Lean manufacturing definition of value

Lean manufacturing identifies value of a product differently to the traditional manufacturing. Lean manufacturing defines value of a product from the customer point of view. This seems like a simple change to the traditional concept. But this small change will redefine the way manufacturers think about manufacturing.

Traditionally the price of a product is marked as the sum of the cost of manufacturing and the profit. But now the equation as changed. Lean manufacturing understands the fact that customer is not willing to pay for the wastes in the manufacturing processes. So the equation lean manufacturers will follow will look like

Profit = price – cost

Definitely you can’t increase your prices as you wish. Your competition will simply win the market if you try to increase the prices of your product. On the other hand, no one is doing business for nothing. As an organization you have to have profits. So you have two constrains. While you need your profits high, you must keep your costs competitive in the market. You are now left only with one variable, which is cost. How to balance this equation with this single variable. Obviously you will have to reduce the costs.

The important fact is, customer gets the priority in balancing the above equation. Customer is not going to pay for the wastes in the system. Alternatively to compete in the markets and to earn profits, organization will have to eliminate its inefficiencies and reduce costs.

Benefits of lean manufacturing – A true lean example

I have been explaining throughout my blog about the results lean manufacturing can bring to you. Well I found some interesting figures that will explain the importance of lean manufacturing efforts itself.

According to an article By Anil Kumar and C.K. Yin titled “LEAN brings result” they have quantified the results lean bought to their organization.

One interesting fact that struck me was their discovery about the actual value added activities. According to their studies only 2% of the all activities of the organizations can be considered as value added. They say another 10% of these activities are supporting activities to the value addition or unavoidable in the value addition process. So conclusion is 88% of the activities carried out in an organization do not add any value to the final product. Scary isn’t it?

In this report they compare the improvements to the quality of the products before and after implementation of lean techniques. Cycle times and work in progress are also compared. According to this comparison quality has improved to 99.7% from 83.9%. Improvement in cycle time was 18 days to 3 days.

Lean is proven to give results isn’t it?

Lean manufacturing and environment

Lean manufacturing is in fashion today. Every manufacturer wants to move towards lean manufacturing whether they understand the concepts of lean manufacturing or not. But even the people who really understand the principle of lean manufacturing might overlook one great advantage of lean manufacturing. This is the environmental friendliness of the system.

Lean manufacturing is efficient since it removes waste from the system. Waste can be in the form of time, materials, people and money. Whenever organizations finds and avoid material wastes, it leads to the increment of efficiency of the system. But from the environment point of view this is great. Any reduction in material and energy wastes will obviously improve our environment.

I think we should credit all the lean manufacturers for their contribution to the environment whether they know about it or not.

Lean manufacturing beyond it’s boundaries – A journey towards lean enterprise

Lean manufacturing is explained as a great way of reducing wastes and improving the efficiencies in an organization. But as it sounds lean manufacturing is more focused towards the organization and improving its functionalities. But in the real world your customers, suppliers and also other parties who has some sort of connection with your organization can do much more than you think in improving your efficiencies.

Some researches have shown that around $250 to $400 Billion are wasted annually in North American industries alone due to the inefficiencies in supply chain. They estimate this amount would be as big as $1 trillion worldwide. (Source : Creating the Lean Enterprise By David Baum). So to exploit the real potential of your organization you must go beyond the boundaries of your premises.

Lean manufacturing concepts are now extending towards lean enterprise concepts. In a lean enterprise full supply chain is integrated. Lean manufacturing principles are used to achieve waste elimination objectives. Seamless integration of the activities along the supply chain will save huge amounts of money, time and effort.

Rhythm of lean manufacturing – TAKT

Lean manufacturing is a rhythmic system. This is one reason why lean manufacturers are doing well. Any system should have a good rhythm to perform at its best. If you have seen, people in some countries work hard throughout the day to the rhythm of music. They are productive when they have music on background than when they do not have the music. If you play music in your working place you will feel very comfortable even though you do not feel that you are working to a rhythm or listing to the music. Although I am not a specialist in this area, I have seen this happening in real life.

TAKT is a word for rhythm of a system. In lean manufacturing context this plays a major role. We can make 100 pieces within the last hour of work (if we have the capacity) or we can produce 10 pieces per each hour for ten hours continuously in our production facility. At the end of the day from the point of view of your organization it has produced 100pcs in both cases. But what do you think the approach we should take.

Cutting costs Vs cutting corners

Lean manufacturing explains the importance of improving on costs. Any organization works on lean manufacturing principle should look for the possibilities where wastes can be eliminated and therefore cost savings can be achieved. But is it good to reduce the facilities your employees currently get in the effort of cost reduction?

As I have keep telling throughout this blog, lean manufacturing is heavily dependent on employees to carry it forward. No employee support is equal to No lean manufacturing. For some reason you might have given your employees the facilities they use today. You might have employed extra people to cover inefficiencies of your organization. But remember it is you the organization is responsible for these decisions and you shouldn’t penalize the employees.

When you implement lean manufacturing in your organization, you might find you have more workers than required. What would be the initial reaction? Getting read of them isn’t it? But think for a moment. From the employee point of view in this case, lean manufacturing is a way of loosing their jobs and benefits. When this mentality gets in to the organization you will never get lean going. In this case you might ask me “if I we can’t get read of the employees what is the efficiency lean manufacturing bought in to my system?” Think carefully, employees are very important resource than you think. You have more than enough ways to using them creatively. This is where the real skill of management comes in.

You surely need to improve on your costs in a lean environment. But cutting corners is not the way. Definitely not in the name of lean manufacturing.

Simple lean manufacturing tools for great results

In many of posts I have made in this blog, I am a fan of simplicity of lean manufacturing. Lean manufacturing tools are no exception to this. I am even more excited to see the effectiveness of these tools in operation. Few of these tools are listed below

Process Maps: helps in identifying the hidden wastes in your processes

Cause and effect diagram: Also known as Ishikawa diagram. Used to pictorially represent the cause for a problem.

Pareto Curve: used to rank the causes for a problem according to the importance of them.

Histogram: used to analyze the variations of a variable. Simple graph which will be used in recording the changes

Scatter Diagram: Used to identify the correlations between two variables.

Control Chart: Used to see the process variations in relation to the predefined limits.

Checklist: A simple method used to verify critical steps in a process