Why you should be lean if you’re not already

Lean manufacturing is a way for companies in the manufacturing industry to improve themselves by taking a look at how they run their processes. It is a highly popular philosophy in manufacturing, but there are many who are still unfamiliar with why it works so well. This is a shame as lean can be crucial for a business, especially in manufacturing where margins can be small and small improvements in ROI can be significant.

Lean manufacturing looks to remove all sources of waste and improve all kinds of productivities. It was pioneered in Japan, evolving from Toyota’s approach to production. Below we explore several principles to lean manufacturing.

The 8 Wastes

Waste is bad; at the end of the day, it’s bad for your finances and it is bad for the environment in many cases. There are 8 wastes that lean manufacturing seeks to address:

  • Excess inventory – inventory management is key as unutilised storage and machines are a waste of money via depreciation or rent costs. Ideally, you should be using your storage and machines to full capacity the whole time, which means having a steady flow of raw materials going in and inventory going out.
  • Unnecessary movement of people or other resources – it’s basic physics that movement costs energy and takes time. Energy and time cost money. You should keep these to a minimum, having a production line that is automated and intuitive.
  • Unnecessary transport – this speaks for itself
  • Idling or reduced production time – this is especially important with employee management. Many factories have maintenance engineers on standby in case a machine breaks. While they are on standby, they are not being productive. Fix this by granting them additional training. Give them Skills Training Group electrician courses so they can fix electrical as well as mechanical issues. Give them some R&D training so they can brainstorm modifying machines to increase efficiency. It’s important to be creative and look outside the box when reducing waste.
  • Overproduction of a part or product, feeding into excess inventory – everything should be running at max capacity and your max capacity should be dictated by your sales. This is rarely possible, but try to get as close to this as you can.
  • Over-processing; putting more time into a product than a customer requires – it can be tempting to want to provide the very best quality product, but if this isn’t reflected by price and if the customer doesn’t have a need for the quality difference, you’re just wasting time and resources.
  • Defects – these need to be fixed as they increase costs. A system like Motorola’s six sigma is an excellent way of reducing your defects massively.

The 5 Principles

The book Lean Thinking: Banish Waste and Create Wealth in Your Corporation lays out 5 core principles by which a lean manufacturer should abide by:

Value

The manufacturer is making a product that brings value to a customer, so they need to have a very good idea of what the customer values. This will allow them to put a price on the services and products that they provide, allowing them to cut costs and waste in order to find an equilibrium between cost and price.

Value Stream Mapping

In order to find that equilibrium, a company needs to map the value stream. They need to look at the flows of materials throughout their business, mapping how each material gets treated as part of the manufacturing processes. At every stage of the value stream, the additional value should be calculated and sources of waste should be analysed and reduced.

Flow Creation

After the value stream is mapped, the company should create flow by analysing barriers to production and eliminating any that they identify. This will reduce interruptions and time to market, improving the cost effectiveness of the operation.

Establish Pull

A push system is when a product is put onto the market regardless of demand. A pull system is one which is sensitive to demand, where companies increase production alongside demand increases.

Kaizen

Kaizen is the Japanese principle of continuous improvement. It is to strive for perfection by making an improvement to the operation and efficiency every single day. By making small improvements every day, you will reduce waste, increase productivity, lower defects and improve employee happiness. The term means ‘good change’ and was initially achieved by putting quality control and improvements in the hands of the workers who know the intricacies of each stage of production more than the general overseers.

Kaizen

Although Kaizen is one of the 5 principles of lean manufacturing, it has evolved 5 elements that have helped to define it in action. Understanding the 5 elements of Kaizen is important to effectively implementing it and reaping the benefits.

  1. Personal discipline – if you have a busy day, it can be pretty tempting to not make sure that the kaizen improvement of the day has been made. You need to have the personal discipline to avoid this feeling; good habits are hard to make and bad habits are easy to develop. If you allow yourself to ignore kaizen for a day, you could do this the next day and the day after that.
  2. Teamwork – the economist von Hayek won a Nobel Prize for his observation that no central government can know as much about the economy as all the people who contribute to it. The same is true for your business. Encourage teamwork so information is shared and everybody benefits.
  3. Suggestions for improvement – these should be encouraged and rewarded.
  4. Quality circles – these are a small group of workers who meet to identify and solve work-related problems. They should be encouraged and supported.
  5. Improved morale – one of the problems that Marx saw with industrial capitalism is that workers only contribute a small amount to a product and don’t see the positive impact of that contribution on society. If each worker can make an improvement to the company, which is their community, their morale will improve, they will work harder, and they will be happier with their job.

It is worth noting that effective utilization of Kaizen takes time and the boosts to efficiency and productivity grow over time instead of being a sudden change.