Q&A: How a car production system saved one NGO $1.5M a year

Back in the 1950s, Taiichi Ohno, chief of production at Toyota, became interested in whether his company’s production line could run more efficiently. He introduced technical and structural changes to cut as much waste as possible from the production process — and it worked. Ohno’s theories were picked up and copied by other carmakers, and then by other industries. Gradually, his methods evolved into a management system known as “lean.” Although it is not without its critics, nowadays lean is used in industries ranging from aeronautics to supermarkets. But could it also be used to help NGOs? The answer is yes, according to Andrew Parris. Parris is now process excellence manager at MedAir but he previously implemented lean at World Vision, which he says made savings of $1.5 million a year. We asked him all about it. This conversation has been edited for length and clarity. How does lean work? Lean is about reducing waste. It teaches that all business activity should be about providing value for customers — or for beneficiaries, at INGOs. And waste is the enemy of value. To cut waste, you can start by mapping and streamlining your processes. Delivering a project involves a series of repeatable processes: hiring people, moving money, writing documentation. Can any of those be improved? Lean tells us to map everything we’re doing to deliver a particular activity, identify all the steps, and then look at which steps add value, and which don’t. Among the ones that don’t, some will be necessary for other reasons — to check quality, or assure honesty, or to report to third parties. Then you try to trim out the bits which don’t add value. You look at the way things are done and see if there are more efficient ways of doing the same thing. Standardize the work. If you have eight country offices, and each of them runs their finances and HR in a different way, that means most people probably aren’t using the best practice, and no one understands anyone else’s practice. There’s no consistency. “Most innovation isn’t about replacing the horse-drawn carriage with the car. It’s about making a slightly better car.” --— Andrew Parris, implemented lean at World Vision So create a standard operating procedure. Then whenever anyone finds a way to improve that process, document it and share it. And focus on preventing mistakes. When mistakes happen, look at why — what was the failure in the process that led to them? What can you do to prevent that mistake from happening again? How did you implement lean at World Vision? One of the first lessons of lean is that if you’re going to do it, you have to start at the top. Lean is a powerful tool, but it takes time and expertise, and that means you need management support from the start. We were lucky to have [a] buy-in from the senior leaders to implement it. In World Vision, we focused most on HR, finance, and supply chain management processes. One of the biggest savings we made was around framework agreements. World Vision bought all sorts of different things, and the process involved a lot of work. Each time we bought something we had to raise a purchase order, which took time, so the buyers would sometimes wait until they had lots of requests and then put in one big purchase. But that meant there were delays in getting supplies to the front line. Needs constantly changed, so we were also buying things at short notice. We paid more and got variable quality. We identified a smaller number of suppliers and put in place framework agreements. We said that we expected to buy so much wood, so many nails, so many tarps, and agreed on a price at the start. We streamlined the process, saved staff time, and got better prices. And the suppliers were happy because they could see how much future business they were likely to get. “There are millions of dollars in savings readily available.” --— Another area was recruitment. In one country, we had a country director approving every new job offer. People were physically taking contracts to her desk to sign. She didn’t know who these people were. It was pointless. We cut recruitment times from 130 to 41 days. What advice would you give to others interested in using lean principles? Start by taking a baseline. You have to know where you start from, so when you make a change, you can measure if it made a difference. Measuring in the humanitarian sector is like pulling teeth. No one wants to do it. But if you don’t measure [the] before and after, you can’t know if you [have] improved. Understand that the changes you’ll make are incremental and continuous. Most innovation isn’t about replacing the horse-drawn carriage with the car. It’s about making a slightly better car. Inspire and equip your people to improve. Lean gives people principles and practices; once people know the “why,” they can apply the “how” to make improvements anywhere. Also, you need to go where the action is. It’s hard to make improvements at the front line if you’re sitting in [the] head office, so you have to empower people working locally. What are the barriers to implementing lean? One of the big barriers is the funding model in the NGO sector. In a for-profit organization, if you spend $1 million upfront to make $1 million a year in efficiency savings, that’s great, you have more profit. But in an NGO, if most of your funding is program grants, most of the saving[s] won’t go to you, but to the funder. So there is limited return on investment to invest in efficiency. For similar reasons, many NGOs also don’t have the management capacity to do lean well. It takes time and skills to implement lean, and these are hard to find if your managers are overworked. We spend so much time doing good that we don’t have enough time to spend doing better. Is the sector making full use of lean? Absolutely not. We’re miles behind many other industries. There are millions of dollars in savings readily available.