Lean

7 Ways to Reduce Cost

By Ron Pereira Published on August 7th, 2007

I finished the book Gemba Kaizen by Masaaki Imai.  It was quite good and I highly recommend it.  It is chalk full of excellent tips like 7 ways to reduce costs in gemba (as Mr. Imai phrases it).  They are:

  1. Improve Quality:  Imai stresses how good quality is a prerequisite to making lean work.  He even speaks about things like control charts which you don’t find mentioned in many lean books.
  2. Improve Productivity: Productivity improves when less input produces more output.  The book stresses how freed up human resources should be used for more kaizen (not fired).
  3. Reduce Inventory:  Inventory can be nasty stuff if not controlled.  It takes up space, slows cash flow, and all kinds of other nasty things.
  4. Shorten the Production Line:  Long, football field like, assembly lines need to go.  When shortened we reduce all kinds of muda (i.e. transportation, motion, waiting, etc.).
  5. Reduce Machine Downtime:  Next to quality, Imai stresses an excellent Total Productive Maintenance program is essential to TPS.  Like jidoka, TPM doesn’t seem to get the love it deserves from western lean practitioners.  Not sexy enough I guess.  Funny I mention this lack of love since I just realized I have never blogged extensively about TPM before.  Guess I just found my next series topic!
  6. Reduce Space:  Imai estimates that most manufacturing companies use four times as much space as needed.  Like long production lines using too much space invites muda (i.e. inventory) to come.  When we free up space we should aim to add more capacity after getting after our sales force to get us some more business!
  7. Reduce Lead Time:  This is perhaps the funnest aspect of lean.  We simply determine the time it takes between getting an order and collecting payment for the finished product… and then shorten it.  Once we shorten it we do it again, and again, and again.  And that, my good friends, is what this stuff called lean manufacturing is all about.

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Ron Pereira

Ron has more than 20 years of experience in various manufacturing, supply chain, and senior leadership roles. Ron has held the titles of process engineer, engineering manager, master black belt, and director of manufacturing & continuous improvement. In 2002 Ron was the first American to win the Nokia Global Six Sigma and Overall Quality award in Helsinki, Finland. Ron holds a bachelor's degree in automated manufacturing and an MBA in technology management.

  1. Mark Graban

    August 7, 2007 - 9:50 pm
    Reply

    I haven’t read Imai in a while. I don’t have the book handy, so tell me, is that the sequence he used?

    I think it’s worth pointing out that you can’t (shouldn’t) reduce inventory before you reduce lead time, reduce downtime, and improve quality. That list shouldn’t be taken as a sequence or priority (not that you were saying to).

    Too many companies have been burned by reducing inventory without addressing the underlying root causes of said inventory.

  2. Ron Pereira

    August 8, 2007 - 7:21 am
    Reply

    Hi Mark, yes this is the order in which Imai uses. I am not sure he meant it in a prerequisite type manner since earlier in the book he preaches about quality and TPM must be in place before JIT. And TPM was 5 on his list here.

    I do agree with you that we have to be careful with being too aggressive with inventory reduction but also believe those of us in the West tend to use inventory as a crutch more than we should.

    So the key, to me at least, is to slowly drain the pond (inventory) which exposes all the nasty issues (quality, incapable processes, etc.). Because until we fix these issues leadtime reduction is very difficult.

    So it’s a balancing act and hard to really explain via a list I suppose.

  3. Michelle Pereira

    August 8, 2007 - 1:44 pm
    Reply

    Hello from Canada…..I am one of the sister’s(his favourite) that Ron was visiting in August.

    I am launching a new radio station in Winnipeg, Manitoba Canada. We have basically “cleaned house” if you will and redeveloped from the ground up with new staff, sales team, programming etc. Ron or “Ronnie” as I call him, and I discussed the “Lean” philosophy. I recently facilitated a meeting and used the plus and delta format, and I have to say, you might have something here Ronnie! Thank you for your insight. I am extremely interested in this process, and will look forward to keeping you posted. So. the moral of the story is………this works anywhere!

    Your Brilliant Ronnie!

    Cheers!

    Michelle…..miss you guys!

  4. Ron Pereira

    August 8, 2007 - 2:58 pm
    Reply

    Hey Sis, try SPACER with your next meeting and let me know how that works. I put the link down on that Word document on your desktop. I will send you some books soon. Stay tuned.

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