Postal Service Provides Model for Lean Government

Originally published Sept 10, 2005

It would be easy to point out how non-Lean the U.S. government has been at the city, state, and federal levels these last few weeks. We’ve seen examples of a lack of decision-making, poor logistics, misaligned goals, poor communication between functional areas, and poor planning, to name just a few, resulting in terrible consequences.

Instead, let’s keep it positive and look at the practical problem of Lean government and how to get started. One way to change culture through kaizen is to start with easy wins. There are many customer-oriented, repetitive, simple production-type processes in government that can benefit immediately from applying kaizen principles. A good example of this is the postal service.

Rather than tackling the biggest, most complicated problems (such as healthcare, social security, etc.) and being bogged down in politics, real change will come through Lean government if we fix one small thing at a time. As people learn this is successful, attitudes will change. As citizens and taxpayers see that cutting out government waste is possible, hopefully, we will vote for more of that type of government.

Speaking of the postal service, there are several notable successes through Lean implementation. For instance, at the postal service in Denmark, they began in 2000, focusing on standardization to improve productivity, reduce lead times, and enhance delivery service quality. The use of Value Stream Mapping, cross-functional kaizen teams, employee suggestions, key performance indicator (KPI) boards, and improvement meetings while “being in Gemba (shop floor)” resulted in a 20% cost reduction and stable service performance at 95%.

Changing the way they work was not easy, and changing behavior was even more difficult. Successful Lean implementation is almost always about creating a kaizen culture, and the public sector is no exception. The results were almost too good and too easy, meaning there are probably further gains to be had.

Closer to home, Canada Post has received some publicity for its thorough application of Lean principles. Andre Ouellet, the President and CEO of Canada Post, said the following during a speech in April 2003 in Montréal:

The concept of value streams has been introduced at Canada Post, with leaders focused on improving the end-to-end processes. Employees work in small workgroups and rotate through different jobs within the value stream. This makes for more interesting work, teamwork, and relationship building, and better ergonomics.

The Canada Post achieved a national on-time delivery of 96.7% for letter mail in 2002. Canada Post has been profitable for eight years running. Employee satisfaction continues to improve. Through reductions in operating costs over the past five years, Canada Post has repaid $274 million in dividends and capital to the Canadian government.

In Japan, an upcoming election has significant implications for government waste and the Japanese postal service. Prime Minister Koizumi called this election when his bill to privatize the postal service was defeated. He would like to cut back on the extensive public works infrastructure in rural areas of Japan. He is trying to structurally eliminate some large portions of “pork barrel spending” in American terms.

Growing up in rural Japan, I was always frustrated as a kid when they would pave the rivers with concrete blocks, ruining the fishing for quite some time. It made no sense to me when the adults explained that the river was “safer” for us with paved blocks running along the bottoms of these shallow rivers, instead of the natural river stones. Doubtless some local politicians must have run out of legitimate things for his “construction vote” buddies to pave after years of funneling public works tax dollars to them.

Even if the spending on rural development is legitimate, Japan can not continue down this path. Japan’s national debt is 163% of GDP (Gross Domestic Product) and this is higher than any major industrialized nation. Compare this with 66% of GDP for the United States according to the OECD (Organization for Economic Cooperation and Development). A combination of declining and aging population, an increasingly urbanized population, and low economic growth make this spending unsustainable.

It made news in Japan a few years ago when the postal service received help from Toyota managers with their Kaikaku effort. By implementing the Toyota Production System the postal service was able improve productivity and reduce costs by 30 billion Yen (approximately $250 million) according to the minutes of the April 7, 2004 meeting of the Japanese government’s Economic & Public Finance Inquiry Committee.

Productivity improved by 20% and this extra capacity was used to make further improvements and cost reductions, as well as gain more business, resulting in greater revenue than projected by about $120 million. The losses in 2002 were about $200 million, and this turned around to profits of $100 million in 2003.

With results like these, and Japan’s debt-to-GDP number, it’s a shame the Japanese postal service didn’t implement TPS sooner. Let that be a warning to the rest of us. Lean government now.

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