Dr Bishwa Mohan Acharya

 

No any business can survive without profit because profit is the major motive of any business organization. Without profit they can’t survive and are forced to be out of the market. Business organizations or companies can increase profits by raising prices or lowering the costs. But in this highly competitive world, it is not so easy to raise prices and earn profit. Hence, they have the best option to choose the latter – to cut costs and lower prices of their products. Lean management helps them to reduce costs and to survive in the market. 

 

Concept 

Lean is a term used in business to describe a simplified and minimalist approach to doing business. According to the Environmental Protection Agency (EPA), the lean methodology took off in the U.S. in 1980s as a way for companies to reduce overhead costs, streamline processes and production and eliminate waste. 

 

Lean management concepts include understanding the most simplistic but powerful ideology behind the working of lean management and then applying it to the organization considering the structure and constraints of the organization. The most basic or simplistic idea behind lean is the efficient and correct usage of the work force to foster maximum results. Lean thinkers of the organization must look forward to implement lean principles in the organization and at the same time they should also help others to understand the Lean management concepts. Any type of organization can implement lean concepts into its organizational structure as these concepts are not limited to production and manufacturing industries. 

 

History of Lean 

While the philosophy of lean was originated by Toyota in the 1950s, the term was first defined in the book entitled The Machine That Changed the World: The Story of Lean Production written by Womack, James P., Daniel T. Jones, and Daniel Roos. The book documents results of a study performed at the Massachusetts Institute of Technology (MIT) on the vehicle industry. The book chronicles the movement of automobile manufacturing from craft production to mass production to lean production. 

 

Although there are instances of rigorous process thinking in manufacturing all the way back to the Arsenal in Venice in the 1450s, the first person to truly integrate an entire production process was Henry Ford. 

 

Henry Ford

 

The problem with Ford’s system was not the flow. He was able to turn the inventories of the entire company every few days. Rather it was his inability to provide variety. The Model T was not just limited to one color. It was also limited to one specification so that all Model T chassis were essentially identical up through the end of production in 1926. (The customer did have a choice of four or five body styles, a drop-on feature from outside suppliers added at the very end of the production line). Indeed, it appears that practically every machine in the Ford Motor Company worked on a single part number, and there were essentially no changeovers. 

 

When the world wanted variety, including model cycles shorter than the 19 years for the Model T, Ford seemed to lose his way. Other automakers responded to the need for many models, each with many options, but with production systems whose design and fabrication steps regressed toward process areas with much longer throughput times. Over time they populated their fabrication shops with larger and larger machines that ran faster and faster, apparently lowering costs per process step, but continually increasing throughput times and inventories except in the rare case— like engine machining lines—where all of the process steps could be linked and automated. Even worse, the time lags between process steps and the complex part routings required ever more sophisticated information management systems culminating in computerized Materials Requirements Planning (MRP) systems. 

 

Kiichiro Toyoda

 

As Kiichiro Toyoda, Taiichi Ohno, and others at Toyota looked at this situation in the 1930s, and more intensely just after World War II, it occurred to them that a series of simple innovations might make it more possible to provide both continuity in process flow and a wide variety in product offerings. They therefore revisited Ford’s original thinking, and invented the Toyota Production System. 

 

This system in essence shifted the focus of the manufacturing engineer from individual machines and their utilization, to the flow of the product through the total process. Toyota concluded that by right-sizing machines for the actual volume needed, introducing self-monitoring machines to ensure quality, lining the machines up in process sequence, pioneering quick setups so each machine could make small volumes of many part numbers, and having each process step notify the previous step of its current needs for materials, it would be possible to obtain low cost, high variety, high quality, and very rapid throughput times to respond to changing customer desires. Also, information management could be made much simpler and more accurate. Just in time (JIT) is a substantial portion of the Toyota system. 

 

The origins of lean management, which is widely found throughout the business world, sprang from a simple concept. The core philosophy behind lean is that customers do not pay for mistakes or waste but value. As such, companies need to increase the value of their products or services in order to maximize profit. Lean management offers an opportunity to drive up value and promote continuous improvement. 

 

Principles of Lean Management 

The basic principles of lean management is based on value of a product or a service, waste in the organization, root causes of a problem, perfect solutions and implement the solution. Lean management defines the value of a product or a service with the customer point of view. Customers do not mind how hard you work or what is the technology you used to create the product or service you are selling to them. They will evaluate your product or the service by looking at how well this is going to fulfill their requirements. 

 

In lean manufacturing the wastes are defined as anything which does not add value to the end product. If customer sees the value with the end product, it is very much fair to define a waste in this way. Customers do not mind how much it costs you to repair damage, cost for your huge stocks and stores or other over heads. Of cause there are wastes that can be avoided. But some are unavoidable to many reasons. 

 

The principles of lean can be depicted as follows: 

At the heart of lean philosophy, “value” is defined based on the customer’s perspectives in terms of cost, product functions, etc. Another common definition of value is that it is the opposite of waste (Muda). Waste is often classified into one of the following eight categories. They are overproduction, inventory, waiting, work in progress (WIP), unnecessary transport, unnecessary or inappropriate processing, unnecessary human motions or ergonomic problems and defects. 

 

The value stream includes all activities (value added and non-value added) from the creation of the raw materials to the final delivery of the output to the end consumer. Activities within a value stream map are often broadly categorized as value added, non-value added but necessary and non-value added and not necessary. This is a structured process that helps managers understand the flow of materials through the organization. It typically follows the addition of value to the customer. At an automobile manufacturer, the assembly line is in the value stream while the company infirmary and cafeteria are not. Lean organizations typically focus upon improving the value stream before improving those processes off the value stream. 

