What Is Lean Manufacturing?  

Before production ever begins, it’s essential to identify the value that your product will provide to your customers. Is your product a convenience item? A luxury? Does it solve a problem for your customers? Defining the value of your product can help identify the raw materials needed, the manufacturing process, and the points in your supply chain. Identify points in your production where you can apply lean manufacturing principles to increase value for you and your customers.  

Review the life cycle of your product to identify areas where you can reduce waste. Anything you manufacture will produce a certain amount of wasted materials. What do you intend to do with those materials? Are you going to recycle them and send them through the manufacturing line again? Dispose of them? Both processes will require answers and associated costs. Whichever is the most cost-effective for your production process and saves your customers the most money in the end will likely be the best solution. 

The principle of continuous flow means manufacturing and fulfillment happen at nearly the same rate so that you’re producing one widget for every widget your customers buy. By managing a proper flow, you can prevent an overstock of inventory that decreases in value as it sits on your shelves accumulating warehousing fees while also avoiding a shortage of inventory that could, ultimately, have your customers looking elsewhere for your product. Both overstocked items and inventory shortages can also cause inefficiencies in your manufacturing process by constantly slowing down and speeding up production.  

A pull system triggers production only when the product is needed. Many small businesses create pull when starting out with drop-shipping. For instance, a small online T-shirt company will allow a drop shipper to print and send an order with every purchase from their online store. This process eliminates the need for warehousing and inventory management. However, relying on a third party can cause fulfillment problems during peak seasons, and orders could start coming in faster than the drop shipper can send them out. Contingencies must be put in place to account for both the busy and the light seasons. 

Even if your process works great from the beginning, keep in mind that it’s going to need improving. You can continue to work with every partner in your supply chain to find areas where you can trim some of the fat and enhance efficiency. Whether you’re looking for shorter routes in the delivery process or making changes to packaging, make data-driven decisions to continue to improve and perfect your manufacturing process. 

No matter how nailed down you have your process, production isn’t always going to be perfect. Even the top automakers in the world send out lemons from time to time that need rectifying. However, how you respond to product defects is what sets you apart from your competitors. Are you going to identify the problem? Consider it an anomaly? Take time to address product defects to ensure your company isn’t spending money on poor products that can hurt your brand by losing customer trust. 

Even if they are anomalous, product defects reduce profitability with recalls, customer returns, and distrust. Identify the source of defects quickly to prevent future defects by ensuring proper machine repair, production documentation, and quality control processes. Having a firm grasp on your production process ensures a reduction in defects, which ultimately increases revenue.  

Process errors can lead to excessive and inadequate processing. Typically, process errors are a result of any number of breakdowns within the process. They can be related to poor communication, human error, or slow approval or reporting processes that keep production from moving forward. Excess production requires up-front costs to manufacture products as well as warehousing and transport fees that drive profits down. An essential part of lean manufacturing includes producing products at a rate that is similar to that at which they're sold, which is ideal in avoiding the previously mentioned costs.  

Optimizing your workflow with proper communication and inventory counts and understanding your customers’ needs is the best way to reduce process errors. Create a clear map that outlines the production process and makes it easier for everyone in the process to understand their role. Streamline approval and reporting processes to cut down on idle time and keep products moving down the line. 

While it might seem like a good idea to manufacture a large batch of products to reduce costs and create overstock, there are inherent risks with large-batch production. As previously mentioned, overstock comes with warehousing fees. Even if you’re storing products on-site and don’t pay a third party to hold your inventory, you’re going to have to find somewhere to put items, which comes with added costs, including climate control, electricity, staffing, and a variety of other issues that come with warehousing your products. The longer you sit on these items in a warehouse, the more it costs, which eats into your profits.  

