The Management of Lean and Agile Organisations

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Introduction

For a company to continue being competitive in the marketplace today, they must comprehend the needs and wants of their customers, and also they must fully analyze their design processes for them to meet their targets and requirements.

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Companies like Toyota have done a great job in understanding their customers and their design processes. As the end product of this practice, the company has sustained a competitive advantage over its competitors in the marketplace. Toyota managed to do this by a self-made philosophy of continuous improvement and waster reduction which are the same principles that became the basis of lean manufacturing. What does lean manufacturing exactly mean? How does it differ from another operational strategy like mass production? What might be the barriers to implementing lean production? This paper aims to answer the questions just mentioned. The paper also presents the writer’s personal opinion about the practicality of implementing lean in a chosen company.

Lean manufacturing overview

Definition

Lean Manufacturing, also known as lean production, is a systematic approach to production whereby wastes are identified and eliminated by focusing on the wants or demands of the customers (Heizer and Render, 2006). Lean manufacturing does this by the continuous improvement of the production process by creating the product guided by the customers’ demand.

The practice of lean production points out that resources must only be spent on activities that create value for the final customer. Generally, lean production focuses on creating more value by doing less work. Activities that do not add value to the end product are considered wastes and thus must be eliminated. The term “value” should be looked at from the perspective of the customers who pay for the product or service. Thus, value refers to the activities or processes that the customers are eager to pay for.

Rational

As wastes are reduced, resources can be utilized for activities that add value to the product, thus the quality of the product increases. Furthermore, faster response to the customers’ needs can be achieved. By eliminating wastes or any activity that does not add value, involving everyone, and continuous improvement help give a competitive advantage to the company.

History and Evolution

The concept of removing waste has already been in the history for a long time. The philosophies created long time ago became the basis of the present concepts of lean manufacturing.

Basically, the philosophy that surrounds lean manufacturing was derived mainly from folk wisdom of thrift economy and adopted by the Toyota Production System in waste reduction. The world acknowledged the company’s excellence in the removal of the original “seven wastes” as set out by Toyota. (Heizer and Render, 2006). The company received much attention because of its impressive value-making activities. The world is amazed at how a small company managed to be one of the world’s leading automobile makers (Bailey, 2008). Since then, studies have been made to understand how that happened

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The term “lean” was first coined by John Krafcik in 1988. The Sloan Management Review published Krafcik’s article entitled, “Triumph of the Lean Production System”. The article was based on Krafcik’s thesis during his master’s in Sloan School of Management (Womack et al, 1991).

The ideas that Toyota developed that soon became the same ideas of lean manufacturing may have come from Sakichi Toyoda and his textile factory in the 20th century. Autonomation and Jidoka have started when Sakichi used the factory looms in such a way that the looms will automatically stop whenever a thread is broken. During the year 1934, the company transformed into an automaker. Since then, the founder of Toyota, Kiichiro Toyoda developed and redeveloped the company’s processes. Specifically, Kiichiro introduced the concept of “kaizen” teams to improve the quality of their product. He also was the one who initiated the pull production scheduling which suggests that sales must be driven by actual sales instead of mere targets. It was Taiichi Ohno that integrated all the principles used by the company and created the Toyota Production System (Strategos, Inc. Official website).

The philosophy underlying lean manufacturing was originally intended for the automobile-making industry specifically for production scheduling, quality improvement and waste reduction. The interest of the business world to lean manufacturing has increased since its first proposal Today, lean manufacturing has been applied in other industries and business processes. Call centers were able to reduce handle time, agent variability, accent barriers and other wasteful activities (Adsit, 2009). Furthermore, the potential use of lean manufacturing in the public sector was also seen in a study made by Warwick University for the Scottish Executive (Radnor et al., 2006)

Studies regarding the application of the principle of lean are already being made. In fact, there have been researches that claim that the use of the principle of lean was the key to success of some retail and also airline companies (Ruffa, 2008). Notwithstanding these researches, the application of lean principles to the services industry still needs further experimental developments (George, 2003).

The Future for Lean Manufacturing

Lean focuses on eliminating the activities that do not add value to a product or service. Six Sigma are tools originally utilized for quality engineering with a purpose of improving the quality and reliability of a product or service. These two disciplines are now slowly converging into a new discipline that can be more useful for all industries and business processes (Global Six Sigma USA, 2005). This new methodology can be applied not only for manufacturing and supply chain processes but for all aspects of a business (Six Sigma Institute). The application of lean in other business processes and industries will bring the same ultimate benefit that manufacturing companies enjoy which is the competitive advantage over its competitors.

