Lean Manufacturing – Definition, History, Objectives, and Examples

Lean manufacturing is the production of goods using less of everything compared to mass production. It focuses on less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. Lean manufacturing is a generic process management philosophy derived mostly from the Toyota Production System (TPS). Lean manufacturing is a technique that allows companies to be more responsive to quickly changing markets and more sophisticated & demanding customers.

History of Lean Manufacturing

Toyota is often considered one of the most efficient manufacturing companies in the world and the company that sets the standard for best practices in Lean Manufacturing. Lean Manufacturing has increasingly been applied by leading manufacturing companies throughout the world, lead by the major automobile manufactures and their equipment suppliers. Lean Manufacturing is becoming an increasingly important topic for manufacturing companies in developed countries as they try to find ways to compete more effectively against competition from developing countries.

Starting about 1910, Ford and his right-hand-man, Charles E. Sorensen, fashioned the first comprehensive Manufacturing Strategy. They took all the elements of a manufacturing system— people, machines, tooling, and products— and arranged them in a continuous system for manufacturing the Model T automobile. Ford was so incredibly successful he quickly became one of the world’s richest men and put the world on wheels. Ford is considered by many to be the first practitioner of Just in Time and Lean Manufacturing.

Concept of Lean Manufacturing

Lean manufacturing is the systematic elimination of waste from all aspects of an organization’s operations, where waste is viewed as any use or loss of resources that does not lead directly to creating the product or service a customer wants when they want it. In many industrial processes, such non-value added activity can comprise more than 90 percent of a factory’s total activity.

Many of the concepts in Lean Manufacturing originate from the Toyota Production System (TPS) and have been implemented gradually throughout Toyota’s operations beginning in the 1950’s. By the 1980’s Toyota had increasingly become known for the effectiveness with which it had implemented Just-In-Time (JIT) manufacturing systems.

Originally 7- 9 main types of waste were identified as part of the Toyota Production System. However, this list has been modified and expanded by various practitioners of lean manufacturing and generally includes the following:

1. Over-production — Over-production is unnecessarily producing more than demanded or producing it too early before it is needed. This increases the risk of obsolescence, increases the risk of producing the wrong thing and increases the possibility of having to sell those items at a discount or discard them as scrap. However, there are some cases when an extra supply of semi-finished or finished products is intentionally maintained, even by lean manufacturers.
2. Defects — In addition to physical defects which directly add to the costs of goods sold, this may include errors in paperwork, provision of incorrect information about the product, late delivery, production to incorrect specifications, use of too much raw materials or generation of unnecessary scrap.
3. Inventory — Inventory waste means having unnecessarily high levels of raw materials, works-in-progress and finished products. Extra inventory leads to higher inventory financing costs, higher storage costs and higher defect rates.
4. Transportation — Transportation includes any movement of materials that does not add any value to the product, such as moving materials between workstations. The idea is that transportation of materials between production stages should aim for the ideal, that the output of one process is immediately used as the input for the next process. Transportation between processing stages results in prolonging production cycle times, the inefficient use of labor and space and can also be a source of minor production stoppages.
5. Waiting — Waiting is idle time for workers or machines due to bottlenecks or inefficient production flow on the factory floor. Waiting also includes small delays between processing of units. Waiting results in a significant cost insofar as it increases labor costs and depreciation costs per unit of output.
6. Motion — Motion includes any unnecessary physical motions or walking by workers which diverts them from actual processing work. For example, this might include walking around the factory floor to look for a tool, or even unnecessary or difficult physical movements, due to poorly designed ergonomics, which slow down the workers.
7. Correction — Correction, or reprocessing, is when something has to be re-done because it wasn’t done correctly the first time. This not only results in inefficient use of labor and equipment but the act of re-processing often causes disruptions to the smooth flow of production and therefore generates bottlenecks and stoppages. Also, issues associated with reworking typically consume a significant amount of management time and therefore add to factory overhead costs.
8. Over-processing — Over-processing is unintentionally doing more processing work than the customer requires in terms of product quality or features — such as polishing or applying finishing on some areas of a product that won’t be seen by the customer.
9. Knowledge Disconnection — This is when information or knowledge isn’t available where or when it is needed. This might include information on correct procedures, specifications, ways to solve problems, etc. Lack of correct information often leads to defects and bottlenecks. For example, unavailability of a mixing formula may potentially suspend the entire process or create defective items due to time-consuming trial-and-error tests.

