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Cut costs and boost profits in uncertain times Add to ...

Chris Wood admits he felt some apprehension before deciding to change the way his company produces stamped metal components for car manufacturers.

But with the auto sector in crisis and entire production lines being cancelled without advance notice, Mr. Wood knew he had to reduce the odds that his firm would find itself stuck with inventory his customers no longer wanted to buy.

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So Mr. Wood and his company, Marwood Metal Fabrication Ltd., turned to a lean management philosophy known as kaizen - Japanese for continuous improvement - to help them usher in a more efficient way of producing their components.

"I thought we were going to have a lot more trouble with buy-in on the shop floor - I was worried there'd be resistance to change," said Mr. Wood, president of the 200-employee firm based in Tillsonburg, Ontario. "But people really liked the new system."

Mr. Wood says the changes in production methods brought in as a result of the exercise have saved the company millions of dollars and helped it survive the recession.

Key to the successful transition was involving staff from every level of the company - from senior management to the shop floor - in analyzing how the production system worked and how it might be improved.

That's a central tenet of the Kaizen approach to operational efficiency - a philosophy pioneered in Japan by Toyota Motor Corp. in the 1940s whose influence has spread worldwide.

Kaizen is one of many lean management techniques - including such ones as just-in-time inventory management and value-stream mapping - that companies can use to boost the efficiency of their operations and cut costs.

Kaizen involves taking small groups of workers from throughout a company and having them brainstorm intensively about the way they do their work to identify waste and cut out processes that add cost but not value.

The idea is to achieve incremental changes that can be swiftly implemented.

Kaizen teams always involve a cross-section of the company, from shop-floor workers to senior managers who are freed from their duties to participate in the workshops. Half will come from the area of the firm where the improvements are being sought; the rest come from throughout the company. All decisions are made by consensus.

An economic slowdown can be a good time to introduce such reforms, says James Womack, founder of the Lean Enterprise Institute, a non-profit organization based in Cambridge, Mass., that promotes lean production methods.

"It focuses your mind to have your back to the wall. That's not the way life is supposed to work, but that's often the way life does work."

In tough times, Mr. Womack explains, employees are often open to change and eager to help. Still, he cautions that if Kaizen is used only as a way to finesse staff cuts, employees will see through the ruse, and the entire effort will fail. A basic level of trust between employer and workers, he says, is a must for Kaizen to succeed.

Kaizen methods are applicable not only to manufacturing; they can be used to improve operational efficiency in a variety of sectors, including by streamlining administrative work flow.

For example, Mr. Wood's company used Kaizen to improve the company's system for accounts payable and receivable.

Another key area where Kaizen has helped Marwood has been in integrating databases. Previously, says Steve Spanjers, the company's vice president of operations, the company "had a lot of disjointed databases that didn't talk to each other." Now, everyone works on a single, integrated database.

But to achieve that, rather than simply impose the change from above, Marwood seized the occasion to involve staff from throughout the company to analyze office work flows and how they could be made more efficient. The result, Mr. Spanjers says, has been not only to integrate disparate databases into one seamless system, but also to improve the efficiency of the entire operation.

Unlike many companies, Marwood has used Kaizen since it was founded in 1990. Initially, says Mr. Spanjers, it was required by the Japanese-owned automakers who bought its components.

"But now we're actively doing it on our own. It's still mandated by our customers, but even if it wasn't we'd still do it, because it's good value."



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