“Lean and making money”, to one person completely logical, to the other completely the opposite. There can be major differences of opinion when it comes to revenue generation and cost saving around the implementation of lean within an organization. In this article, I explore a few of the ideas – and misconceptions – that exist around what exactly ‘lean’ can and should be expected to achieve.

Lean is a cost-cutting measure
This is absolutely the wrong idea. It’s very common, particularly in the healthcare sector, to hear “Lean is going to help us save some serious money “. If that’s the idea, please stop immediately – there’s no point in continuing. Cost cuttings are done by drawing red lines through a budget behind a desk. Savings are created by looking together at how you can make a process faster and smarter. It may not sound it, but that’s a big difference. To try and underline the difference, you can think of it this way: Cuts are one-way traffic, savings involve turning a cross roads into a roundabout.

Lean costs money
One of the reasons why organizations can be reluctant to start with lean is the thought that it costs a lot of money. Well, it certainly does involve costs – but it doesn’t cost any extra money. When an employee starts working on a problem, he or she needs to find time to invest. This time is a small investment that will deliver an improvement in a process. This improvement in the process then has the potential to return way more to the organization than the initial outlay. It will keep delivering time savings as long as the process continues to run.

Look at companies like SEW-Eurodrive. They worked, before they began with lean, with more than 400 employees. After 12 years, there are now less than 200 people working in the factory, and not one person has been let go. That’s a lot of manpower available for other value-adding activities. They’ve decreased the shop floor by 60% and run double the production volume compared to the year before they started with lean. And furthermore, the employees are very happy with the improvements, the total sick leave staying low. For me, these numbers paint a pretty clear picture of whether lean ‘costs’ money or not.

When to do the sums
There are many different ways to try and calculate the savings generated by lean within organizations. One may choose not to look any further than the pure financial impact the changes have had in the business. Another might choose for the Lean 6 Sigma approach. Lean 6 Sigma involves using a business case for a share of the lean-related projects rolled out by a Green or Black Belt (experts in the Lean-methodology). The aim is to make a clear justification for the resources that were deployed. It makes it possible to begin the project with a reasonable idea of the potential cost savings that can be expected and promotes good monitoring of actual expenses and returns. In addition to these projects, there will be a wide range of improvements that aren’t monitored but that also deliver savings and are not directly visible. Individually they may not have the greatest impact, but if they can be counted up together, their impact often becomes extremely clear.

Quality and cash
Lean can also be implemented to improve product quality and align products better with customer requirements – the added extra here being the increased availability of cash for other activities. In the healthcare sector, increasing quality can free up money for further product development or to increase service for particular patient groups.

Lean is thus, in short, about savings not cuttings, and savings are done by looking carefully at how processes can become more intelligent and more efficient. Lean doesn’t cost you any extra money, and the application of Lean 6 Sigma can help you keep a close eye on both your outgoings and incomes. And, as a further step, think carefully about opportunities to drive improvements in product or service quality. In short, lean offers huge potential to do things better. As such, it should seriously be considered to help tackle inefficiency and and remove bottlenecks – whatever industry you’re active in.