Lean? ...your private equity funder will thank you..
It’s well reported that the maritime industry has been in a spot of bother for a while now. With banks retreating from the sector and private equity enthusiastically pushing to create yet more value, the pressure is on for management teams to use every tool available to grow their business.
Naturally, perhaps, in such times business managers have been inclined to reach for their traditional cost-cutting ‘tools’ like redundancies and squeezing suppliers to reduce their operating costs. But simply firing people and beating up suppliers can destroy capacity which ultimately just introduces yet more cost that simply appears again a few months down the line.
Perhaps we may merge or buy other businesses to try and generate efficiencies of scale. But sometimes, from the way we behave anyway, it seems we don’t have much idea of what to do with those newly acquired businesses. The outlook for the poor maritime business manager then can seem a little bleak.
I suggest using a tool to extract cost from the business that is, arguably, more valuable than winning another brand-new client? What if that tool was ‘sustainable’ and had the potential to continuously yield tangible benefits, like cash?
Historically, concepts like ‘lean management’ haven’t been used much in the maritime sector. Yet lean management is a well-established and sustainable means of extracting cost from a business. Its’ effect on the bottom line can be the equivalent of finding a significant new client. So, why would anyone ignore it? – yet, time and again, it’s perfectly clear that we do.
If we ever do think of ‘lean’ we either think of bacon or the manufacturing industries. But lean is not just about the manufacturing sector. Lean is about standardising work processes to make ‘bottlenecks’ visible. If we make those bottlenecks visible, we can improve our processes and ‘extract’ cost. Extracting cost is the end-product of making those improvements.
Maritime businesses are service businesses and, one way or another, they’re often engineering businesses too. If the quality of our administration or engineering is poor, we can be sure that our business is failing to thrive. The processes involved in the maritime sector are varied, long and often complex. Every operation can be unique and need lengthy and special consideration. Much of the work we do involves many independent parties working across several sites, vessels and time-zones, on apparently disconnected operations. Much of our work only takes place as we sit alone behind our computer screens, completely invisible to others – and so, therefore, is the cost.
So we go on squandering opportunities to improve. When we fail to improve, we’re accepting cost and thereby squandering cash and destroying value.
It is because so many of our processes tend to have long cycle times with complex variables, multiple decision points and interactions with a variety of internal and external sources that lean management is such a great ‘tool’—it can be of huge benefit in extracting cost from maritime operations and businesses. Many processes are often not physically observable, so any tools like, visual management, that make otherwise invisible bottlenecks visible, are especially useful. When we can see a difference between what we expect to happen and what really happens in practice, then we have an opportunity to improve the process or open a bottleneck and extract cost. The same principles can be applied to our administration, ship-operations or our engineering.
If your maritime business doesn’t currently practice ‘lean’ (and it probably doesn’t, does it?) you could try a simple visual management experiment just to prove the point to yourselves. Find a group of colleagues that do similar work, such as in procurement, entering voyage or cargo data, managing cargo bookings, taking client instructions, cargo handling or some basic engineering tasks. It really doesn’t matter what the task is or whether it’s administrative or operational. What matters is that it’s an activity or operation that’s repeated time and again by different people.
One of my own favourite cost areas to work on is in the management of spares. These processes can include the ordering, storage, transport and delivery of new parts and the removal, landing, repair or refurbishment, storage and ultimate disposal of the old parts. One way or another, a considerable amount of cash is tied up in this ‘stock’. If our stock-control is poor, then we have a potentially large amount of cash just lying around that isn’t being put to work or is even being lost altogether.
Give each colleague a different coloured pad of post-it notes and together choose just one process that all colleagues regularly undertake. Ask each person to write down each of the steps that they take to do the work on a separate post-it note. Once each person has completed their post-its, stick their notes in a row—one row for each colleague, one above the other—onto a clear wall or whiteboard. If all your colleagues are performing the same task, it’s reasonable to expect that all the rows of post-it notes will be the same length and contain the same number of steps performed in the same order. Except that they won’t…
After completing the exercise, none of the rows will be the same length or have the same steps in the same order. This demonstrates precisely why it’s important for organisations with such complex processes and multiple decision points, to use tools that make those processes ‘visible’. Only when our people are doing work in the same way every time, can we begin to be confident that we are delivering a consistently high-quality service to both internal and external users.
We need to continuously use our critical-thinking skills to improve processes so we can begin to extract cost. Otherwise we can’t expect to make the right management decisions when responding to demands to add yet more value.
By using simple lean management tools, we can develop better processes for doing work that are visible. When a process is visible it can be quantified and we can begin to manage that work. When a bottleneck becomes visible, we can continuously refine it… extract cost and add value.
So, ‘lean’ isn’t just for the manufacturing sector after all. It’s about standardising work processes to make bottlenecks visible. It’s about working to develop our colleagues’ abilities to remove bottlenecks and then refine processes to extract cost. That, I suggest, is more sensible and sustainable than simply slashing head-count or squeezing your suppliers for another few percent… your private-equity funder will thank you!