- Definition and Importance of Lean Management Part 1
- 6 Benefits of Lean Management Part 2
- Disadvantages of Lean Management Part 3
- Lean Management Best Practices Part 4
What Is Lean Management?
Lean management is all about the creation of value. What is making your company revenue? Whatever is not included in the category of creating value for the company is considered waste. The goal is to develop processes that are working toward continued success. Those who believe in lean management also look at value and progress through the eye of the customer, who is respected as one of the most important stakeholders.
Another goal of this type of management is to maximize profits by increasing the value or products and processes. Lean management involves a lot of process examination, the addition of perspectives from various leaders in the organization, and mapping the processes that are adding to the company. It is essential that lean management processes are accompanied with structured plans that map out progress.
Why Is Lean Management Important?
The history of lean management starts with the automotive industry. Henry Ford started on the path to efficiency and lean management with the Model T in the early 1920s. The assembly line and production processes were some of the first of their kind to implement continuous improvement. Fast-forward a few decades, and Toyota became the poster child for lean processes. Their practices that embrace efficient technology usage, carrying cost reduction with “Just in Time” inventory strategies and a relentless commitment to innovation have inspired companies across many industries.
Lean management has spelled success for Toyota and many other companies. According to the Manufacturing Advisory Service in the UK, many businesses have benefitted from taking on these practices. The businesses the service tracked had deliveries, stock turns, and productivity all increase between 25 and 33 percent, while scrap and space decreased 26 and 33 percent respectively. A National Institutes of Health study revealed results of the Virginia Mason Medical Center’s usage of comprehensive lean policies. The hospital noted increased profits, decreased deaths, an 85 percent decrease in the wait for lab results, and a 93 percent increase in productivity.
Whether companies call it “lean” or not, waste management has to be a key component in creating successful growth. If a program is not working, then companies have to discontinue it. If a new product has a component that is decreasing sales, then it should be removed. Companies have to take inventory of where waste is happening to eliminate it adequately. However, these programs start when companies begin to take a “customer first” approach. To adequately grow, the customer’s viewpoint has to be a significant part of the lean management philosophy.
6 Benefits of Lean Management
A Decrease in Cost
— Lean management is all about maximizing profits. While the selling price is impacted by various factors that could depend on product qualities or markets, usually companies can do more to control their costs, and lean practices help to decrease costs so that all savings can be added to profit.
Improved Customer Interactions
— Lean management began with the customer’s viewpoint in mind. The way they communicate with staff, responsiveness to their concerns, and their experience with the product are some of the leading drivers of cutting wasteful practices.
— If customer surveys are skewing a certain way, then leaders should pay attention to what the company can stand to lose.
— As a result, customer interactions and overall service should improve.
Utilization of “Push and Pull”
— Company expenses can become inflated if leaders are not paying attention to how inventory is piling up.
— A strategy that can help manage this is having a “pull” over a “push” mentality.
— This means that later production stages determine what is happening in earlier processes.
— This can help companies prevent the problem of overproduction and paying a higher carrying cost. Companies will only order what they need.
— Lean management is also about a great deal of attention being paid to details.
— The goal is to decrease the number of defects and reworks in products.
— This action means that processes will be optimized to avoid mistakes which saves time that workers will have to take to remake products, and the money needed to pay them for the labor.
An Improvement Culture
— When a company understands the importance of lean management and begins to implement the strategies, then a new way of thought begins to take over in the company.
— Workers are more open to improvement and are looking for ways to consistently make the work they do even more impactful.
— Introducing teams to lean management can create a culture that values daily improvement.
Increased Employee Morale
— Since lean management favors an approach where managers are in regular communication with employees about their work and their process, employees could feel they are empowered to make better decisions.
— Workers know where they stand and where they can improve to create quality work.
Disadvantages of Lean Management
There are a lot of pros to incorporating a management style that highlights continuous improvement. However, with any new process implementation, there are factors leaders should be aware of.
The Problem of Inventory
— Traditionally, in lean management implementation, low amounts of stock are kept on hand to decrease carrying costs.
— This causes companies to depend on suppliers and hope they are able to make the adjustment to deliver goods quickly and efficiently.
— If there is any disruption of inventory processes, then it can derail the company.
Difficult to Change Over
— Employees may not always be welcoming to lean management practices. The implementation of this style will take a lot of patience and a complete overhaul to work processes. This may not be something longer-tenured workers will be comfortable with.
— Therefore, leaders have to be transparent about all changes that will happen in the company.
— There also has to be some time allowed for inquiries from workers who are not yet sold on the switch.
High Implementation Cost
— Most of the time, when lean management is implemented in a company that has never before used it, it is likely that all systems and production processes will have to end in their current state.
— This event can bring high costs for companies who are not prepared for the increased expenses of bringing in new equipment and training programs.
The Temptation to Over-Structure
— Everything might not need an overhaul. The challenge for leaders is to determine what needs to be incorporated into lean management and what does not.
— Leaders can push the processes beyond what they may be able to yield, so understanding the impact of incremental changes is key here.
Lean Management Best Practices
Have a Centralized Point-Of-Contact for Suppliers
Vendors and suppliers are going to be one of the most critical groups in the implementation of lean management. Timely communication, deliveries, and responsiveness to unforeseen issues is key to this relationship. Therefore, there should be a staff member that is dedicated to supplier management and acts as a point of contact for this group.
Apply Lean Management to Safety
Worker safety and well-being should be the primary priority for all business leaders. Lean management principles should be applied to ensuring the safety of all employees. Whether it is fixing faulty equipment or reducing work hours to ensure workers are not too exhausted it is crucial that leaders realize the importance of lean management practices with regard to safety.
Keeping good metrics are key to knowing how much waste is being eradicated due to lean management implementation. Workers should know how well they are doing in the new system to keep morale and motivation high, while leaders should be aware if carrying costs and other expenses have decreased as a result of these new processes. As stated above, lean management can increase costs, so leaders need to know if their spending is worth it for the company.
Train Workers on Lean Management Principles
The more that workers are aware of the benefits and intricacies of lean management, the more allies leaders have in understanding the value of cutting of wasteful projects and processes. Six Sigma is a popular set of techniques and practices that address process improvements. Workers can benefit from learning these principles so they can further implement the methodology in the company. The more continuous improvement principles that employees are exposed to, the better.
Adopt a Change Management Approach
Leaders are going to have to become prepared for all the factors they need to take into account when preparing to change processes that adhere to continuous improvement. Leaders should develop a plan for how they are going to introduce employees to the new practices, steps to implement procedures in each department, and the future vision for the company after lean management is performed. Anything can happen, but leaders have to ensure they are planning for the actual transition.