3.23.2014

The Biggest Waste of All?

Perhaps not bigger than some government spending programs, but that is a different problem far out of our control. Let's focus for a moment on a spending pipeline we have direct control over: lean consulting and payroll dollars.

If you do a quick search on LinkedIn for the term "Lean" and filter for Industry: Management Consulting you will get a return of approximately 3,468 results.

Let's say for a moment that all of those results are for hire. And for a modest Lean Manufacturing Implementation Project, a consultant should reasonably expect to take in at least $100,000 per year in order to live to see another day. One way to look at this problem is that companies are spending somewhere in the neighborhood of $350M for Lean Consulting. Companies who shell out this cash readily admit that an estimated 75% of the time, their Lean Implementation is considered a failure. In other words, we are prepared to flush $268M down the toilet every year. Sounds wasteful, right? Hold on just one minute and look in the mirror.

That is just the cost associated with Lean Consulting companies. What about those of us working within industry itself?

There are approximately 1.8M LinkedIn users that return the word Lean back in their current or past job title, this author included. Let's say that on average, these individuals are paid $80K per year. That puts us into some serious spend territory that would put some politicians to shame. Before I claim $144B is spent on Lean payroll per year, let's whack that back to a conservative 25%, just for the sake of argument. This lands us on $36B per year of estimated spend on assigning people to seek out and eliminate waste. On top of an additional $350M. Let's round to $36B and throw in our 25% success rate: o.k., we waste $30B per year on Lean activities!

And that doesn't include yellow aisle tape! And we Leansters wonder why executives and workers get bent out of shape over the next flavor of the month! We are advocating for a clean flush of their dollars!

I suppose if you compare this number to excessive inventories, we are talking small potatoes. January 2014 durable goods inventories were 10x the value of labor - so definitely not the biggest waste of all. But if I look at that inventory number ($387B) and assume that Lean was successful 25% of the time (that is in achieving flow and thereby reducing inventories) then there must have been some payback, right? How many do you think were truly successful at fully utilized lean systems where inventory was drastically reduced and maintained as a flow system?

Very few, perhaps less than 1% if I had to bet. In fact, durable goods inventories rose 3.7% in one year, hardly an inventory reduction. Of course, I'm playing with fire and about to be smacked down by a real economist who knows precisely how these numbers work, right? But that isn't really the point of this post so I'll stop while I'm ahead.

I wonder what that payback is on all of these Lean skills we have been learning? Are we achieving what we really need to? How do you see the payback? How do you sell the need for continuous improvement? What is the value in your organization? What responsibility does each individual in your organization have to effectively spend this money wisely? What can each do? How do we maximize the potential of each and every person, and not waste it 3/4 of their time? Can you imagine the results?

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