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 are new. Manufacturing faces an increasingly difficult landscape. Learn more about how Lean methodology can be implemented.
What Are the Five Lean Manufacturing Principles?
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: A true understanding of what benefit your product adds for a customer is key, especially as many businesses continue to contend with economic uncertainty and supply chain issues. According to Deloitte’s Manufacturing Industry Outlook, 80% of surveyed manufacturing executives were heavily impacted by supply chain disruptions over the last 12-18 months. Manufacturers can safeguard their value by diversifying their supplier base to keep momentum and boost their local capacity to avoid problems with transportation.
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: Eliminating waste is more important than ever. And many manufacturers are taking steps to reduce waste through sustainable production methods. Investors, customers and even employees are showing interest in businesses that are environmentally conscious and demonstrate an effort to produce as little waste as possible. Plus, sustainable strategies are good for business and can help lower expenses.
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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: According to the National Association of Manufacturers Trends for 2023, the need for skilled talent continues to hurt operational efficiency. Manufacturers can bolster talent retention by offering better pay and benefits and creating a welcoming workplace culture where everyone has a voice. And by cross-training and upskilling current employees, manufacturers can address the need for skilled talent and provide career incentives for staff to stay.
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: There have been major fluctuations in demand across industries in recent years. And according to the National Association of Manufacturers, another recession may be on the horizon. Using a pull system will better prepare manufacturers for abrupt changes to customer demands. Reexamining the cost of warehousing, exploring material substitutes and transportation alternatives, for example, will help manufacturers reduce waste and gain more operational control.
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: One way manufacturers are taking steps toward perfection is through implementing advanced technology. According to Deloitte, manufacturers with “higher digital maturity” have shown more resilience and are better able to adapt to the demands of the industry. Using tools such as the cloud and smart factories will set up manufacturers and their staff for success, creating a better customer experience.
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.
(Editor’s Note: This post was originally published in November 2020 and has been updated for freshness, accuracy and comprehensiveness.)