The Business Book

(Joyce) #1


Workers on a production line will
be much more efficient if all the
components they need are within easy
reach. Time spent searching for items
increases the movement muda, which
incurs a cost to the business.

Lean producers try to eliminate
overproduction and waste stock by
using the just-in-time (JIT) system,
in which production only happens
in response to a customer order.
Companies that use just-in-time
never produce output for stock, and
if there are no orders from buyers,
production stops. Thus, production
is pulled through by the consumer,
rather than being pushed through
by the manufacturer. The same
principle is extended to raw
materials and bought-in components.
Lean producers run with minimal
buffer stocks, relying instead on
daily, or even hourly, deliveries from
suppliers. However, the absence of
a stock of raw materials means that
a faulty shipment of components
could bring an entire factory to a
halt. So to make just-in-time work,
lean producers require reliable
suppliers that produce zero defects.

Lead times
If products are to be made to order
rather than supplied from stock,
there is a risk that a long lead
time (the time between an order
being made and delivery to the
consumer) could result in customer
dissatisfaction and consequently
falling sales. Therefore, to run lean

production effectively, companies
need to shorten the cycle time
taken to make their products. To
accelerate the pace of production,
managers will need to control the
movement muda, the waiting muda,
and the transportation muda. At its
simplest, this could be achieved
by redesigning workstations and
production lines so that employees
have all the tools and components
to complete the task close at hand.
Likewise, bottlenecks in production
can be eliminated by deploying
more machinery or more labor at
the problem area.

Lean producers tackle wasteful
overprocessing, the sixth muda,
by applying a process called value
analysis at the product design
stage. Companies using value
analysis attempt to identify product
features that create cost but have
no value for the consumer. If these
features can be removed to create a
simpler, cheaper product, profit
margins will rise. At the same time,
revenues should not fall, because
the features that have been removed
were not valued in the first place.
It could be argued that the
business model of a no-frills hotel,
as seen in the Malaysian company


Tune Hotels, is based on value
analysis. For Tune Hotels, affordable
rooms are its priority. To achieve
this, services that push up the price
of a room but are viewed as
nonessential by customers, such as
air-conditioning or toiletries, have
become optional add-ons. The chain
focuses solely on core qualitites
such as cleanliness and safety,
valued highly by the customer.
To eliminate the seventh muda,
defective products, lean producers
seek to create high-quality items.
This requires managers to trust
workers to spot any fall in quality.
Employees have the authority to
stop the production line in order to
solve the problem, and production
only restarts once the source of the
problem has been found and fixed.
High product quality, achieved
by lean production, leads to lower
costs. By solving problems at their
source, companies spend less time
and money on reworking defective
products to bring them up to the
required standard. ■

Regardless of how much
workers move, it does not
mean work has been done.
Working means that progress
has been made.
Taiichi Ohno

All we are doing is looking
at the time line, from the
moment the customer gives us
an order to the point when we
collect the cash.
Taiichi Ohno

Free download pdf