Lean manufacturing systems were created by the Toyota Production system in Japan in the 1990s. They encompass five steps that aim to eliminate waste in a manufacturing process, leading to better customer value and reduced costs.
While Lean methodology has been around for decades, how to apply these principles to manufacturing in 2021 are new. Manufacturing faces an increasingly difficult landscape, especially in the wake of global disruption brought about by COVID-19. Learn more about how Lean methodology can be implemented in 2021 and beyond.
What Are the Five Lean Manufacturing Principles?
1. Define Value
While price is always a key decision factor in manufacturing, are you accurately defining the value of your product? Value is what the customer is willing to pay for, not necessarily the price of your product. Often with novel products or new technologies, customers are unable to articulate what the value is or they may not understand it themselves.
Using techniques like market research, interviews, demographic information and web analytics can help better understand what value your manufactured product holds.
Key Takeaway for 2021 and Beyond: A true understanding of what benefit your product adds for a customer is key, especially as many are tightening belts in less than ideal economic conditions. According to Deloitte’s midyear update to their 2020 Manufacturing Industry Outlook defining that value is playing out in manufacturing by many companies streamlining their businesses. Deloitte reports that many manufacturing companies that have historically had diverse business models are divesting from outlier products, and instead crystallizing around core value propositions for both customers and financial markets.
2. Mapping the Value Stream
The next step in lean manufacturing principles is to identify and map the value stream. What this means is that you should take the customers value, then pinpoint all the activities your business takes to contribute to these values. So-called “Value Added Activities” must be:
- Work that the customer is willing to pay for
- Work that physically transforms the product (or document/information)
- Work that is done right the first time
In manufacturing, this can mean drilling a product or welding a seam. But when using lean manufacturing principles to transform a whole business, it can also mean hiring, developing talent and improving processes.
Other business operations may be considered waste. Waste can be broken into two categories: necessary but non-value added or non-value added waste. An example of a necessary but non-value added resource may be extra inventory a customer has asked you to store. Waste in general is work that is not completed right the first time or extra transportation necessary due to poor layout.
By reducing and eliminating the unnecessary waste, you can work to get customers what they want while also reducing costs.
Key Takeaway for 2021: Eliminating waste is more important than ever this year. According to Deloitte, one way to reduce waste is to bulk up on digital muscle. This means eliminating friction in the production cycle through tools like artificial intelligence, cloud computing, advanced analytics, robotics and even additive manufacturing. By building digital muscle you can eliminate waste areas and improve the next step, flow.
Download our eBook: Everything You Need to Know About Manufacturing Staffing
Discover the historical context, recent data, and best practices for staffing manufacturing jobs in America. Download our eBook, “Everything You Need to Know About Manufacturing Staffing” for data-driven strategies for staffing manufacturing jobs.
3. Creating Flow
After you’ve identified value-added steps, now you must make sure your product and business are moving through these positive areas in an efficient manner without delays. Some initiatives you can use to improve flow include breaking down steps, reconfiguring the order of production steps, leveling workloads and ensuring you have proper staffing levels and training employees to be multi-skilled and adaptive to reduce waste.
Key Takeaway for 2021: According to PricewaterhouseCoopers 2020 Manufacturing Industry Trends, manufacturing had a historically tight labor market in 2019 and despite the rise in unemployment due to the coronavirus pandemic, restrictions on movement are reducing an already limited talent pool, especially when it comes to the STEM graduates who drive manufacturing innovation. PwC also notes that the workforce is aging. For the first time since 1948 in the US, those old enough to retire now outnumbering those just entering the workforce. This means hiring the right skilled workforce is both more important and harder than ever before.
4. Using a Pull System
A pull-based system means you manufacture products to meet actual demand. Excess product, unless required by your customers, is a major waste in the lean manufacturing principles. This is compared to a push-based system, which would be generating enough product to meet expected demand.
Key Takeaway for 2021: Amid the coronavirus pandemic, there has been major fluctuations in demand across industries, with obvious examples like cleaning supplies struggling to meet demand. According to the Michigan Manufacturing Technology Center, using a pull system can make manufacturers nimbler and able to meet specific customer demands with shorter lead times due to having little work in progress that isn’t earmarked for customers. This can also lead to less waste in the factory and storage, especially when compared to a push system.
5. Pursuing Perfection
While perfection in any business, especially manufacturing, sounds near impossible, according to lean manufacturing principles one should always be working toward that goal. You should constantly look at the lean system and manage toward perfection so that the number of steps and the amount of time and information needed to serve the customer continues to fall.
Key Takeaway for 2021: According to Deloitte, one way manufacturers are moving toward eliminating steps is through partnerships. Recent Deloitte research showed that a group of digital front-runner manufacturers were executing in areas such as improving customer experience or creating new business models much faster than others. According to Deloitte, these top-performers pursue partnerships to create new business models at 5x the rate of others and to create new value for customers at 2x the rate of others. Joining in partnerships eliminates waste in the lean model, be it in outsourcing supplies or training staff.
Lean Manufacturing Principles Apply to All Aspects of Your Business
While lean manufacturing can sometimes be applied to the actual process of welding and handling products, it is also a beneficial mindset for your entire business. Working toward value in all aspects, from talent acquisition to business operations, can help reduce costs and increase productivity. Another area of waste in the Lean method can be worker productivity. To learn more about how to get the most out of your most precious resource — workers — consider the webinar The Leader’s Edge: Improving Employee Performance No Matter What the Job!
If your organization needs manufacturing staffing services, we can help. At TERRA, we understand the dynamic needs and shifting demands of the manufacturing industry.