Lean Management vs Traditional Management

Are the functions of a manager different in a lean manufacturing environment versus a traditional management structure truly different? Of course it will differ in some ways and in other ways it won’t at all. It is important though to understand what the differences in a lean manufacturing environment for managing people and processes are compared to in a traditional manufacturing environment.

So what are the differences? In a lean manufacturing environment production is based on real customer demand. In a traditional manufacturing environment production is based on what you hope to sell. Instead of pushing product into the market, lean production pulls the product through a system that is set up to quickly respond to a customer’s needs and demands.

Below are some of the differences, that are outlined and side-by-side, so you can see how the different management practices are truly different. For this demonstration though we are just going to focus on the manufacturing side of the organization.

Lean Management Traditional Management

– Production is made to order

– Products are made to fill customer orders

– Cycle times are in hours and days

– Inventory levels are based on one-piece flow

– Stations are set up by product flow

– Quality is tested at each station

– Workers are empowered for identifying improvements

– Manufacturing schedule flexibility is high and easy to adjust

– Manufacturing costs are controlled and decreasing

– Production is based on a forecast

– Products are made to replenish the inventory

– Cycle times are in weeks and months

– Inventory levels are based on large batches

– Stations are set up by department function

– Quality is done through random sampling

– Workers have little or no input

– Manufacturing schedule is rigid and hard to adjust

– Manufacturing costs are rising and very difficult to control

As you can see, by utilizing lean manufacturing practices, organizations are more likely to produce high quality products and services and at a lower cost, since the products are made-to-order.

Traditional management is old school and is very costly to an organization. Not only is it seen in the manufacturing processes, but throughout the organization, such as through leadership, customer satisfaction, cultural, operational capability, maintenance and engineering, to name a few.

You need to start with a sound business strategy—using traditional management practices focuses on exploiting economies of scale for product designs and technology that is not unique. When you implement lean management practices the shift is customer-focused that is geared towards attaining a competitive advantage.

Lean management principles is truly about operating your organization in the most efficient and effective way possible, through reducing cost and eliminating waste.

Read more about lean management

This article is submitted to us by one of our contributors.

What is Lean Management?

Last week when I said “it can be tricky to answer the question, what is lean management?” This is an explanation I got some time back to the same question from one of our contributors. I thought of sharing it with you now since it might make more sense with my last week’s post.

Lean manufacturing has been a business “household” name for quite some time, but what exactly does it mean? Lean manufacturing is really a way of managing, so lean management is really probably what you would want to refer to it as. It simply means a system for organizing and managing all aspects of a business’ function by creating a principles, practices and tools in order to develop goods and services with higher quality and fewer defects. The general outcome is to do this by using less effort, space, capital and time than the mass production system of yesteryear.

I’ll be you didn’t know that it was actually Henry Ford that developed the first production system? He coined it “flow production”. The Japanese took Ford’s ideas and further developed the principles due to their constraints on limited human, financial and material resources—this was largely due to the effects that WWII had on the country. However, through their persistence and determination, the Japanese developed the Toyota Production System (TPS).
So how do people actually manage their resources in a lean manufacturing environment? Of course this will depend on what your thoughts are for what resources consist of. In a lean manufacturing environment, the focus will be the products and the resources needed to make the products.

One such resource is the inventory. Controlling inventory will determine the overall efficiency within your organization. High inventories results in low inventory turns—this means that efficiency is low or the process is not working. For instance, if there is a lot of inventory in raw materials not being used for making the customer-ordered product, then there is an issue with the supplier, which needs to be dealt with in order for lean manufacturing to work in by eliminating waste and reducing costs.

Production is not the only place that management of the resources must occur. It also needs to occur within the other departments, as they all affect the production of the product in some way, whether it is managing the human resources, or managing the materials, it all goes together. For instance, if there is a lot of inventory sitting around, then there is a problem within the marketing and/or sales team’s efficiency.

