What is Lean Management ?
Most of the managers have a poor understanding of various dimensions of relationship that exists between the organization and the suppliers/the customers. In this connection, one should not lose the sight of the fact that mutual trust and cooperation are two strong pillars of a successful venture.
Lean management is considered to be an inseparable ingredient of the concept of "lean thinking". The philosophy of lean management is a radical departure from the traditional management philosophy, which does not ensure right emphasis or support for the initiative taken for the involvement of lean management in an organisation. In the absence of appropriate action to bring about necessary changes in the management of processes, people, and products, the implementation of lean philosophy is likely to face failure. Due to this reason, a number of organisations have not been able to implement lean thinking in its entirety.
Most of such organisations start their journey towards lean management with a lot of publicity, without having a clear understanding of the concept, techniques to be used, or proper guidance, as a result, they cannot go much ahead in their journey. It is, therefore, necessary to have management system, which fulfills the requirements of a transforming organisation.
The genesis of lean management, a very popular concept in the business arena, may be traced back to a simple concept that the customers are willing to pay for values only, and not for the mistakes or wastes. The companies pursuing lean management system, therefore, must endeavor to keep on adding values to their products or services to ensure their customers' satisfaction level, and also to improve their bottom-lines. Lean management opens up avenues to add value to the products and services offered by a company on a sustainable basis. A company need to define lean management with a view to creating a sense of direction and corporate goals.
During the process of implementing the system of lean management, a company finds itself in a position to get rid of the processes, which do not add value and track improvements through a set of trusted criteria. Once this kind of management system has been set up in an organisation, its executives get clarity with regard to the areas functioning in a way they are expected to function. and those areas, which are required to be changed.
Definition of Lean Management
According to Womack and his associates :
"It denotes a system that utilizes less, in term of all inputs, to create the same outputs as those created by a traditional mass production system, while contributing increased varieties for the end customer".
The system of lean management is one of the highly evolved and refined systems, which functions on the foundations of numerous complex techniques - both conceptual and physical. It is something like viewing a company from an altogether different perspective. Various processes, operations, etc. starts giving new meanings, which is entirely different from the traditional meanings Lean management facilitates a company in realizing its hierarchical structure, with a view to ensuring that its leaders and manager give shares of their skills within the context of teams. The benefits of re-alignment of the companies functions are multi-folded as under :
- There is no competition among-st the different operations being taken place within the organisation (internal competition), bur against the competitors of the organisation (external competition).
- Organisational in-activeness, which is the most harmful rival, is broken.
- The culture of autocracy is replaced by a culture of team spirit.
The driving force behind the new kind of leadership under the system of lean management is the want of quality promptness, flexibility, and efficient communication tools to ensure hassle-free communication between the company and its customers/suppliers and between the company and its employees. In a lean environment people are more important and it is the responsibility of the lean management to ensure maintenance of good relationship between the people and machines. An ideal lean leadership and lean communication system are the integral part of the overall lean management. system; they evolve slowly over a period of time, and not in a sudden manner.
Principles of Lean Management
The framework of the lean thinking is founded on five fundamental principles, which have been discussed in the following points :
1) Value :
The value placed by customers upon an organisation's products is of paramount importance for that organisation, and it is imperative on its part to have an in-depth understanding of the same. This is the aspect, which decides the level of the price a customer is ready to pay for the product/service on offer. This is also the fountainhead of what is known as 'top down target costing approach", which was put to application by a number of organisations (including Toyota) successfully for a number of years. The essence of target costing is laying emphasis on the customers' willingness to pay for specific products. characteristics, and services, which may be taken as the basis for the determination of the price tag of those products and services. It is the company's responsibility to ensure minimization of wastage's and cost-reduction through the business processes, so that the products/services may be delivered at the customers' expected prices, and at the same time leaving adequate profit for the company.
2) Value Stream :
The complete stream of a product's life cycle, starting from the procurement of the raw material, manufacturing. production phase, use of the product by customers, and eventually after the use, disposal of the product is referred to as "Value Stream Stream' An exhaustive study of the value stream and associated value-addition enables an organisation to fully comprehend the waste involved in the manufacture and delivery of a product and/or service. Lean thinking recommends following steps for the removal of waste from the complete value stream :
- Supplier and customer partnership.
- Radical supply chain management.
3) Flow :
Flow plays a pivotal role in the process of waste removal. An interruption in the value-chain, due to any reason whatsoever, results in waste. Therefore, the value stream needs to be designed in such a manner, that the entire production takes place without any break at any stage and there is complete synchronization between various aspects of production and delivery on one hand and other elements on the other. Accurately planned flow throughout the entire value-chain is likely to ensure minimum level of waste coupled with maximum value for the customers.
4) Pull :
Application of 'Pull Approach' ensures that (i) nothing is made ahead of time, and (ii) work in-process inventory is not built-up, which prevents the synchronized flow. This approach is altogether different from the traditional 'Push approach', popular amongst Western manufacturers, wherein MRP-II and ERP are used for production planning and control; production is pushed through the factory, on the basis of forecasting and scheduling. Under the "Pull Approach", nothing is produced, unless there is a demand from the customers' end. However, there are certain prerequisites under this approach, which are as followings :
- Plenty of flexibility/elasticity.
- A short cycle times of production and delivery of products/services.
A mechanism is required to be put in place, wherein the value chain is kept informed of each step with regard to the daily needs, so that the customers expectations are met.
5) Perfection :
It is necessary for a manufacturer pursuing the lean management to set the targets for perfection. The concept of Total Quality Management (TQM) provides total removal of the basic reasons behind the poor quality, from the production process in a systematic and sustainable manner. This ultimately leads the plants and products towards perfection.
Assumptions of Lean Methodology
There are certain presumptions which are the keystones of lean methodology. They are us following :
- Visual impacts of flow are appreciated and therefore valued by the people.
- Wastage is the main hurdle in the path towards profitability of the organisation.
- Small improvements in any area in frequent manner create substantial positive impact, rather than mere analytical study.
- Resolution of process interaction effects may be achieved through the refinement of value-stream.
This approach especially appeals to those people who are associated with operations. A number of people are involved in the value-stream under the lean system. Transformation of people to the new paradigm, i.e. flow thinking brings about radical changes in the peoples perception with regard to their roles in the organisation served by them and their relationship with the specific product.
Related Terms :
Difference between Mass Management and Lean Management
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