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What is the major aim of lean management?

Lean management is the process of reducing work wastes in all business processes, techniques, and methods to help manufacturing organizations to reduce lead-time right from order stage to final sale of products to the customer.

Is there any difference from lean management and Toyota Production System (TPS)?

Toyota Production System was later given the name lean management by Womack in 1990. The purchase of TPS is the elimination of all wastes from business processes to reduce lead-time in production.

What is ‘Kaizen’ and what is its significance in lean management?

Kaizen in Japanese language means continuous improvement. In lean management, this Kaizen principle is applied in business processes as small incremental improvements at frequent intervals. In Kaizen application, all process improvements are attained without adding extra spaces or more employees or additional investments for the execution of changes.

Are the benefits of lean management tangible and measurable? If so, how long would it take to achieve results?

The results of lean management are tangible and measureable if applied properly on a weekly basis. Improvement in processes and increase in bottom line through reduction of wastes and costs are significant even in short-term. They are classified as hard savings and soft savings. Hard savings include reductions in inventories, cycle times, lead-times, and defects, with increase in productivity and achievement of zero defects performance. Soft savings consist of space saving and 99% improvement in on-time deliveries, apart from enhancement of employee attitudes and morale.

If lean management leads to employment of lesser people to achieve better results, then would it not lead to job cuts and disillusion among the employees?

The Kaizen principles do result in lesser number of employees but job cuts are not implemented by the management. Hence, managements executing lean management reduce headcounts on a long-term basis through reassignments, promotions, retirements, voluntary resignations, and non-renewal of contracts of temporary or part-time workers.

How could lean management be integrated with Six Sigma?

Lean management emphasizes on waste elimination from activities that do not have value additions, while Six Sigma focuses on reduction of variations or defects from processes. Hence, they are not contradictory and but complementary to each other. Integrating them is very easy.

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The major benefits of lean management are the reduction of efforts, costs, defects, and process times through waste elimination. Investments in lean management achieved productivity gains of around 25%, wastage reductions by 90%, shrinking of floor spaces by 50%, and cutting down of travel distances by 75%. Higher, revenues, enhanced employee motivations, and larger customer bases were the direct result. Low productivity, rampant wages, high organizational expense, prolonged cycle times, dissatisfied customers, and disenchanted employees became things of past.

Still TPM, lean management, Kaizen, Six Sigma, all of them based on the same techniques and principles had several limitations. Initial funding of employee training in lean management is substantially larger and overspendings had been the norm. Kaizen initiatives were only approximations, instead of comprehensive time study data by qualified industrial engineers. Analyses are based on snapshot views of prevailing situations and overall continuity of events are usually lacking. Changes in equipment or other resources on a larger scale for reduction of wastes and improvement in performances generally led to frustrations, alienation, and inefficiency. Real challenge in the implementation of lean management is long-term sustenance, as well as simultaneous execution on all divisions and sectors at right paces.

The roles of balanced scorecards and strategic planning are being applied increasingly in carrying out lean management techniques. They indicate past performances of business processes and projects. At the same time, they also forecast consequences of various actions in future project approaches. The performance levels are transposed into real-time performance metrics, making balanced scorecards and strategic planning an integral part of lean principles. The feedback from balance scorecards reach all the stakeholders of the company, such as management, employees, customers, vendors, and shareholders. Problem areas are identified and rectification measures are undertaken on a continuous basis for long-term sustenance of lean management programs.

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The best five examples of real-life usage of lean management system and achieving success are Toyota Motor Company, eflexgroup.com, CIGNA Group, Bechtel Corporation, and Starwood Hotels & Resorts.

Toyota Motor Company

Pushed to the brink of bankruptcy due to wrong management decisions and the resignation of several senior members forced Toyota to bring in novel changes to replace the old and inefficient processes and methods. The new system became famous as Toyota Production System or TPS. TPS freely borrowed the principles of Taylor, Henry Ford, and Dr. Deming, and improved, refined, and honed them to apply the new principles to all areas of the organization. TPS was termed as lean management by Dr. Womack of MIT. Toyota made mass production as a starting point and added key strategies to build it as a total production system.

