For most companies, the value of an employee or a tool is measured in production. Every person and every step in the process needs to contribute value to the production of the end product. Any step in a process that does not contribute value is an opportunity for cost reduction or production improvement. For example, consider an area of a part that cannot have coating on it because it interferes with the fit of the part. There are three ways to deal with this:

1. Remove the coating from the area after the part comes off the line.
2. Put a mask on the part so that it does not get any coating.
3. Change the part so that the fit can tolerate the coating.

Number one is clearly a nonvalue-added step. Adding an employee and a step in the process to remove coating from a part cannot be efficient by any definition. Masking the part can be an excellent resolution if the mask is designed well and does not add significant time to the racking operation. Number three would be the best solution, but it may not be practical to allow for buildup of coating if the fit is precise.

American manufacturers are more challenged now than at any time in modern history. The economy is going through one of the most prolonged rough patches in memory, demand in certain markets is low, and foreign competition is tougher than ever. Many companies that have been able to tolerate excess in the cost of manufacturing in the past are being forced to re-evaluate themselves and get serious about cost reduction and continuous improvement. Many businesses cannot continue to think and act like a big company anymore. They need to be nimble and streamlined for survival.

In our efforts to meet these challenges, there is a temptation to eliminate cost without careful consideration of value. Cutting a person out of the operation or reducing service may save money in the short term but have undesirable side effects. Elimination of nonvalue-added steps is smart manufacturing, elimination of valuable assets, services and personnel is short-term thinking with potential long-term consequences.

A year ago, all of our research pointed to a desire by businesses to reduce costs and become more efficient. Unfortunately, for many companies, cutting cost meant cutting people. Now the most common complaint is that no task has gone away, but there are fewer people to do them. No hours have been added to the day, there have been no pay increases, but each of us (who still has a job) must accomplish more.

While it is important to maintain a staff that is cost effective, it is equally important to maintain the quality of our products. Commitment to service and quality are long-term goals that should not be sacrificed for short-term savings. Cost cutting may be vital to survival, but it must be done in ways that do not reduce the value of the products we make.

Effective cost control takes creative thinking and dedication to the principles of improvement. Evaluation of how things are being done can often uncover wasted time, space or material. These are real opportunities for cost reduction.

Bottom line, “lean and mean” is a reference to fitness for competition. It is a long-term commitment to proper allocation of resources, not a short-term, cost-reduction measure that leads to weakness and an inability to provide service and value.