The Definition of Lean Operations

by Chelsea Levinson ; Updated June 08, 2018
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Many of the largest and most profitable companies in the United States use lean operations principles to improve operations and increase profitability. The two primary objectives of lean operations are providing higher value to customers and eliminating waste. A company operating on lean principles strives to be efficient. It seeks to optimize its operations through a careful and painstaking process that looks at every aspect of the business and eliminates everything that is nonessential to create long-term profits.

Lean Operations Definition

Lean operations is a means of running an organization by focusing on providing greater customer satisfaction while using as few resources as possible. The objective of lean operations is twofold: Creating value for customers and eliminating waste. Companies that use lean operations are highly concerned with efficiency. Everything in a business’s operations that do not meet the ultimate end of providing customers value and increasing profits is cut from the organization. Hence the “lean” in lean operations. Mostly, if you implement lean operations, you want to cut all inefficiencies. Lean operations allow companies to do more with less which creates value and increases profits.

There are several areas of waste that companies should consider reviewing when taking on lean operations. The following are a few examples of the areas where businesses can improve their operations and slash inefficiencies:

  • Jobs: Salaries and benefits are not cheap for an organization. Of course, it’s not good business practice to eliminate necessary positions or to squeeze your workforce. However, it’s vital to ensure that all employees in an organization serve an essential function and that they are adequately trained to do so. It is a waste of company money to have inefficiency in jobs and employees who aren’t being used to their full potential. Lean operations would clean up these messes, and make sure that each employee is doing a necessary job to the best of their ability.
  • Inventory: Having too much stock on hand is a waste of money for a company because it costs money to store inventory. The longer it sits around not being sold, the more it costs your company. However, you need to make sure to have enough stock to meet customer demand and this is where optimization comes into play. Your company should keep an optimal level of inventory, and no more and no less, to ensure lean operations.
  • Production times: Inefficiency and waste can rear their heads in the production process. Lean operations require that you eliminate any inefficiencies or delays in the production process. This ensures that all products are produced in less time, therefore costing less money.  
  • Transportation: Transportation is another area where waste and inefficiency can cause a company to bleed money. Your company shouldn’t be transporting goods unnecessarily or transporting them at the wrong times. This can cause inventory problems, or simply incur unnecessary expenses.

Lean Operations Benefits

There are many benefits of lean operations. First, the main objective and benefit of lean operations are improving efficiency. When everything works like a well-oiled machine, operations improve and profits increase. Lean operations are concerned with maximizing efficiency. Eliminating waste is a huge benefit in and of itself. It allows you to cut through the noise and look at your business, genuinely understanding where its strengths and weaknesses are.

Further, businesses that practice lean operations have a strong focus on quality. By eliminating waste and inefficiency, you are left with a higher quality product. This higher quality product is achieved by focusing on customer value, which is one of the main objectives of lean operations. Lean helps eliminate defects and improves the production process so that quality products are achieved in less time and with less money.

Another benefit of lean operations is that it helps you make better use of your employees. By operating lean, you are cutting inefficiencies, production delays and unnecessary jobs which helps your company meet customer demand with fewer employees. Highly-trained, efficient employees are a marker of a healthy organization. Lean operations promote this concept entirely. What’s more, employees are happier under a lean operations model. Good employees want to do their job and do it well. Lean operations employees are given the opportunity to improve their skills and do things more efficiently. Eliminating inefficiencies such as unnecessary meetings and production issues is a surefire way to make workers happier.

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Finally, lean operations optimize space for your company. When you have the optimal amount of inventory and everything is in its correct place, you will not have to pay for any extra real estate. Also, less inventory lying around means your workspaces will be better organized and safer for employees.

Lean Operations Examples

One of the most famous lean operations examples is Toyota. The car manufacturer famously created the Toyota Production System (TPS), which has been a longtime model for lean operations. The TPS is a socio-technical system, meaning it focuses on workplace interactions between people and technology. The TPS is mainly tasked with eliminating waste and inconsistency in the manufacturing process. This revolutionary and oft-referenced system has made Toyota one of the top competitors in the highly competitive automobile industry.

Another example of lean operations is seen at Kimberly Clark, the famous parent company of brands like Kleenex, Scott and Huggies. Kleenex was struggling with low employee morale due to long shifts at factories. This resulted in 10-percent absenteeism, costing the company a lot of money and further straining workers. Kleenex decided to hire Unipart, a lean-operations-specialist company, to take over logistical operations. Unipart suggested that Kleenex invest in employee engagement and staff development. The result was decreased absenteeism and increased employee morale. This ultimately saved Kleenex money and increased productivity.

