Update: June 3 @ 7:33 PM CST Over the weekend, this post has had some good action (via comments and emails I have received). I am modifying the original post ever so slightly to make the “assumptions” a bit more clear. This modification comes after Mark and John have posted their comments. Although I am making some changes this does not make their excellent thoughts any less relevant.
We often hear how companies “apply lean” and subsequently lay-off hundreds, even thousands, of people. Here is another example. In this article we read:
Companywide, employment is down sharply. Telect now employs 747 people worldwide, down from about 830 a year ago and 2,300 at its peak in 2000. In the past year, it has implemented lean-manufacturing strategies at its plants in Texas, Mexico, and Poland and now can achieve the same production level with fewer people, he says.
So let me ask a hypothetical question. Let’s say you, a Lean enthusiast, are named CEO of a mid sized manufacturing company.
Let’s also assume your market has turned down and the constraint is clearly outside your plant. Further, let’s assume you need to improve cash flow, reduce inventory, improve OTD, and most importantly improve employee morale. Next, assume the company you inherited was poorly managed before you came on and is not even a decent mass producer. Lastly, let’s assume that the previous management (who the board fired) went on a massive hiring frenzy over the past few years in hopes of improving things by throwing bodies at the problem.
Now then, let’s imagine you come into this situation (as CEO) and immediately implement lean and six sigma principles. On time delivery improves, inventory turns have doubled, cash flow is improving, and morale is on the way up. All is good with one exception.
After calculating the optimal crew size for each area (leaving in the ability to meet some expected increased demand) you realize you have too many employees. In fact, your calculations show you need 250 employees (including dedicated Black Belts and Lean Masters) to run the plant and you currently have 425.
The reason you have so many employees is again due to the previous management who went on the massive hiring frenzy the past few years.
What would you do?
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