Stop panicking, and start transforming instead

Applying the five lean manufacturing principles.

Measures to curb the spread of COVID-19 has not only directly impacted the ability of businesses to operate, but has infected them with something even more deadly: uncertainty.

Small and medium-sized businesses are the most vulnerable segment to uncertainty, and manufacturing has been one of the worst-affected industries. Although it can be difficult to stay positive during uncertain times, those business that hope to survive must look beyond the current crisis and focus on those things that do remain in their control. “SMEs should use this time to build more efficient and effective organisations. One way to do this is to apply the five lean manufacturing principles,” says Marten Stavast, Senior Industry Expert in Manufacturing at GroFin, an impact-driven SME financier. He reminds manufacturers of these principles:

1. Define value

Any entrepreneur will agree that the customer always comes first. Lean manufacturing takes this idea beyond customer relations to also put the customer first in the production process. The true value of any product or service is defined by what your customers are willing to pay for it. Your product may seem valuable to you because of the time and resources that went into creating, but its value is determined from the point of view of the customer.

Lean manufacturing begins by determining the needs of the customer. Interviews, surveys, demographic information, and web analytics are some of the tools you can use to determine what your customers want and at what price they can afford it.

2. Map your value stream

Once you know what your customers want and value, you can map your value stream. Use your customer’s value as a starting point and identify all the activities that help to create this value. The goal is to ensure that every activity in your production process adds value to your customer and can be delivered at the price point they want. If an activity does not add value to your customer, it is a waste. If you cut out any unnecessary processes that do not add value, you can reduce production cost while ensuring your customers still get what they want.

3. Create flow

Now that only necessary and value-adding activities remain in your value stream, you should ensure that each step flows smoothly to the next. Interruption and delays in production are no different to waste. A delay is more than just a bottleneck when one production step waits on another – it is any step that takes longer than it has to. You can improve the flow of value-adding activities by breaking down every step of the process and reconfiguring it as efficiently as possible, levelling out the workload, and training your employees to be multi-skilled and adaptive.

4. Establish pull

Stock sitting on your shelves or raw materials piled up in your warehouse is one of the biggest forms of waste in any production system and often places a big drag on cashflow for smaller businesses. This is even more true in the current environment.

A pull-based production system means that you only produce products based on the needs of your customers and only at the time and the quantities needed. Strive to limit your inventory and work in process items to only the materials needed for a smooth workflow. This approach requires ensuring some flexibility in your production process and the current environment, it might just give you the edge as a small business.

Stock sitting on your shelves or raw materials piled up in your warehouse is one of the biggest forms of waste in any production system, and often places a big drag on cashflow for smaller businesses.

5. Pursue perfection

The final step in implementing lean manufacturing is by far the most important. Lean thinking should not be a once-off exercise that you complete now, while times are tough. It should become part of the culture of your company in such a way that every employee strives toward perfection and constantly getting better at meeting customer needs and reducing waste. This will not only set your business apart during times when customers are themselves under financial pressure but also when things improve.

Mend your nets

When this pandemic and the uncertainty it brings have passed, those business owners who spent this time wisely will have built businesses that can remain competitive by increasing the value they deliver to customers. There is a saying that goes “when fishermen cannot go to sea, they mend their nets.” Now is the time for business owners to do this same by using their time to transform their businesses, not just to survive the current storm, but also to look to the future.

This article was first published in the August/September 2020 issue of Your Business Magazine.

GroFin supports SMEs through COVID-19 crisis

The COVID-19 pandemic is having a severe impact on economic activity and small businesses are bearing the brunt of this crisis in both developed and developing countries.

GroFin finances small businesses in some of the world’s most vulnerable economies. We are hard at work to increase the resilience of these communities as they deal with the fallout of the outbreak.

Our model has always centred on providing entrepreneurs with continuous support and advice. We realise that it is even more crucial than ever before during an unprecedented crisis like this. As such, we have taken several measures to continue assisting our clients despite the challenges presented by the virus and are responding as follows:

Ensuring we can continue servicing SMEs

The health and safety of GroFin’s staff and clients are our highest priority. We ensured a safe working environment for staff across our markets by implementing Environmental, Social, and Governance (ESG) measures to limit the possibility of infection. The majority of GroFin staff is working from home and we plan to extend this to all staff within the next week. All our core business platforms are available remotely so that we can continue operating and engaging with our clients using digital platforms.

Advising SMEs on measures against the spread of COVID-19

We have also focused on helping our clients to minimise contagion risk to their own employees and customers. GroFin’s Impact team developed a COVID-19 Environmental, Social, and Governance (ESG) framework, drawing on international best practise on this lifesaving issue. This ESG framework has been shared with our clients and the GroFin Investment team is providing them with support and advice to implement the measures it recommends.

Providing support to our clients

Unlike commercial lenders, we decided not to take a portfolio approach to assess the impact of the outbreak on our investees. In line with our focus on providing entrepreneurs with continuous support, we developed a toolkit to assess the disruption and impact on key business elements of each SME in our portfolio.

We believe this will allow GroFin to use our expertise to provide appropriate advice to each entrepreneur, while also giving us a view on the viability of each business during and after disruptions to their operations. The outcomes of this assessment will determine our actions to be taken per client. Where available, we will also link our investees to local relief options like government support.

As an organisation working with SMEs in some of the most challenging markets, we have always been amazed and inspired by the resilience, determination and ingenuity of the entrepreneurs who are our clients. They will need all these qualities to overcome this crisis but can rest assured that GroFin will be there to support them throughout it.

Brienne van der Walt

Chief Executive Officer, GroFin