Sep 17 2013

I’ve heard it said a few times that if you focus on costs, the costs seem to go up. I didn’t find any specific quote on it in a Google search, but I have seen it happen. Rather than looking at the whole situation, the system in its entirety, some people think it is better to focus on the details and try to make improvements to various aspects that are highlighted when looking at the numbers without considering the impact elsewhere.

Of course we’ve probably all heard “look after the pennies & the pounds will look after themselves”. However, there is a slight nuance to this that can be overlooked. When looking after the pennies in our own budgets, if we can save a bit on one bill or another, that rarely risks a different bill going up by more than we save on the first.

The principle of looking after the details and the larger issues will take care of themselves is generally sound advice. Lean is very much about making small improvements, small savings here & there which add up over time. The difference though, is that Lean also requires sufficient analysis or verification that the change doesn’t cause greater loss or waste elsewhere in the system.

If you save £100k in your logistics/materials department by reducing your fork lift trucks or moving to a new supplier for example, that’s great. But if that savings is then offset by quality losses or delays in production which incur penalties or lost sales, then is it really savings? Of course it depends on the extent of the offsetting loss.

One of the things I have seen time & time again is a focus on certain aspects of a business or organisation without considering the impact elsewhere. Reduce the inventory (waste) and transportation (waste) costs may go up, or waiting (waste) may increase. Eliminate a certain motion (waste) and defects (waste) may increase.

Looking after the pennies is important, don’t get me wrong, but not at the cost of losing them elsewhere because of a lack of systems thinking. Understand that businesses & organisations are systems, not a collection of stand alone entities. Making changes in one area often affects several others. Identify the opportunities, especially the small easy ones, but always remember that a small change in one areas of your business, may have a huge impact somewhere else.

photo credit: EJP Photo via photopin cc

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