Lean Consulting: What it Can Do for Manufacturers
After reading this article, you will understand the landscape of Lean Consulting, a service rooted in Lean Management principles derived from the Toyota Production System. I will share its core principles, benefits, and operational roles.
I will share the best situations for organizations to engage Lean Consulting firms; I will delve into financial considerations, fee structures, and the temporal aspects of these engagements. I will give you insights on selecting a Lean Consulting firm, including criteria such as objectives, expertise evaluation, methodologies, communication dynamics, and client references.
Engaging a Lean consulting firm has the potential for a substantial return on investment. By embracing Lean Consulting, organizations can streamline processes, foster a culture of continuous improvement, and secure a competitive edge in today’s dynamic business environment.
Did You Know?
- That 95% of a manufacturer’s quoted lead time for customer orders is typically waste.
- Success rates for Lean Manufacturing initiatives average around 24%.
- Over 70% of manufacturers are actively engaged in improvement efforts.
- Lean consultants often provide an average ROI close to 500%.
- Average engagement with Lean consultants is worth seven to eight figures in savings, both tangible and intangible.
|Lean Consulting applies Lean Management principles from the Toyota Production System to enhance client business execution and profitability.
|Provide clear direction and expectations early in the initiative, emphasizing quantifiable business outcomes(i.e. higher quality, improved productivity, reduced turnover, etc.).
|When to Hire
|When facing performance plateaus, consistent quality issues, market changes, competitive pressures, process challenges, or cultural change challenges.
|Fee structures include time-based, project-based, value-based, and retainer-based fees.
|Engagements range from short-term projects (a few weeks) to medium-term initiatives (a few months) and long-term transformations (one or multiple years).
Evaluate expertise, industry-specific knowledge, track record, methodologies, and change management capabilities.
Evaluate the level of involvement in implementation. Choose a firm that will be hands-on in implementation.
Seek client references and online reviews for insights into the firm’s performance.
Favor a partnering over a transactional relationship.
Evaluate team dynamics during the diagnosis phase to ensure harmonious collaboration.
1. Introduction to Lean Consulting
1.1 What is Lean Consulting?
Lean Consulting is a service approach to applying Lean Management, a management system derived from the Toyota Production System, to a client business to improve execution and profitability. This approach largely focuses on improving efficiency through the elimination of unnecessary activities, often called waste.
1.2 Core Principles:
Value-Driven: Lean consulting focuses on maximizing the value-added activities performed by their clients. These activities are recognized through three criteria:
- Done right the first time.
- Transforms information or material into a product or service.
- The customer is willing to pay for it.
Any activity failing any one of these criteria is considered unnecessary and, therefore, waste.
Waste Elimination: As previously mentioned, Lean consulting will focus on uncovering the eight types of waste within a business and collaborating with the client staff to implement improvements to remove them completely.
Continuous Improvement (Kaizen): Lean consulting seeks to lead clients away from the common reactive way of managing operations and shift to a more proactive approach. This approach encourages employees to evaluate their performance and implement improvements to their processes continuously.
Just-in-Time Production: Lean consulting will seek to understand demand patterns and capacity constraints and design a production process to deliver orders with minimal inventory while remaining flexible to customer requirements.
Respect for People: Influenced by the Toyota Production System, Lean Consulting will seek to engage employees directly in the identification of challenges, analysis of root causes, and countermeasure development and implementation. The spirit of this value is to create an environment where employees can perform their work in harmony.
2. Benefits of Lean Consulting.
2.1 Operational Efficiency:
2.1.1. Lead Time Reduction: In manufacturing, lead time is defined as the time from taking an order to shipment or delivery of that order (depending on customer agreements). Lean consulting focuses on eliminating waste from the process to reduce lead times to enable profitable growth through flexibility and responsiveness to customer demands.
Watch this video to learn more about how manufacturers reduce their lead times by 50%.
2.1.2 Increased Productivity: By optimizing processes and removing waste, Lean consulting enables your employees to focus on value-added activities and therefore increase productivity.
