Lean is a philosophy that spurred from the Toyota Production System (TPS). TPS was created by Toyota’s founder Sakichi Toyodo, Kiichiro Toyoda, and Taiichi Ohno. Much of TPS was also influenced by W. Edwards Deming’s statistic process control (SPC) and Henry Ford’s mass production lines. However, the Japanese were not impressed with Ford’s approach because it was filled with over-production, lots of inventory, and much waiting. Toyota identified these weaknesses in Ford’s production line and adapted the production line to create a more productive and reliable production line. TPS and lean also use just-in-time inventory where only small amounts of inventory were ordered and very little inventory was left waiting in the production line. This also was very different from Ford’s production line which usually bought high volumes of materials and had high inventory levels to lower costs.
After TPS proved to be successful for Toyota, many companies adapted their production lines to incorporate lean principles. Lean management was first introduced in the United States in the early 1980’s after a global study of the performance of automotive assembly plants. Essentially, the primary principle of lean is that it is a tool used in manufacturing to eliminate waste, improve quality, and reduce cost. Waste is eliminated by identifying non-value added activity. The main objective is to supply perfect value to the customer through a perfect value product that has no waste. Lean manufacturing focuses at eliminating waste along entire value streams, instead of at isolated points, creates processes that need less human effort, less space, less capital, and less time to make products and services at far less costs and with much fewer defects, compared with traditional business systems.
Companies may face certain challenges when applying lean to their production lines. First, lean should be applied to companies that have production lines that are routine, predictable, stable, and can be flow charted. Second, lean implementation may take years and can be very costly in large companies. Depending on how integrated the systems and how disciplined the production line is, it is quite possible that a lean implementation may fail. There are several key lean manufacturing principles that need to be understood in order to implement lean. Failure to understand and apply these principles will most likely result in failure or a lack of commitment from everyone. These principles are as follows: 1. Elimination of waste; 2. Continuous improvement; 3. Respect for humanity; 4. Levelized production; 5. Just-in-time production; and 6. Quality built-in.
Management may also be discouraged to adopt lean manufacturing right away because the lean implementation is a long term investment. Most CEOs make decisions that benefit the company in the short run, and may choose not to adopt lean because it may show unfavorable results on the financial statement during the early stages. Lean will cause a decrease in inventory levels, causing assets on the balance sheet to drop which is not always favorable. However, these short term negative results will eventually become long run gains as the company benefits from less inventory holding costs and improved processes.