Eflexgroup.com (eflex)

Eflex, a Wisconsin-based health flexible accounts administration company, was processing claims within 7 to 10 days, against the 24-hour claim process target. Customers started deserting eflex, frustrated with the delays. Joyner, CEO, formed a core team of 4 people to implement lean Six Sigma. When changes were introduced, workers were assured of no job cuts. They were induced to express difficulties and offer solutions. They were retrained in the new system. This interactive approach brought a turnaround for eflex.

CIGNA Group

In the beginning of this decade, CIGNA did not have any corporate-level quality management system worth mentioning. The introduction of computer changeover system brought the deep lacunae existing in quality management and the company started losing clients. Share prices fell. Cordani, present President and CEO, realized that lean management and Six Sigma were the best solutions. Volunteers from different departments were trained as Black Belts and Green Belts. DMAIC projects were completed one after another with lean management techniques. Outside Kaizen professional were hired to implement lean management in critical areas of service operations. Kaizen events led to enhanced metrics by employees and hundreds of millions of dollars were saved by CIGNA and its clients.

Bechtel Corporation

In 2000, when the business of Bechtel grew at unprecedented levels, problems also cropped up on large scales. Focus on economic, environmental, and social aspects of big projects in remote areas became a matter of concern, particularly because of employment of local workers who had no knowledge abut lean Six Sigma principles. The company approached the work process of each project as separate entities and lean techniques were implemented in measured, slow steps in offices, business units, and work spots across the world. The investment on lean Six Sigma program broke even in 3 years.

Starwood Hotels and Resorts

The beginning of this decade brought fresh momentum in the hospitality sector growth. Even though the world leader in this field, Starwood realized that building upon and sustaining the growth, as well strengthening the global brand name in the face of stiffer, tougher, and bigger competition required lean principles implementation. Meyer, VP of Six Sigma led the lean Six Sigma program execution to improve check-in, room standards, and cleanliness, provide immediate responses to complaints and requests, and reduction wastes. The increase in net margins and profits in the next 5-6 years was astonishing.

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Out of all the factors, plan and goal set the wheel to roll in a positive manner simultaneously taking care of the approach, workers, system, etc. So, the plan should be in accordance with the targeted goal and vice-versa. Once this is executed nicely, lean management serves you with the best outcomes that create a good market value for your company.

The key success factors of lean management had been enumerated as are plan, goal, involvement, approach, workers, metric system, and communication.

• Plan includes select customer-oriented, planned projects. In this lean management process, efforts of the employees are recognized and valued by the employers. The workers should also understand that their main objective is satisfaction of the customers and should refrain from overproduction of the products that have greater demand
• Goals are normally fixed at higher levels so that people are willing to expect and work upon bigger changes in the entire organization. At the same time, even if goals are ambitious, the starting of lean management implementation should have manageable goals as highest priority for maximum effect.
• Involvement from the top to the lowest level is the key to the success of all lean management programs. When each one is directly involved, information, knowledge, and insight are available to all others. This results in team effort and grater zeal to adapt the lean principles of the company.
• Approach is modification of attitudes, traditions, and cultures to suit the particular business of the company. Hence, such approach changes are effected from top down steps for directing, integrating, implementing, tracking, and empowering the lower level employees.
• Workers are selected and assigned jobs on their levels of skills and commitment. Several companies fail in the implementation of lean management by assigning critical work to junior and part-time employees. Hence, the output is significantly affected, compared to those companies with skilled and committed staff. Further, such employees are able to grasp and put into practice the lean principles much faster than unskilled and non-committed employees.
• Metric systems are applied in appropriate fashion for driving improvement and development. Efforts and results of all programs should be measured to identify and correct faults, errors, wastes, and defects. Metric systems are highly important for successful implementation of lean management principles.
• Communication is in integral and key tool in lean management. Continuous communication at all levels, obtaining feedbacks, and making necessary changes or modifications are critical to proper application of lean principles.

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Any good accomplishments often demand systematic approaches and lean management is no different. When sincerity is granted to the steps followed this policy collaborates well with your system or business and allows it to taste a good flavor of success.

