Lean manufacturing

Lean manufacturing is a method of manufacturing goods aimed primarily at reducing times within the production system as well as response times from suppliers and customers. It is closely related to another concept called just-in-time manufacturing (JIT manufacturing in short). Just-in-time manufacturing tries to match production to demand by only supplying goods that have been ordered and focus on efficiency, productivity (with a commitment to continuous improvement), and reduction of "wastes" for the producer and supplier of goods. Lean manufacturing adopts the just-in-time approach and additionally focuses on reducing cycle, flow, and throughput times by further eliminating activities that do not add any value for the customer. Lean manufacturing also involves people who work outside of the manufacturing process, such as in marketing and customer service.
Lean manufacturing (also known as agile manufacturing) is particularly related to the operational model implemented in the post-war 1950s and 1960s by the Japanese automobile company Toyota called the Toyota Production System (TPS), known in the United States as "The Toyota Way". Toyota's system was erected on the two pillars of just-in-time inventory management and automated quality control.
The seven "wastes" (muda in Japanese), first formulated by Toyota engineer Shigeo Shingo, are:
The term Lean was coined in 1988 by American businessman John Krafcik in his article "Triumph of the Lean Production System," and defined in 1996 by American researchers James Womack and Daniel Jones to consist of five key principles: "Precisely specify value by specific product, identify the value stream for each product, make value flow without interruptions, let customer pull value from the producer, and pursue perfection."
Companies employ the strategy to increase efficiency. By receiving goods only as they need them for the production process, it reduces inventory costs and wastage, and increases productivity and profit. The downside is that it requires producers to forecast demand accurately as the benefits can be nullified by minor delays in the supply chain. It may also impact negatively on workers due to added stress and inflexible conditions. A successful operation depends on a company having regular outputs, high-quality processes, and reliable suppliers.
Frederick Taylor and Henry Ford documented their observations relating to these topics, and Shigeo Shingo and Taiichi Ohno applied their enhanced thoughts on the subject at Toyota in the late 1940s after World War II. The resulting methods were researched in the mid-20th century and dubbed Lean by John Krafcik in 1988, and then were defined in The Machine that Changed the World and further detailed by James Womack and Daniel Jones in Lean Thinking (1996).
The adoption of just-in-time manufacturing in Japan and many other early forms of Lean can be traced back directly to the US-backed Reconstruction and Occupation of Japan following WWII. During this time, an American economist, W. Edwards Deming, and an American statistician, Walter A. Shewhart, promoted some of the earliest modern manufacturing methods and management philosophies they developed in the late '30s and early '40s. The two experts were the first to apply these newly developed statistical models to improve efficiencies in many of America's largest military manufacturers during WWII. However, Deming and Shewhart failed to convince other US manufacturers to apply these "radical" methods.
After the war, Deming was assigned to participate in the Reconstruction of Japan by General Douglas MacArthur. Deming participated as a manufacturing consultant for Japan's struggling heavy industries, which included Toyota and Mitsubishi. Unlike what they experienced in the US, Deming found the Japanese very receptive to learning and applying these new efficiency methods. Many of the manufacturing methods first introduced by Deming in Japan, and later innovated by Japanese companies, are what we now call Lean Manufacturing. Japanese manufacturers still recognize Deming for his contributions to modern Japanese efficiency practices by awarding the best manufacturers in the world the Deming Prize. In addition to Deming's critical influence in Japan, most local companies were in a position where they needed an immediate solution to the extreme situation they were living in after World War II. American supply chain specialist Gerhard Plenert has offered four quite vague reasons, paraphrased here. During Japan's post–World War II rebuilding (of economy, infrastructure, industry, political, and social-emotional stability):
Thus, the Japanese "leaned out" their processes. "They built smaller factories ... in which the only materials housed in the factory were those on which work was currently being done. In this way, inventory levels were kept low, investment in in-process inventories was at a minimum, and the investment in purchased natural resources was quickly turned around so that additional materials were purchased." Plenert goes on to explain Toyota's key role in developing this lean or just-in-time production methodology.
