For businesses, profit is a result of the price charged and cost incurred in delivering the product to the customer. In the present high competitive market, the price is market driven giving a very less scope for charging a high premium. However, to maintain good margins, many companies have turned their attention to lean manufacturing. Lean manufacturing enables businesses to increase production, reduce costs, improve quality, and increase profits by following five key principles: Specify a value, Identify the value stream, Establish flow, Pull value and seek perfection.
The lean manufacturing principles were formed by Eiji Toyoda and Taiichi Ono in Japan. The tools were collectively known as the Toyota Production System.
The Five Lean Manufacturing Principles
The first lean principle is about identifying and specifying the value for which the customers should be willing to pay. This is the first step to become lean. This step requires firms to define the value for customer’s value and how their products or services meet those values. It involves finding answers to “My product is solving which specific problems?”, “The specific product features for which my customers are looking to pay for?”
By designing products for specific needs, businesses can eliminate wasteful steps that may have been required for unwanted features. Design For Six Sigma is one of the tools which shall enable companies to define, measure, and analyze their customer needs. With the clear identification of value, companies can then design products best suited for their customers.
Identify the Value Steam
After identifying the customer’s value, identify the value stream. The value stream involves determining every raw material, process, machines, and labor required to get the product to reach the customers. The objective is to maximize the value as much as possible, eliminating wasteful effort.
Once the value stream is identified, it will be easier to eliminate steps that do not add customer’s value.
The third lean principle is establishing flow. With product value stream mapped, the activities are to be conducted in a sequence. With flow, items have a smooth progression from production to shipping without interruption which can be achieved by effective scheduling in the workshop. The goal is to have continuous and synchronized production with minimum inefficiencies and losses.
With a focus on eliminating waste, establishing a pull system ensures low inventory and wastages.
In a pull system, the customer’s order acts as a trigger for manufacturing of the good which prompts for purchasing of manufacturing supplies. The Pull system establishes a Just in Time model which has been used by various companies to optimize their inventory and working capital.
The final lean manufacturing principle is to seek perfection. With companies always looking to cut down costs, Lean Managers are required to identify opportunities for improvement in the value stream. Seeking perfection ensures that the companies continuously improve their internal practices by innovating and set high internal standards for a better future.
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