How Lean Thinking Can Make Your Shop More Profitable & Efficient
At its core, Lean Thinking is a set of simple business principles, which are highly effective at maximizing profits while minimizing waste. Put simply, Lean principles are about running your business more efficiently and providing better service for your customers, all while using fewer resources. The end result is a win/win; for your company, your employees, and your customers.
Lean Thinking came out of the manufacturing industry, after a series of studies on the phenomenal success of the Toyota manufacturing company. At one time, Toyota was a bankrupt Japanese automaker, but a group of visionary leaders in the company decided to move in a new direction. The outcome was an unprecedented expansion for Toyota.
As the company grew, economists and business experts were puzzled. Not only was Toyota capturing new markets, but it was doing so with much lower costs than other companies in the industry. And, even more puzzling, it was succeeding without following the usual practices of business management. These visionary practices make up the principles of Lean Thinking today, and have helped thousands of companies reach a new level of efficiency and profitability.
So, how can Lean Thinking help your shop become more profitable and efficient? It starts with your thinking, and small changes to the workflow of your business, which have a major impact on your bottom line. To help you get started, we have broken down some Lean Thinking ideas, dividing them into stages. Start with the basics. Once you’ve mastered the basics, move on to the more advanced steps, and watch your profits grow.
Because Lean Thinking is a thought process, instead of just a set of tactics, it’s important to practice the Lean mindset consistently. At its most basic, the Lean model has three simple sets of questions which are meant to guide the transformation of the entire business:
- Purpose: What is the real purpose of your business? What specific value are you providing to the world? What problems are you solving for your customers?
- Process: Assess each major value stream of your business. Is each process, product, employee, and service valuable, capable, available, adequate, and flexible? Are all of the streams linked together by a smooth workflow, sufficient creative tension, and shared end-goal for process perfection?
- People: Think about each individual person in your company, rather than thinking of them as departments. Is every single person responsible for an essential process in the company? Does each employee understand how to evaluate his/her own value stream, and identify problems as soon as they arise? How can you help every person in the company be more actively engaged in correcting operational problems and improving the workflow?
Now that you are familiar with the basic principles of Lean Thinking, it’s time to explore some practical steps to take to put this process to use in your shop. There are many things shop owners never consider, which when added together, make a big difference in how well the company performs. We have broken down some Lean ideas that can be easily implemented in any shop or business, to help you reach your goals and improve your profit margins. Let’s get started with the basics:
- Optimize Billing: Make sure you are billing for everything you should be. Remember, little things add up. For example, many shops don’t bill for shop supplies. This is a typical shop charge and should be on every invoice. Similarly, if you maintain a clean shop, you should bill for the time it takes to clean the bay after each job is completed.
Action Plan: Take time to carefully review how and where you are using resources, and how those resources are associated with each job. Get your employees involved in the analysis process. This will help you identify where you can pick up and recover waste and expenses.
- Manage Company Time: Monitor where time is being spent. This allows you to ensure that all time spent on a job is being properly billed. It is also a good first step to identify training and workflow problems.
Action Plan: Put a solid time-tracking system in place. Enlist the help of your employees to log the time they are spending on various aspects of the job each day. Identify any steps in the workflow which are creating problematic lags in the schedule.
Once you’ve dialed in your billing process and time management, you’re ready to move on to the next steps of the Lean approach for your business. By now, you’ve identified any serious problems with your billing, workflow, scheduling, and use of supplies. You have a clear view of the fundamentals of your shop, you’ve engaged your employees in identifying and solving problems, and you’re already seeing results. Now, let’s implement some more advanced Lean principles:
- Get Organized: It’s important that everything has a place, and that it is convenient to the workflow of the business. A well organized shop eliminates wasted time spent searching for lost tools and parts. It also helps reduce employee frustration, leading to a more efficient and satisfied workforce.
Action Plan: Study your workforce in action, and look for instances where tools are being lost, or employees are having to leave their work stations to fetch parts. With employee input, implement a system of organization which is tailored to workflow efficiency. Train and develop habits in the workforce to put things back where they belong, and to clean equipment after use.
