Lean manufacturing is a comprehensive term referring to manufacturing methodologies based on maximizing value and minimizing waste in the manufacturing process. Lean manufacturing has evolved in North America from its beginnings in the Toyota Production System (TPS) in Japan. Many of the most recognizable phrases, including kaizen, andon, and kanban, are Japanese terms that have become standard terms in lean manufacturing.
At the heart of lean is the determination of value. Value is defined as an item or feature for which a customer is willing to pay. All other aspects of the manufacturing process are deemed waste. Lean manufacturing is used as a tool to focus resources and energies on producing the value-added features while identifying and eliminating non value added activities.
In order to understand lean it is necessary to understand that lean focuses more on how we think about the manufacturing process than anything else. Lean manufacturing is the codification of a set of ideas that work in harmony. By identifying both who the customer is and how they define value, lean manufacturing allows companies and individuals to focus resources on adding value. By manufacturing to customer demand, driving out waste and continuously improving, companies can satisfy customers, employees and shareholders alike.
Manufacturing to customer demand includes the correct level of quality and features, in addition to delivery. In a lean environment, a pull system forces just in time deliveries. A small finished goods inventory is maintained and as the inventory is depleted it is replenished. Starting with the end customer, each new production order is pulled through the system. The goal of a lean organization is to be able to deliver the exact product in the exact quantity with the exact quality that the customer needs exactly when they need it.
One of the stumbling blocks to lean is understanding the concept of waste. In any manufacturing environment everyone works to minimize waste. However lean redefines waste. Traditionally waste has been viewed as an object. It is very easy to envision a barrel of scrap and identify it as waste. In lean manufacturing the term waste actually refers not to the physical material but rather the relationship of the resource to the end customer. In short, if the end customer won't pay you for it, it is waste.
One of the hallmarks of companies that are truly lean is a focus on continuous improvement. Although project-based changes are more typical, a lean environment lends itself to constant change. By being able to quickly identify and remove waste from the value stream, immediate gains are achieved.
Lean manufacturing techniques are used to increase profitability by reducing costs. By understanding how customers define value, costs that do not add value are reduced or eliminated.
Traditional View: Cost + Profit = Sales Price
In the above example the cost to bring your product to market plus profit dictates the selling price of a product. Particularly in our global economy this model is rarely reflective of current practices. Competition and customer demand will often set selling prices. By controlling your costs through eliminating non value-added activities, a lean manufacturing environment will directly affect your bottom line.
Lean View: Profit = Sales Price – Cost
When you implement and follow a lean path you should see direct cost savings by driving out waste. You will also see significant improvements in other areas:
- Employee morale and productivity
- Customer satisfaction due to reduced defects and improved delivery
- Faster time to market
Lean manufacturing is customer focused. Since the success of your business as a whole is due in large part on satisfying customer demands, lean allows your manufacturing activities to become more closely aligned with other company goals and activities.
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