American industrialists recognized the threat of cheap offshore labor to American workers during the 1910s and explicitly stated the goal of what is now called lean manufacturing as a countermeasure. Henry Towne, past president of the American Society of Mechanical Engineers, wrote in the foreword to Frederick Winslow Taylor's Shop Management (1911), "We are justly proud of the high wage rates which prevail throughout our country, and jealous of any interference with them by the products of the cheaper labor of other countries. To maintain this condition, to strengthen our control of home markets, and, above all, to broaden our opportunities in foreign markets where we must compete with the products of other industrial nations, we should welcome and encourage every influence tending to increase the efficiency of our productive processes."
Continuous production improvement and incentives for such were documented in Taylor's Principles of Scientific Management (1911):
Shigeo Shingo cites reading Principles of Scientific Management in 1931 and being "greatly impressed to make the study and practice of scientific management his life's work".
Shingo and Taiichi Ohno were key to the design of Toyota's manufacturing process. Previously a textile company, Toyota moved into building automobiles in 1934. Kiichiro Toyoda, the founder of Toyota Motor Corporation, directed the engine casting work and discovered many problems in their manufacturing, with wasted resources on the repair of poor-quality castings. Toyota engaged in intense study of each stage of the process. In 1936, when Toyota won its first truck contract with the Japanese government, the processes encountered new problems, to which Toyota responded by developing Kaizen improvement teams, which into what has become the Toyota Production System (TPS), and subsequently The Toyota Way.
Levels of demand in the postwar economy of Japan were low; as a result, the focus of mass production on lowest cost per item via economies of scale had little application. Having visited and seen supermarkets in the United States, Ohno recognized that the scheduling of work should not be driven by sales or production targets but by actual sales. Given the financial situation during this period, over-production had to be avoided, and thus the notion of "pull" (or "build-to-order" rather than target-driven "push") came to underpin production scheduling.
Just-in-time manufacturing was introduced in Australia in the 1950s by the British Motor Corporation (Australia) at its Victoria Park plant in Sydney, from where the idea later migrated to Toyota. News about just-in-time/Toyota production system reached other western countries from Japan in 1977 in two English-language articles: one referred to the methodology as the "Ohno system", after Taiichi Ohno, who was instrumental in its development within Toyota. The other article, by Toyota authors in an international journal, provided additional details. Finally, those and other publicity were translated into implementations, beginning in 1980 and then quickly multiplying throughout industry in the United States and other developed countries. A seminal 1980 event was a conference in Detroit at Ford World Headquarters co-sponsored by the Repetitive Manufacturing Group (RMG), which had been founded 1979 within the American Production and Inventory Control Society (APICS) to seek advances in manufacturing. The principal speaker, Fujio Cho (later, president of Toyota Motor Corp.), in explaining the Toyota system, stirred up the audience, and led to the RMG's shifting gears from things like automation to just-in-time/Toyota production system.
At least some of audience's stirring had to do with a perceived clash between the new just-in-time regime and manufacturing resource planning (MRP II), a computer software-based system of manufacturing planning and control which had become prominent in industry in the 1960s and 1970s. Debates in professional meetings on just-in-time vs. MRP II were followed by published articles, one of them titled, "The Rise and Fall of Just-in-Time". Less confrontational was Walt Goddard's, "Kanban Versus MRP II—Which Is Best for You?" in 1982. Four years later, Goddard had answered his own question with a book advocating just-in-time. Among the best known of MRP II's advocates was George Plossl, who authored two articles questioning just-in-time's kanban planning method and the "japanning of America". But, as with Goddard, Plossl later wrote that "JIT is a concept whose time has come".
Just-in-time/TPS implementations may be found in many case-study articles from the 1980s and beyond. An article in a 1984 issue of Inc. magazine relates how Omark Industries (chain saws, ammunition, log loaders, etc.) emerged as an extensive just-in-time implementer under its US home-grown name ZIPS, or "zero inventory production system". At Omark's mother plant in Portland, Oregon, after the work force had received 40 hours of ZIPS training, they were "turned loose" and things began to happen. A first step was to "arbitrarily eliminate a week's lead time [after which] things ran smoother. 'People asked that we try taking another week's worth out.' After that, ZIPS spread throughout the plant's operations 'like an amoeba.'" The article also notes that Omark's 20 other plants were similarly engaged in ZIPS, beginning with pilot projects. For example, at one of Omark's smaller plants making drill bits in Mesabi, Minnesota, "large-size drill inventory was cut by 92%, productivity increased by 30%, scrap and rework ... dropped 20%, and lead time ... from order to finished product was slashed from three weeks to three days." The Inc. article states that companies using just-in-time the most extensively include "the Big Four, Hewlett-Packard, Motorola, Westinghouse Electric, General Electric, Deere & Company, and Black and Decker".
