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What is Lean Production and how do Businesses Take this Approach?
What is Lean Production?
Lean production is ultimately an attempt by businesses to lower costs by reducing the total amount of waste in the manufacturing process. However, instead of reducing waste carelessly, lean production seeks to only cut waste in areas which do not give the company monetary value.
If a factory was in the process of lean production, they would not make staff redundant to cut costs (as this would lower quality) but would instead strive to improve the efficiency of the workers, meaning that more goods would be able to be produced. This would reduce the amount of time taken to produce goods, therefore costs would be lowered in terms of time while quality remains at the same standard.
The general consensus is that lean production originated as a concept in Japan, although it is difficult to tell where the growth of lean production took place. The prestige of lean production seems to blossom when witnessing the growth of Toyota Production Systems, which now has a stock exchange price of ¥8066 - roughly $67.8 as of February 22nd 2015. Due to the significant growth and competitiveness of Toyota and other companies due to lean production, it is interesting to see how the concept of lean production is achieved.
How can a Company Move Towards Lean Production?
There are several methods a business can use in order to cut costs while keeping the quality of its products at a high standard:
- Simultaneous Engineering - This seeks to allow a company to develop and release a new product quickly and efficiently. Rather than individually focusing on the departments for a new project, simultaneous engineering allows all departments to work together in a parallel fashion. This method of lean production is more likely to make a company more competitive; if a business is able to release new products more quickly, they will obtain first mover advantage and be able to charge higher prices for their products as less efficient competitors will not release rival products for some time after. By working simultaneously, a business is also less likely to discover faults in their products as communication between departments will be more fluid, making the product more reliable.
- Time-based Management - This attempts to lower waste in terms of time. Often, firms which are slow to respond to changes in the market will fall behind and become uncompetitive. Therefore, businesses moving towards lean production will attempt to respond the fastest to changes in the market and business environment. Bosses may go about this by ensuring that workers and machinery are flexible and able to switch production as fast as possible. Effective use of time-based management will likely make a company more competitive as they will release new and modified products before competitors.
- Just in Time Production - This is a risky method of cutting unnecessary costs but also highly efficient if used correctly. Just in time production seeks to keep storage costs low by ordering deliveries of goods and materials to arrive as soon as they are needed. For example, a car producing company would seek to receive a delivery of tyres to arrive as soon as the business runs out of tyres. If this is not planned correctly, businesses could face serious trouble as they may run out of resources needed to manufacture goods. Companies nowadays tend to use complicated software and communicate regularly with suppliers in order to ensure that goods arrive "just in time". Should just in time production be effective, there will be minimum storage costs for a business.
- Cell Production - Cell production aims to motivate workers while, at the same time, making production more efficient. Each group of workers will be split into teams and given a "cell", which focuses on a specific area of the finished goods. This is likely to lead to better communication within the business while workers will take greater pride in their work as they will fell it is their own. Workers will also rotate jobs regularly to prevent them from finding the work dull and demotivating. The fact that workers will rotate jobs also gives them a wider set of skills, meaning that employees can change jobs smoothly when required if needs change.
- Total Quality Management - Total quality management, or TQM, puts quality at the heart of the business and seeks to improve the prestige of a business while at the same time cutting costs by reducing the numbers of faulty products. TQM aims for complete customer satisfaction with zero defective products. Should this feat be achieved, the business would become highly competitive and would be likely to see large increases in demand as a result.
Would you be persuaded to push for lean production if you were the boss of a company?
Beneficial but Risky
It is clear to see where the advantages in lean production lie. Lower costs will allow companies to expand while, at the same time, maintaining or having increasing quality will keep the prestige of the business high. However, it should be noted that some aspects of lean production are risky and should be undertaken with precaution. With the likes of Toyota benefiting from lean production, it is evident as to why more businesses are aiming to move towards lean production.