I went to the gym this morning, April 1, and the gym’s owner, sole employee, and pretty much everyone’s personal trainer, Howie, asked me the same question he asks me every time I see him: “What’s your weight?”
“Stayed the same,” I said, but jokingly added, “Actually, I’m ahead of the game because yesterday I skipped the ice cream and cake at the Easter dinner."
“So what?” Howie asked. “Is that an improvement?”
"Not exactly", I quipped, "but I'd call it “weight avoidance.”
Howie laughed, “Who are you kidding?”
In Howie’s lean world, the one from which the Lean analogy is drawn, to make improvement you have to lift weight and lose weight. Neither is supposed to occur in a blitz, just a little bit every day. “If you want to be an old lean dude you have to stop concocting pretend improvements to avoid real improvement,” Howie admonished.
“I understand,” I replied.
In my work, I encounter Lean avoiders all the time. In fact, “cost avoidance” is one of the most often chosen bogeys for improvement. While there can be real opportunities to collaborate with suppliers to stave off cost increases to both supplier and consumer, cost avoidance, as I observe it in practice, is almost always the outcome of leveraging and hedging.
A purchasing manager at Hospital A, for example, asserts that she has avoided a price increase on consumable goods by committing to larger deliveries. “Less receipts and inspections,” she says, “less invoices to pay also -- and we can still hold the line on a price increase this year.”
"You just received three months worth of material purchased on speculation,” I respond. “Isn’t that over-production and cash out the door?”
“Not to worry,” she replies, "if our usage slows down, we’ll just schedule out later deliveries.”
“But didn’t you make a commitment to purchase these quantities in order to hold the price?” I ask.
She smiles at me. ‘That’s the game,” she says.
Listening to my story, Howie comments, “That’s a losing game. If I ran my gym like that with pretend savings based on cheating suppliers or buying stuff I don’t need to hold a price, they’d be pad-locking my doors in short order. How can they call that cost avoidance? Seems to me more like improvement avoidance.”
How does your organization handle cost avoidance? Is it a win-win for you and your supplier or just a funny number on your improvement bogeys for the year? Let me hear from you.