Scrappy companies keep their production lean. Rather than indiscriminately manufacturing as much as possible, these resourceful businesses work with tight timelines and quick turnover to target output to meet demand and use as few resources as possible. Lean production takes savvy and ongoing pivoting, but it saves time and money and makes your business a much smarter operation.
TL;DR (Too Long; Didn't Read)
Lean production is an approach to manufacturing that focuses on reduced waste, low inventory and efficient systems.
Lean Production Meaning
Lean production is both a guiding principle and a set of methodologies that can be adapted to just about any manufacturing operation. The overarching idea behind lean manufacturing is the reduction of waste from every aspect of production. The waste to be eliminated includes both wasted time from processes that take longer than necessary, and wasted money and materials through systems that don't make the most of available resources.
But any lean production definition would be incomplete without also covering the specifics of how waste is minimized. Although any waste reduction strategy could be classified as lean simply because it increases efficiency and makes effective use of resources, the body of knowledge that falls under the scope of lean manufacturing emphasizes a core group of ideas, including kaizen, or continuous improvement.
Like lean production, kaizen is both a mindset and a methodology. In broad general terms, it is simply an orientation that always strives to do better. In practice, it also involves a systematic approach to analyzing the causes of current inefficiencies and then seeking better solutions.
The Importance of Inventory
It is impossible to define lean production without emphasizing the importance of lean inventory, one of lean manufacturing's central tenets. This particular efficiency can be achieved by minimizing both the amount of raw material inventory that your business has on hand as well as the inventory of finished goods that your business has manufactured.
Reducing your inventory of raw materials helps you to keep your cash liquid rather than tying it up in items that may sit on your shelves for weeks or months. No matter how well you understand the rhythm of orders that your business receives, you will never be able to predict future customer purchasing with complete accuracy.
Consumer tastes change and competitors enter the market, putting dents in your sales. By holding off on buying raw materials until you know precisely what your customers have ordered, you can reduce inventory waste by targeting your purchasing to materials you will actually use.
Reducing your inventory of finished goods allows you to similarly invest your labor and materials in ways that are as closely aligned as possible with the orders you receive. Traditional manufacturing relies on the idea that you achieve economies of scale by streamlining production processes and making as much stock as possible once you set your production processes in motion. Lean inventory management sacrifices some of this production efficiency for a more sophisticated approach to waste reduction as you avoid stockpiling finished goods you may not sell and keep your warehouse clear rather than cluttered.
Other Lean Manufacturing Principles
- Defining value. If you understand what matters to your customers, you can devote your resources to making the most useful product in the most efficient way rather than wasting energy by shooting in the dark. A clothing manufacturer who does the necessary research to learn that consumers want more durable fabrics will avoid wasting materials and production time on lightweight versions that may be more fashionable or less expensive to produce, but don't meet customers' needs.
- Understanding value. Value has both tangible and intangible dimensions, lying in both the quality of materials and workmanship, and the effective use of resources. Your company may manufacture efficient heating systems using environmentally friendly energy sources but if you're installing them in homes that aren't properly insulated, your customers will still use more energy than necessary. Lean manufacturing takes a deep and broad look at value and problem solving, thinking outside the box to bring about the most efficient outcomes.
- Maintaining flow. It takes considerably less energy to keep an engine running than to start it up when it's cold. Unnecessary stopping and starting interferes with production efficiency and has no place in lean manufacturing. Maintaining equipment, scheduling personnel and having necessary raw materials on hand when you need them all help to keep your operations flowing as efficiently as possible.
- Synching with demand. Lean production is driven by customer orders rather than by a company's manufacturing capacity. By making only what your customers need and only what you know you will be able to sell, you can avoid the waste that comes from making items that only collect dust, and being insufficiently prepared to provide the items that your customers actually order, when they order them.
Types of Waste
Because lean manufacturing focuses on eliminating waste, its proponents have given considerable thought to identifying the many ways that a business may use more resources than necessary.
- Unnecessary mistakes. It takes considerably more resources to redo an order or fix a mistake than it does to get a process right the first time around. Not only do mistakes take extra time and money to correct, but they also divert your energy from more productive endeavors and they cost you customers, forcing you to put additional resources into sales and marketing.
- Unnecessary movement. This may involve time wasted moving back and forth between pieces of equipment that aren't optimally located or making too many trips to the storeroom for parts. A lean production process should be designed to eliminate unnecessary steps and motions so that work can flow continuously and easily.
- Overprocessing. Although lean manufacturing principles emphasize ongoing improvement, it is wasteful to give your customers more than your costs can bear and more than you really need to put into achieving value.
- Waste of talent. Your personnel are an invaluable resource, and it doesn't cost any extra to hear their voices when they bring good ideas to the table. Not only will this respect and openness improve your bottom line by allowing you to incorporate observations from all levels of production, but it will also improve employee morale when your staff feels that their ideas have been heard.
Lean Production Advantages and Disadvantages
Lean manufacturing saves your business money by eliminating many types of waste. It also helps to keep your customers loyal by providing them with consistently high-quality products. Your staff benefits from lean production as well by having the opportunity to be more engaged in processes that allow space for their unique and invaluable contributions. Improved profits, customer loyalty and employee engagement all help your business to thrive in both tangible and intangible ways.
However, lean production isn't always easy to implement. It's easier in the short term to stock up on inventory than to pay close attention to levels on hand and order as close to a deadline as possible. This "just in time" approach to inventory puts you at risk of not having what you need when you need it, and introducing inefficiencies to your production processes as you wait for new shipments to arrive. Order delays lead to customer dissatisfaction, negating the benefits of lean production.
The difference between implementing a lean production system in advantageous and disadvantageous ways often comes down to developing systems that are robust enough to operate effectively. Inventory systems should have sufficient information to allow you to order in time. Production processes should be carefully coordinated in ways that allow you to adapt when things go wrong. When these systems do not work as they should, your staff should always take the opportunity to learn from mistakes and continually improve.
Devra Gartenstein founded her first food business in 1987. In 2013 she transformed her most recent venture, a farmers market concession and catering company, into a worker-owned cooperative. She does one-on-one mentoring and consulting focused on entrepreneurship and practical business skills.