- Equip Your Team: It’s important that every employee has easy access to the tools they require to do their job safely and efficiently. Having technicians wander around the shop to find common tools is a waste of time and resources.
Action Plan: Make sure that every work station has its own set of tools and necessary supplies. Properly equipping a bay or work station is a one-time expense which will pay for itself over and over again in time savings.
- Plan Your Jobs: Proper planning prevents poor performance. Good planning will ensure that you have a sufficient time slot for the job, all of the proper materials are ordered ahead of time, and the necessary tools are on hand.
Action Plan: Always ensure that the initial diagnostic work on a vehicle is accurate, before scheduling a job. To do this, put your best mechanics to the task of diagnostics. Never start a job until all of the materials, parts, and the right mechanic are available to see the job through to completion.
- Eliminate Free Labor: Too often, work is done on jobs that the customer will never pay for. If you are providing extra work which the customer values, they should be willing to pay for it. For instance, if you often clean a vehicle at the end of a repair job, you should bill for that service. Instead of doing the work for free, offer the service to the customer as an add-on, at a reasonable price.
Action Plan: Identify any areas in your workflow where labor or parts are being given away for free, or are being under-priced. Begin offering these services to customers as up-sale options, or add-ons, to other services. You may be surprised how much your customers value these options, and how many are willing to pay for them.
High Level Thinking
If you’ve gotten this far, you’ve already eliminated lost profits by billing for all services, reined in wasted time and materials, and solved any hiccups in your workflow. Your business is running much more smoothly, and your employees are more efficient than ever. Now you’re ready to take Lean principles to the next level. Let’s look at some top level techniques to further optimize the system you’ve worked so hard to create:
- Tackle and Learn From Defects: In most shops, figuring out how to reduce warranty work (and re-work), is an ongoing process. While nobody likes to see defects in their work, they can provide an excellent opportunity to review your systems. In Lean Thinking, we learn that it’s important to attack the process which led to a defect or breakdown; not the people who were involved in that breakdown. Invariably, a defect can be traced back to a problem in the systems, the repair practices, or even the employee training.
Action Plan: Cultivate a culture in your company of shared responsibility and problem solving. Empower your employees to systematically identify problems in processes and workflow, and feel comfortable calling them out as they occur. Replace the habit of blame, with a more constructive view toward diagnosing problems and finding optimal solutions, as a team.
- Analyze Company Workflow: If you have effectively implemented a time tracking system, you can now analyze a number of things. For instance, you can identify how efficient each type of job is, and compare them to other job types. One example might be to review how efficient brake jobs and oil changes are, compared to an in-frame overhaul.
Action Plan: Once you have compiled some data about your workflow, you can begin to make adjustments to various processes. Experiment with different methods and arrangements until you get the results you’re looking for. Once you’ve achieved an ideal process, lock it in, standardize it, and make sure all employees are properly trained in that process.
- Stabilize the Shop Schedule: Jobs in a typical shop often ebb and flow, coming in waves. This can result in slow times, where employees are on the clock without being actively engaged in a job. This is inefficient and costly to the company.
Action Plan: Identify any predictable slow periods in the shop schedule, and work to fill them. An active marketing program, such as preventative maintenance reminders, can help fill slow periods and keep the shop running closer to maximum efficiency.
- Keep a Waiting List: Some customers are willing to wait for work to get done on larger projects, such as overhauls. Keeping a list of these types of jobs allows you to effectively use your workforce during slow periods, ensuring the best possible efficiency.
Action Plan: Offer special rates to customers that are willing to wait for openings. Keep a call list of these customers, so that when the shop is in a lull, you are more likely to be able to fill empty slots in the schedule.
As with anything new, Lean Thinking does require a bit of practice. By implementing some of the ideas outlined here, you will find that this new way of approaching your business comes easier with time.
As your profitability improves, and your workforce becomes more efficient, the time you’ve invested in learning how to think Lean will quickly pay for itself. Your bottom line, and your employees, will thank you.