Lean manufacturing and cost

Reducing cost is a key focus for many organizations. But in lean manufacturing cost reduction is not just about saving some dollars, it is much more. In fact most of the costs traditionally identified as critical are questioned with lean practices.

Saving costs is replaced by eliminating waste in lean manufacturing. So it is not about correcting the end result but about removing the sources for that. On the other hand lean has a broader definition about cost. Lead time to the customer, poor quality of product and non empowered employees all can be a cost in the eyes of lean.

In the effort of saving few dollars any organization should not incur more long lasting costs in other areas. For an example in the process of cutting down the cost of transportation it is important not to overlook the costs that can be created by delayed deliveries to the customers and possible loss of orders due to that. Cutting down jobs is another example. Organizations will save some money doing so. But they will loose the knowledge and the trust in long term. This can create long lasting negative impacts on the organization and will cost much more than they save today.

Higher costs are the result not the source. In lean these sources are identified with its classification of eight wastes. Eliminating these wastes from the system will automatically reduce cost for you. But if you focus just on saving some dollars you might incur heavy costs in the future.

In lean manufacturing financial documents like P&L and Balance Sheets reflects the past. To be successful in the future you need continue to find out and remove wastes from your system. In this case there is no requirement to specifically focus on cost cutting, it will be achieved automatically.

Good practices vs. lean systems

Every organization has at least one or two good programs focused on solving their key issues. Human resource development programs, regular trainings for workers, machine routine checks and repairs, quality improvement programs are some of them.

Interestingly in a lean manufacturing environment you will find almost all the movements listed above. Can we call all the manufacturers following similar practices as lean manufacturers? The answer is No.

Lean systems are not about individual, isolated programs which solve problems in one area of your organization. Lean systems originate from lean thinking. Lean systems are about optimizing the organizational performance to meet the customer demands by eliminating wastes from the system. All the activities are coordinated to achieve this final objective. So the key difference between a traditional manufacturer and a lean manufacturer is the objective and coordination of activities carried out in establishing a solid system. Lean systems satisfy the overall organizational goals while traditional organizations are satisfied with achieving their departmental or program objectives.

Lean and green manufacturing

We have discussed the relationship between lean manufacturing and green initiatives earlier in this blog. For the past few weeks there were some news items popping up in my inbox about lean and green initiatives. It is very interesting to see people looking at lean for help in protecting environment apart from the productivity improvement and related advantages.

By its very concept of eliminating waste lean provides the best platform for any manufacturer who is looking to be green in their manufacturing. No waste means less consumption of resources and less waste as output. So it is very handy not only in limiting the usage of natural resources but also in less pollution due to low waste outputs.

In one of the posts on environmentalleader.com, they discus about the concept of “lean and green purchasing strategy”, its opportunities, challenges and benefits. There are some staggering figures in savings for those who participated in the exercise. But more than anything else I found it is interesting to see that most of the manufacturers using their efforts and results as a marketing initiative. This goes to show the need for green manufactured product in the market and the marketing opportunities comes with it. This will help long term sustainability of the system.

In much more specific case, one of the retail giants “M&S” and one of the state of the art apparel manufacturer MAS holdings in Sri Lanka opened a green manufacturing facility in Sri Lanka. In their website MAS Holdings say “MAS Intimates Thurulie will also become the world’s first lean and green manufacturing facility, designed for MAS’ lean manufacturing standard. Based on the renowned Toyota Production System, the MAS Operating System (MOS) is geared towards the elimination of waste both in material and process in order to achieve higher efficiencies. MAS Chairman Deshamanya Mahesh Amalean declared that “We have always excelled in ethical business practices and MAS Intimates Thurulie brings in the environmental focus to complement our excellent work in social sustainability. Today MAS has set a tough global benchmark to show what the future of manufacturing will be – ethical, efficient and sustainable.”"

I am very pleased to see words like sustainability, ethics and efficiency are related with lean (or Toyota Production System) apart from common goal of elimination of waste.

With these initiatives I believe lean is achieving new heights. It has evolved from manufacturing, to the entire supply chain to the environment and community. As it has always been this goes to show that lean concepts are universal.