For businesses focused on maximum efficiency and continuous improvement, lean management principles have a lot to offer.
Quick takeaways if you’re in a hurry
- Lean management focuses on the elimination of waste to drive greater efficiency
- Lean began as a set of continuous improvement principles that were applied in Japanese manufacturing, but its principles are now adopted by a varied and diverse range of industries
- Start up businesses can benefit from Lean management processes when they evolve their product prior to finalising the concept.
Read on: Reach maximum efficiency with lean management principles[estimated reading time: 9 minutes]
Lean management is a set of continuous improvement principles that has been implemented with varying success across different industries. The principles of Lean began in the Japanese manufacturing industry, and have most famously been adopted successfully and developed by Toyota into their Toyota Production System. But the waste reductive theories that underpin Lean practices actually trace back far into history.
Lean as a phrase is much more modern, and was coined in 1988 by John Krafcik in his article, “Triumph of the Lean Production System” based on his master’s thesis, which went on to form the foundations to the now international best-selling book The Machine That Changed The World, co-authored by Jim Womack, Daniel Jones, and Daniel Roos.
What is Lean Management?
In effect Lean principles provide a more efficient and effective way to do business. A commonly held view is that Lean is represented by the toolkit of techniques and practices that support the elimination of waste. However the Toyota Production System holds that Lean is the practice of eliminating waste, and the tools are secondary, providing ways to make that happen.
The elimination of waste
Originally in Lean practice waste was defined by the three Japanese words: muda, muri and mura. For modern Lean practitioners waste exists in 8 states, which are defined as: defects; overproduction; waiting time; un-utilised talents; unnecessary transportation; excess inventory; extra motion; extra processing. The principles of Lean focus on reducing these forms of waste across the entire business and thereby driving positive benefits.
Cost reduction is a natural side effect of successful Lean management practices. What is important is that cost reduction is not the formative thought that drives the Lean process, but rather that it is the output from the reduction of waste. Cost reduction can come from a range of practices such as more efficient use of resources; less stock-piling of materials and products; and removal of product elements that do not add value to customers.
Perfect work flow
Perfect work flow is a target of Lean manufacturing, as it eliminates many of the different types of waste. Perfect work flow is achieved by mapping the value stream (value stream mapping) from the beginning of a process through to the end customer, and identifying then eliminating any element which is non-essential or does not add value.
Another element of perfect work flow is achieved by managing defects by avoiding peaks and troughs in workflow. A good example of the detrimental effect of inconsistent workflow would be a production plant who have a quarterly production target to meet and so put in extra time and increase the speed of production in order to achieve it.
The inevitable output of the stress on both workers and machines would be seen to be an decrease in quality levels due to both machine and human errors. Lean practices avoid placing their people or equipment under physical or mental stress as it is believed that natural limits should be managed for optimum productivity.
Efficient use of resources
Lean has a strong reputation for efficiency and this translates to a smooth production flow often referred to as ‘right things to right place at right time in right quantity’. This is a direct path both to improved quality and reduced stock piling.
Materials are only purchased as they are needed thanks to a Kanban or trigger, which indicates optimum reordering points for minimum stock holding. Similarly companies do not manufacture large quantities of product which cannot be sold, as there is no value in product that rests in a warehouse.
People and machines are also regarded as resources, and so the consistency of operation supports quality as neither are put under undue strain and therefore good production practices can be adhered to and optimum processing delivered.
Increased value to the customer
Lean management principles extend beyond the production line to the design of the product itself. A focus on eliminating extra processing requires that the configuration and attributes of a product be evaluated to ensure that they deliver value to the customer.
Any element that does not add value translates to a waste of resource throughout the manufacturing and production processes, and in the product itself. Removing non-value-adding attributes contributes to the efficiency of the product and the removal of waste.
One of the best recognised principles of Lean in the broader business community is the practice of continuous improvement, but like many Lean processes it is open to misinterpretation. Continuous improvement is successful as part of Lean because it is a cultural tool that is embraced from the top of the business down, and is adopted by every member of a company.
Continuous improvement empowers workers by clearly communicating goals and strategies. Staff are then challenged to create smart strategies for improving their own processes in order to contribute to those goals. The process focuses upon an iterative cycle of PDCA (Plan Do Check Act) which is recognised as effective as it allows the evolution of processes and the adoption of continuous improvement.
PDCA has more recently been championed as an effective tool for start up businesses, where it is increasingly recognised as a smart strategy for evolving a product concept before fully conceptualising and materially producing it.
PDCA allows entrepreneurs to quickly bring to life their ideas and then incorporate feedback. By evolving both creative design and financial thinking they can quickly progress to a product that achieves targets by meeting the needs of their customers and their financial goals.
Creativity and innovation from the ground up
Lean manufacturing processes create a culture of ownership. Staff are empowered to make their sphere of influence as free of waste as possible. And because efficiency is increased and waste is reduced, it becomes possible to instil in the workforce a culture of creativity and innovation.
People become involved in ideas for improving processes and become increasingly engaged in working collaboratively to bring greater success to the business. Problem solving leads to creative thinking and those who build the product are challenged to come up with ways of innovating and improving the product in a way that adds further value without increasing waste.
Lean manufacturing may focus on eliminating waste, but it’s success is in the complete package of waste elimination, improved efficiency and increased staff engagement. From the customer’s perspective they can rely on consistent product quality and standards of service.
From the employee’s perspective they are involved in the decisions that affect they way that they work, and they are empowered to improve their own productivity and influence the success of the business. It’s easy to see why Toyota see Lean as more than just a toolkit and believe that the reduction of waste is really the core principle.
“Only the last turn of the bolt tightens it – the rest is just movement.”
Shigeo Shingo, Japanese Industrial Engineer and leading expert on manufacturing processes and Toyota Production System.
Invoice Finance, Cashflow Solutions and Business Loans
Fifo Capital are experts in cashflow solutions for small to medium business. Find out more about invoice finance and our fast business loans here: