Browsed by
Month: June 2016

Do We Need to Re-Think How We Think?

Do We Need to Re-Think How We Think?

In my previous post, I covered the “what” that underlies a “production system” (“production” is not “manufacturing”, but “manufacturing” can be “production”) and emphasized that it is the people and their thinking, the “who”, that makes the system function. Now the challenge is to uncover “how” that thinking, and “what” kind of thinking, can make the production system not just function, but function well. And a well-functioning production system is one that provides value to the customer. The system and…

Read More Read More

Who Does the Thinking Around Here Anyway?

Who Does the Thinking Around Here Anyway?

Up to this point in my blog, I have tried to build a basic foundation for understanding “where” Lean comes from, “what” Lean is, “how” Lean works, and hopefully begin to generate some understanding of “why” Lean works. If we don’t have a very good grasp of all of these concepts, we will have a very hard time tackling the next, and probably most important, key component of a successful Lean transformation. And that key component is: “who” makes Lean…

Read More Read More

ROI versus the P&L: The Difference between Efficiency and Effectiveness

ROI versus the P&L: The Difference between Efficiency and Effectiveness

In my previous post, I concentrated on the river body of our Lean River System (the balance sheet) to illustrate that there are costs there that play a very significant role in the performance of any enterprise. That inventory and Working Capital are listed on the financial statement as “assets” tends to divert attention from the fact that these entities represent real costs to the business – sunk costs. When Ohno talked about “cutting costs”, he was referring to both…

Read More Read More

The Lean River System – Part 4: ROI and the River

The Lean River System – Part 4: ROI and the River

Now back to the river system analogy. If you haven’t yet done so, I recommend you at least read The Lean River System – Part 3 before proceeding further. But it would be best if you read Part 1 and Part 2 also. Here is ROI (Return on Investment) again: ROI = Earnings/Total Investment = (Sales – Cost of Sales)/(Working Capital + Permanent Investment) The numerator of ROI (earnings) represents the net input and output of the river system. Earnings…

Read More Read More