Thinking lean is a way of doing business in a competitive environment. Ultimately, you want to provide a product or service as quickly as possible at the highest quality and lowest cost. To do that, you need to eliminate or simplify work processes that add no value to the product or service from the customer's perspective. This means you will be getting rid of waste everywhere in your business—from overproduction to defective products and even poor employee training.
There are 5 basic principles of lean production:
- Value is what your customers perceive as value.
- Map out your operations to determine which processes create waste; find ways to improve.
- Production flow should move smoothly from raw material to finished goods. If that's not the case, identify bottlenecks and improve your processes.
- Only produce what is necessary; avoid stocking goods. Instead of pushing your products out, let customer demand pull finished goods through the system. You design and produce products according to customer quantity, quality and cost needs.
- Continuous improvement means there is always room to improve the way you do business by reducing time, cost, space, mistakes or effort.
What are the benefits?
By thinking lean, you can push your company to be more productive in a competitive environment. When implementing a lean approach, you can expect productivity increases from 10 per cent to 50 per cent, quicker detection of errors and quality problems, a lower risk of obsolescence, reduced space requirements and shorter travel distances, increased ability to get to market faster, reduced order processing errors and better customer service. This should lead to significant cost savings in reduced inventory costs (30 per cent to 80 per cent), less handling damage and lower material handling costs, reduced set-up time (30 per cent to 90 per cent) and response time (30 per cent to 70 per cent), reduced turnover and costs of attrition, and less paperwork.
A continuous improvement initiative
Ever-changing customer expectations, new procedures and technologies, and the desire to run a better, faster and cheaper organization drive the need for continuous improvement. The process never stops. In order to make continuous improvement work, you need to have clear objectives and identify all problem areas.
There are 2 general types of improvement activities: breakthrough improvements and incremental improvements. Breakthrough improvements typically are made by one or a few individuals who bring a new theory, invention or technology to solve an old problem.
On the other hand, incremental improvements are generally less significant improvements carried out by many people over time in gradual and constant small steps. Incremental improvement may not produce a dramatic result, but the results are long lasting. The accumulation of numerous small improvements is often equal to or greater than the value of one or two breakthrough improvements.
Here are some of the steps you can take to keep the momentum going:
- Put a team in place with people who are accountable.
- Hire an external consultant such as BDC Consulting to review your business processes. A fresh perspective can help.
- Do the simple and less costly things first; you don't have to tackle your entire production line. Instead, you can focus on a specific initiative such as reducing inventory.
- Always get feedback from your employees and set up a way for them to share their opinions, e.g. a suggestion box, forums, etc.
- Engage everyone in the organization to gradually and continuously improve how they work on a daily basis. Reward employees for their improvement efforts.
- Put continuous improvement on your business agenda, and make sure it's a regular item at company meetings.
- Be sure your customers are involved in your initiatives. Their input is invaluable, and they can help you develop products that add value.
- Keep an eye on your industry, and follow best practices.
- Make continuous improvement a part of your business culture.
Some popular tools
Despite the popular perception that lean production is a complex and highly costly process, this renowned management approach can be simplified and customized for entrepreneurs depending on their needs. Here are some common lean manufacturing tools or approaches used today.
The conventional push system keeps people and machines occupied, literally pushing the product along the production line to the next operation. But working in this fashion creates waste. When you implement a pull system where the customer controls or pulls what is produced, the results are higher customer satisfaction, lower inventory, reduced costs and product design that is constantly evolving to meet changing customer needs.
During production planning, it is important to take into consideration the complexity and product diversity that will be involved. The pull system works under the assumption that there is no disruption in the production process from beginning to end. If your product is relatively simple and product diversity is not a concern, a pull system could provide the best strategy.
This enables you to measure your performance and compare it with similar companies in your industry. An important part of benchmarking is measuring how you perform in terms of time, cost and resources. By comparing your processes, you can make the necessary adjustments to improve and set higher standards. Evaluate different departments within your business and ask: Why is one group always meeting deadlines vs. the other? What processes do they have in place that enable them to be more organized? Once you've benchmarked and identified problem areas, work with managers and employees to identify ways of improving things.
Implement an action plan with objectives that can be achieved gradually over a fixed period of time. Constantly review and monitor the parameters of the selected projects as you go along. After all, even lean manufacturing experts build flexibility into their detailed plans. If you have made the effort to clearly understand where the problems lie, your chances of success are much greater.
A method for maintaining an orderly flow of material, Kanban cards are used to indicate points at which material should be ordered, how much is needed, where it's ordered and where it should be delivered. It is one of the primary tools of the JIT (Just-in-Time) system.
Another tool used today is 5S, which helps ensure you lose no time when looking for materials. A clean and well-maintained factory can help you delay or avoid the need for a larger facility since you should be able to gain 15% more free space after implementing 5S. Following the implementation, businesses benefit from an increase in production quality and productivity.
- Sort: get rid of all clutter so we can find the things we need.
- Straighten: Be sure everything is in its place and materials stay where they belong. Systematically arrange the plant.
- Sweep: Make sure your premises are clean, and install systems to keep them that way.
- Standardize: Establish procedures to maintain workplace organization. Assign duties.
- Sustain: Manage your system on an ongoing basis.
SMED (Single Minute Exchange of Die) is a technique to reduce setup time for tooling changes. It's also known as quick changeover, where you eliminate waste from the process. This method helps you identify counterproductive elements and determine which operations you can perform while equipment is running and those for which equipment must be stopped. This method is ideal in smaller manufacturing settings; businesses can benefit from faster delivery, lower inventory and higher overall equipment efficiency.
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.