By 1986, a case-study book on just-in-time in the U.S. was able to devote a full chapter to ZIPS at Omark, along with two chapters on just-in-time at several Hewlett-Packard plants, and single chapters for Harley-Davidson, John Deere, IBM-Raleigh, North Carolina, and California-based Apple Inc., a Toyota truck-bed plant, and New United Motor Manufacturing joint venture between Toyota and General Motors.
Two similar, contemporaneous books from the UK are more international in scope. One of the books, with both conceptual articles and case studies, includes three sections on just-in-time practices: in Japan (e.g., at Toyota, Mazda, and Tokagawa Electric); in Europe (jmg Bostrom, Lucas Electric, Cummins Engine, IBM, 3M, Datasolve Ltd., Renault, Massey Ferguson); and in the US and Australia (Repco Manufacturing-Australia, Xerox Computer, and two on Hewlett-Packard). The second book, reporting on what was billed as the First International Conference on just-in-time manufacturing, includes case studies in three companies: Repco-Australia, IBM-UK, and 3M-UK. In addition, a day two keynote address discussed just-in-time as applied "across all disciplines, ... from accounting and systems to design and production".
Writing in an east African context, Kigwana notes that terminology also used for similar versions of just-in-time includes "material-as-needed" (MAN) and a system known as "daily overhead and perfect supply in the nick of time" (DOPs).
John Krafcik coined the term Lean in his 1988 article, "Triumph of the Lean Production System". The article states: (a) Lean manufacturing plants have higher levels of productivity/quality than non-Lean and (b) "The level of plant technology seems to have little effect on operating performance" (page 51). According to the article, risks with implementing Lean can be reduced by: "developing a well-trained, flexible workforce, product designs that are easy to build with high quality, and a supportive, high-performance supplier network" (page 51).
Three more books which include just-in-time implementations were published in 1993, 1995, and 1996, which are start-up years of the lean manufacturing/lean management movement that was launched in 1990 with publication of the book, The Machine That Changed the World. That one, along with other books, articles, and case studies on lean, were supplanting just-in-time terminology in the 1990s and beyond. The same period, saw the rise of books and articles with similar concepts and methodologies but with alternative names, including cycle time management, time-based competition, quick-response manufacturing, flow, and pull-based production systems.
There is more to just-in-time than its usual manufacturing-centered explication. Inasmuch as manufacturing ends with order-fulfillment to distributors, retailers, and end users, and also includes remanufacturing, repair, and warranty claims, just-in-time's concepts and methods have application downstream from manufacturing itself. A 1993 book on "world-class distribution logistics" discusses kanban links from factories onward, and a manufacturer-to-retailer model developed in the U.S. in the 1980s, referred to as quick response, has morphed over time to what is called fast fashion.
The strategic elements of lean can be quite complex, and comprise multiple elements. Four different notions of lean have been identified:
The other way to avoid market risk and control the supply efficiently is to cut down in stock. P&G has completed their goal to co-operate with Walmart and other wholesales companies by building the response system of stocks directly to the suppliers companies.
In 1999, Spear and Bowen identified four rules which characterize the "Toyota DNA":
This is a fundamentally different approach from most improvement methodologies, and requires more persistence than basic application of the tools, which may partially account for its lack of popularity. The implementation of "smooth flow" exposes quality problems that already existed, and waste reduction then happens as a natural consequence, a system-wide perspective rather focusing directly upon the wasteful practices themselves.
Takt time is the rate at which products need to be produced to meet customer demand. The JIT system is designed to produce products at the rate of takt time, which ensures that products are produced just in time to meet customer demand.