2.2 Cost Savings:
2.2.1 Inventory Cost Reduction: Lean Consulting will implement Just-in-time principles and reduce your inventory significantly. This will free up working capital that can be deployed in other ways.
2.2.2 Waste Elimination: The elimination of unnecessary activities will inevitably lower your cost of goods sold (both direct labor and direct material costs).
2.3 Quality Improvement:
2.3.1 Defect Reduction: Defects are one of the eight wastes. This means that efforts in a Lean Consulting engagement will focus heavily on reducing scrap and rework from your operation.
2.3.2 Product Consistency: One of the most important aspects of Lean Consulting is the standardization of processes. The goal is to create reliable processes that can easily be repeated by your workforce.
2.4 Cultural Transformation:
2.4.1 Employee Empowerment: In manufacturing, employees often are disengaged because they don’t have the opportunity to utilize their talent and creativity. Lean consulting emphasizes employees’ active involvement in all improvement activities.
2.4.2 Cross-Functional Collaboration: Lean Consulting engagements often involve cross-functional improvement activities. Manufacturers commonly see silos between functions, shifts, departments, locations, regions, etc. By collaborating in solving common problems, employees find a renewed purpose and put differences aside.
3. What Do Lean Consulting Firms Do?
3.1 Business Diagnosis:
3.1.1 Current State Analysis: Lean consulting firms will conduct a thorough evaluation of a manufacturing business. This diagnosis will consist of data collection, interviews, and first-hand observations on your production floor. This diagnosis will help the Lean Consulting firm understand your challenges and gaps and develop a roadmap to improve performance.
3.2 Customized Strategy for your manufacturing business:
As a result of the business diagnosis, a customized Lean Consulting engagement plan will be presented. Each Lean Consulting firm brings its own approach to its services. Here are the four areas we focus on when working with manufacturers:
- Operational improvements – We work with your employees to implement changes to improve results on operational metrics, such as Safety, Quality, Delivery, and Cost.
- Leadership development – We coach and mentor your leaders to shift from reactive to proactive management; this will enable them to reduce operational issues.
- Strategy Deployment – We work with your executive leadership to implement a structured approach to deploying your strategic plans over the next 3-5 years. This process will empower you to realize your vision for the business in less time.
- Culture Development – We work with a designated internal culture transformation team to modify the organization’s cultural elements (i.e., values, priorities, policies, decision-making, etc.) and design an environment free of unhealthy situations (excessive turnover, disengaged employees, internal dysfunction and tension between teams, etc.).
“I find that most lean consulting firms neglect the people and cultural side; we ensure the client is successful by addressing leadership and cultural issues head-on.”
We find this approach allows the client to sustain the improvements achieved long after we are disengaged.
Read a more detailed description of our approach to working with manufacturers.
3.3 Training and Knowledge Transfer:
3.3.1 Training Programs: Lean consulting firms will design and implement training programs for your employees to understand the Lean practices and how to apply them in their work environment.
3.3.2 Knowledge Transfer: One of the goals for a successful Lean consulting engagement is that the client is self-sufficient after the engagement. This happens through transferring the knowledge of lean practices to internal teams.
4. When Does It Make Sense to Hire a Lean Consulting Firm?
4.1 Performance Plateau:
4.1.1 Stagnant Productivity: When a manufacturer hits a plateau in productivity, this may be a sign that current processes need to be further optimized. A Lean Consulting firm will serve as a fresh set of outside eyes to help you break past limiting plateaus.
4.1.2 Consistent Quality Issues: Ongoing quality issues, such as rework, scrap, and customer complaints, are symptoms that your processes may be incapable of consistently conforming to customer requirements.
“Most of your quality issues will come from an incapable process rather than human error.”
Lean consulting firms can help you get to the root cause of the problems and implement improvements that will eliminate these issues.
Read this article to learn more about strategies to sustain your improvements.
4.2 Market Changes and Competitive Pressures:
4.2.1 Customer Demand Fluctuations: Customer demand and mix will inevitably shift with the introduction of new products, the business expanding to new markets, and seasonality. Lean consulting firms can help you adjust your manufacturing operation to better serve the current demand trends and remain responsive and competitive.
