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Lean Business – What Does it Mean?

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Lean business essentially involves maximising customer value while reducing or eliminating waste from the production process. Lean manufacturing was initially practiced by Japanese industrial giants such as Toyota, but in recent years has come to be widely adopted by British and European startups in industries as diverse as manufacturing and software development.

What does lean thinking involve?

Implementing a lean philosophy within your organisation primarily means prioritising customer value and focussing on reducing waste. More simply, lean involves doing more with less. In an ideal world, lean organisations would provide very high value to customers through perfect processes that create zero waste. In reality, lean is a relative term – a company is generally lean if it seeks to reduce excess inventory, prevent waste and increase productive efficiency.

Companies that adopt a lean approach generally try to optimise efficiency across an entire production chain rather than improving yield or performance at isolated points on the production line. By bringing different departments within a business together, lean producers are often able to reduce the human effort, inventory capacity, capital investment and time which are required in the production process.

Four Key Principles

Lean production is often defined in terms of four key principles. The first of these is pull; in lean inventory, customer demand is said to pull a product through the production process. Businesses respond to actual demand (i.e. orders) rather than ordering or manufacturing inventory based on anticipated demand.

The second principle is one piece flow. This idea refers to the concept of moving one product at a time through each stage of the manufacturing process, in contrast to processing an entire batch at each production stage before moving to the next process.

The third principle is pulse, commonly referred to as ‘takt’. Takt can be thought of as the pulse or heartbeat of the production process. Production should scale to takt; as customer demand increases, the pulse increases and production should be able to seamlessly scale up.

The fourth principle is zero defects. Previously, proponents of lean manufacturing would strive to eliminate defects, in line with the goal of eliminating waste. In reality, eliminating defects is impossible and the returns to effort in doing so diminish steeply – at some point, accepting a given level of defects is more cost effective. Although defects cannot be eliminated altogether, a lean company will strive not to pass defects from manufacturing inventory on to the next stage of production and, ultimately, on to the customer.

How to implement lean in manufacturing inventory

The pull principle is the natural starting point for introducing lean methodology into your business. Instead of ordering or manufacturing inventory ahead of time, consider adopting a just in time inventory system where stock is pulled only when it is needed. This is a great starting point and even if you don’t go any further, your business is likely to record some efficiencies.

Implementing the other principles can be a little less straightforward but generally involves changing the way your production line and quality control processes are set up. To achieve one piece flow and takt, you will need to gear your business for flexibility. Achieving zero defects requires robust quality control checks and reducing waste.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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