Lean is most widely used in industries that are assembly-oriented or have a high amount of repetitive human processes. These are typically industries for which productivity is highly influenced by the efficiency and attention to detail of the people who are working manually with tools or operating equipment. For these kinds of companies, improved systems can eliminate significant levels of waste or inefficiency. Examples of these companies include wood-processing, garment manufacturing, automobile assembly, electronic assembly and equipment manufacturing. Lean Manufacturing is also appropriate in industries for which it is a strategic priority to shorten the production cycle time to the absolute minimum as a source of competitive advantage for the company.

Objectives of Lean Manufacturing

Lean Manufacturing, also called Lean Production, is a set of tools and methodologies that aims for the continuous elimination of all waste in the production process. The main benefits of this are lower production costs, increased output and shorter production lead times. More specifically, some of the goals include:

1. Defects and wastage — Reduce defects and unnecessary physical wastage, including excess use of raw material inputs, preventable defects, costs associated with reprocessing defective items, and unnecessary product characteristics which are not required by customers.
2. Cycle Times — Reduce manufacturing lead times and production cycle times by reducing waiting times between processing stages, as well as process preparation times and product/model conversion times.
3. Inventory levels — Minimize inventory levels at all stages of production, particularly works-in-progress between production stages. Lower inventories also mean lower working capital requirements.
4. Labor productivity — Improve labor productivity, both by reducing the idle time of workers and ensuring that when workers are working, they are using their effort as productively as possible (including not doing unnecessary tasks or unnecessary motions).
5. Utilization of equipment and space — Use equipment and manufacturing space more efficiently by eliminating bottlenecks and maximizing the rate of production though existing equipment, while minimizing machine downtime.
6. Flexibility — Have the ability to produce a more flexible range of products with minimum changeover costs and changeover time.
7. Output — Insofar as reduced cycle times, increased labor productivity and elimination of bottlenecks and machine downtime can be achieved, companies can generally significantly increased output from their existing facilities.

Examples of Lean Manufacturing

1. Toyota

Toyota’s manufacturing approach is the most prominent example of Lean since the company’s founder was the first to develop the system. The Toyota Production System (TPS) has embraced the philosophy of the complete elimination of all waste imbuing all aspects of production in pursuit of the most efficient methods. Prior to establishing the system, Toyota has worked on continuous improvements and ensuring that customers get their vehicles in the most efficient and the quickest way possible.

TPS incorporates the two Lean concepts: Jidoka and Just-in-Time. The former implies the elimination of defective products by stopping equipment as soon as an error occurs. The latter is associated with producing only what is needed within a continuous manufacturing flow.

It is essential to note that the TPS is a socio-technical system that pays a great deal of attention to respect for employees and teamwork. This means that Toyota’s Lean system is more than just an approach to manufacturing – it is a social philosophy in which the mutual trust between workers and personal growth is stimulated. Unlike other companies that are wary of any advancements, the TPS is welcoming of change because it encourages the company to improve and adapt.

The TPS incorporates a range a set of underlying principles, otherwise known as the Toyota Way. They include continuous improvement, respect for workers, long-term philosophy, producing the right results with the right processes, adding value, and organizational learning. The combination of the mentioned principles makes it possible for Toyota to reduce the errors in construction, reduce waste, and foster a positive environment in which workers are valued and supported.

