How Lean Manufacturers Avoid Costs When They’re Growing

I spend a lot of time speaking with and working with some of the world’s smartest lean manufacturers. They embrace the idea of lean manufacturing. They live and breathe it and every part of their business; however, many of them admittedly struggle in one area in particular. Staying lean through periods of growth.

lean manufacturer cut costs

Let’s face it, lean manufacturing is easy when you have the right technology and the right systems in place. Unfortunately, when lean manufacturers grow, they have to scale, add new systems, and often incur the costs of increased production. In many of these instances, the lean concepts they live by get sort of blurry.

Below, I’ll highlight some really interesting lessons I’ve been learning from some of the world’s top lean manufacturers about how to stay lean when the business is growing.

How do lean manufacturers justify the costs of grow?

This is one of the fundamental questions that really kicks everything off. How do you know when you can justify the costs of infrastructure needed to grow. The answer is always math and data, but where do you get it and which formulas are most reliable?

One of the most common scenarios we can look at is related to the costs of adding additional machines. This is actually more critical than what many think.

Once you reach capacity in what you can produce with your current group of machines, it’s time to compare the costs of adding the new machine(s) to the profit that they would produce right? Unfortunately, the best lean manufacturers know it isn’t really this simple. There are actually opportunities to become more efficient embedded inside of this exercise.

New machine vs. getting more out of current ones?

Lean manufacturers hate buying new technology or new equipment, but this is often needed to grow. However, there are a lot of hidden costs that come with this stuff. New machines could mean new training, additional employees, new technology systems, and implementations of anything that is different from existing processes.

What lean manufacturers really want to know when they’re growing is, “can I get more out of my existing machines”? If so, you can actually grow with existing infrastructure longer and more efficiently. The profit generated from being able to do this could actually then properly fund the costs needed to add things like additional machines.

This is the holy grail of growing strategies for lean manufacturers. Exercises in growing using existing components to fund the materials needed to truly expand.

A smarter way of growing

So how do you do this? It might be easier than you think.

How much could an additional 12 minutes per machine, per shift get you in annual production time? Let’s say you have 17 machines right now, running two 12 hour shifts per day. That could be in excess of +2,000 hours worth of production time per year out of your existing equipment. Probably more than enough to generate enough profit to add additional machines. Then, when you add those additional machines you’ll truly know the value that they can bring. Not only will this be more efficient, but you can generate the capital needed to fund future growth. Fundamental lean manufacturing.

To do this, look at the cost of a new machine and do the math behind if that machine ran the same amount of time (24×5), then you can compare that machine cost vs. what you can squeeze out of optimizing additional equipment.

How do you know if you can squeeze out that 12 minutes of additional production? We talked about that a little more here when we talked about uptime and downtime.

Save the money now, not later

You can save money now and in the future by doing this today instead of doing it retroactively. Too many lean manufacturers make the mistake of thinking of this after they’ve added additional infrastructure. They’ve missed a real opportunity to justify the costs of growth (and fund it).

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