Due to all the attention that lean manufacturing and its other potentials, the principles of lean manufacturing are here to stay. A lot of studies are still ongoing right now in the field of lean manufacturing. There is still a lot to improve in this promising production approach.

Lean manufacturing vs. Mass production

Definition of Mass Production

Mass production, also known as flow production or series production, is the process of producing large quantities of homogeneous products which normally calls for the use of an assembly line. In mass production, processes are repetitive in all units of product. The use of an assembly line is an approach that pulls the pre-fabricated parts together at string of workstations in those repetitive processes (Heragu, 1997).

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Mass production concepts can be used in different varieties of products, from fluids and others that are produced in bulk like food, chemicals, and fuel. Discrete solid parts like pencils also use the concept of mass production. Products that have parts that needed assembly like appliances and automobiles can also use the concepts of mass production.

Differences between Lean and Mass Production

Mass production is used in order to produce goods that are families of similar high-volume, low-variety units. This gives the company full utilization and economies of scale. On the other hand, lean manufacturing focuses on the quality and efficiency of using all the company’s resources (Heizer and Render, 2006)

Lean manufacturing employs a “pull” system of production scheduling whereby the production of goods is driven by the actual sales or demand for the product. In the case of mass production, goods are produced based on the production or sales target of the company regardless of whether sales are actually being made. Furthermore, companies that employ lean manufacturing always want to keep their inventory level at the minimum with some even no inventories at all. Employing mass production process would most likely mean maintaining a quite large amount of finished goods in its inventory (Levinson and Rerick, 2002)

In terms of capacity utilization, mass production demonstrates higher performance in the use of personnel and facility compared to lean manufacturing. Capacity utilization is an economic concept that refers to the level of utilization of the available production capacity of an organization or an economy. It is function of the actual output of the facility and the potential output that could have been produced when the full capacity of the facility is utilized (Heragu, 1997).

Advantages and disadvantages of both strategies

It is more convenient to follow mass production strategy in creating goods with high volume standardized products. This will result in lower variable costs per unit of product. Furthermore, mass production decreases the cost of material handling work-in-process inventory. Easier training and supervision can also be achieved when mass production is used. Lastly, mass production dramatically reduces the time it takes to produce a single unit of product (Womack et al, 1991).

The major disadvantage of mass production is the need for large investment because it requires specialized equipment. Furthermore, the flexibility of the production line is very poor. Once the process is installed, it will be very difficult to alter the design to produce different varieties of final output (Global Six Sigma USA, 2005).

Lean production brings about many advantages to an organization’s production process. First of all, lean production decreases almost all types of costs by reducing wastes. Furthermore, variability is reduced. Variability is any deviation from the optimum process that makes a perfect product at the perfect time. Because of these things, quality is improved. Another great advantage of lean production is its flexibility. A lean production system can easily accommodate changes that are to be expected with a philosophy of continuous improvement (Levinson and Rerick, 2002). It can be said that it is more convenient to adopt a lean strategy if the company is required to have a flexible production process.

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The disadvantages of lean production lie within the barriers of implementing it. Implementing a lean manufacturing system requires a lot of organizational, operational and manpower changes. Implementing these changes is not an easy task because of the barriers inherent in them. These barriers are to be discussed in the next section.

Barriers to lean implementation

Organizational

Creating an organization where learning and continuous improvement are the norms is a big challenge. To create a successful lean process, the organization must focus on quality, just-in-time and employee empowerment. In order to do this, a culture change in the organization is required. A cultural change calls for a change in the knowledge, belief, morals, customs and any other capabilities and habits of the members of the organization (Bertrand, 1973)

In terms of cost, it is not expensive to implement lean. Lean does not require an abrupt change in the production and organization of the company. It can be made by a gradual change in the company’s business processes as well as adoption of practical ways that can be implemented in the shortest time possible (Womack et al, 1991).

Operational

In implementing the lean principles, it is not necessary to implement all of the tools like kaizen, kanban and cell manufacturing. Not all organization has operations that are suitable for these kinds of practice (Womack et al, 1991).

In terms of market demand, lean principles can be implemented in any type of market demand. Lean is developed in a very flexible way that lets a company easily adapt to changes in the demand for their product (Womack et al, 1991).

At the initial implementation of lean, it can disrupt normal production. This can be considered as the major operational barrier for lean (Womack et al, 1991).

