Lean Manufacturing–What Is It and How Can You Use it in Your Startup?

Lean manufacturing, often referred to simply as “Lean”, has been described as a business model focused on efficiently delivering high-quality products or services to customers in a manner that ensures value by identifying waste within the value stream and eliminating it whenever possible.  While practitioners of lean manufacturing have developed a set of tactics that can be implemented to improve the workplace, lean is also a way of thinking about work that is based on continuously seeking ways to proactively make improvements.  Lean manufacturers do not wait for something to go wrong before changes are made, instead they empower people throughout the organization of to suggest and implement better ways to improve processes and reduce waste.  While lean ideas have been employed for centuries, it is generally recognized that Japan’s Toyota Motor Company was among the first to bring many of the ideas associated with lean manufacturing together into a coherent methodology that became known as the “Toyota Production System”, or “TPS”.  Since the emergence of the TPS in the 1980s, lean manufacturing principles have been implemented in businesses and organizations across many industries and work settings.

This article is adapted from material in Lean Product and Customer Development: A Guide for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

It has been explained that the key goals of the TPS were to streamline processes, increase efficiency, improve productivity, respect people and please the customer.  TPS was based on the understanding that businesses are engaged in three types of activities: value-added, non-value-added and waste.  In order for an activity to be value-added, it must satisfy several criteria: customers will pay for the activity, the product changes in some way and the work is done correctly without defects. The non-value-added activities must be performed, but aren’t readily recognized by customer as adding value to the actual product (e.g., complying with governmental safety regulations during the manufacturing process).  Finally, the most problematic activity is waste.  Since waste does not add value for the customer, and does not need to be done in order to complete a product or service, efforts should be taken to eliminate it.  In Japanese the word for waste is “muda” and in the TPS there were a number of main types of muda: defects, waiting, extra motion, excess inventory, over-production, extra processing, unnecessary transportation and unutilized talent or skills.  In addition, lean manufacturing attempted to eliminate mura, which referred to unevenness in production, and muri, which meant overburdening people or equipment.

The critical guiding principals for effectively deploying lean manufacturing techniques have been summarized as follows:

  • Elimination of Waste: Businesses need to identify non-value-added work and eliminate it in order to remove the following types of unnecessary wastes from the manufacturing process: overproduction; unnecessary motion; wasted inventory; production defects; unnecessary waiting time; wasted transportation and over-processing.
  • Continuous Improvement: Commonly referred to using the Japanese word “kaizen”, continuous improvement is about promoting constant, necessary changes, both large and small, toward the achievement of a desired state. Continuous improvement begins with establishing and maintaining standardized work and level production and moves forward as a continual mindset throughout the organization based on the premise that there is always room for improvement.
  • Respect for Humanity: Companies should understand that the people that work for them are their most valuable resources and that they must be respected and kept in high regard as lean manufacturing principles are implemented.  Among other things, this means listening to the ideas of workers and providing them with help when necessary for them to fulfill their roles.  Respect for humanity builds loyalty among workers and their sense of personal worth.
  • Levelized and “Just in Time” Production: Levelized production refers to the aspiration to establish and maintain the work load at the same level every day.  This requires striking the right balance between traditional forecasting, which often leads to excess inventories that are not needed for customer orders, and the “pull system”, which waits for customer orders but must be primed sufficiently to avoid delays in deliveries to customers.  The key to achieving levelized production is “just in time” production, which is based on the principle that companies must be focused on avoiding waste by building only what is require, when it is required and in the quantities required.
  • Quality Built In: Lean manufacturing seeks to build quality into the manufacturing process, the product design, the parts in the product and the finished product itself, including the packaging of the finished product and the manner in which it is shipped.  The continuous improvement efforts mentioned above are heavily focused on quality issues and generating and implementing ideas for improving quality.

While lean manufacturing has its roots in larger companies such as Toyota, certain of its techniques and tools have been incorporated into the principles of the “lean startup”, particularly conversion of traditional push methods to pull and reduction of batch sizes.   Startups, with few resources and needing quick iteration of the development of their initial products, have been urged to “go lean” by working in small batches to ensure that they minimize the expenditure of time, money, and effort that ultimately turns out to be wasted and identify problems with their fledgling products more quickly.  Toyota worked on the basis of small batches by foregoing large specialized machines that could produce thousands of parts at a time in favor of smaller general-purpose machines that could produce a wide variety of parts in small batches.  Toyota leveraged the capabilities of these smaller machines by figuring out ways quickly reconfigure each machine—minimizing “changeover time”–to make the right part at the right time and ultimately produce entire automobiles using small batching throughout the process.  Workers did not have to work harder; instead they worked smarter because they were able to rely on better tools and processes.  Everyone in the company benefited from the company’s success using small batches to diversify its product line and compete in a larger number of otherwise fragmented markets.  Lean startups are not yet at the stage where they are in larger scale production of finished products, but small batching provides value to them by facilitating faster testing and learning of product ideas with real customers.

This article is adapted from material in Lean Product and Customer Development: A Guide for Sustainable Entrepreneurs, which is prepared and distributed by the Sustainable Entrepreneurship Project and can be downloaded here.

Alan Gutterman is the Founding Director of the Sustainable Entrepreneurship Project, which engages in and promotes research, education and training activities relating to entrepreneurial ventures launched with the aspiration to create sustainable enterprises that achieve significant growth in scale and value creation through the development of innovative products or services which form the basis for a successful international business.  Visit the Project’s Library of Resources for Sustainable Entrepreneurs to download handbooks, guides, articles and other materials relating to sustainable entrepreneurship and keep up with the Project’s activities by following Alan on LinkedInTwitter and Facebook.

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