The Dark Side of Efficiency

In their pursuit of efficiency, many businesses have put principles of lean and the elimination of waste -also called muda (無駄)- at the center of their organizational design strategies. Partially a management philosophy and partially a mix of tools and practices, lean has become something of a holy grail of how an enterprise should operate internally and, indeed, along its entire value chain. Particularly with regard to lean supply chain management, there are notable large-scale success stories.

But as Edward Tenner argues in a great article in The Atlantic, the advent of lean operations and the overly zealous pursuit of more and more efficiency have resulted in dangerous side-effects. Be it the consolidation of business units into larger entities or the just-in-time approaches to manufacturing and delivery, lean practices have generally made businesses -and indeed, societies at large- more vulnerable to shocks such as the current coronavirus pandemic. Why? Well, because lean practices often seem to assume that the world beyond the business context where they are applied is static. Unless antifragility is factored into their design (see my old post here), lean measures do not sufficiently address the very real chance of a drastic change in external influences to the value chain. Example: Heavy inventory reductions and just-in-time manufacturing only work if input supply chains are diversified enough and are functioning properly. If the required input to production is suddenly absent (say, because the supplier had to shut down its plants because of a pandemic), end customers immediately feel the pain because there is no inventory and thus no delivery of output.

Tenner’s article also presents us with a particularly dire example regarding the dangers linked to large-scale consolidation and “efficient” value chain design: A large pork production plant in Sioux Falls, US, had to shut down because 700 of its workers were tested positive for the coronavirus. As a direct result, other plants were forced to close because their supply chain exclusively relied on raw product from the Sioux Falls plant. The meat supply of an entire region was devastated. When considering the risks of such dependencies and the exposedness of a geographically concentrated workforce to outside factors such as a virus, it becomes clear that the efficiency imperative may not only be hazardous to individual well-being, but also to business value chains and society at large.

All this is not to say that lean principles are a bad thing. Not at all. I am myself an advocate of eliminating waste in business processes. Lean as a guiding philosophy is great. But one must keep in mind that an unchecked, tunnel-view pursuit of efficiency is inevitably linked to dangers and risks. It may well be as Edward Tenner says: “A strategic amount of inefficiency is crucial in keeping society healthy”.

Featured post image: Photo by Bill Oxford on Unsplash

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