What It Means To Be Lean

What It Means To Be LeanUnless you’ve been living under an extremely large rock for the last year, you’ve no-doubt heard the buzzword that’s been making its way through the distribution industry—lean. Everybody is searching for ways to be lean and increase efficiencies in order to survive in this difficult economy.

To put it simply, “getting lean” means going through your company’s operations with a fine-toothed comb, looking for any and every way to cut costs. To truly pull it off, it requires everyone from the president to the most junior salesperson to pitch in. So what does that mean for GAWDA Young Executives? To explain, I am going to break things down into three categories—inventory, collections and personnel.

In times of recession and in times of prosperity, keeping proper levels of inventory is paramount to maintaining adequate cash flow levels. However, what a “proper level” of inventory is varies greatly depending on the economic situation. During good times, you want to keep inventory levels high so you’re able to quickly respond to customer demands. In times of recession, you have to be much more selective about what you stock.

If sales are down 15-20 percent, you should probably be stocking 15-20 percent less inventory. So how do you know what to stock? That’s goes back to the “team effort” concept. The C-level executives need to be constantly reviewing sales trends, the purchasing manager has to monitor inventory levels daily, and the salesperson on the street needs to be reporting on what customers are asking about. By making inventory management a collaborative process, a company allows itself to truly optimize the equipment that it stocks and avoids being caught with products that won’t sell. If you can find that perfect balance between too much inventory and not enough, you’re on your way to truly being lean.

In times like these, accounts receivable becomes one of the most dangerous areas for a company. Closing a deal is great, but a sale isn’t truly a sale until payment is received. Typically, we have net-30-day terms for our sales. It’s a fair time period that allows the customer time to make the payment without putting our cash-flow at risk. However, during the last year or so, many companies, Delta Gases included, have noticed customers beginning to fall behind on payments.

So how should a lean-thinking company tackle this issue? You could start sending people to collections, but I wouldn’t recommend it. It may be a good option for a new customer that is proving to be a deadbeat; however, with longterm customers, you have to use more tact. A company can’t afford to ruin a long-term relationship over what might be a short-term problem with a business.

The first step in resolving the situation involves someone in the accounts receivable department making phone calls. If that doesn’t work, then the burden falls to the salesperson who made the deal. This is an area where a Young Executive can really help his or her company. As a salesperson, you have a unique bond with the customer. In the process of developing a solution for that customer, you should have developed a relationship with the customer. It’s this relationship that is going to uniquely enable a salesperson to collect past-due payments. Call your customer and find out what has been preventing payment. Did a deal fall through? Did business slow down unexpectedly? Find out what’s causing the delay and then work with him or her to develop a payment plan. Then you will able to trim up your past-due account balance without damaging a relationship.

In almost every business, personnel is the greatest expense. Thus, it stands to reason that to become truly lean, a company needs to make sure its employees are all performing with a high level of efficiency. Sometimes that isn’t the case and cuts need to be made. However, staff cuts during a downturn should be a last resort. Eventually the economy is going to recover, and you don’t want to be stuck having to scramble to hire and train new employees. Not only does it cost money, but you’ll miss out on sales while the new employees learn. The key is to make cuts in other places. For instance, this year we froze raises for the first time in our history.

On the staff level, it’s up to individuals to make sure that they are earning their keep. Everyone needs to take it upon themselves to be more efficient. When a company is trying to run lean, you can’t afford to have a manager standing over employees and telling each of them what they should be doing better.

Little Things Make a Big Difference
Take the time to think about little things that can help your company run better. Don’t just be a nine-to-fiver; get to the office early and plot out your day. Instead of making sales calls that are 20 minutes apart, try and make it so if you have five or six customers in the same area, you call on them all in one day. Not only are you going to save time, which allows you to make more sales calls, you’re going to save gas, which will save your company money. In times like these, nobody is guaranteed a job. You have to take it upon yourself to stay busy. Going lean is all about creating value wherever you can. The easiest way that a young person can add value to the company is by going the extra mile to be the best employee that he or she can possibly be.

Whether it be in personnel, collections or inventory, going lean is all about maximizing efficiency. The only way a company can truly achieve its “maximum efficiency” is if all members of the team, from the president on down, are dedicating themselves to the cause. If a company can achieve that ideal, there isn’t a recession in the world that can beat it.

Gases and Welding Distributors Association
Todd Linnenbringer Meet the Author
Todd Linnenbringer is vice president of Delta Gases in Maryland Heights, MO, and on the Web at www.deltagases.com.