2. Caterpillar

Caterpillar (CAT) is among the leading producers and constructors of mining machinery, natural gas and diesel engines, diesel-electric locomotives. It has also differentiated the business into producing travel accessories and footwear. The Caterpillar Production System (CPS) has been established for monitoring the quality of manufactured products, meet the established cost goals, retain staff, and reduce waste. Based on the TPS framework, CPS also incorporates such concepts as Poka Yoke, pull production, continuous improvements, and numerous others. Importantly, CPS is implemented not only in factories but also at stages of product design and development, supply chain management, and purchasing.

The integration of CPS allowed the company to reach unprecedented results. Between 2004 and 2008, Caterpillar capitalized on the economic boom, with sales and revenues topping $51 billion, exceeding the 2010 goal of $50 billion much ahead of schedule. Even during the downturn of 2009-2010, CAT managed to reach its objectives through the implementation of CPS. In 2010, the company increased its revenues by 31% compared to 2009 and earned $42.59 billion while its profit per share was $4.15 in 2010 compared to $1.43 in 2009.

In product design, the CPS is used for continuous innovation and adaptation to the needs of customers and the environment. In demand management, the system allows to make unbiased predictions and act in regards to maximizing the value delivered to customers. In quality management and process planning, the CPS is instrumental in delivering defect-free products and specifying the resources needed for improving the quality. Incapability building, the CPS maintains workplace values and enables the company to ensure the development of appropriate skills.

3. Intel

Intel is the key company supplying computer processes to such giants as HP, Dell, Apple, and Lenovo, and the scope of manufactured parts does not end there. In the recent decade, Intel has invested in the development of Lean solutions not only for increasing its manufacturing capabilities but also for reducing waste on such stages as Research and Development (R&D). When implementing Lean methodologies, Intel managed to eliminate waste by reducing the idle time experienced by the researchers and engineers who implement the change while reducing the business process variation simultaneously.

Particularly, Intel implemented Lean Six Sigma (LSS), which established a systematic approach to R&D along with the assessment of the present state through planning a process, preparing a map to identify inefficiencies and waste, defining a realistic objective, taking actions for improvement, and documenting outcomes. In terms of the real results of LSS integration, Intel reduced waste and idle time by 60%. Along with this outcome, the rate of stakeholder satisfaction increased without the need to compromise the technical accuracy during manufacturing.

When it comes to specific products, the manufacturing of microchips at Intel’s facility in Leixlip, Ireland benefited from the system. It made it possible for the company to reduce waste and set-up times and therefore reduce costs in the manufacturing of microchips. By introducing Lean, Intel developed to support not only for the company overall but also for its separate departments in Ireland. The support of a Lean system was important because without its implementation, up to twenty-five different product lines involving three hundred steps had to be managed.

4. Ford

While Lean manufacturing was first developed at Toyota, there are similarities of the system established at Henry Ford’s line assembly and manufacturing process. The key idea behind the Ford manufacturing system is the establishment of a standardized product that leads to the performance of standard processes. This guarantees that workers’ training is easier, and the procedures within the plant are optimized to meet the appropriate standards. With the introduction of the moving assembly line, the manufacturing takes place the way Ford expects; for example, workers can easily adapt to the speed of the conveyor without too much training or time.

Therefore, the Ford Lean system implies the harmonization of the work of machinery and employees. The Ford Production System (FPS) brought employees, materials, and mechanical resources in a timely manner to accomplish the established goals by reducing waste, costs, and fostering continuous improvement. The FPS was adopted in all FPS plants, and the company estimated that its savings would add up to $500 million per year.

Ford’s system is continuously pursuing perfection in all aspects of its business. From policy deployment to daily management, Ford integrates Lean principles every day. The FPS combines tools of improvement, cultural philosophy, and management subsystems. In regards to tools of improvement, they include mistake-proofing, Kanban, Just-in-Time, pull production, the 5S, load leveling, and visual workplaces.

As to the cultural philosophy, Ford engages in blameless management, continuous improvement, the development of people resources, and orientation on customers. Management SubSystems include such aspects as Quality Management Systems, team leader systems, Hoshin planning, coaching and human development, audit systems, and several others that make it easier to differentiate the objectives of various departments.