Sepheri provides a list of methodologies of just-in-time manufacturing that "are important but not exhaustive":
Womack and Jones define Lean as "...a way to do more and more with less and less—less human effort, less equipment, less time, and less space—while coming closer and closer to providing customers exactly what they want" and then translate this into five key principles:
Lean is founded on the concept of continuous and incremental improvements on product and process while eliminating redundant activities. "The value of adding activities are simply only those things the customer is willing to pay for, everything else is waste, and should be eliminated, simplified, reduced, or integrated".
On principle 2, waste, see seven basic waste types under The Toyota Way. Additional waste types are:
One paper suggests that an organization implementing Lean needs its own Lean plan as developed by the "Lean Leadership". This should enable Lean teams to provide suggestions for their managers who then makes the actual decisions about what to implement. Coaching is recommended when an organization starts off with Lean to impart knowledge and skills to shop-floor staff. Improvement metrics are required for informed decision-making.
Lean philosophy and culture is as important as tools and methodologies. Management should not decide on solutions without understanding the true problem by consulting shop floor personnel.
The solution to a specific problem for a specific company may not have generalized application. The solution must fit the problem.
Value-stream mapping (VSM) and 5S are the most common approaches companies take on their first steps to Lean. Lean can be focused on specific processes, or cover the entire supply chain. Front-line workers should be involved in VSM activities. Implementing a series of small improvements incrementally along the supply chain can bring forth enhanced productivity.
Alternative terms for JIT manufacturing have been used. Motorola's choice was short-cycle manufacturing (SCM). IBM's was continuous-flow manufacturing (CFM), and demand-flow manufacturing (DFM), a term handed down from consultant John Constanza at his Institute of Technology in Colorado. Still another alternative was mentioned by Goddard, who said that "Toyota Production System is often mistakenly referred to as the 'Kanban System'", and pointed out that kanban is but one element of TPS, as well as JIT production.
The wide use of the term JIT manufacturing throughout the 1980s faded fast in the 1990s, as the new term lean manufacturing became established as "a more recent name for JIT". As just one testament to the commonality of the two terms, Toyota production system (TPS) has been and is widely used as a synonym for both JIT and lean manufacturing.
Objectives and benefits of JIT manufacturing may be stated in two primary ways: first, in specific and quantitative terms, via published case studies; second, general listings and discussion.
A case-study summary from Daman Products in 1999 lists the following benefits: reduced cycle times 97%, setup times 50%, lead times from 4 to 8 weeks to 5 to 10 days, flow distance 90%. This was achieved via four focused (cellular) factories, pull scheduling, kanban, visual management, and employee empowerment.
Another study from NCR (Dundee, Scotland) in 1998, a producer of make-to-order automated teller machines, includes some of the same benefits while also focusing on JIT purchasing: In switching to JIT over a weekend in 1998, eliminated buffer inventories, reducing inventory from 47 days to 5 days, flow time from 15 days to 2 days, with 60% of purchased parts arriving JIT and 77% going dock to line, and suppliers reduced from 480 to 165.
Hewlett-Packard, one of western industry's earliest JIT implementers, provides a set of four case studies from four H-P divisions during the mid-1980s. The four divisions, Greeley, Fort Collins, Computer Systems, and Vancouver, employed some but not all of the same measures. At the time about half of H-P's 52 divisions had adopted JIT.
Lean principles have been successfully applied to various sectors and services, such as call centers and healthcare. In the former, lean's waste reduction practices have been used to reduce handle time, within and between agent variation, accent barriers, as well as attain near perfect process adherence. In the latter, several hospitals have adopted the idea of lean hospital, a concept that prioritizes the patient, thus increasing the employee commitment and motivation, as well as boosting medical quality and cost effectiveness.
Lean principles also have applications to software development and maintenance as well as other sectors of information technology (IT). More generally, the use of lean in information technology has become known as Lean IT. Lean methods are also applicable to the public sector, but most results have been achieved using a much more restricted range of techniques than lean provides.