Intel is another excellent example of lean operations. The famous technology giant drastically reduced the time it took to introduce a new computer chip to the market, from an arduous 12 weeks to just ten days. Intel was able to achieve this feat in five years through implementing lean principles.

How to Implement Lean Operations

For businesses that want to implement lean operations, there are several vital steps to take. Of course, the process will vary, depending on your company and the industry in which you compete. For an idea of what the process of going lean looks like, consider the following points:

  • Business-wide review: The first step to going lean is reviewing every aspect of your business. For this step, you need to look at every process in your business with a critical eye. Many companies hire consultants or lean specialists to do this, as it’s a daunting task. However, a small business owner may be able to do this on his own. Identify areas that could use improvement. Ask yourself, “Does this add customer value?” and “Is there waste here?” This review should help guide your priorities and highlight areas where changes are needed.
  • Tell your employees: Tell your workforce that you intend to make operational improvements. Spell out for them the changes that are to come. Employees like to be in the know. Keeping workers abreast of changes will reduce anxiety and let them know that ultimately, the new system will improve their work lives.
  • Eliminate waste in the physical workspace: The first step of eliminating waste is usually started in the physical workspace. Does your office, factory or warehouse suffer from ineffective design? Is the setup of your physical space causing workflow problems? Make sure workspaces and tools are set up smartly and efficiently to maximize productivity.
  • Eliminate waste in product and process: Next, focus on how your product travels through its lifespan, from planning and production to sales. Identify errors, delays and anything holding up the product flow. If there are unnecessary steps, eliminate them. If multiple employees are doing the same job and butting heads, streamline their duties or try eliminating an unnecessary position. Consider different manufacturing systems to improve processing times and quality. For example, if you have long assembly lines, consider breaking up your manufacturing process into smaller cells which can improve efficiency. During this step, it’s often helpful to consult with specialists who know what is needed to maximize efficiency.
  • Implement lean tools: Countless lean operations tools can help you gradually improve your company’s efficiency over time. Try implementing some of these tools as your operations tighten up. Lean tools can help you with every aspect of your business, including automation, workflow, time management, waste, pacing and more.

How to Reduce Waste at a Business

The first step to reducing waste at a business is regularly taking a look at your business operations to pinpoint where waste is an issue. Incremental check-ups are necessary to ensure smooth, efficient operations. Ensure you are checking in on your progress periodically, and making small improvements and upgrades as needed. Going lean little by little is much less overwhelming than doing a massive overhaul of your business.

Another way to reduce waste is to train your employees properly. This is a crucial step. For lean operations to work, the entire workforce has to be on the same page, following the same systems and processes. An efficient, well-trained workforce accomplishes more and with a higher quality of work. So, if you see inconsistencies in your workforce, address them through the proper training. When you give employees the resources they need to succeed, they are more productive, not to mention happier. Teach your workers to spot waste and how to eliminate it. This gets employees involved in lean operations so that everyone in the organization is invested in improving outcomes.

Next, take a look at your inventories, and implement a new inventory system if necessary. Inventory management is an important aspect of lean operations. Many lean operations experts suggest a just-in-time inventory system. This means you stock inventory on an as-needed basis, rather than keeping a large stock on hand at all times. This reduces the storage you need, and can also lessen transportation costs. Further, just-in-time reduces the loss of inventory that becomes discontinued or unsaleable.

Automation is yet another way to eliminate waste. Many manual processes bring in inefficiencies and confusion. Automation ensures smooth transactions and accounting. Many companies use automation in their inventory process, improving organization and making it easier for employees to locate and move stock. Automation can also reduce shipping errors.

Finally, you can work to eliminate smaller wastes in your business, such as paper waste. It might seem insignificant, but the costs of paper waste can add up over time. Try to move your company towards being paperless to whatever extent possible. Eliminating paper can make your operations more efficient. For example, paper warehouse tickets can easily get lost. Using scanners and scan codes eliminate this inefficiency and reduces paper costs. Of course, there’s another fringe benefit of going paperless besides efficiency and cost-savings: it’s much better for the environment.

About the Author

Chelsea Levinson earned her B.S. in Business from Fordham University and her J.D. from Cardozo. She is a small business owner who has created content for Bank of America, H&R Block, CNBC, AOL and many more.

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