Lean management originated from Toyota Production System (TPS). Developed by the Toyota company engineer, Ohno, in 1980, it focused on value addition through waste reduction, thereby achieving savings in costs and efforts. Value addition was defined as any action or process that was tangible enough to induce customers to buy the products of the organization, in preference to that of other competitors. Since the basic principle of lean management is market-driven, it is considered the most powerful management technique at present. The implementation of the lean management or TPS of Toyota was effected through seven steps of waste recognition and elimination. In Japanese language, waste was called ‘muda’ and hence this step-by-step procedure was known as Seven Mudas.

Over Production was exceeding the market demand, resulting in idle inventories that put pressure on working capital of the company. The inventory cycles of raw materials, work-in-progress, and finished goods should be as short as possible and any increase in length is a waste of available resources, leading to inadequate returns on investments. Motion dealt with wear and tear, damage, and safety of products during the time of handling them by the employees, equipments, or producers. Waiting involved products that were lying unprocessed or undelivered. Over processing was putting more effort on a product than was actually required. Transportation was concerned with transit damages, products lost in transit, and transport delays. Transportation always remains one of the major cost centers that do not result in value addition. Flaws are quality defects, flaws, or issues that force the process system to rework the entire production plans. This could seriously affect cost minimization.

The lean management principles are implemented in 5 steps. They are

• value addition through waste elimination
• focus shift to managers and engineers who add more value to the product than the average employees
• deferred deliveries until there is actual demand in the market leading to value addition
• avoidance of departmental evaluation systems due to the tendency of this practice to isolate each department through localized loyalties
• giving employees adequate time to adapt to changes caused by lean management

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Though lean management faces competitions from its siblings, it is yet termed as the best rated policy due to its unique advantages. It solely allows the company to work in tandem with the market demand thereby realizing the requirements sought by consumers. Though Six Sigma also walks in this route to eradicate woes, lean management still remains one step ahead in sensing the customers’ needs.

Even though lean management is a powerful process management tool, other tools are also used by several organizations as separate lean manufacturing techniques or combined with lean management to achieve even greater results. The main alternatives to lean management are Six Sigma, Fordism, Scientific Management or Taylorism, and Theory of Constraints.

Six Sigma is essentially a theory of variation, which is the difference between the input and output processes. Six Sigma uses the techniques of statistics, business, and engineering for various applications such as production, marketing, sales, services, etc.

Fordism is based on the principles advocated by Henry Ford. He stated that methods that reduce the cost of the products should be found to make them cheaper and affordable to ordinary people. He was the first entrepreneur to implement the concept of mass production for taking advantages from economies of scale. He insisted on standardizing of manufacturing process even with laborers of lesser skills. Another contribution of Ford was the moving assembly lines to achieve this manufacturing process standardization.

Taylorism or scientific management was developed by Frederick Taylor. He focused on cost reduction and exact work procedures based on working and movements of individual workers. His major thrust was shifting the focus of lean management from employees to the management personnel. He further emphasized in standardizing the production method of each job and selecting employees with skills suited to that particular production method.

Theory of constraints was introduced by Goldart. His conclusion was that businesses that failed to do well were suffering from inherent constraints. He pointed out that businesses could easily grow if these constrains were identified and eliminated. His main contribution was the buffers concept. He felt that each system should have its own buffer, which would protect the production from discontinuation even when system brakes occurred.

Due to the requirement of trained managers and specialized training to other employees for implementing these alternatives to lean management and the comprehensive focus of Kaizen principles, compared to segmented approaches by other systems, lean management is still the preferred process management technique, though many organizations combine these alternatives with lean management.

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To keep a track of the performance of every individual connected to your business, this balance score cards render befitting aid. It helps you to judge the progress made by the business people and the company viewing from each and every possible angles. New innovative strategies find a door of tapping once the balance scorecards analyze the ongoing progress.

