Updated: Aug 8, 2019
WHAT IS LEAN?
The main idea behind lean is to maximise customer value while minimising waste. Adopting Lean creates more value for customers with fewer resources.
‘Customer value’ is the value of your products as perceived by their customers.
The value stream is a sequence of activities and process steps that are essential to creating and developing a product.
A lean organisation understands customer value and focuses its fundamental processes on increasing it continuously. The ultimate goal is to provide perfect value to the customer through a complete value creation process that has zero waste.
Womnack & Jones define three fundamental business issue that should guide the transformation of the entire business
"Thinking deeply about purpose, process, people is the key to doing this."
· Purpose: What customer problems will the enterprise solve to achieve its mission of prospering?
· Process: How will the organisation assess each primary value stream to make sure each step is valuable, capable, available, adequate, flexible, and that all the steps are linked by flow, pull, and levelling?
· People: How can the organisation ensure that every critical process has someone responsible for continually evaluating that value stream regarding the business purpose and lean operation? How can everyone touching the value stream be actively engaged in operating it correctly and continuously improving it?
Why does the business need Lean?
Improved Customer Service
As the first principle of Lean is identifying value as perceived by the customer; customers will be given what they want, when and where they need it.
A company is successful as long as the customers are satisfied. If a company always supplies top quality products and services on time, at the right place, those happy customers are going to keep on returning, allowing the business to thrive.
One of the significant advantages of implementing Lean into the organisation is getting more done with fewer people. When waste is reduced, there is less space and workforce required to manage.
Waste is a significant product of any process.
The Lean method concentrates on improving process speed and quality through reduction of process waste. Waste consumes energy, money, and is of no value to the customer.
In The Lean Approach, reduced waste means less transport, less moving, less waiting, less space required and reduces all variations throughout the process
With a lean culture, all employees are personally invested and responsible for continuous improvement, from high-level managers to front-line staff, the entire business focuses on new ways to work efficiently, increase value and deliver better service to clients and customers.
If the Lean principles are correctly set in the company, the economic benefits are highly significant. A happy customer will make any business operate without a hitch. The reduction in waste and defects adds extra money. The money saved on product storage and inventory management adds additional cash flow in the company. However, fewer employees mean additional training for workers, but with clear work instructions and standardised work, the job is quickly and more eagerly performed. Managing satisfied workers is efficiently conducted and makes any business prosper in the long run.
Lean is very lucrative since it can reduce costs, eliminate waste, increase productivity, maintain high levels of quality and thus make a significant increase in your profit.
What is Lean Not?
Most people think Lean management is the same as cost-cutting measures, but this is not true. Comprehending the difference between the two is crucial. Lean management eliminates waste from all aspects of operations while cost-cutting focuses on reducing expenses.
A closer look at each:
· Delivers value to the customer
· Has a team centred approach
· Focuses on quality improvement
Many small steps lead to significant changes
· Focuses on continuous improvement
· Goal is to eliminate waste
· Focuses on the bottom line only
· Unilateral decision making
· Quality is hardly considered
· Targets large impact changes
· One opportunity to get it right
· Wasted effort if cuts were not sufficient?
Let's get clearer with an example.
A hiring freeze scenario, regular equipment maintenance not performed to save costs, travel and training bans switched on
During a hiring freeze scenario initially, many employees leave for other opportunities and only loyal employees remain. Eventually, loyal employees also go as work pressure mounts, and dissatisfaction occurs, in the end, there are lot fewer employees than initially planned.
When regular equipment maintenance is not performed complication occurs, and the machine starts to break down. New equipment cannot be purchased due to spending freezes, and hence fewer products are produced due to downtime which results in an ultimate loss of revenue.
Travel and training ban results in a deficiency of learning and business development effort slackens.
All these issues lead to irritated customer and loss of sales; to counter this the sales team may offer reduced price which will lead to further cost-cutting measures, and the cycle carries on.
What happens when you go Lean?
1. Product quality improves because potential problems are identified before they can even occur
2. The elimination or reduction of waste happens on all levels in a Lean operation.
3. Reduced waste reduces costs and increases profitability.
4. Lean processes identify bottlenecks and wait times slowing the production process. Tools like value stream mapping determine the future state of production without bottlenecks.
There are many differences between lean processes and cost-cutting measures. Lean methods focus on efficiency, quality enhancement and banishing waste. Cost cutting seems like a last-ditch attempt to minimise spending to meet the bottom line. Once those cuts are made, and the bottom line is still not realised Lean processes will be the only real option to pursue.
Lean is not just for a Manufacturing organisation.
A popular misconception is that lean is suited only for manufacturing. Not true. Lean applies to every business and every process.
In the next Blog let us explore in detail of how Lean is used in other industries with examples from different sectors.