Calculating the Financial Benefits of Lean using Lean Accounting – Part 3

The next step in this process is looking at capacity. In the area of capacity management, a LST should focus on reallocating existing capacity and exploring alternatives for divesting of excess capacity.

Reallocating capacity:

  • Cross train employees to create a more flexible workforce. A cross training program should be part of continuous improvement and progress measured by performance measurements
  • Assign available employees to continuous improvement activities when productive activities are not available. A formal company-wide continuous improvement program should be created that identifies employees with available capacity and matches them to continuous improvement activities.
  • Bring outsourced activities in-house. All outsourced production activities should be analyzed to determine if the company possesses the resources to perform these activities in-house. If the resources exist, bringing outsourced activities in house will reduce costs
  • Become a contract manufacturer. If your company possesses a particular core manufacturing process competency, explore the possibility of using that competency to produce products outside of your normal product families.

Divesting excess capacity

  • Develop an employee attrition program, where full-time employees who leave the company are not replaced. A sound cross-training program makes an attrition program possible
  • Reduce or eliminate overtime
  • Freeze full-time hiring and begin a temporary workforce program. This program requires the company to create a pool of temporary workers that can be called on to meet spikes in customer demand, and don’t work if not needed. Additionally, a temporary worker program identifies potential full-time employees with the specific skills & experience that could be needed if a full-time employee must be replaced, or if demand has sufficiently increased to warrant hiring full-time employees
  • Sell excess machinery & equipment
  • Reduce your facility size or rent excess space

Each of these alternatives will require some time to analyze and/or implement. The LST must use good project management practices to ensure that responsibility, accountability and deadlines are met.