A large number of businesses around the world have adopted lean manufacturing methodologies to gain a competitive edge faster. Several advantages are associated with lean manufacturing including higher productivity, reduced operational costs, improved quality and profits as well as minimized wastage. The term Lean has always been associated with the Toyota Motors Corporation. The company developed several lean tools and techniques in the 1950s. The company was faced with a large number of challenges at that time and needed to find ways to grow its efficiency and produce more using less capital. With time the importance of lean principles or lean methodologies has grown and apart from manufacturing, lean methodologies are also being applied in the other areas of business operations. The use of lean focuses on the elimination of waste. Lean methodologies are called lean because they enable businesses to achieve more while spending less. Lean organizations achieve more even while using less equipment, human efforts or facilities. However, lean is not just another cost-cutting measure like the ones used across a wide number of organizations. More than cost-cutting, lean is about conserving valuable resources through the elimination of wastage.
The following are the five core principles of lean that James Womack and Daniel Jones have identified in their book Lean Thinking.
Identify value from the customer’s perspective:
The first important step for any business organization towards becoming lean is to define value from the customer’s perspective or identifying what the customers value and how a product meets their needs. While it may sound like a generic statement, understanding value in the real terms is a little complex. Managers must define value in terms of specific products. It means managers should know how each product meets the needs of specific customers at a specific price and at a specific time.
Mapping the value stream for each product or service.
The second core principle in the lean framework developed by Jones and Womack is describing the value stream or value chain for a product or service or for a group of products or services in some cases. The value stream like Porter’s Value chain includes a set of activities that the business performs to bring a finished product to the customers. Apart from the direct manufacturing activities or the primary activities, the value stream also includes secondary activities like order processing, purchasing, and materials management. Business managers need to develop a detailed map for each of the activities involved in the value stream. Mapping each step helps identify wastage at each stage. Usually, managers can identify a huge amount of wastage while mapping each of the stages in the value stream. By mapping the value stream the managers can identify the stages which are adding the most value to the finished product. Apart from that it also helps them identify the steps that add no value but cannot be eliminated due to several reasons or eliminating which can cause losses or disrupt operations. Moreover, they can identify the stages that add no value and can be eliminated immediately or at least be reduced substantially to minimize their negative impact on production.
Create flow in each value stream:
The third core principle of lean manufacturing is embodied in the word flow. By mapping the value stream and identifying the nonessential processes, managers can eliminate them so only the necessary and value-adding activities remain. The basic idea behind the third core principle is to arrange the remaining activities sequentially so that products move smoothly from one stage to the next. However, bringing flow does not mean just making the movement of products smooth and easy. Flow is the opposite of the traditional Batch and queue model of manufacturing. Under the batch and queue model products, the people and equipment were organized and located by function and products as well as their components were manufactured in large batches. The lean organizations follow a different principle. Instead of producing in large batches, they produce in smaller batches. This allows them to improve flow while also reducing their operational costs and increasing their production flexibility.
Produce at the pace of actual customer demand:
The fourth core principle of lean manufacturing is to produce at the pace of actual customer demand. It allows companies to respond to the actual customer demand rather than anticipate demand and produce in advance. Compared to the batch and queue model, one major advantage of the lean model or continuous flow production is that the lead times fall dramatically. With reduced lead times and higher flexibility, the companies can efficiently respond to the actual customer demand rather than trying to predict the level of demand in advance. The batch and queue models often led to larger inventories in stock. Compared to that the lean model lowers the finished goods and work in process inventories substantially.
Continuous improvement across all business operations:
Lean manufacturing or lean management seeks continuous improvement without which all the hard work the managers have done will be wasted. In Japanese, this principle is expressed in the word Kaizen. Lean organizations believe in continuous improvement to the business processes or that any business process always has further scope for improvement. They conduct Kaizen events regularly in order to make continuous improvements to specific processes and operations. Today, even while Toyota is recognized as one of the leanest organizations in the world, it is still striving for continuous improvement.
Example of Kaizen at Toyota:
At Toyota, Kaizen is one of the core principles related to production management. The company had adopted this principle so that standardized work processes are followed at every worksite. This philosophy is focused on continuously improving efficiency in terms of work processes and equipment. Since the employees follow the work processes consistently, any type of problem in the production stream can be identified and addressed promptly. Kaizen has generated great benefits for Toyota including wastage elimination, reduced operational expenses as well as higher dedication from employees. At Toyota, Kaizen starts at the early stages of the production process and continues until the end supported by a process that Toyota calls Nemawashi.