Lean management

M.C. Mathupala

Businessmen and business enterprises have adopted many approaches in their unceasing attempts to enhance their profits through higher levels of productivity.

They have based these attempts on the understanding that profit is the difference between price and cost (profit = price - cost).

Increasing prices distracts customers from the goods and services offered. Hence the better alternative is to reduce the cost of production of the offered goods and services while maintaining their quality. ‘Lean production’ evolved as the answer.

This article attempts to describe briefly, how the concepts of lean production and lean management evolved and how they became two of the recent popular strategies among the more successful entrepreneurs during the last two or three decades.

The main emphasis here is on the reduction of waste that occurs in tangible as well as intangible forms. Tangible waste is visible and normally gets collected at the refuse or waste dump. But intangible waste like excess movement of people and materials, idle time of machines, unproductive time of executives and operatives, unutilized space, etc., go unnoticed very often and get added to the final cost of products and services.

Just like fat that can accumulate in our bodies and make us lethargic and unfit, waste in an organization can lead to ‘organisational sicknesses’. Hence the opposite of lean management is ‘fat management’.

Since the beginning of the last century many attempts were made by pioneers like F.W. Taylor to find better, more productive and less costly processes to produce goods and services for the diverse markets that were emerging.

Work study, O&M, continuous production, task specialization, incentive schemes, and a plethora of similar techniques were introduced to workplaces as a result.

These led to higher levels of efficiency and helped the enterprises adopting such techniques to capture markets and enhance their profitability.

Consequent to the second world war and the quality movement in Japan spearheaded by Professors Jurang and Deming the Japanese acquired the expertise to produce ‘quality goods at reasonable prices’.

Many pioneers in disciplines like industrial engineering, production management, product design and quality control emerged in Japan and helped their industries to capture a large share of the global markets.

The approaches and techniques they initiated, developed, applied and popularized in Japan spread right round the globe and are helping entrepreneurs in all countries to enhance their productivity and profit levels.

‘Just In Time (JIT)’ has helped them to get rid of, or reduce inventories. ‘Kanban’ systems reduced the in-process inventories and expedited production processes.

‘Zero defects’ assisted in achieving higher levels of quality and eliminated rework and repairs while reducing inspection time.

Application of 5S made the workplaces more pleasant, better organized and disciplined the total workforce. ‘Poka-yoka’ was instrumental in error-proofing the production processes. All such approaches combined to instill a sense of ‘Kaizen’ - continuous improvement- resulting in a highly productive and progressive work ethic that is being emulated the world over to make a ‘better tomorrow’.

Two leaders who emerged in Japan, Shigeo Shingo and Taiichi Ono, contributed in many ways to help reduce waste.

Shigeo Shingo became world famous for SMED (single minute exchange of die) and ‘poka yoka’ and Taiichi Ono is considered to be the expert responsible for the Toyota Production System (TPS) that was developed in 2001 which helped Japanese businesses identify three major types of waste: muda (non value adding work), muri (overburden), mura (unevenness).

These developments that originated in Japan were adopted by enterprises in other countries and led to the concept of ‘lean management’ and spread to other management disciplines like finance which has resulted in more purposeful and effective management accounting and financial reporting systems.

The Toyota Production System focuses on (a) relentless elimination of waste in the seven areas mentioned below; (b) kaizen or continuous improvement and (c) respect for the workforce through the engagement of long term relationships based on continuous improvement and mutual trust.

The seven areas of waste - the seven ‘muda’ - identified are (1) transport -moving materials and other articles unnecessarily; (2) Inventory -keeping excess inventory prior to, during or after the production processes; (3) Motion - people walking and/or moving equipment more than what is required for efficient processes to produce the targeted goods and services; (4) Waiting - waiting for the next stage of production; (5) Overproduction; (6) Over processing and (7) Defects.

Two more areas of waste have been added to the seven mentioned above by recent thinkers. They are: (1) manufacturing products or providing services that do not need customer demand or specifications and (2) Waste of human talent. Wasted human talent is one of the intangible wastes that go unnoticed in most workplaces. In addition to management weaknesses in recruitment of talented employees and the appropriate allocation of tasks and responsibilities, age old unproductive concepts like ‘turf-consciousness’ among employees contribute to the generation of such intangible wastes.

Lean management concentrates on the elimination of all such forms of waste in order to achieve higher levels of productivity and profitability.