4.2.2 Increased Competition: Manufacturers can be threatened by competitors vying for their customers. Lean consulting firms will help optimize your operation to make sure your execution remains high, and your profitability improves, enabling you to strengthen your position.
4.3 Process Challenges:
4.3.1 Complex Value Streams: Manufacturing processes with intricate value streams and multiple interdependencies may benefit from the expertise of lean consulting firms. Value stream mapping and analysis can reveal opportunities for optimization.
4.3.2 Supply Chain Complexity: Organizations dealing with complex supply chains may find it challenging to maintain lean practices. Consulting firms can assist in streamlining supply chain processes for improved efficiency and resilience.
4.4 Cultural Change Challenges:
4.4.1 Resistance to Change: Like any other initiative, Lean can face resistance from your employees. Unaddressed resistance can lead your efforts to failure. Lean Consulting firms have experience using change management strategies to help employees see the Lean benefits for employees.
Watch this video to learn more about getting buy-in from your team.
- Lack of Employee Engagement: Employee engagement is a must for the sustainment of a lean implementation. Lean consulting firms will develop strategies to engage your employees and increase ownership to ensure sustainment.
Read this article to learn more about the signs of a manufacturer’s declining culture.
5. How Do Lean Consulting Firms Charge?
5.1 Consulting Fee Structure:
5.1.1 Time-based Fees: Some lean consulting firms charge an hourly or daily rate for their services. This may be suitable for short-term projects or specific advisory services.
5.1.2 Project-Based Fees: Some lean consulting firms often offer project-based fees. This structure may include a fixed fee for the entire project or a phased approach with milestone payments.
5.1.3 Value-Based Fees: Another fee structure is value-based fees, which, as stated in the name, are structured based on the value the Lean consulting firm can help generate (i.e., increased capacity for sales, reduced costs, time saved, simplified processes, and personal challenges removal).
5.1.4 Retainer-Based Fees: Retainer-based fees are used alternatively to time-based fees when the nature of the work is advisory services. Or when the client and the consulting firm establish a fixed work schedule and this structure fits the client. This fee structure implies a fixed monthly fee for the duration of the engagement.
5.2 Factors Influencing the Investment:
“Think about your engagement with a Lean consulting firm as an investment rather than a cost. Never lose sight that you stand to receive a direct ROI from the engagement.”
5.2.1 Scope of Engagement: The complexity and scope of the consulting engagement significantly impact the overall investment. Larger organizations or those with intricate processes may incur higher fees.
5.2.2 Duration of Engagement: The length of the consulting engagement is a key determinant of costs for Lean consulting firms charging time-based fees (hourly, daily, etc.). Longer-term projects or those requiring extended support typically involve higher fees.
5.2.3 Expertise and Reputation: Well-established and highly reputable lean consulting firms may charge premium rates for their expertise and track record of delivering successful outcomes.
5.2.4 Training and Knowledge Transfer: Engagements that include extensive training programs and knowledge transfer initiatives may incur additional costs.
6. How Long Does a Lean Consulting Engagement Last?
6.1 Short-Term Projects: Some lean consulting engagements may be short-term, focusing on specific challenges or processes. These projects can last a few weeks to a couple of months.
6.2 Medium-Term Initiatives: Medium-term engagements typically involve a more comprehensive review of processes and the implementation of targeted improvements. These projects may extend for several months.
6.3 Long-Term Transformation: Organizations opting for a complete lean transformation, including cultural change and sustained improvement, may engage with lean consulting firms for a year or more.
Read this article to learn more about what to expect from a Lean Transformation.
6.4 Ongoing Support: Lean consulting firms may offer ongoing support or periodic check-ins even after the primary engagement concludes. This ensures that the organization stays on course and continues to reap the benefits of lean practices.
Watch this video to learn more about the improvement stages of a manufacturing business.
7. How to Choose a Lean Consulting Firm?
7.1 Define Your Objectives:
7.1.1 Clearly Articulate Objectives: Before selecting a lean consulting firm, leaders must clearly articulate their goals and objectives for the engagement. State your objectives as desired business outcomes (i.e., reduce quality defects by X% by EOQ3.)
