The good news:  The label business has been a reliable source of growth, even through the recent recession, and things look even better for the future. The bad news: Unless you’re integrating Lean Manufacturing operations into your business, it will be hard to take advantage of what this market has to offer.

What? Why does anyone have to worry about getting Lean if more growth is on the way? Because your revenue won’t be the only thing growing. According to Ed Klaczak of EJK Consulting, “When you double your growth, you also will double your inefficiencies,” he says.
It’s easy to lose sight of the impact inefficiencies have on a business, especially in boom times.  However, 10% growth and 10% cost-savings will both have the same impact on the bottom line. In fact, the cost-savings will likely yield even more profit margin as you improve your overall processes.

So if Lean has so many benefits, why don’t more companies pursue it?

Most companies don’t bother with Lean because they don’t think their company is at the right stage in its growth cycle. A common misconception is that Lean is only for mature companies. Truth be told, Lean can work for everyone – start-up companies, mature companies, and even companies for sale. 

In future articles, we’re going to be presenting examples of how Lean Manufacturing is at work in the label industry. For this edition, we want to give you an overview of how Lean works for companies at various growth stages, and what tools are employed.

1. Start-up businesses and the ad hoc owner
If you’re an entrepreneur and just launching your company, you’re likely what Klaczak would refer to as an “ad hoc” owner. 

You know the business, you know management, and so you shoot from the hip on a lot of decisions.  That might work out of the gates, when you’re trying to get enough clients and revenue churning so you can pay the bills. At a certain point, however, you’re going to see that you’re working harder and harder for less money.

If you take the time to set goals, and document work processes, you’ll be one step ahead of the game when the inevitable occurs and your company begins to become inefficient.  If you’re documenting work processes, you may be able to avoid that undesirable state altogether.


2. Mature companies and the inevitable inefficiencies
The inefficiencies that plague every business are a natural byproduct of growth, and often owners don’t even see it coming. You’re so embroiled in the day-to-day activity that you can’t see that things aren’t working as smoothly as they should.

As companies grow, they become very different animals.  As Klaczak points out, “A $10 million company will operate differently than a $20 million company, and a $30 million will be different than a $20 million.” 

As your company grows, you’ll lose touch with your people and your processes. 

Mature companies often face this situation, and when you get larger and larger, organization-wide improvements can have a much greater impact than smaller additions in revenue. 

3. Companies for sale and cleaning the car
Isn’t it funny that when you put your car up for sale, you always clean it up? That’s natural, as you want to put the best product possible on the market.

Lean operations can help you “clean up” some processes and make things look much more attractive in the short run.  A long-term commitment to Lean can yield even more profound benefits.

For example, many company owners, as they near an impending sale, will take their eyes off the growth efforts. They’ll neglect marketing and sales efforts, and revenues will slip.  This can have an impact on the multiples of the sales agreement.

However, you can balance that effect if you have a Lean culture in place. With Lean operations in place, constantly reducing efficiencies is part of your everyday workflow.  If they are systemic throughout the organization, they will continue to work even if an owner is distracted.

Getting Started with the Balanced Scorecard
If Lean operations can work in any size company, what does it look like? I’m going to provide some examples by introducing you to the Balanced Scorecard and Value Stream Mapping. We’ll start with the Balanced Scorecard. 

Metrics make Lean operations go, and you need the right model in place to make them effective. Klaczak recommends a Balanced Scorecard Model, pictured in the graphic on the following page.

In the Balanced Scorecard method, you begin at the top (far left-hand box) with your company’s vision, mission statement and initiatives.  You’ll need to have these established before any discussion of metrics begins.

You then “cascade” down to the desired Executive Goals and Metrics you’d like to achieve, and then on to your management team, and finally down to the employee levels. For each group to achieve their goals, they’re dependent on the group above and below them.

Note the Feedback arrow, which appears to be heading back upstream. The Feedback metrics will tell you if your goals are being achieved, if they’re realistic, or if there is a process breakdown.

Watch Out for Rogue Metrics
Setting up metrics in this fashion is critical. If you don’t, you run into the issue of the Rogue Metrics.

The Rogue Metrics occur when one set of metrics is introduced without any consideration to how it will affect the rest of organization.  Klaczak recalls a case where a company wanted to incentivize its sales force, so they introduced bonuses for increased sales.

A great idea, but the projected new revenue metrics were not shared with the production team. As you would expect, the sales team hit the streets hard and got their numbers.  Unfortunately, the production team couldn’t keep pace.

The result? Irritated customers, irritated sales people, and irritated production staff. 

So what happens if you discover that one area of your organization isn’t hitting their numbers? That’s when Value Stream Mapping enters into the picture.

Finding the Needle in the Haystack
It’s not always easy to find out where the inefficiencies lie in an organization, but quite often they’re a result of what Klaczak calls the “non-synchronized process.” 

Consider the example of Company X.  The company has a regular production schedule. In the event there is a customer complaint, someone is pulled from the regular schedule to deal with the complaint and produce a new product.

That’s terrific customer service, but it can have a tremendous impact on the overall production and revenue. If Company X typically produced 10 products in an hour, and then had a large amount of customer complaints, its production might slip to six. 

To determine the revenue loss, you multiply the four products that weren’t produced by the revenue for the product.  The losses can truly pile up.

To find the source of the problem, and then move to the desired state, you can implement the following steps:
Step #1 – As-Is Map.  This identifies the current processes.  In this case, we’d see how the entire production is affected when a customer complaint is received.  It’s important to take your time and be meticulous in this process, as the devil is in the details.
Step #2 – Should-Be Map. Next, identify how you would improve the As-Is Map and get to an ideal state.  You may be able to tweak the process to solve the issue, or you may have to generate a completely new process.  Whichever you choose, be sure to integrate the process participants into development of the Should-Be Map, as they will be the champions of its progress.
Step #3 – Value Stream Mapping Action Plan.  With the two maps in place, you’re ready to develop an action plan that will help guide you through the implementation. Remember to document any changes in the processes that occur as you move forward.
Step #4 – Track the Results.  Metrics in Value Stream Mapping are critical to your efforts. It’s exciting to be able to see the results – good or bad – and tweak the process as a result.

Both the Balanced Scorecard and Value Stream Mapping provide invaluable metrics and documented processes, which are the lifeblood of your quality efforts. 

Are they tools that can be used for every company, in every stage of growth?

Realistically, no.  For example, the As-Is Map won’t work that well for a start-up organization that’s creating a new product or service. 

However, now that I’ve detailed how these tools can be used, you can see the value of documenting processes and using key metrics at any stage of company development.

Without a doubt, committing to Lean operations and its methodologies is a long, involved process. However, because you’re creating a systemic approach, once you’ve integrated quality into the culture, it will work continuously to help your company refine its performance and its output.

If economic growth continues, you can expect the label business to grow as well. It’s up to you just how dramatic your growth will be, and if you’re ready to maximize your profits. Lean operations will make your growth more significant, and prevent pain when the business stops booming.


Rock LaManna, President and CEO of LaManna Alliance, helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic path. Rock can be reached by email at [email protected].