In addition to warehousing and storage costs, overproduction can lead to additional quality issues. Large-scale production doesn’t give quality assurance as much of an opportunity to ensure production meets your standards. Consider a large batch of widgets is produced, and there’s a machine error at the start of production. If the error isn’t caught at the start of a batch, you’ll wind up with a large batch of defective widgets that you can’t sell. Produce in smaller batches to reduce waste, help ensure quality, and more easily manage your inventory.

Downtime is often one of the most significant wastes of company resources. Whether you're waiting for approvals or reports, having equipment sitting idly, or experiencing poor communication, waiting wastes money because you’re still paying people for the idle time. Streamlining communication and production forecasting help ensure people and machines aren’t standing by waiting for the next task at hand. Remember that product design, research and development, and manufacturing are a chain in and of themselves that are dependent on one another to move forward with their processes. A breakdown at any point in the process will slow production and cause waste. 

Understand that waiting leads to money wasted with nothing happening in your process. Then added costs are likely to be accrued by rushed production that can cause faulty products, additional hourly wages, and machine repairs from overuse. Identify areas in your process that eliminate waiting to ensure manufacturing is always done at a steady rate.

Inventory control is an essential part of managing waste in lean manufacturing. Whether you’re considering raw materials, works in process, or a final product, it costs money to store products. Of course, there are times when a supplier will offer a discounted rate for placing a large order, but you must weigh the savings with what it’ll cost to warehouse the additional inventory.  

In contrast to overbuying products, underbuying can have an equally negative effect. If your inventory of a specific product runs low, you could find your production team scrambling to catch up or customers going with a competitor to buy the product, both of which will cost you. Keep in mind that manufacturers will often charge extra for rush jobs to account for potential overtime wages and added wear and tear on machinery. Proper inventory management from end to end of your supply chain reduces wasted costs within your manufacturing process. 

Shipping and handling often add significant costs to products. With shipping costs that include vehicle maintenance, fuel, and drivers as well as handling costs for workers who are paid to package the item, label it, and get it to where it needs to be to ship, the price of your product continues to climb. Efficiency in transportation helps ensure you can keep your product at a price point that’s still appealing to your customers.  

Reduce transportation waste by finding the fastest route for product delivery in your supply chain. For instance, if you’re sourcing raw materials directly from another country, ensure they’re coming through customs and directly to you. Try to avoid additional processing or detours that cost you more money. The more people your product has to go through to get to your customers, the more it’s going to cost them in the end. 

One way to increase efficiency with transportation is improving supply chain visibility. Implementing supply chain tracing helps ensure you know where your products are at all times, reducing the risk of loss during transport. While the up-front costs of putting a tracking system in place might feel exorbitant, it’ll ultimately end up saving you much more money than you spent. 

While transportation is big-picture motion, motion waste is typically considered with internal processes. Consider the amount of time your employees take to walk from one point to another within your office. Does it take a ladder every time someone needs to get to an often-used item? While using the ladder might take an extra minute, think about how often your employees are climbing that ladder throughout the course of a day, month, or year. An extra minute to reach an item 10 times per day is an extra 50 minutes per week or 43 hours and 20 minutes per year. If you’re paying your employees $20 an hour, that adds up to $866.67 per employee per year, simply to climb a ladder to reach an item. Consider evaluating how your office or store is set up to improve efficiency in how your people move about.

Properly utilizing talent can be a tricky thing. While it would be nice to have someone overqualified for a position giving you quality work at an increased pace and a discounted rate, you could end up wasting time and money on that employee constantly waiting for their next task. In contrast, an underqualified employee often needs help from other employees to complete their tasks, adding to the manpower and hourly wages paid. Having a proper understanding of your talent helps to eliminate waste by creating working efficiencies. 

Proper staffing at any given time can help to eliminate waste. Consider staffing a 24-hour fast food restaurant. The kitchen will likely be full of workers between 4 PM and 7 PM to accommodate the dinnertime rush, but the crew thins as the evening goes on until there are one or two people in the early morning hours. A full kitchen likely won’t have many, if any, workers standing around waiting for something to do, which reduces waste and still ensures customers are served.