A guy named Chris Anderson wrote a book called “The Long Tail: Why the Future of Business is Selling Less of More” that is well worth the ten bucks it costs to get the Kindle version because it gets right at the heart of the reason lean manufacturers thrive and mass producers are as dead as Marley’s ghost – even though many are still dead men walking and haven’t figured it out yet.
Now Anderson doesn’t know anything about manufacturing – he is a technology guy so he only seems to be able to see the implications of his ideas through the lens of a computer screen or Google Glass - but that’s OK. He writes about a concept called the ‘long tail’. It basically revolves around the idea that there are lots and lots of products outside of the core, mass market; and the potential to see these small quantity variations may well and often does add up to the potential to sell as much or more than the guys who only sell the mainstream, mass market versions of the product.
Says Anderson, “Many of our assumptions about popular taste are actually artifacts of poor supply-and-demand matching— a market response to inefficient distribution.” He is exactly correct.
The nexus between the Lean tail theory and lean is really pretty straightforward. The Wikipedia description of Long Tail theory includes this: “The key supply-side factor that determines whether a sales distribution has a long tail is the cost of inventory storage and distribution. Where inventory storage and distribution costs are insignificant, it becomes economically viable to sell relatively unpopular products; however, when storage and distribution costs are high, only the most popular products can be sold.” Of course the Wikipedia contributors (to this piece anyway) don’t know nuthin’ about manufacturing either, so they too get hung up on technology as the key to making money out on the Long Tail.
Lean thinkers, however, should see the point immediately.
Whether you can make any money selling long tail products instead of mass produced stuff depends on the cost of “inventory storage and distribution”. The cost of “inventory storage and distribution” is obviously a function of just how much inventory it takes to support the market. Just how much inventory it takes to do anything is a function of lead time and variability. In as much as lean is aimed squarely and most importantly on cycle time compression, it is aimed at lead time reduction; which means less inventory is required; which means “inventory storage and distribution” costs are lower; which means lean companies can make a lot more money further and further out on the long tail than mass production, buy it from Bangladesh by the container-load companies can make.
Anderson and the folks at Wikipedia can see the digital examples with great clarity – books, music, etc… Not so much the physical stuff, but the manufacturers seen as ‘niche players’ making real, physical stuff – companies like my friends at West Paw Design – are making money based on precisely the same Long Tail principle.
In fact, just about every manufacturer in every segment of every market can make a lot of money by being a long tailer if they are lean enough.