When you have a consistent focus on all aspects of the supply chain, then there is more focus on the areas where inefficiencies occur within the process. The true way to manage resources with a lean management focus is to lower your margins by having higher inventory turns—knowing how each area affects the other will help you to move to managing the resources effectively and efficiently.

Lean Management – The End of Management By Exception

As I have always emphasized on this blog lean is not just a set of tools. It is a process based on lean thinking. Management in a lean environment is not an exception. Lean management is the force behind any successful lean manufacturing implementation.

What is Lean Management?

Question above can be a tricky one to answer. But simply put lean management can be defined as using lean concepts in managing the organization. For an example managers will be looking at the value stream of the organization and question the none value adding activities continuously. They will define the value in the eyes of customers in the process, unhiding huge amount of waste in the system. A lean manager will not misuse lean to reduce their head count.

What is Management By Exception?

If put simply management by exception says “if everything is going OK, managers do not have to interfere. They will act if the system faces an exception”. This is an old management technique followed mainly by managers of larger organizations. This will reduce workload for the managers and will build a sustainable system.

Lean Management Vs Management by Exception

When it comes to management by exception, processes will run without any hindrance if they are bringing in the expected results. They will be questioned if they are not performing up to the expectations. But lean management is about continuously removing waste from the system. So even the best processes will be questioned. They will be changed and reengineered to remove waste from the system and to realize value to the customers. But in the case of failure, processes will stop immediately and problems will be solved.

In lean management, involvement of a manager is very high. A lean manager will not stop just at developing a strategies and policies, he will have to come to the work floor and make it happen. This thinking is eminent with the lean tools like “Go and See for Your Self”.

So in a lean environment management by exception is not applicable. Management by involvement or lean management is the way to go.

Lean Vs MRP

Any organization would like to save costs and earn more profits. Organizations chose methodologies like Lean manufacturing and Material Requirement Planning to achieve their goals. Lean and Material Requirement Planning or MRP are both looking at optimizing the resources we have in order to produce certain results so that the cost involved in will be less and value addition will be higher. This will mean more profit for the organization.

We have discussed about the origins of lean in our earlier posts. Lean revolves around certain simple set of concepts. Similarly, MRP is very simple in concept. As its name suggests MRP is meant for Material Requirement Planning so that organizations can plan both in-house and external requirements according to the demand an organizations have to fulfill. If you need to produce 100 bicycles within next week MRP will tell you that you need to have 200 rims, 200 tyres in-house before the start of next week and 80 handles apart from the 20 which are already in stock by the 2nd day of next week for an example.

Although seems simple enough in theory, it is not easy to calculate all these requirements for an organization which will produce 100s of items with 1000 or tens of thousands sub assembly parts. And specially there are number of variables to take into considerations. Among them are Minimum Stock Levels, MOQ or the Minimum Order Quantities of the suppliers, lead times and through put time of the internal assemblies and forecasted demands are few. This means you will not be able to use a simple spread sheet or a calculator to do all these complex calculations. So you would need computing power especially for the organizations operates in multiple locations.

MRP concept is pioneered by “Joseph Orlicky” in early 1960s in US. It spread around the world in breeze and helped many entrepreneurs and managers to make their decisions with much more accuracy. Stock levels went down and resources were managed much more efficiently making organizations much more profitable and successful. It is widely used even today and for many of the organizations MRP is a must have and they cannot live without it.

As mentioned earlier MRP is a predictive system. Its demand is mainly from a forecast which can change day to day. Its lead times are fixed. There will be some safety stocks to cover up any deviations of the predictions with the actual. In other words MRP is about building a system where we work in the existing scenario efficiently. For an Example MRP driven companies will purchase their raw materials even long before they are actually required for manufacturing if the lead times are longer for those raw material. They will not question the longer lead times nor will they look for the ways of reducing those lead times.