Human

Personal skills like communication, problem solving and teamwork are needed in the implementation of Lean. Communication skills are needed in informing the people in what to do and also it is needed in order to tell the appropriate person whenever problems are noticed. Once problems are identified, problem-solving skill is needed. People should be analytical in solving organizational problems. In a lean environment, all people are involved. A weakness in one aspect can be seen in the final output. Thus, teamwork between the people in the organization is required. The lack of these skills can act as a barrier to the successful implementation of lean. Leadership skills also play an important role in the successful implementation of lean. Leadership skills are needed in order to steer the organization in the proper direction. Lack of this skill can also be a barrier in a lean environment (Bertrand, 1973).

Another barrier to the successful implementation of lean is the possible resistance of the people in the shop-floor area. People in this area are usually comfortable with their repetitive tasks. Once they are forced to study and do other jobs other than what they used to do, it may lead to inefficiencies.

Analysis of lean manufacturing in chosen company

In light of the material presented, lean is truly an effective strategy in improving an organization’s operations management. On the contrary, implementation of a successful lean environment is not an easy task. It requires a lot of organizational, operational and manpower changes. Furthermore, the application of lean in other industries like the service sector and the public sector is not yet studied fully. Further research and studies should be made in order to determine whether the principles of lean are also applicable to these kinds of organizations.

A company that can implement lean production is Green Gear Cycling Inc. The company produces “Bike Friday”, these are high-performance, high-quality, custom bicycles. Adopting lean to the organization will bring a lot of benefits to the company. Lean production will mean fast throughput, low inventory, work cells and elimination of machine setups. The barriers mentioned in the preceding section can be easily overcome by the organization because since the inception of the company, it has already believes in the power of making high-quality bicycles at the least time in an economical way (Green Gear Cycling, Inc, 2009).

Conclusions

Lean manufacturing is a philosophy developed through time, by combining mostly the philosophy that Toyota used in their company. It is really an effective tool for the continuous improvement of the product or service and identifying and eliminating wastes or activities that do not add value to the final product. In this way, the company can give the customer what they want. Lean production has the ability to significantly reduce production costs just like mass production. Mass production, though reduces costs, requires many assumptions before it can be implemented. Implementing lean is not an easy task. Before implementing lean in an organization, a lot of barriers must first be considered. The culture change needed disruption of the normal production and lack of personal skills are few of the barriers that a company might face in implementing lean. Overall, a company that successfully implemented a lean operation can really reap the benefits of a competitive advantage in the marketplace.

References

  1. Adsit, Dennis. “Cutting Edge Methods Target Real Call Center Waste”.
  2. Agilean Profit Catalysts. “The Lean Revolution”.
  3. Bailey, David. (2008). “Automotive News calls Toyota world No 1 car maker”. Reuters Online. Web.
  4. Bertrand, Alvin L. (1973). Basic Sociology. 2nd. Ed. New York: Appleton-Century-Crofts.
  5. George, Michael L. (2003). Lean Six Sigma For Service, McGraw-Hill.
  6. Global Six Sigma USA. (2005). “What does it take to be successful in your Lean Journey”.
  7. Green Gear Cycling, Inc. Official website.
  8. Heizer, Jay & Render, Barry. (2006). Operations Management, 8th edition. Pearson Education, Inc., Prentice Hall
  9. Heragu, Surenderesh. (1997). Facilties Design. Boston, MA: PWS Publishing Company.
  10. Levinson, William A. and Rerick, Raymond (2002). Lean Enterprise: A Synergistic Approach to Minimizing Waste, ASQ Quality Press.
  11. Radnor, Dr Zoe; Paul Walley, Andrew Stephens, Giovanni Bucci. “Evaluation Of The Lean Approach To Business Management And Its Use In The Public Sector”.
  12. Ruffa, Stephen A. (2008), Going Lean: How the Best Companies Apply Lean Manufacturing Principles to Shatter Uncertainty, Drive Innovation, and Maximize Profits, AMACOM.
  13. Six Sigma Institute. “Lean Six Sigma Overview” Web.
  14. Strategos, Inc. Website. Just in time, Toyota Production System & lean manufacturing: Origins & history lean manufacturing. Web.
  15. Womack, James P., Jones, Daniel T., and Roos, Daniel (1991), The Machine That Changed the World

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BusinessEssay. "The Management of Lean and Agile Organisations." January 27, 2022. https://business-essay.com/the-management-of-lean-and-agile-organisations/.