In manufacturing, the most efficient process is destined to come out on top. Efficiency is the highest priority.
Toyota revolutionized the standards of efficient manufacturing by applying the principles of what is now known as lean thinking, a term coined by Daniel T. Jones and James P. Womack who have studied Toyota’s rise in-depth.
Lean Thinking Explained
The goal of lean thinking is to create a lean business—a business that focuses on customer and employee satisfaction and aims to maximize both, while simultaneously eliminating any type of waste—be it additional costs to customers, suppliers or the environment at large.
These principles became widely adopted across industries, branching into two distinct directions—lean thinking and lean manufacturing—with the former focusing on continuous improvement, and the latter focusing on the operational efficiency of processes.
Both can be practiced at the same time, and by making them a core component of your business, you can center your respect for your customers and staff around your way of doing business and improve your efficiency at the same time.
There are five major components of the lean thinking process.
1. Defining Value
How much customers will be willing to pay for your product defines its value. Charge too much, and you'll lose out on prospective customers. Charge too little, and your employees, your growth potential, and your bottom line will all suffer.
A saturated market makes it easier to define value. You can find a ballpark number thanks to your competitors and their manufacturing practices and work from there.
When working with new technologies or ideas, it's a little harder, because oftentimes customers won’t have any benchmarks to value the product.
Direct engagement channels such as surveys and interviews help here, as well as secondary sources like data analysis and web analytics.
The defined value will help you keep costs low without affecting the quality of your products.
2. Determining the Value Stream
Value helps determine costs to produce it, the services connected to manufacturing, and helps eliminate waste.
That way, the customer gets the value they expect, and your company gets the highest possible profit.
You need to figure out how you can keep production as low-cost and effective as possible without sacrificing value in the process.
This requires detailing every step in the life cycle of your product, starting at the cost of raw materials, extending through production, software systems, and shipment, and covering any costs associated with waste.
Your goal here is to weigh the cost of the various steps in the value stream against the value they offer. Features, materials, or steps that don't add to the value are eliminated here.
3. Creating Flow
The flow of all the steps that are left in the lifecycle should run as smoothly as possible. If the production process stops at any point, it means that not all waste was eliminated.
To ensure flow is smooth, try to break the production process down into distinct steps so that you can analyze them individually.
After that, you can look at additional measures like splitting the workload more evenly across manufacturing teams, creating a better sense of communication between floors, and establishing methods by which your staff can develop multi-disciplinarian skills so you can reduce redundancy within the process.
4. Establishing Pull
Inventory management is the most difficult stage to make and keep lean in the whole production process. Poor inventory management quickly leads to lots of waste in terms of money wasted for storage for items produced ahead of time.
That's where the value of a pull-based system really shines through.
A pull-based system is all about trying to minimize inventory and work in progress items as much as possible.
In a pull-based system, nothing is being produced unless a customer demands it.
Optimizing a pull-based system to eliminate waste entirely can be difficult, but the earlier steps in the lean thinking process can get you a lot closer.
5. Pursuing Perfection
Sitting down and readjusting your business model to follow principles of lean thinking can be an exhaustive process, but it's critical to remember that lean thinking works best when it extends through the whole life of your business.
While the first four steps will reduce waste, keeping pace with lean thinking principles will ensure that your business can stay competitive and relevant even in a more crowded marketplace.
That's why continuous improvement should always be a core value of your company.
By continually evaluating how you do business, keeping an eye out for potential waste, and looking for opportunities for improvement, lean thinking will become neatly integrated with your business model.
You will be able to achieve efficient results even as market trends shift and your business grows more complex.