Small businesses, big impact

Small businesses account for about 90% of the global economy and are responsible for an enormous proportion of employment. Yet, when it comes to lean, they are often overlooked. Most of the lean transformations we hear and read about concern medium-sized and (more often) large organizations – many of them employing thousands of people and relying on supply chains that span different continents.

But the experience of Lean Institute Brasil (LIB) and SEBRAE over the past three years proves that lean can also have a very positive impact on SMEs.

SEBRAE is a government-funded agency present in every Brazilian state, dedicated to supporting small and medium-sized enterprises. Historically, its approach to developing the capabilities of these organizations has been based on in-person training and interventions. When the pandemic hit, this model quickly proved problematic, and SEBRAE looked for a way to turn a difficulty into an opportunity.

It was at that time that they contacted LIB and asked us to develop a consulting program – called Quick Wins – for their members in the state of São Paulo. The initiative aimed to provide SMEs with immediate, impactful solutions to the challenges they were facing. Unlike traditional programs, Quick Wins was designed to be 100% online, offering pre-recorded training together with real-time online coaching sessions (we use different platforms – Zoom, Meet, WhatsApp video – to ensure that each company has continuous access to us, regardless of its technological infrastructure).

SEBRAE member companies that needed help – ranging from churches to hairdressers and shops – were encouraged to take part in the Quick Wins program. The results have been impressive and challenge our preconceptions about the scalability of lean principles.

The right knowledge for the right people at the right time

Unable to visit the companies due to Covid restrictions, our consultants had to find a different way to assess the current state of SEBRAE's companies in order to then provide them with an improvement proposal. That is why, in the diagnostic phase, they ask the companies to make a video showing the process in as much detail as possible. This is our way of "going to the gemba".

With only two to four weeks available to complete our interventions and ensure tangible, rapid improvements, we knew that a traditional approach would not be enough. Therefore, to help them develop a basic understanding of lean, our trainers ask learners to watch video content developed by LIB - part of it mandatory, part of it on demand. The coaching sessions are then used to challenge the client companies to carry out the identified improvements together with the consultants.

Because of the limited time available to help organizations achieve these quick wins, LIB decided to limit the scope of what was taught in the program to a small number of fundamental lean tools and techniques. The online training course they developed is comprehensive without being excessive and includes the most impactful tools in the lean toolbox: process maps, work instruction sheets, Ishikawa, 5 whys, effort-impact matrix, 5S and spaghetti diagrams. Some of these tools - such as 5S - were added at a later stage, in response to requests from the client companies.

The nature of the problems brought to our consultants has evolved over time. Initially dominated by pandemic-related uncertainty, the cases presented shifted toward more operations-focused challenges as companies adapted to the changing scenario.

Examples

As mentioned, all kinds of organizations took part in the Quick Wins program. Here are a few short examples of the problems they faced and the countermeasures that were implemented.

• Yonamine & Hito Alimentos is a producer of sweets and cotton candy. They discovered they were wasting a lot of sugar in the production and packaging processes. The root causes of the problem were found in the absence of a sugar-quantity gauge for the turbine and the lack of work standards, as well as of visual management. The team implemented several countermeasures to address the situation: they began using a gauge once the right amount of sugar had been determined; an SOP (standard operating procedure) for the process was established; visual management in the facility was reinforced and the team was trained. These changes resulted in an approximate 12% reduction in total process time, with non-value-added activities cut in half and necessary but non-value-added activities reduced by 33%. In addition, waiting time was cut in half.

• Redora Serviços e Produtos de Mobiliário manufactures and repairs furniture in the city of São Paulo. To diagnose the problem, the team examined customer requirements and realized that in its pilot process – chairs – there was an excessive amount of inventory and a significant imbalance between operations, resulting in a bottleneck. Employees worked in large batches and were often idle. To change operations, production cells were introduced (Separation, Selection, Sealing, Painting and Assembly) and minimum and maximum inventory levels for inputs were defined. Clear procedures for the production cells were developed, inventory control was put in place and a preventive maintenance plan was drawn up. The company also changed its layout to allow better production flow. Operators were trained in the new procedures. Among the benefits obtained were: work balancing and a reduction in operation times; a reduction in the lead time from picking to dispatch from 8 hours and 13 minutes to just under 7 hours; increased productivity; and cost reduction through better use of the company's human capital.

• At the food company Lorenzzo Comércio e Distribuição de Produtos Alimentícios, which specializes in producing pizza and pastry dough, the application of lean also brought great benefits. The company faced delays and low efficiency, especially in the drying process and during the unloading and release of carts from the drying facility and the oven. As a result, the production targets set were rarely achieved. The process was analyzed to better balance production between the two lines. In addition, maintenance of the drying chamber was carried out and the ventilation time for cooling the dough was reduced from 15 to 10 minutes, thus freeing up much-needed carts. Thanks to these improvements, energy consumption was reduced by 10% (savings of R$ 800/month) and daily productivity improved by 50%. In addition, the company saved R$ 60,000, which it was about to invest in buying new carts.

• A marketing agency that also took part in the Quick Wins program was looking for a way to reduce the time needed to close new contracts and thus increase revenue. The analysis of the problem, carried out by the team and its LIB consultant, revealed that the main causes were the centralization of activities, people's work deviating from their job descriptions, an outdated briefing process and the lack of information provided to prospects. To tackle the situation, the team began to prioritize customers. They worked to better define roles and responsibilities and to make workers more autonomous in their work. Creating product bundles also proved to be an attractive proposition for the agency's clients. After the intervention, the process of closing new contracts took 61% less time than before (going from 16 to six hours – and now they are trying to bring it down to two hours).

• Starcookies sells artisanal cookies, but was having a lot of trouble controlling its finished-goods inventory and with the limited space available to store its products. They also had no process for planning production. The only inventory controlled was what was available for sale (finished batch). Putting into practice the knowledge acquired during the Quick Wins program, the company began to control inventory by batch, frozen stock, as well as expected sales. As a result, the total time needed to complete the inventory management process decreased by 26%. They also carried out an ABC analysis of their products to understand which ones make the biggest contribution to their revenue. A major change was also implemented in the way products are stored. Before the program, the cookies were kept in zip bags and only half of the freezer capacity was used. Now, boxes of 50 units each are stacked on top of one another, making inventory control easier and increasing freezer capacity by 86% - an additional 1,200 units.
  
  

Planting seeds

In a departure from the institute's traditional way of working, the Quick Wins program does not aim to achieve large-scale lean transformations, but to deliver targeted interventions that address specific business problems. However, this does not mean that introducing basic lean knowledge into these organizations is not planting seeds that may one day grow and lead to broader transformations.

In 2023, the third year of the program, there was a transition to a fee-based model. Fewer companies joined, but LIB observed greater commitment, with participating organizations showing growing interest in developing long-term management skills.

The program is a completely new way for Lean Institute Brasil to spread lean thinking and practice. The collaboration with SEBRAE made it possible to reach a significant number of SMEs (well over 3,000), demonstrating the universal applicability of lean principles. The success of the program (reflected in a Net Promoter Score of 97%) raises the question: what would happen if the program were implemented across the whole country? And indeed, what would happen if other countries adopted a similar approach to supporting SMEs?

We believe that the model LIB and SEBRAE have been exploring and refining over the past three years can serve as inspiration for governments and government-funded agencies around the world tasked with improving the success rate of small and medium-sized enterprises. Lean is a proven management philosophy for helping generate profits, and it is clear to us that greater profitability for SMEs, which represent the backbone of our economy, will lead to improved living conditions for millions of people.