The challenge in moving lean to services is the lack of widely available reference implementations to allow people to see how directly applying lean manufacturing tools and practices can work and the impact it does have. This makes it more difficult to build the level of belief seen as necessary for strong implementation. However, some research does relate widely recognized examples of success in retail and even airlines to the underlying principles of lean. Despite this, it remains the case that the direct manufacturing examples of 'techniques' or 'tools' need to be better 'translated' into a service context to support the more prominent approaches of implementation, which has not yet received the level of work or publicity that would give starting points for implementors. The upshot of this is that each implementation often 'feels its way' along as must the early industrial engineering practices of Toyota. This places huge importance upon sponsorship to encourage and protect these experimental developments.
Lean management is nowadays implemented also in non-manufacturing processes and administrative processes. In non-manufacturing processes is still huge potential for optimization and efficiency increase. Some people have advocated using STEM resources to teach children Lean thinking instead of computer science.
Lean manufacturing methodology has become a prevalent practice in public healthcare, commonly known as lean healthcare. Due to the intensively competitive environment, lean approach becomes a growing alternative in the healthcare sector to achieve optimized resource management and performance improvement.
According to Williams, it becomes necessary to find suppliers that are close by or can supply materials quickly with limited advance notice. When ordering small quantities of materials, suppliers' minimum order policies may pose a problem, though.
Employees are at risk of precarious work when employed by factories that utilize just-in-time and flexible production techniques. A longitudinal study of US workers since 1970 indicates employers seeking to easily adjust their workforce in response to supply and demand conditions respond by creating more nonstandard work arrangements, such as contracting and temporary work.
Natural and human-made disasters will disrupt the flow of energy, goods and services. The down-stream customers of those goods and services will, in turn, not be able to produce their product or render their service because they were counting on incoming deliveries "just in time" and so have little or no inventory to work with. The disruption to the economic system will cascade to some degree depending on the nature and severity of the original disaster and may create shortages. The larger the disaster the worse the effect on just-in-time failures. Electrical power is the ultimate example of just-in-time delivery. A severe geomagnetic storm could disrupt electrical power delivery for hours to years, locally or even globally. Lack of supplies on hand to repair the electrical system would have catastrophic effects.
The COVID-19 pandemic has caused disruption in JIT practices, with various quarantine restrictions on international trade and commercial activity in general interrupting supply while lacking stockpiles to handle the disruption; along with increased demand for medical supplies like personal protective equipment (PPE) and ventilators, and even panic buying, including of various domestically manufactured (and so less vulnerable) products like panic buying of toilet paper, disturbing regular demand. This has led to suggestions that stockpiles and diversification of suppliers should be more heavily focused.
Critics of Lean argue that this management method has significant drawbacks, especially for the employees of companies operating under Lean. Common criticism of Lean is that it fails to take into consideration the employee's safety and well-being. Lean manufacturing is associated with an increased level of stress among employees, who have a small margin of error in their work environment which require perfection. Lean also over-focuses on cutting waste, which may lead management to cut sectors of the company that are not essential to the company's short-term productivity but are nevertheless important to the company's legacy. Lean also over-focuses on the present, which hinders a company's plans for the future.
Critics also make negative comparison of Lean and 19th century scientific management, which had been fought by the labor movement and was considered obsolete by the 1930s. Finally, lean is criticized for lacking a standard methodology: "Lean is more a culture than a method, and there is no standard lean production model."
After years of success of Toyota's Lean Production, the consolidation of supply chain networks has brought Toyota to the position of being the world's biggest carmaker in the rapid expansion. In 2010, the crisis of safety-related problems in Toyota made other carmakers that duplicated Toyota's supply chain system wary that the same recall issue might happen to them. James Womack had warned Toyota that cooperating with single outsourced suppliers might bring unexpected problems.
Lean manufacturing is different from lean enterprise. Recent research reports the existence of several lean manufacturing processes but of few lean enterprises. One distinguishing feature opposes lean accounting and standard cost accounting. For standard cost accounting, SKUs are difficult to grasp. SKUs include too much hypothesis and variance, i.e., SKUs hold too much indeterminacy. Manufacturing may want to consider moving away from traditional accounting and adopting lean accounting. In using lean accounting, one expected gain is activity-based cost visibility, i.e., measuring the direct and indirect costs at each step of an activity rather than traditional cost accounting that limits itself to labor and supplies.