On the other hand lean manufacturing techniques are more reactive to the actual demand. This takes the requirement for long term forecasts and planning based on that forecast out of the equation since you will mainly deal with the actual demand. Generally people will not have to wait till good are produced after placing their order even in lean context. So there will be certain levels of stocks with retailers to satisfy the demand instantly. But this stock will not be a buffer to hide behind for the manufacturer.

With the reactive nature of lean, it needs to act quickly in order to satisfy the demand. This requires greater deal of flexibility both in-house and with the external vendors. This cannot be achieved with traditional means. You will have to build a system where you can respond to your customer demand on time. Unlike MRP it is not enough to organize what you have in an efficient manner, it is required to question existing systems and continuously improve. Below video explains this.

Although MRP is mainly about forecasts and demands as explained above, MRP can be used even in lean context to manage its resources effectively. MRP in a MTO or Make To Order system will be much closer to lean. Unlike MTS or a Make To Stock system where demand is not real but a prediction, MTO work with actual demand. This will help manufacturers to plan their real demands accurately and efficiently. So lean while removing wastes from the system can be greatly benefited by MRP in achieving the final goal of satisfying your customer and making healthy profits.

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Lean is not about change without a plan

Any organization will change with time due to many reasons. This is why managers call “Change is the only constant”. But should we chase the change or should we allow it to come to us. In either case how do we manage it? These are series of questions we have to ask ourselves when we try changing something. Especially in the context of lean manufacturing when it demands us to change continuously.

The term change is misused by many organizations especially in the name of lean. Any change should add value to the customer. If not that change is just a waste adding cost and confusion than doing any good to the organization.

In the context of lean, continuous improvement or Kaizan can demand continuous change. But kaizen events will be inline with the requirements of the organization for it to achieve the best. It is not random set of events happening in uncoordinated manner. It is well organized and planned.

In most of the organizations they misuse the words like Kaizen and continuous change in order to hide the inefficiencies of the organization. People will do certain things without planning and without analyzing the decisions in deep. When those decisions go wrong they will change the changes they made earlier and will call it lean manufacturing. Some lean consultants call this LAME not lean.

So if you are lean, think about the plan and what you are going to achieve before making the decision to change. Changing the change continuously is not lean.

Lean manufacturing and lean management

My last weeks post on lean manufacturing and TPS caught attention of many. In a comment to that post I found something interesting. This is from a reader with the blog name MM. In his comment I found something very important on lean manufacturing and the management, even in Toyota

In his comment mm says “……you probably be surprised at the number of areas within Toyota not practicing TPS. This is due to the influx of Senior Managers hired directly from other Manufacturers into Toyota without fully understanding TPS. The more effective Managers come up through the ranks. Just my opinionWith his self introduction I think this statement makes much more sense. Our reader introduces himself “Having worked as one of Toyota‘s internal TPS consultants for 18 years, I can tell you what you’re looking at” So I think he has a great knowledge about Toyota. 

Management plays an important role in applying lean concepts in to practice. Even the most matured lean system like TPS seems to be having problem with making it truly lean. This is where lean management comes to play. 

First of all don’t confuse lean management to the project management. Simply lean management is where basic principles and concepts of lean are applied in managing the organization. For an example instead of increasing end line quality check, a lean manager will look at the source to the problem and will fix it to improve on quality. They will always question the way things are done even when they seems to be working fine. 

Lean is a culture. Management is a critical part of this culture. Everything will evolve around management. Managers who identify and live this lean culture can bring result to the organization. Generally identifying and training these managers takes time. Hence this is a continuous process. Managers who do not follow lean can create the total system to break. As per the comment by our reader, this seems to be a problem even in Toyota. Hiring people from outside can be a good strategy to bring different point of views and different sets of skills. But it can add true value to the system if they can understand and live the lean culture. 

In short although seems simple, cultivating a true lean culture is very difficult.  It involves training, careful recruitment, passion and much more. Lean management will play the central role in this lean culture.