In today’s challenging economic climate, many businesses struggle to increase profitability. Often the assumption is that more growth equals more profit, but that’s not always the case. A smarter approach is to optimise operations and reduce costs using sustainable strategies like LEAN waste reduction.
What is LEAN?
Lean manufacturing was introduced by Toyota as the Toyota Production System, which recognised initially 7 types of waste which has been expanded to 8 types after some years. The system was conceived to eliminate waste of time, material and labour, but may also relate to utilisation of skills and deals with poor planning. By optimising manufacturing and eliminating waste, cost savings are achieved at each phase of the production process. These LEAN strategies can also be implemented in service industries.
Types of waste
1. Defects
Defects mostly require re-work which impact time, money, resources and customer satisfaction. They arise mostly from lack of proper quality control throughout workflow processes. Documented quality methods, work standardisation and audited checklists assist in reducing this type of waste.
2. Excess Processing
This is a sign of poorly designed processes. Often referred to as ‘Red Tape’ and relates to management or administrative issues such as a lack of communication, duplication of data, overlapping areas of authority and human error. Optimising workflow through process mapping, reporting, sign-off and document control can eliminate over processing.
3. Overproduction
When components are produced before they are required by the next downstream process, overproduction occurs and creates excess WIP. Common causes for overproduction are unreliable processes, unstable production schedules, poor automation or long and delayed set up times. Measured and process-mapped jobs result in reduced setup time allowing for efficient small batch flow and pull systems such as Kanban can be used to control or eliminate excess WIP.
4. Waiting
Waiting can include people, machines or equipment, either through breakdowns, changeover times or time management issues all create waiting costs. This may also trigger additional waste through defects arising when jobs are rushed or shortcuts are being taken in order to catch up. In many ways waiting is the opposite of overproduction.
5. Inventory
Excess inventory is considered a form of waste, caused by over purchasing or poor planning. LEAN does not only look at manufacturing but also on process optimisation between support functions. One of the tools used is Optimum Order Quantity calculations.
6. Transportation
Poor plant design or production systems create excess motion – moving from A to B – have negative impacts on overhead costs. Value Stream Mapping and partial or full changes in factory layout can reduce transportation waste.
7. Motion
Includes raw materials, people and equipment. Also includes excess physical motion, such as reaching, lifting and bending. All unnecessary motion results in non-value-added time and increases cost. As an effective process map is developed, proper utilisation of space needs to be integrated.
8. Non-utilised Talent
Occurs when management fails to ensure that all their employee talent is utilised. Employees may be assigned the wrong tasks or tasks for which they were never properly trained. It may also result from poor communication between staff and management.
The Process
Implementing LEAN process re-engineering is a five stage process: define, measure, analyse,
improve and control. The process improvement methodology works by identifying, prioritising and eliminating waste and to create processes that deliver higher profitability for the business owners.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in the article. Genfocus accepts no responsibility for any loss suffered as a result of any party using or relying on this article.