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.[1] Lean manufacturing also involves people who work outside of the manufacturing process, such as in marketing and customer service.
Lean 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 US as "The Toyota Way".[2][3] 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 waste of superfluous inventory of raw material and finished goods, the waste of overproduction (producing more than what is needed now), the waste of over-processing (processing or making parts beyond the standard expected by customer), the waste of transportation (unnecessary movement of people and goods inside the system), the waste of excess motion (mechanizing or automating before improving the method), the waste of waiting (inactive working periods due to job queues), and the waste of making defective products (reworking to fix avoidable defects in products and processes).[4]
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."[5]
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.
Naming[edit]
Alternative terms for JIT manufacturing have been used. Motorola's choice was short-cycle manufacturing (SCM).[52][53] IBM's was continuous-flow manufacturing (CFM),[54][55] and demand-flow manufacturing (DFM), a term handed down from consultant John Constanza at his Institute of Technology in Colorado.[56] 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.[17]: 11
The wide use of the term JIT manufacturing throughout the 1980s faded fast in the 1990s, as the new term lean manufacturing became established[57], [58] as "a more recent name for JIT".[59] 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.[60], [61]
Criticism[edit]
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.[72]
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.[73]
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.[74] 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.[75]
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.[76][77][78][79]
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.[80]
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."[80]
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.[81]
Lean manufacturing is different from lean enterprise. Recent research reports the existence of several lean manufacturing processes but of few lean enterprises.[82] 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.