Lean at Ariens – Cost *and* Value
Considering Ariens was an inspiration for one of the leading Lean hospitals (ThedaCare), that’s a huge contribution to the Lean world (and society, in general).
This article doesn’t go into great detail on their Lean efforts, but there are a few quotes worth talking about.
First off, most every company or service provider is complaining about increasing raw material costs, “forcing” them to increase the prices they charge to make up for the cost increase. Ariens apparently sees it differently:
Rising costs of raw materials and energy is a constant battle for any manufacturer.
Ariens Co. often is looked at by the state as a good example of a business that has adopted and successfully implemented lean manufacturing principles to its operations.
“Lean has to be our constant mantra to drive our costs down,” Ariens said. “The economy presents its own challenges with continually rising commodities and energy costs.”
Since prices (on the customer side or supplier side) are driven by economics, companies can’t just raise their prices willy-nilly. Companies must work to reduce costs in other areas, through operational efficiency, to make up for raw material cost increases. You can’t raise prices unless customers are willing to pay. Plus, if price and cost were tied together (the old “Price = Cost +Desired Profit” model), wouldn’t companies now be LOWERING prices with oil prices declining almost 40% from peak levels?
Ariens also follows a Lean principle of being customer focused. That’s one way you can increase prices — providing more value to the customer.
A regular challenge is to keep up with customer’s changing needs, he said.
“Besides staying in tune with their needs, we have to make sure we deliver the best value at the lowest cost possible,” Ariens said.
Notice how we don’t hear any whining from Ariens? Notice how we don’t see them running for government loans or bailouts??