Porsche Consulting – THE MAGAZINE

Capital Project
Faster production rates that yield better quality—that alone is no longer
sufficient to convince some company leaders of the benefits of lean management.
They want to know exactly how optimizing processes can affect financial indices
such as profits and liquidity. An unusual simulation demonstrates the financial
effectiveness of lean processes—in a playful manner.

_DAVID SELBACH _NIELS SCHUBERT

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Porsche Consulting – THE MAGAZINE

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Porsche Consulting – THE MAGAZINE

PHOTO_ LUFTHANSA TECHNIK

I “I finally have
nventory levels are reduced, and loss statement has changed as a result: what
throughput times are shortened. What have the effects been on total capital turnover,

the chance
happens with return on capital em- liquidity, and return on capital employed (see
ployed? What sounds like the question “Invisible lever” above on the next page).

to see what is
on an exam for future business admin-
istrators causes the eyes of 60 established Before the economic crisis, different expec-

possible”
professionals to light up. The engineers and tations were placed on lean management.
lean project managers from Lufthansa Tech- Thanks to leaner processes, companies with
nik—the service provider that maintains, bursting order books could produce faster
repairs, and overhauls aircrafts—come from and with higher levels of quality. “Everything
production and have already carried out lean design the production facility, and take crates that raised the output was welcome, because
projects themselves. They are now standing of material from the board. “I finally have capacities were rather limited,” reports Olaf
together with their colleagues from the con- the chance to see what is possible,” one of Langanke, Principal at Porsche Consulting
trolling department in five groups, each of them says. who is responsible for the “Lean Counts”
which has a game board with Lego figures. simulation. “But the crisis has changed all
“Lean Counts” is what Porsche Consulting calls that. Companies were rather not being fully
Each group stands around a miniature model this extraordinary simulation. With the consul- utilized.” And since then, controlling depart-
of an aircraft production plant—with a materi- tants’ help, the Lufthansa Technik employees ments have been demanding precise evidence
als warehouse, airplanes, machinery, and fork- determine for themselves the potential sav- of the economic benefits of lean management,
lift trucks. The participants in this simulation ings that can be derived from lean manage- explains Nicolas Franzwa, a project manager
want to work together to solve the tasks—but ment. With support from the controllers, they on Langanke’s team.
not with paper or spreadsheets: in order to successively calculate the reduction in work-
try out the effects of lean processes, they ing capital during the simulation. Finally, they The problem lies in the fact that “Lean” ex-
cheerfully push machines back and forth, re- determine how the balance sheet or profit-and- perts, production specialists, and finance

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 Porsche Consulting – THE MAGAZINE

Invisible lever
Companies that make their processes leaner
also improve their balance sheets and
profit-and-loss statement. The Lego simulation
shows how lean management affects impor-
tant financial indices (example).

LEAN MANAGEMENT INDICES

Inventory: – 30%
Throughput time: – 20%
Productivity: + 10%
FINANCIAL INDICES

Return on capital employed: + 50%

Before After
The game board is full: The game board has lightened up:
A large amount of capital is tied up; Lean processes have freed up a consider-
the return on capital employed is poor able amount of capital

specialists do not speak the same language. Consulting. For an entire day the “lean man- After a few rounds the game boards are
The bright idea of bringing these two worlds agement” specialists moved the “numbers thinned out, and have become “lean.” The
together occurred to Langanke and Franzwa in material form” back and forth, combined “potential savings pots” are filled with machin-
on a drive to a bank—a Porsche Consulting work situations into flow lines and reduced ery, personnel, and goods.
customer who naturally posed very precise the warehouse inventory. “For the first time
questions about finances. “We said to our- the immediate financial effects of optimization Then it’s the financial experts’ turn. They look
selves that we needed a model: something were very clear to everyone,” says Franzwa. at the extracted working capital and start
that you could literally grasp,” recalls Franzwa, thinking, what should we do with this much po-
“and then we hit on the solution.” The very next To convey the financial consequences, Fran- tential? “With a simple Excel tool we can show
day they obtained model cars for an automo- zwa and his colleagues start workshops by the positive influence on indices of a typical
tive plant, converted a construction kit for a explaining the principles of lean management. balance sheet,” says Franzwa. “And precisely
locomotive into an injection molding machine, Then, as in the case of the Lufthansa Technik that is the learning effect.” f
purchased miniature replicas of plant workers, group, controlling experts can provide an intro-
and made shelves from building materials. duction to financial indices. Following that, the
All the models received stickers of different group finally sets to work. Each table with its
colors: violet for “finished products,” green for mixed team of production and financial experts
“fixed assets,” red for “work in progress”— receives a model factory, and also a task, such
and were marked with an equivalent value in as “Reduce your inventory levels. The days on
euros. hand are currently at 220. Experts believe that
half of that would be sufficient.”
In early 2010, Langanke and Franzwa opened
the lid of their silver hard-top suitcase to reveal The participants place all the excess inventory
their miniature factory for the first time at an on a letter-size sheet of paper of the same color,
internal workshop for the experts at Porsche which is called the “potential savings pot.”

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