CUTTING THE FAT, adding the value The concept may have been born in Toyota’s manufacturing plant in the 1990s, but lean management has caught on across the world and is reinventing the way leaders in the resource industry operate and work with their teams. TOYOTA’S ASCENSION FROM a capital-starved Japanese automaker into one of the most powerful corporations in the world was driven by cutting three types of waste: non-value adding work, overburden and unevenness. The process involves reviewing every step in the value chain to eliminate unnecessary waste and lower costs, increase efficiency and boost productivity. It’s a simple and effective management philosophy that has made corporations across the world stand up and take notice. Today, ‘Lean Thinking’ is fast infiltrating Australian organisations and evolving beyond manufacturing to a range of sectors – including the dynamic resource industry. Consultancy firm SA Partners provides thought leadership in this area, and managing director Chris Butterworth says its principles are proving to be very effective in project-based work, service sectors and support functions. “There are a lot of myths about lean thinking, but an obviously one is that it is just for manufacturing,” says Butterworth, who worked for SA Partners in the UK for a decade before heading the firm’s Australian expansion. “The other myth is that it is for order fulfilment – getting stuff out the door – and a lot of people think it’s just a continuous production, rather than project work. I think the key thing that people need to recognise is that it’s about lean thinking as opposed to lean manufacturing. “Lean thinking isn’t about providing tools and techniques to help make business decisions. Success and sustainability is about people, and 10 per cent about tools and techniques.” Butterworth’s right-hand man is Jon Lindsay, the managing consultant of the firm and its leadership coach. Lindsay’s view in applying lean management to resources clients is that the principles can be applied to more closely match supply and the varying demand of take-up by the end customer. He says lean management isn’t solely about controlling costs and cutting corners, but rather about providing value to the customer, often defined in terms of time and quality, which encourages repeat business and increases profit. “The principles of lean can be applied to the resource sector, despite the fact that the industry has often felt the need to stockpile and maintain production even in the light of rapidly fluctuating demand. The principle of ‘flow’ is as applicable to digging and transporting materials as it is in a manufacturing sense,” says Lindsay. “The resource industry can apply lean principles to processes outside of just producing material. For example, lean approaches can be used in matters of recruitment, sales management as well as operations management and product development.
“One striking example in the resource sector is that projects and operations are not necessarily aligned with their objectives. Operations can quite often be starved of funds for incremental improvement, whereas projects can benefit from headline catching investment cash. “So there is an opportunity for a combined goal – one more aligned between projects and operations to make a massive improvement in operational effectiveness in some resource sectors.” Butterworth elaborates on this in a human resources sense, explaining that a wide understanding of the company’s overall goals and objectives helps employees understand why they are doing what they are doing. “What delivers customer value? Its key processes. And processes cut across every department. For example, just take the simple process of getting the material to the customer – it involves purchasing, planning, logistics, operations, finance. However, the main thing to consider: is what are the value streams within these processes?” says Butterworth. “If I am sitting in a department, how do I understand what my role is in supporting the process and not just in supporting the department? What we see is many organisations create massive waste by optimising departmental performance at the expense of efficiency in another area of the business. “So when we’re looking at value stream, we are looking at how people understand how they can fit in supporting the process as a whole, and make sure that the measures we’ve got in place assess the process performance and not an individual department performance which drives everyone’s behaviour.”
CHRIS BUTTERWORTH MANAGING DIRECTOR SA PARTNERS.
| Spring 2012 | www.amma.org.au