 

The next step after having identified the value stream is to transform it from the traditional batch and wait approach to one where the flow is continuous. A key aspect to achieving such a smooth flow is to master schedule small lots of final products. 

 

A way to capitalize on the increasing strategic importance of fast response to the customer is to minimize all the lead times. As opposed to the MRP approach of “pushing” materials through a plant, lean enterprises rely on pull systems whereby actual customer demand drives the production process. A pull system is a control based system that signals the requirement for parts as they are needed in reality. 

 

The last step is to seek perfection by continually attempting to produce exactly what the customer wants. It is the journey of continuous improvement by producing exactly what the customer wants, exactly when, economically. Perfection is an aspiration, anything and everything is able to be improved. The pursuit of perfection includes five commonly used tools by which the lean organization can turn on. They are 5S, the visual factory, kaizen, poka yoke, and total productive maintenance. 

 

Lean Tools & Techniques 

Lean management, according to the experts at the Lean Learning Center consultancy, is “an integrated approach to designing and improving work,” the result being a customer-focused organization with everyone aligned by common principles and practices. The tools are the practices that achieve that state. Several of them have Japanese names, as they originated at Toyota; the Toyota Production System (TPS) served as the basis for Lean principles. They are Seiri, Seiton, Seiso, Seiketsu, and Shitsuke. Seiri refers to the sorting items according to their importance of use and discarding the items which are not useful. Seiton refers to the arranging of the selected items in a well organized and meaningful manner. This is like keeping the tools used frequently near to the worker. This is equivalent to rearranging the work process so that work will be much more efficient. This will help in making a workplace which is fool proofed, that is there is very little or no room for silly mistakes to occur. Seiso refers to keeping the workplace clean. This might be equivalent of having a continuous process of identification and removal of wastes. 

 

Seiketsu is continuously following the above three rules to achieve a good and organized work place. Shitsuke is training and motivating the people to follow these good practices simply as a part of their day to day life. This is very much important for any organization since everyone should have the discipline to achieve the objective of the organization. It is also very important to make this process self driven so that there is no extra effort required from the people. 

 

Cell-based Manufacturing 

This is a sequential ordering of work, which allows easy and immediate passage of work from one cell to another without wasted time or movement and with easy communication. In electronics, someone in one cell might be responsible for placing circuits on a board, while in the next cell, someone solders those circuits. Cells may be virtual among knowledge-based workers; an engineer may pass a change request through email, rather than sit in the next office from a manager. 

Poka-Yoke (Mistake Proofing) 

 

It is also called as mistake proofing, error proofing or “idiot proofing.” The latter is closest to the Japanese term but of course has unpleasant connotations in Western workplaces. This involves redesigning a process to eliminate the possibility of errors or defects. Error proofing seeks to improve a worker’s ability to do their job by improving how they do their work. 

Kanban (Pull Inventory Management) 

 

This is a system of signals to request a part for a given process. This is chiefly used in manufacturing, though knowledge workers such as editors may signal when they are about finished with one batch of articles and are ready for more work. In manufacturing, Kanban may be physical, using a system of cards, lights or written requests. The electronic form (called eKanban) automatically signals a stockroom for replenishment. 

Kaizen (Continuous Improvement) 

 

This is a tool involving edge workers - those closest to a process--- to improve the efficiency of the process and eliminate waste. The theory is that the edge workers know best what does and does not work well in their jobs. A kaizen event is a formal improvement, and the number of kaizen events is a signal of excellence, somewhat like the number of days without injury signage found at many industrial sites. 

Six Sigma 

 

Six Sigma, like Lean, is a business management strategy used to improve the quality and efficiency of operational processes. While Lean focuses on identifying ways to streamline processes and reduce waste, Six Sigma aims predominantly to make processes more uniform and precise through the application of statistical methods. Six Sigma was originally developed by Bill Smith of Motorola in 1986 as a way of eliminating defects in manufacturing, where a defect is understood to be a product or process that fails to meet customers’ expectations and requirements. The name Six Sigma refers to a quality level defined as the near-perfect defect rate of 3.4 defects per million opportunities. As a process improvement strategy, Six Sigma gained much attention through its association with General Electric and its former CEO Jack Welsh. 

 

Conclusion 

Lean management is based on the philosophy to help eliminate defects. It believes on the process of streamlining production using more “pull” than “push.” This means that later production stages dictate what is happening in earlier ones, instead of vice versa. 

 

Without using lean, a company might generate a thousand pieces at an early stage, forecasting that the products will be sold at market, trying to push through. By this, it is difficult to discover a defective processing step until after the thousand pieces have been produced. In a lean system, though, it is possible to discover faulty material earlier and then halt production and fix the problem. 

 

At present, Lean management has moved beyond the world of manufacturing and is now used by managers in a variety of disciplines, like construction, health care, service, public sector, academic institutions, government, maintenance and many more. The organizations which implement lean philosophy find greater awareness with regard to waste. Efficiency becomes a top priority and helps to maximize corporate profit. Lean involves the culture of the whole company, not just manufacturing. 

 

(This article is based on different sources from the internet and published material.) 

Dr Acharya has been serving as Expert (Cooperatives & Poverty) at the Ministry of Cooperatives & Poverty Alleviation, Government of Nepal. He can be reached via email: [email protected]