What Is Lean Manufacturing?

Lean manufacturing is a way of manufacturing or running a production business that focuses on reducing waste and providing value to customers with every process step. Lean manufacturing works off a pull system that originates in demand from the customer and optimizes flow across the entire supply chain. Lean manufacturers emphasize staff trust rather than machine optimization alone.

Unlike traditional production enterprises, Lean manufacturing looks at the process as a whole, with a drive to improve the whole value chain, not just the results of individual process steps.

Lean manufacturing was invented at the Toyota Motor Company, as the Toyota Production System, and was later called Lean by an MIT student working for Jim Womack on research for the “The Machine that Changed the World” book.

How does Lean manufacturing work?

Lean manufacturing puts focus on the following principles to optimize and improve business and its processes:

Step 1: Focusing on value

Lean manufacturers prioritize those activities that create value for the client. And activities that don’t produce a value that the client will pay for, are considered a waste (Muda) and must be eradicated. Lean has its dedicated ways of reducing waste, for example 5Whys, Gemba, or an A3 report.

Step 2: Using pull not push systems

The Lean manufacturing business operates on a demand system, not forecasting one. Traditional manufacturing businesses work mostly using ERP applications that strive for operational and logistics efficiency. Lean manufacturing embraces pull-based Kanban systems. The Kanban method ensures that teams are not overloaded and are working on the specific items that the customer has requested.

Step 3: Considering the entire value stream

By looking at the entire value stream, so at all the activities and services used to provide an end product to the customer, the Lean manufacturer minimizes the presence of bottlenecks, reduces unnecessary transportation, and ensures that only the required amounts of raw materials are being ordered. Every activity must be adding value that the client will pay for and any unnecessary overheads, i.e. large warehouses that store finished goods, sitting for months in waiting to be sold, are seen as wasteful.

Step 4: Improving continuously

A Lean manufacturing company is never content to rest on its laurels, it’s always on a path of continuous improvement. Kaizen, as this approach is called, is the philosophy of ensuring that through small, continuous, positive changes a company improves. Daily standups, retrospectives, and tools such as Poka-Yoke are some of the ways in which a Lean enterprise continues to advance.

What does Lean manufacturing mean for a company?

When a company adopts Lean manufacturing, the experience of its staff, suppliers, and customers changes completely. That is mostly due to Lean companies working in direct opposition to the previously used, more traditional manufacturing principles.

Traditional manufacturing bases the production of its goods on manual, machine, or a combination of labor. While goods are being produced, they are seen as work in progress (WIP) and are typically accounted for on the company’s balance sheet. This principle supports mass production - doing a lot of work in bulk, and then trying to forecast sales. Now, Lean manufacturing operates on the rule that a company will deliver work only on a customer’s requests (e.g. brand new cars are only produced for the dealer after the customer has placed their order), and therefore WIP isn’t perceived as an asset, but rather as an expense that needs to be limited. This, in turn, impacts the Lean company’s accounting, marketing, and sale processes.

Unlike traditional manufacturing, Lean emphasizes optimizing human potential, rather than focusing on machine implementation and improvement. As an example, a Lean manufacturing company will let a machine wait on a human, but never the other way around. This comes from principles established by Toyota - a trust that people can improve their efficiency, while machines cannot.

Lean focuses on a company’s entire value stream and tries to minimize overheads. Traditional manufacturing preferred concentrating improvement efforts in specific areas. Each division could show their costs and how they have improved in their domain, leading to bonuses in their departments. Lean manufacturers understand that working together across the entire stream will ensure the greatest possible increase in production throughput.

Why does Lean manufacturing matter?

To put it simply, had traditional manufacturing approaches been good enough, then Lean manufacturing would never have arisen. While traditional manufacturing was shown to increase cost, waste, and time to market, Lean manufacturing has proven to improve staff morale and engagement, to increase the quality of the product, along with a company’s bottom line. Lean helped Toyota move from their failing position in the 1940s to the worldwide successful company they are today.

In conclusion, Lean manufacturing is a newer way of conducting manufacturing, that moves from a push process to a pull process, driving down costs, and increasing value to customers through the eradication of waste.