Balanced scorecard is the driving force of all strategic planning in the deployment of lean management in any organization. Balanced scorecard helps the company to have a holistic approach, with a broad view of all the process drivers. Balanced scorecard reveals how the company had been managing the business until now and also presents the possible results of proposed action plans to the forecasters. In the process cycle of lean management, balanced scorecard is the basis of all control processes. It establishes the methods of carrying out the plans and the input efforts of the employees in sustaining the predetermined levels of performance. These plans and inputs are transposed as performance metrics in the balance scorecard. As such, it is not just a measurement system but also a management system. The balance scorecard provided constant feedback on processes, defects, wastes, underperformance, and other deficient areas in the organization to both the internal players at management level and to the external business players such as vendors, customers, and shareholders.

The balance scorecard considers four primary perspectives, which are the core of the organizational strategy and vision. The learning and growth perspective is the art of talent development among the workforce. The learning curve should be gradual and simple from the employee perspective, so that the employees grow with the organization and glow in the success. The performance metrics of the scorecard are the triggers of the respective areas of development and sustenance from the perspective of employees. The business perspective addresses the business processes either through internal experts or by hiring external consultants. The financial perspective of the balance scorecard brings out the financial position and approach of the organization. The financial reports should relate performance and efficiency to cost management. Finally, the customer perspective should be viewed not from generic approaches but classified on various customer profiles, so that the products and services actually satisfy the expectations of the customers.

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Lean management is maximization of customer value by reducing all work wastes. Lean management addresses the five critical problems in processes of all types of organizations. These five are low productivity, prolonged cycle time, costly organization, rampant wastage, and dissatisfied customers and employees. The major stakeholders are customers, employees, and organization. Balanced scorecard and strategic planning are employed to control and address the learning and growth perspective, the business perspective, the financial perspective, and the customer perspective comprehensively. Certain alternatives to lean management are Six Sigma, Fordism, Scientific Management or Taylorism, and Theory of Constraints.

The identification and elimination of waste is achieved through the seven mudas or wastes in Japanese language. They are flaws, motion, over processing, waiting, transportation, inventory, and over production. The key success factors of lean management are plan, goal, involvement, approach, workers, metric system, and communication. The five major organizations that had benefited by lean management are Toyota Motor Company, eflexgroup.com, CIGNA Group, Bechtel Corporation, and Starwood Hotels & Resorts. The crucial techniques adopted in lean management are total productive maintenance, total quality management, and just in time techniques. Lean management is the answer to crucial questions, such as the major aim of lean management, Kaizen and its significance, the tangible and measurable benefits and time taken to achieve them, handling of job cuts or disillusion among employees, and integration of lean management with Six Sigma.

Introduction to Lean Management

Lean management has been developed with the intention of reducing process wastes and maximizing the value of the product or the service to the customer. This is achieved through unique techniques like flow charts, total productive maintenance, just in time techniques, workplace redesigning techniques, and total quality management. The chief aim of eliminating wastes in lean management results in higher revenues, enhanced customer base, and improved levels of employee motivation. When lean management is introduced and implemented in any organization, the important problems addressed are low productivity, prolonged cycle times, control of organizational expenses, rampant wastage, and dissatisfied customers and employees.

Low productivity is improved and yields are increased through lean management. Time handling is integral to successful resolution of problems and shorter cycle times are replaced by prolonged cycle times. Wastages of time, manpower, resources and costs are managed effectively, allowing the organization to have better room for improvement. The lean management follows the principle of ‘WOCAS’ or what our customers are saying. This leads to more and more satisfied customers. Further, the regular meetings, discussions, and interactions with the employees keep them motivated, removing dissatisfaction from their work environments.

Since the major stakeholders of lean management are customers, the old cliché principle that customer is always right is rigorously followed. They are presented with a feeling that they are valued above anything else. Customer issues and concerns are addressed on a priority basis, without giving false promises. There is continuous striving for providing value added services to them. The next important stakeholders are the rank and file workforce. Happy employees are the driving force of any organization. When they are given definite directions and compensated properly, their empowerment would boost the operations of the organizations. The last stakeholders of a company are the business owners or shareholders, the board members, and the CEO. They are the ones who implement the lean management and they should do that in balanced, unbiased fashion.

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