All major decisions in business should be accompanied by reasoning that helps the company in the short and long term. So, what are the short- and long-term benefits that have made lean manufacturing such a popular manufacturing process and discipline among major global manufacturing companies such as Toyota, GM, and Forbes? More importantly, what does your business have to gain by adopting the lean manufacturing strategies? You should have answers to those questions and more by the end of reading this post.
What is Lean Manufacturing: History and Introduction
Lean manufacturing principles originate from Japan and the core methodology is thousands of years old, but the modern concept of lean was first applied successfully by Toyota in the 1930s. The term “Lean” was later coined in 1988 by a young John Krafcik, while the principles were modernized and detailed by his mentor James Womack, along with Daniel Jones later in 1996. It should be noted that even Womack’s interpretation of the lean manufacturing method was derived from ‘The Toyota Way’, which is the lean manufacturing process that the Japanese automobile giant follows even today.
It should be noted that there are several interpretations of the core idea behind lean and they do differ quite a bit, depending on factors such as who interpreted them, when they were interpreted, and for what. Nevertheless, we can summarize the core ideas behind lean manufacturing as follows:
- Defining what the customer wants the product to be, aka, the value of the product to the customer.
- Identifying what steps should be taken to manufacture the defined product.
- Eliminating every unnecessary step that doesn’t add that predefined value (step 1) to the product.
- Reducing the time gap between the identified and defined steps to create a seamless flow of work.
- Eliminating resource wastage by adopting an on-demand manufacturing strategy that produces only what is ordered/required.
- Reexamining the five steps already mentioned and further refining it before and during the next cycle.
- Continuing the cycle until perfection is reached and a customized lean manufacturing process is established.
- Continuing with the evaluations without making any sudden changes to the established process.
As you can probably see, any manufacturer in any sector can only gain by eliminating wastage of resources, manpower and time. This is exactly what has made lean principles so popular now. To properly learn what is lean manufacturing in the digital age, and how executives and/or business owners stand to benefit by learning about its practical applications, consider taking an online course in lean manufacturing from Kettering Global University. As for the main benefits of lean, that’s what we will discuss in brief next.
Raising Value by Lowering Production Costs
If a manufacturer did not have to spend as much money in their production process as they are spending now, then they can only become more profitable from each sale. It might be possible to do so by simply defining what is it that the customer wants. Most manufacturers make the mistake of wrong value assignment, which means that they invest more money in manufacturing a product than they should.
All customers have a set, maximum budget per product and they are not willing to pay more for features that they do not need. Lean suggests that the production process can be made more valuable by identifying and eliminating those unnecessary features from the product. Since the customer has no need for those features, losing them makes the product more valuable for the customer, as it becomes more affordable and suitable for them. The manufacturing cost per product also goes down consequently, but the sales rate increases at the same time.
Increasing Profits by Decreasing Steps
The more steps that can be eliminated from the production and assembly process, the less each batch will cost to manufacture. However, lean methodology warns that:
- The distinction between necessary and unnecessary steps must be properly validated.
- No eliminated step should reduce the defined value of the final products to customers in any way.
An excellent example of eliminating steps would be that of removing unnecessary bureaucracy from the factory. By simplifying the chain of command and removing unnecessary and irrelevant individuals from communication lines between factory workers, supervisors, and management, it is possible to establish a tight workflow that proceeds without halts at every small hitch. This naturally makes each manufacturing unit more productive, while encouraging employees to be proactive and communicative.
Creating Reputation in the Market with Higher Quality
Reputation is everything in the business, especially when we are discussing a core industry such as manufacturing. Lean methods are oriented towards not only establishing a positive reputation, but also to improve on it, and maintain it through the years.
If you go back to the first section of this post and read steps 6 and 7, you should be able to understand exactly how that works. By refining every production cycle with knowledge and experience from the previous one, the quality and perceived value of the new products can only improve with time. Of course, established processes must also be changed with time to keep them up to date, which is exactly why the evaluation process does not ever stop in lean.
Reducing Losses through Excellent Inventory Management
Inventory management used to be a pain to deal with in manufacturing and applying lean to it always involved the risk of underproduction. Even then, underproduction was a preferable option than overproduction, as it helped in eliminating losses, albeit at the cost of losing out on an opportunity to generate more revenue.
In 2021 and beyond though, that is no longer an issue, thanks to digital technology. With the help of data analytics, it is possible to estimate inventory needs quite accurately these days, which has made lean even more successful than it was previously in reducing losses due to overproduction. On-demand production is not just about reducing losses anymore, but also about maximizing revenue and profit generation as well.