“We work with our clients to create, preferably quantifiable, business outcomes and plan on measuring results throughout the engagement.”
7.1.2 Prioritize Challenges: Identify the most pressing challenges or pain points within the organization that require the expertise of a lean consulting firm. This will guide the selection process toward firms with relevant experience.
7.2 Evaluate Expertise and Experience:
7.2.1 Industry-Specific Knowledge: Consider lean consulting firms with expertise in your specific industry. Industry-specific knowledge ensures a deeper understanding of challenges and best practices relevant to your organization.
“ I recommend you see industry-specific experience as a nice-to-have. Remember, the lean consulting firm is primarily focused on waste elimination, not on your value-added processes.”
7.2.2 Track Record: Evaluate the track record of potential firms. Ask for case studies, testimonials, and references from past clients to gauge the firm’s success in delivering tangible results.
7.3 Assess Methodologies and Approach:
7.3.1 Adaptable Methodologies: Lean consulting firms should demonstrate the ability to tailor their methodologies to fit the unique challenges of your organization. A one-size-fits-all approach may not yield optimal results.
Read a more detailed description of our approach to working with manufacturers.
7.3.2 Change Management Expertise: Assess the firm’s expertise in change management. Ask about the firm’s ability to navigate cultural shifts and engage employees in the process. This is crucial for sustained success.
7.3.3 Strategy vs Implementation: Assess the Lean consulting firm’s level of involvement in implementation.
“We have heard from clients that often Lean consulting firms will only work on developing the plan and will not participate hands-on in implementation activities.”
This is a major consideration, make sure you choose someone that will help you implement the plan.
7.4 Training and Knowledge Transfer:
7.4.1 Training Programs: If knowledge transfer and employee development are important components of the engagement, ensure that the consulting firm has a comprehensive approach to training programs.
7.4.2 Knowledge Transfer Approach: Look for firms that involve and train internal teams throughout the consulting process. This ensures that the organization becomes self-sufficient in sustaining lean practices.
7.5 Communication and Collaboration:
7.5.1 Partnering Approach: Choose a lean consulting firm that values open communication and collaboration. A transparent and collaborative approach fosters a positive working relationship throughout the engagement.
“I often see leaders treat Lean consulting firms as a pair of hands. Avoid having a transactional relationship and strive for a more intimate partnering one.”
7.5.2 Team Dynamics: Use the diagnosis phase to assess how well the consulting firm integrates with your internal teams. Ask others for feedback on their interactions with the Lean consulting firm. A harmonious working relationship is vital for the success of the lean transformation journey.
Read this article to learn more about how manufacturers get the most from a Lean Consultant.
7.6 Cost Considerations:
7.6.1 Transparent Pricing: Seek transparency in pricing structures. Understand how the firm charges for its services, whether it’s hourly rates, project-based fees, value-based fees, or a combination.
7.6.2 Value for Investment: While cost is a factor, prioritize value for investment. Consider the potential return on investment (ROI) in terms of improved efficiency, cost savings, and long-term sustainability.
7.7 Client References and Reviews:
7.7.1 Client References: Request client references from potential lean consulting firms. Speaking directly to past clients provides valuable insights into the firm’s performance, collaboration style, and the outcomes achieved.
7.7.2 Online Reviews: Explore online platforms for reviews and testimonials about the consulting firms under consideration. Online reviews can offer additional perspectives on the firm’s reputation and client satisfaction.
Visit this page to learn more about our company and see what clients say about us.
Lean consulting can be a source of competitive advantage. When manufacturers can increase execution, they impact profitability and customer satisfaction. In addition to that, when they engage their employees in developing better processes and solving problems, they also increase employee satisfaction.
Engaging a Lean consulting firm will help manufacturers navigate the difficulties of achieving these objectives and save the leader a significant amount of time and headaches because they have been there and done that.
Lastly, a Lean consulting engagement should provide a 500% ROI on the investment, which more than justifies their fees. The journey to create profitable growth can be a long and tough one, depending on your current situation; always consider having a partner to help you get there faster.