Lean in Sales and Service
What is Lean Thinking?
Lean Thinking is simply the generic version of the Toyota Production System. The term ’Lean‘ was coined in The Machine that Changed the World (Womack, Jones and Roos) in 1990. This book summarized the Massachusetts Institute of Technology’s study of the global automobile industry, which documented the great performance advantages that a best-in-class Lean manufacturer such as Toyota had over typical mass producers in Western countries. They were Lean because they used less of everything to achieve a given output. Lean Production has now spread into all car manufacturers and to their suppliers.
The principles of Lean and the way it applied in other industries were described in Jim Womack and Dan Jones’ next book, Lean Thinking, published in 1995. The Lean principles are:
- Value: Specify what does and does not create value from the customers perspective
- Value Stream: Identify all the steps necessary to design, order & produce the product across the whole value stream to highlight non value adding waste.
- Flow: Make those actions that create value flow without interruption, detours, backflows, waiting or scrap
- Pull: Only make what is pulled by the customer just-in-time
- Perfection: Strive for perfection by continually removing successive layers of waste as they are uncovered
Another way of describing Lean was expressed by Taiichi Ohno the man credited with much of the development of the Toyota Production System. He said: “All we are doing is to compress the time between the point when the customer gives us an order and the point when we collect the cash”.
In Lean Thinking, Jim Womack and Dan Jones introduced the world to the principles of lean production — the principles for eliminating waste during production. In their next book, Lean Solutions, they established the ground-breaking principles of Lean consumption, showing companies how to eliminate inefficiency during consumption. A summary of this book is given in their Harvard Business Review article Lean Consumption. Both the book and the article include the example of Grupo Fernando Simao the leading European example of a Lean dealer.
How does Lean apply to car dealers?
This is throughly described in Creating Lean Dealers but here is a snapshot:
In 1994 the International Car Distribution Programme (ICDP) began to carry out research to show how Lean could apply to the supply chains of new cars and spare parts and many brands have seen improvements in those supply chains as a result of that work. The next question was to find out whether Lean also applied to dealer operations. In their research for ICDP between 1998 and 2001, David Brunt and John Kiff, the authors of Creating Lean Dealers, showed that, with some translation, the Lean principles, tools and techniques were entirely applicable in the dealer environment.
They defined a basic statement of Value to the customer as ‘right first time on time, every time’ and called this Customer Fulfillment.
| Buying a Car | The right car in the right place at the right time |
| Servicing and Repairing a Car | Fixed right first time on time - every time |
They also showed how this linked to other aspects of customer value
Lean thinking focuses on delivering value to the customer and eliminating non-value-creating waste. One of the first steps in understanding Lean is to identify waste so that it can be eliminated
A waste is defined as anything which does not add value to a product or service in any office or workshop or manufacturing activity
Toyota identified 7 Wastes in the production environment and these have direct equivalents in the car dealership. Here is a list of the 7 Wastes and some dealer examples of each (there are of course many more!)
| Waste | Dealer Example |
|---|---|
| Overproduction
(producing more,sooner or faster than is required by the next process) |
Cleaning a car on Tuesday for delivery on Saturday - but then having to re-clean it on Friday |
| Waiting
(delays that prevent the value flowing) |
Technicians waiting to get authorisation from the customer for additional work or waiting for parts at a counter, or waiting to be told what to do next. |
| Conveyance
(unnecessary movement of goods or materials) |
Moving several cars to get at the one needed. Extra transportation increases the risk of damage |
| Over-Processing
(a process that can’t help but make a defect or uses more time, effort or investment than is really needed) |
Not getting the right information about what the customer’s requirements are so that they buy the right car or so that their car can be repaired right first time, on time |
| Inventory
(having more stock than is absolutely necessary) |
More stocks of new cars or spare parts than are needed to meet likely market demand, taking up costly space and causing unnecessary searching, and the risk of damage and obsolescence |
| Motion
(unnecessary motion of both humans and machines) |
Technicians searching through toolboxes for the tool they need. Salesmen searching for cars, keys or forms. |
| Correction
(producing bad quality - parts, services or information) |
Dealers often think that defects can be prevented from reaching the customer by quality inspections, but these are themselves a waste because the original process should work right first time on time. |
Examples of dealers on their Lean journey
Grupo Fernando Simao / Autopartner in Oporto, Portugal began their Lean journey in 2000. Their first project was a Lean used car preparation centre where they can prepare up to 2 year old ex-rental cars to order in 2 days. They now have a centralised parts warehouse which can deliver parts from any one of their 14 brands just-in-time to the group’s outlets and their ‘heavy damage’ body-shop has a throughput time of 2-3 days for any type of repair. All their service workshops are now more Lean which has given them more space to put in new sales and after-sales franchises.
All this has made Simao/Autopartner the most profitable dealer group in Portugal but the icing on their cake is their latest Lean project: a 30 minutes, while-you-wait, appointment-slot service and repair offer for cars under 4 years old and 40,000 miles. This is so popular with customers that they don’t understand why they don’t pay more for the benefit of the convenience. Says chief executive Pedro Simao: “Lean is now core to my business strategy it’s given me happier customers, more space to expand and more profit even in a shrinking market”.
Cormac O’Leary, a VW dealer in Ireland, says “I was sceptical at first, but Lean really works and it’s transformed our business. We’ve had independent verification that we’re now achieving efficiencies of 180% on service and repair work while at the same time our customer satisfaction has improved”.
Meanwhile Swiss dealer Louis Zund asserts: “We now have greater workshop productivity and efficiency and reduced stress for management as emphasis goes from managing people to managing processes. Lean is starting to become a part of our culture”.
Does Lean Thinking Apply to Dealers?
View (or download) the powerpoint presentation: Does Lean Thinking Apply to Dealers? by clicking the link.