A financial growth strategy for lean implementation

In modern manufacturing environments lean initiatives foster flow of customer defined value, reduce waste and lead-time, and facilitate continuous improvement. A problem arises when lean organizational transformation within companies becomes restrained by difficult internal reaction to socioeconomic stressors and cultural change. The purpose of this study was to meet an industry need for a model to overcome these restraints and optimize financial performance through properly sequenced lean transformation. Research questions framed the problem in terms of user-defined value and the mitigation of systemic constraints to the flow of that value within a company. The research used triangulation of income and balance sheet diagnostics, financial ratio analysis, and a set of standard lean value propositions, along with comparison of a set of traditional descriptive statistics, and the application of regression analysis to test hypothetical components of the emerging model. To predict the financial outcome of a firm's lean implementation efforts 14 dimensions of lean assessment were regressed onto core financial statement outcomes from 110 anonymous, publicly traded firms. The result was subsequently validated as an empirical business model in which optimum financial performance was predictable for companies following a sequence of 7 of the 14 lean implementation schemes studied: strategic planning; mass customization; inventory and work in progress (combined with use of space and movement of materials); and commitment to quality; as well as management of complexity. An implementation plan was designed to satisfy an industry need to achieve the desired social benefits of lean transformation including improved productivity, productive capacity, lowered costs and fair pricing, as well as an enhanced competitive excellence.