Defensive Lean

Following my earlier operational excellence blog post Re-imagining Excellence, I have been repeatedly asked, Is Lean dead? Not a few manufacturing thinkers and articles are beginning to say so. But few are suggesting a replacement, so central is Lean to virtually all manufacturing processes today. If Lean is passing away, why, what is the likely impact on supply chains, and what will take its place?

Not small questions. Lean has permeated manufacturing thinking since the publication of “The Machine that Changed the World” in 1991. Principally a benchmarking study of auto manufacturers in Japan, America and Europe, it found that Japanese manufacturers were vastly more efficient than their counterparts. One report in particular provided a death-blow to the Western manufacturers’ approach: over 50 hours of assembly time was needed to produce an S-Class vehicle, and many of those were run up at the close by company engineers who needed to manually fix defects in each car. Toyota did the job in less than twenty hours; and with fewer defects. Auto manufacturing embraced Lean virtually on the spot, and from there every other sort of manufacturing, in small degrees or totally, followed their footsteps. 

But what was Lean? its history long predated the 90s: its roots lay in the work of the great Toyota engineer Shigeo Shingo in the 1930’s. It’s most striking features were subtraction and acceleration. Shingo’s bete noire was waste, and his obsession, speed. His philosophy of manufacturing focused on reducing waste to the minimum, and speed of production and delivery to the maximum.

Lean was not perfect, though it strove obsessively for perfection. The goal was to create a process with no superfluous elements or lost time, and it inspired many a supply chain and operations analyst to shape and present ideal supply chain models to their clients, models that looked magnificent when presented during quarterly reports but that never quite operated as projected when actually applied, and reality complicated things. In practice, related practices like Just In Time (JIT) usually became NEIT (Never Exactly On Time). Downsizing employees led to over-worked remaining employees burning out or fumbling as they tried to handle too many inherited objectives.

There is a difference between being Lean and being anorexic, and it was an easy line to cross. So with Lean’s on speed. There is speed, and there is velocity, which is speed in a specific direction. It does no good to produce products quickly if they’re products the market does not want, or if quality suffers. Speed, as such, is not the goal: profitability, growth and competitive advantage is. Lean’s preoccupation with means easily distracted from ends.

Yet overall, Lean worked. Core elements, like cutting out waste, still works. Speaking as a consultant, one of the quickest and most immediately profitable things I do for clients is seek out and isolate pointless inessentials. Lean taught every supply chain analyst to spot and eliminate waste, wasted time included, and we rightly continue to employ many of its tools and perspectives.

Not only supply chain specialists. So effective was Lean that core manufacturing philosophies soon radiated from it—not only JIT, but 5S, 8D, Kanban, and the cult and toolbox that is Six Sigma. Indeed, the Lean operational philosophy soon touched virtually every other industry, not always wisely or effectively.  

Lean operates on certain assumptions, however—assumptions that the pandemic, sanctions, and hyperinflation have beaten almost to death. One is the expectation that suppliers will deliver on time every time. That expectation vanished with the lockdowns. Another was that overproduction and storage was simply wasteful. Who imagined that panic buying would gut shelves bare, and passionate demand would suddenly find itself with no supply, and companies who had not overproduced would find themselves without sales? Minimizing personnel to only those necessary might have saved costs when personnel abounded, but when employees are locked down or difficult to find at all, production—and sales—plunge. Paradoxically, many of the companies that weathered the storm best were not Lean but bloated: those who warehoused overproduced stock and who maintained more employees than strictly needed.

Perhaps the strongest and saddest Lean assumption shaken in recent years was the assumption of a stable society. Things could be delivered Just In Time because things in general operated normally. You could depend on timely shipping, prompt suppliers; one could make reasonable, near-certain, projections and plans; things were predictable. Companies that hung onto Lean in the hopes of an eventual resolution to the pandemic were then bludgeoned by the repeated blows of hyperinflation and, now, sanctions. And tomorrow, with winter threatening to collapse energy grids and drive German and European manufacturing into bankruptcy or relocation? The manufacturing world has been forced to pass from Adopt to Adapt. Studying and enhancing the manufacturing process is no longer the pursuit of perfection, but the pursuit of resilience.

Does this mean Lean is dead? Hardly. There’s simply too much good sense and too much of a good track record behind Lean for it ever to go away entirely. But it’s clear that Lean—and the manufacturing thinking based on it, from Six Sigma on—needs to be rethought.

Manufacturing is in some ways a process that can stand on its own with a certain abstract coherence. But business is not an abstraction: it moves in constant relation to the realities of the market, and market conditions have changed radically and unevenly. Lockdowns may be abating in the West somewhat, but not in China, where Xi Jinping is imposing a new and draconian wave even in Wuhan. Sanctions against Russia are not going away anytime soon, and the extended consequence as Europe enters the winter months will pose the most daunting complications for European businesses. The reality of hyperinflation and looming recession are other looming factors.

Unavoidably, businesses will need to need a new paradigm. Will it be a sort of 'Defensive Lean,’ a hybrid of the old Lean and the new Resilience? It will certainly need to be a standpoint that allows them to operate successfully not in ideal conditions but in fair weather and foul—and for the foreseeable future, foul; for there are terrible storms gathering on the horizon.

Perhaps most of all, businesses in this new Age of Instability will need to rethink their traditional goals. Those goals have always been simple, worthy and transparent—profit, efficiency, customer value. But perhaps space should be made for a new primary value beside them—survival. Businesses like to maximize profit and reduce waste and turnaround time; but most of all, a business needs to survive. There is no profit or efficiency or customer service at all in collapse. For the foreseeable future, businesses will need to make decisions that consider the strong possibility of fast, unexpected, crippling blows from the incursions of the economic and political turbulence outside their direct influence. Failure to do so may result not in a poor quarter, but in ceasing to exist.

And whether we call it Defensive Lean or the New Resilience, is there a strong new paradigm waiting to steer us through these new challenges? Not as yet. But that some of us in the supply chain arena are thinking very seriously about it is a given.