Anorexic Processes

Sometimes processes can be too lean. When this happens, human labour (the variable input) is unable to sufficiently work a firm’s physical capital (the fixed input) – its equipment, machines and technology. In a word, a process can become labour constrained.

Labour constrained processes are anorexic. Because there is insufficient variable input (labour) relative to the firm’s fixed input (physical capital), output (or total product) is lower than it should be, given the firm’s stock of physical capital. As a result, the firm is unable to maximize its profit.

Process anorexia often occurs as a result of either misguided policies or indiscriminate cost-cutting. Policies that specify hiring a lower than required level of labour, or those which seek to overburden employees, can result in a labour constraint. Similarly, downsizing or indiscriminate cost-cutting can often result in too little labour to work a firm’s physical capital. The solution, in both cases, is to remove the cause of the constraint.

In the short run, rational producers will try to produce in that area where the average product and marginal product curves cross and before marginal product goes below zero. Good Lean practitioners raise the marginal product by increasing process value-add. Lean processes are efficient, but they are never anorexic.

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