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HomeProcurement/Supply Chain ManagementLean Management, Core Principles and Benefits

Lean Management, Core Principles and Benefits

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What is Lean Management?

Lean Management is inspired by the ‘Toyota Production System’ as developed by Taiichi Ohno, Shigeo Shingo and others. It took around 40 years to develop. Lean management is a management and work organization method which is designed to improve a company’s performance w.r.t. quality and efficiency by eliminating wasted resources like time, money and effort. It is also called as lean manufacturing or lean production.

Origin of Lean Management

The concept of lean management was first adopted by the Japanese manufacturing industry in the 1990s. Toyota was the leading business, which introduced this concept in its production system. Initially, it was a small firm which became successful on a global scale. Other manufacturers also inspired by its operational processes and adopted the similar technologies. Today, lean management is a proven methodology and is widely used all across the globe by many companies like Nike, Intel, etc.

Core Principles of Lean Management

There are five core principles of lean management which are discussed below:

Identify value

Value is basically defined by the customer. Every business should first identify the value of the products or services they are offering. What is the customer’s requirement? What is that for which the customer is willing to pay money. To find the answer of these questions is very important to identify the value of a product or service.

The company should be able to solve the customer’s problem. If the problem statement is identified and the company develops the capacity to solve the problem of customer effectively, then the customer will be willing to pay money for it. The identification of value of the product or service is therefore very important for a business.

Map the value chain

Once the value of a product or service is identified, the next step is to map all the steps and processes involved in the production of the item. The process can be in design, procurement, production, HR, customer service, etc. The processes and resources, that are not adding any value to the product are identified and eliminated from the value chain. The objective of mapping the value chain is to map the flow of material/ product through the process and keeping only those processes and resources which are providing value to the product or service. Mapping the value chain is also referred to as process re- engineering.

Creating continuous workflow

After mapping the value chain and elimination of wasteful steps, the next thing is to make sure that remaining steps and processes flow smoothly with no interruptions. The effort should be made to remove bottlenecks and breakdown the complicated steps into small parts to ensure smooth flow.

Pull

This principle states that once the organization achieves a capacity to identify value and to produce the product or service with less efforts, the organization should try to establish a pull system by adopting lean methodology. It means that the products and services should be produced only when there is a demand for those products or services. The resources should be optimized and used only when they are really needed.

You can also refer it as ‘Just in Time’ production or delivery. It means that the customer can pull the product whenever needed. The advantage of developing this system is that there is no need to make production of the products or services in advance or store them which results in extra effort and expenditure to manage the inventory. Lean methodology help the company to save a lot of costs and efforts by making the organization light w.r.t. processes as well as inventory.

Continuous Improvement  

Continuous improvement is the last principal of lean management. After establishing the lean management system through the above mentioned steps, the company should focus on continuous improvement of the processes. The continuous improvement is an ongoing process and every team member should be continuously involved in this process.

There are several techniques to achieve this, like, daily meetings, effective communication, better decision making at all levels, etc.  

Benefits of Lean Management

There are many benefits of lean management. Some of the benefits of adopting this method are as follows:

Optimum Utilization of Resources

Due to elimination of wasteful and unnecessary processes, the available resources may be well utilizing for the value adding processes. Therefore, the lean management ensures optimum utilization of the resources.

Elimination of Wasteful Processes

The primary objective of lean management is to eliminate the processes, which are not adding any value to the product. It is done by first mapping the value chain and identifying the processes, which are adding value to the products. The remaining wasteful processes are then eliminated from the value chain.

Improved Productivity

In the lean management method, the team focuses on creating value and therefore the productivity of the company improves.

Decrease in Cost

As the wasteful processes and steps are eliminated in the lean management and focus is made on limiting the errors and reducing rework, it results in the optimization of resources and saving a substantial cost while producing a value product. Lean management focuses on manufacturing and delivering the products only when the demand arises and avoids advance production and storage. This results in cost saving which would otherwise go into handling the excess inventory.

Increased Quality

Lean management focuses on decreasing number of defects and reducing rework. This can be achieved by optimizing the processes resulting in cost, resource and time saving.

Improvement in Work Culture

Lean management method helps in improving the work culture of the company. When the management pays attention at all the processes and eliminates unnecessary tasks and processes, the time and effort of employees is saved and the value is added to the product. Since every team member is involved in continuous improvement, it results in improving the work culture of the company.

Lean Management Tools

There are various tools available today, which can help an organization in implementing lean management practice. Some of most popular and useful tools are mentioned below:

5S

5S is about organizing the work area.

  • Sort
  • Straighten
  • Shine
  • Standardize
  • Sustain

5S helps eliminating waste that results from a poorly organized work area.

Andon

Andon is a visual feedback system for the plant floor. It depicts production status and alerts to the concerned team members. It also empowers the operators to stop the production immediately, in case of emergency. This tool helps in communication among different team members within the plant so that the problems be addressed immediately, as and when they arise.

Bottleneck Analysis

Bottleneck analysis is the process of identifying the problem area in the flow of production and strengthen the weakest link in the process to ensure smooth production.

Heijunka (Level Scheduling)

Heijunka is the production scheduling that allows manufacturing in small batches. This tool helps reducing lead time and inventory since the batches are small.

Just-In-Time (JIT)

There are two approaches of production. One is push method and other is pull method. In the push method, the production is based on the projected demand, while in the pull method, the production is based on actual customer demand. It means that only that quantity of product is produced, which is actually demanded by the consumer. The benefit of applying Just-in-Time methodology is that it helps in optimum utilization of resources and eliminates excess inventory which results in cost saving.

Kaizen (Continuous Improvement)

Kaizen is a strategy, in which all the team members work proactively to achieve incremental improvement in the manufacturing process.

Kanban (Pull System)

Kanban is a lean workflow management method for managing and improving services. This tool allows visualizing work and continuous improvement. In this method, the work is represented in Kanban boards, which allows better planning and handling various issues in a complex project.

PDCA (Plan, Do, Check, Act)

PDCA is an iterative method through which, continuous improvement is achieved.

  • P- Plan: Plan the work
  • D- Do: Execute the work
  • C- Check: Check for errors
  • Act: Review and assess, repeat again

The Value Stream Mapping

The value stream mapping is the process of visualizing and establishing the work flow of the production. It helps in identifying undesirable processes from the workflow, so that they can be eliminated.

Conclusion

Lean management is a management and work organization method which is designed to improve a company’s performance w.r.t. quality and efficiency by eliminating wasted resources like time, money and effort. There are five core principles of lean management, which are, (1) identify value, (2) map the value chain, (3) creating continuous workflow, (4) Pull and (5) continuous improvement. The advantages of adopting lean management practice are optimum utilization of resources, elimination of wasteful processes, improved productivity, decrease in cost, quality enhancement and improvement in work culture.

Lean management method of management is a widely accepted practice now a day across the globe and it focuses on creating value by incorporating ‘Just in Time’ methodology. The organizations should use this practice to improve productivity & to reduce costs of their manufacturing processes.

References:

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Rajesh Pant
Rajesh Panthttps://managemententhusiast.com
My name is Rajesh Pant. I am M. Tech. (Civil Engineering) and M. B. A. (Infrastructure Management). I have gained knowledge of contract management, procurement & project management while I handled various infrastructure projects as Executive Engineer/ Procurement & Contract Management Expert in Govt. Sector. I also have exposure of handling projects financed by multi-lateral organizations like the World Bank Projects. During my MBA studies I developed interest in management concepts.
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