A Glimpse into Lean Manufacturing

And why the huge focus on efficiency, waste reduction, and value creation.

In the previous article, I mentioned that I would approach the subject of operations management by introducing you to the concepts covered in the book The Gold Mine: A Novel of Lean Turnaround by Freddy Ballé and Michael Balle.

But what exactly is “lean”?

(Think “lean = thin = no excess”)

To begin with,

lean, also called lean production or lean manufacturing, is a type of culture — a management philosophy. It is a concept largely attributed to Toyota, the Japanese company which first introduced it.

Lean focuses on efficiency and value creation.

How does it achieve these two things?

By ensuring the efficient utilization of resources, it maximizes production and minimizes wastage.

It achieves this efficient utilization of resources by only keeping what is required. This means inventory, labor or workforce, equipment, and other resources.

This is why, in lean manufacturing, you shouldn’t be surprised to not find the concept of piled up inventory besides buffer stock and safety stock, i.e. excess inventory kept to meet uncertain demand or for unexpected circumstances, say if the delivery of the raw material gets delayed.

On the other hand, you also shouldn’t be surprised to find production taking place at low costs as a result of close to zero wastage, reduced overtime and/or almost nil downtime of machinery/equipment.

You may have noticed that we have repeatedly mentioned efficiency and minimum wastage.

In Japan, wastage in operations is broadly referred to as muda.

It broadly refers to all things that do not aid the transformation of inputs into the final product or output.

It includes waste in terms of (TIM WOODS)

  • transport — moving items that are not required in processing
  • inventory waste — components of inventory including raw material, work-in-progress, and finished goods that are lying idle and not currently part of any production process
  • waste from motion — movement of equipment, the workforce, etc. that does not create any value
  • waste from waiting — having to pause before the next step in the process can begin
  • waste from overproduction — producing excess product, i.e. beyond the quantity demanded
  • waste from over-processing — excess and non-required process steps for which there is no value being created for the customer
  • defects — time, cost, and efforts used in discarding or reworking a defective product

Ultimately, if you are not being productive or not creating value, then you are not required, and hence, you are a waste.

That sounds pretty harsh.

But apparently, it is the first step towards achieving cost-effectiveness, maximum value creation, and maximum productivity throughout the entire value chain of a business.

And if you think about it, all of these translate into an exceptional customer experience, which will also lead to maximum profitability.

So how does one get around to lean manufacturing?

In the previous article, I had mentioned the names of the chapters to be covered under The Gold Mine. I also said that each is named after a specific concept involved in operations management. These concepts are the tools or techniques that help in lean manufacturing.

To recap, some of them are:

  • Just-in-Time (JIT)
  • Kaizen
  • Kanban
  • Heijunka, etc.

So now that you have a better understanding of lean, you may be able to understand where this book wants to take us when I introduce you to the central problem faced by one of the protagonists of the novel.

Coming up…

Chapter One of The Gold Mine introduces us to Mike, his friend, Phil, and Mike’s dad. Phil is an entrepreneur who, along with his partner Matthew, bought “an ailing company in their industry for a bargain price,” with a view to turn it around with their newly produced patented technology.

Unfortunately for them, though, it didn’t turn out as easy as it sounds. They used up their funds and bank debt in buying the company. Now, they have little cash to pay wages and their suppliers, with their banks breathing down their necks.

Here is where Mike’s dad, a former operations guy who has made numerous trips to Japan and Toyota during his career, comes into the picture. Mike claims that his dad will be able to help Phil.

In the following article, we will take a look at how this might be possible.

In the meantime…

If you feel that you are better off for having read this article, then the next time you come across the term “lean manufacturing,” take a couple of seconds to mentally send us some love and blessings.

You can also make our day by expressing your feedback and suggestions in the Comments section below. After all, learning is a two-way process, and we would appreciate all the help we can get!

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In a world where information won’t unfollow you and where knowledge won’t let you follow it, this space aims to simplify knowledge and allow your mind to wrap itself around core and basic concepts of economics, finance, operations, and more. Here’s to learning — the first time around.

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Priyanshi Sheth

Self-learning enthusiast, reader who loves writing, and recent MBA grad turned FX salesperson