9 Simple Steps to Fix Low or Shrinking Profit Margins (Blog)

Most manufacturers are chasing too many things (too many markets, too many products, too many customers). Pareto analysis (also called the 80/20 rule) tells us that 20 per cent of the work often generates 80 per cent of the benefits. By focusing your attention, you can divest yourself of the loss leader and goodwill strategies that are well-intentioned but may not pay off in the long run. To do this, leaders need data-driven analysis, visual tools and a rigorous look at your process.

Traditionally, sales and purchasing are the two departments that tend to resist Lean the most. Both functions are heavily focused on nurturing and growing relationships and sometimes see Lean as ‘only for the shop floor’ or applicable only when a physical product (your classic widget example) is being produced. However, the idea that you can’t Lean out a relationship-based process is simply untrue. Taking a hard and impartial look at who is doing what and how they’re executing on their job is valuable in every aspect of the organization. Treat service supports like a process, focus on what the customer needs and what they’re willing to pay.

Time is the competitive weapon for any business. The sooner you can do a product revision, upgrade or introduce a new product, the sooner you’ll turn a profit or beat the competition. Speed to market is critical. Toyota was able to thrive during the great recession while many other automakers sank, in part because their industry-leading short turn times allowed them to rapidly introduce lower cost, high-efficiency vehicles to market to meet rapidly changing customer needs and expectations. With product development times that clock in at half those of the competition, Toyota is a prime example of why looking at time is so important.

In Lean for Leaders, CME teaches the concept of creating a factory within a factory. This involves taking a functional organization and organizing the business around product families or markets or around some other criteria that creates a high-level of ownership and accountability. To picture the concept, think of a general hospital, which may have as many as 5,000 people working in a campus like environment. At the operational level, this may mean a heart hospital, pediatric hospital, geriatric hospital and more, each with specialized staff leading and supporting the unit’s goals. By breaking your organization down into small, focused units that can be agile, fast and responsive to the markets they serve, companies can significantly outmaneuver the competition by reducing lead times and work in process by as much as 90 per cent.

Straight out of Lean Blackbelt playbook, mapping a process all the way from inquiry through to solution and identifying the constraints – what’s stopping us from quickly fulfilling a solution – is key to providing leaders with the big picture they need. This means mastering the dual challenge of focusing tactically but thinking strategically. To do this, you’ll need the right tools to map the flow and to implement change, and the change agents to do it.

Don’t boil the ocean. Be data driven. If cash flow is an issue and work in process is a pain point, be a data scientist and investigate. Figure out where the money is draining out of the business.

Most businesses get by without a clear strategic plan, but the best businesses rise to the top. As a leader, it’s important that working on the business be more than a cliché. Don’t leave your strategy in a binder on a shelf: be focused, engage the doers and build your efforts around your value proposition.

Lean is often likened to a total fitness program for your business. Keeping your business healthy requires an ongoing commitment to continuous improvement. Many times, organizations benefit from encouragement to “stay the course,” outside eyes to identify opportunities and assistance to find solutions. Lean consortiums can provide all of that and more. Whether it’s an ongoing peer group commitment throughout the year or a once every few years conference like Embracing Excellence 2022, CME facilities shared learning, collaboration and trains members on new Lean and manufacturing best practices relevant to the consortiums learning goals.

As a leader, you’re never done learning. Often, the first time a leadership team has been together, especially if you’ve gone through recent change, is during a formal strategy setting or deployment session. Agree on mission, strategy, can be built of assessments, etc. and it can be helpful to bring in expert eyes to serve as a facilitator and coach during the process.