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CHAPTER 2

Is There a Right and Wrong Way to Lean?

Yes, there is a wrong way to approach Lean Maintenance. All the examples from the section on safety and Lean maintenance are wrong approaches to Lean. When the edict comes down from on high “cut 10%...” or “We’re Leaning up your plant, reduce head count to 24”, that is a wrong approach to Lean Maintenance. If the cuts are not supported by changes in tools, techniques, or approaches, that is wrong. If the cuts do not take the real needs of the equipment and the life cycles of the equipment into account, that is wrong. In fact, with a Lean approach, the savings will flow up to the ledgers instead of cuts flowing down.

The difference is striking. As a parallel example, consider the effect if you as a parent send down an edict to cut household expenses. Let’s say overtime has been cut out, and the household budget just went into the red. You threaten the kids with all kinds of dire consequences. Every week you see the results and yell abuse or praise to the kids and spouse (without giving away any data).What result can you expect? How will morale be in that house?

A Lean approach might be to present the old budget and the new income (if the kids are old enough). Highlight the gap and ask for suggestions to bridge that gap. Everybody participates in brainstorming ideas to run the household on less money without sacrificing their quality of life. Every week you make a chart of the results from the prior week. What result can you expect? How will morale be in that house?

How you get there makes a difference

Can budget cuts ever lead to Lean Maintenance? This is an important question because many maintenance departments face the budget knife. Lean maintenance is attitudinal so it is difficult to imagine that a company would arrive there from just top-down budget cuts. To achieve a Lean focus, a maintenance department would have to be motivated by the budget cuts. There may be exceptions, perhaps where a leader wants to take on Lean Maintenance in the face of ‘no support’ from management. That situation is unusual but not unknown.

Cost cutting ≠ Lean

Lean maintenance and cost savings (or cost cutting) are not the same. If Lean maintenance activity was a circle, and cost-cutting was also a circle, there would be some overlap and the two activities would intersect. Within that intersection, Lean does promise savings. Of course, it is necessary to be rigorous about the kind, amount, and duration of any money or time saved.

One of the issues is that maintenance has direct costs and other costs that are the result of maintenance problems. These two types of costs are structured like an iceberg. The direct costs of maintenance are what we see of the iceberg. We call these costs above-the-waterline. Above the waterline, costs are generally smaller than below-the-waterline costs by a factor of 10 or more. Above-the-waterline costs might include inside parts and labor, outside parts and labor, equipment rentals, and several types of overheads.

The Maintenance effort also has huge impacts on the costs and quantities of production for both good and ill. As noted, these costs are referred to as below the waterline, and they include downtime, scrap, process energy, operations labor, etc.

Short term thinking works against Lean

This battle is about short term thinking. This is a paradox because we know that Lean is supposed to be a short term tactic and not a long term strategy. W.E. Deming, the quality expert who is credited with the transformation of Japanese production quality, listed short term thinking as one of the diseases in the pursuit of quality. Like quality, maintenance requires long-term thought horizons. In many plants, maintenance requires that some deterioration be followed for decades and that mitigation be planned years in advance. Most major assets take time to deteriorate, and many give adequate indications of problems. The Lean Maintenance tactic then lives inside a long term strategic approach toward maintenance.

Public companies’ stock prices are tightly tied to quarterly performance. Analysts comb over the performance numbers to look for problem areas or opportunities. They look at margins, and determine if trends are good or bad. Top management has bonuses tied to profits and stock prices that are re-calculated every quarter.

Any trend toward increasing maintenance costs is viewed as bad, even if it is reflective of an appropriate, long-term, strategy of asset protection. A few companies make a practice of improving their stock prices by short-term and wholesale reduction of maintenance costs. The fact that these same companies have production, safety, and sometimes environmental problems a few years later, is overlooked or more accurately forgotten.

The best example of this short-sighted mode of operating occurred during the sale of Conrail. Conrail was the government-sponsored successor to many of the old freight railroads in the US (AMTRAK was the passenger part of the business, and as of this writing is still quasi-governmental). After forming Conrail from several bankrupt railroads, the Government spent a good deal of money upgrading the railroad tracks and rolling stock. After more than a decade of independence, management decided that the Railroad Industry was strong enough to sell Conrail.

In the year before they publicly announced the decision to sell, management dramatically cut maintenance personnel and associated expenditures to the bone and beyond. That year, they had their first profit. Reports from people in the field showed that minor derailments, and track problems had increased, and contractor oversight had deteriorated as a result of the cuts.

The auction for the assets of Conrail was a wild success. With a profitable year, the assets were viewed as much more valuable. After bidding billions, CSX and Norfolk Southern split up Conrail. It is to be hoped that the buyers knew what they were getting, and were ready to restore maintenance spending.

The dark side of Lean

Ricky Smith and Bruce Hawkins in their book Lean Maintenance, say that fear often accompanies the lean program. “Many plants undertaking the Lean approach seem to instill fear in their employees almost immediately. Their interpretation of Lean is that productivity must be increased, using the fewest possible employees. To them, Lean means a lean work force, one that will be achieved through fault-finding, blame, and resulting lay-offs.” They go on to say that “the fundamental rule of Lean is that a worker who is rendered unnecessary as a result of efficiency gains cannot be laid off.”

This is Lean’s dark side and it can be seen when companies put Leanness over everything else. The striving for gold overwhelms all other instincts. We may have an example of this with the current crop of problems that Wal-Mart is having. Wal-Mart is, and was by far, the leanest organization in areas of distribution and marketing. Sam Walton, the founder, fought for the lowest costs of doing business. When Sam was alive there were few protests, lawsuits, and negative op-ed pieces about Wal-Mart’s labor practices. You got the impression that he cared about the sales associates (whether he did or not). When he visited a store he always knew people’s names (and he visited stores 175 days a year until his death). Rumor has it that many of the early employees retired as millionaires, due to the appreciation in their holdings of Wal-Mart stock. This group of millionaires is supposedly larger than the similar group of early retirees at Microsoft.

What accounts for Wal-Mart’s alleged abuses against women, overtime, breaks, scheduling, and procurement practices? I submit that the problems are related to the dark side of Lean, with the blind application of Lean without the rest of Sam Walton’s vision. All that was left of the vision was the relentless drive for leanness. Sam seemed to have a vision that included the employees welfare, and his vision was the heart of the enterprise. After his passing his successors moved in and made more rules, thinking that it was the rules that made the company great. Without Sam’s vision, the company has no moral or ethical rudder, and without a rudder the rule makers (any of us without a vision) run amok. The drive for leanness embodied in the corporate practices, metrics, and structures, are still in place but without the tempering of Sam Walton’s vision.

This subject leads to a related conversation on whether an organization can be both huge and Lean? Certainly Wal-Mart is still pretty lean and huge. So the two qualities are not mutually exclusive. But, as with the discussion above about some of the challenges that Wal-Mart faces, it is tough to stay dedicated to lean as an operational philosophy without going to the dark side of lean.