Copyright © Daniel Cullinane CPA.
2500 Plaza 5 25th fl Jersey City NJ 07311 phone 732-516-1648 fax 732-516-9778
ADVANTAGES & DISADVANTAGES OF LEAN PRODUCTION
Daniel Cullinane CPA
25 Plaza 5 25th fl Jersey City NJ phone 732-516-1648 fax 732-516-9778
Lean philosophy centers on the elimination of waste in all forms in the workplace. Specific lean methods include just-in-time inventory management, Kanban scheduling systems, 5S workplace organization, Scrum and other "agile" software development methodologies. Many of these concepts and systems were pioneered by automobile manufacturer Toyota dating back to the 1940s and were subsequently adopted as best practices in many industries beyond automotive production. Applying these principles to your production has the potential for both improved profitability and increased complexity.
Types of Waste
Lean principles aim to minimize all forms of waste, from sources as varied as material defects to worker ergonomics. Many sources of waste are easy to identify and correct, such as a machine that is out of adjustment, producing a high volume of defects. Other forms of waste include environmental conditions that impede worker efficiency. Better lighting may help a worker read production instructions; moving a file cabinet might eliminate wasted time for a clerk.
Implementing lean principles in your workplace requires input and participation from your production staff. They are often in the best place to see where waste and inefficiency occurs. Not only do they serve as a resource for you, employees usually respond in a positive way to sincere efforts to involve them in improvement processes. When they see suggestions and ideas incorporated, a sense of ownership and satisfaction about their contribution is more likely to follow.
Just in Time
JIT is a strategy that suggests large inventories are wasteful of company resources. Business equity tied up in inventories of raw and finished goods interferes with cash flow. Money is also saved through reduced warehousing needs. The perfect JIT scenario would have the raw materials purchased and delivered at the moment production needs them, and the finished product is sold and delivered the moment it comes off the line. While this scenario may be impossible, lean philosophy suggests making improvements toward the ideal.
Beyond simply reducing costs and improving efficiency, lean production techniques introduce systems and develop skills with your staff that support changes in the workplace that new sales create. Space saved on warehousing may be used to add new product lines. The same is true of time savings. Your staff can absorb new work and react quickly to changes in client demand. Producing work quickly, in short iterations, without waste and delivered on time enhances your advantage over your competition.
Lean techniques can be overused. When tracking of productivity and waste starts to impact the time used for production, the solution becomes the problem. When lean principles are first applied, you can expect larger returns than later down the road. It is tempting to push those expectations, but you must examine the value of improvements. If you refine throughput to 1,000 parts an hour in one section that you can supply with only 500 parts from a previous stage, you haven't improved your result.
Problems With JIT
JIT principles work best with stable system components. Delivery times for raw and finished goods are known, and the elements of production can be scheduled accordingly. Being overly aggressive with JIT scheduling leaves you vulnerable to systemic bottlenecks. Supplier delivery issues may cut off your raw materials, interrupting your production flow. Maintenance emergencies can reduce your production throughput. Any constraint not accounted for in your JIT planning potentially jeopardizes the entire system. Margin for error and system waste may be difficult to balance.
When a certain level of refinement is met, using lean methods to squeeze more economy from production can discourage workers, reversing positive motivation and undermining your leadership. Trends of backsliding in previous improvements may indicate worker resentment. Striking a balance between stasis and continuous improvement is a challenge in any lean environment. A small business may be more prone to reaching such a refinement because of its less complex nature. Be aware of how incorporated changes affect your staff to gauge how effective further pushes will be.