Excessive inventory Inventory on the factory floor costs money. Lean experts estimate
that storing your merchandise costs 20% to 40% of the inventorys value. Basic costs
include storage space, insurance, taxes, moving equipment, theft, likelihood of damage,
electricity, temperature maintenance and workers to manage location and materials.
Overproduction Firms may run machines continuously for the sake of efficiency.
This practice can overlook the related costs of maintenance, excess inventory and staff.
getabstract Overprocessing Organizations may use forms that request the same information
Wise leadership multiple times. Check such forms across departments and uses. Also find out how much
must turn naysayers
into positive lean time each part of your process requires. Check the system for redundant steps. One
influencers or company had a three-day production time, but an 18-week delivery schedule. The firm
remove them from the
organization. was treating each order as coming from a new customer, requiring paperwork, credit
getabstract checks and approvals across multiple desks with each order and losing time and clients.
Mistakes Every error costs money. Workers must deviate from productive work to fix
the consequences of mistakes. Materials used to replace damaged products dont earn
new income. Mistakes lengthen the billing cycle and discourage repeat customers.
Innovations Employees usually know what needs fixing and often have solutions.
Encourage their creative recommendations by listening to them.

Waste occurs if firms maintain established practices that no one rethinks. One box-maker
used a material that everyone thought had to cure for 48 hours. The engineers re-examined
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Lean can dramatically the process with a lean consultant and discovered that 20 minutes of curing would suffice.
reduce waste in Also, stopping production in the box factory to deplete excess inventory eliminated 70%
administrative
functions.
of wasted space and 80% of overstock. Staff could identify issues with the boxes more
getabstract quickly, enabling workers to fix problems sooner. With this simple lean change, the firm
now provides on-time delivery 98% of the time.

Dont Waste Staff


Many people believe that implementing lean strategies automatically means reducing staff.
This is a misunderstanding. Difficult economic periods may require scrutinizing ways to
achieve lean production, but good employees are crucial to lean success. Lean firms retain
the value of their employees by establishing guidelines that encourage retention.

getabstract Lean practices should focus on seeking new ways to improve as a business and as a leader
White-collar waste
is the white whale
or employee. Explain to your staff members that they are a part of a lean solution. Offer
of opportunity for openings for them to develop new skills beyond their current roles. Create fluid work
companies that deploy structures so people can expand or refine their jobs, seek opportunities in new locations or
lean administration.
getabstract alter their schedules. When people struggle, changing their assignments might help them
make a fresh contribution.

Avoid using temporary workers who cant contribute to the companys long-range lean
efforts. Keep tasks in-house; educate employees to accomplish jobs you previously

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outsourced. During cutbacks, consider concessions and stimuli to encourage early
retirement. Help employees take their next steps by offering them career guidance
programs. A lean company doesnt eliminate its employees; instead, it maximizes each
individuals contribution.

getabstract Encourage Efficiency


Quantity discounts Lean operations require continuous flow. Having too many processes creates delays,
do lower the unit price
for each item, but this extra steps and unnecessary management approvals that can interrupt, clog or complicate a
practice promotes the systems flow. Nothing should stop the smooth processing of a part, product or invoice from
building of excess (and
eventually obsolete) start to finish. Flow also serves marketing because the supply of the product always meets
inventory. demand. For example, a sandwich company made delicious sandwiches that customers
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loved, but never came back to buy again. A lean consultant observed that customers had to
wait 15 to 20 minutes to get a sandwich. Changing from having one person take an order
and make a sandwich to using an assembly line reduced wait time, minimized food waste,
established quality control and increased sales.

Lean Accounting
Traditional accounting encourages buying items at the lowest possible price. However,
buying in bulk for discounts will lead to unnecessary inventory costs and possible excess
stock. Saving money by compromising on quality has long-term negative effects on the
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The expense of
success of the company. Quality matters; cheap goods create problems later. The costs of
holding inventory is a doing things badly include recalls, reduced product value and increased insurance, as well
direct hit to company as customers claiming warranties or taking business elsewhere. Add to that indirect costs
profits.
getabstract like increased customer service calls or technical support. Overproduction creates similar
problems. Making a lot of your goods all at once might be cheaper, but holding inventory
incurs costs.

Standard costs dont reflect the current value of a product. The lean philosophy reconsiders
how companies measure profits. Lean thinkers note the current market price and subtract
the cost of production to identify the profit. This pricing-to-value practice offers the best
price to customers while calling attention to how the company manages costs.

getabstract Lean Strategy


One tenet
of continuous The process of crafting a strategy addresses innovation and the need for improvements.
improvement is to Policy directives outline corresponding practices. Leadership must establish a strategy
regularly question the
prevailing wisdom, to become lean and then identify the policies and processes that accomplish it. First,
to shake the status produce a clear, brief strategy that everyone understands. Create a waste map that
quo, to challenge the
companys myths and charts your process from beginning to end and identifies roadblocks that impede smooth
beliefs. flow. Train cross-functional teams so you have personnel who know problems from
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different angles and can work toward solutions. The lean approach produces immediate
results, but to sustain your progress, it must become a part of your corporate culture. That
requires teaching new employees the lean way and making sure everyone in your workforce
understands and applies lean tools and practices.
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About the Author
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Mark C. DeLuzio designed the Danaher Business System before becoming the founder and CEO of Lean Horizons
Consulting. He gives speeches worldwide about the lean system.

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