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What is Lean Manufacturing and How To Save Cost With It?

  • Highlights

  • Avoid overproduction of goods to prevent waste

  • Have efficient transportation systems for timely deliveries

  • Avoid having unnecessary inventory on stock

  • Conduct quality checks to minimise defects

In a competitive environment, cost efficiency in production is of paramount importance. Lowering costs in production through elimination of redundancy and wastage enhances revenues for a business. Thus, it helps businesses sustain a healthy cash flow. They can also undertake various initiatives for growth.

Lean manufacturing helps businesses reduce costs and improve efficiency. Let's understand how lean manufacturing helps in reducing costs.

Getting Rid Of Waste - The Core Mantra Of Lean Manufacturing

Lean manufacturing as a management philosophy is derived from the Toyota Production System (TPS). The concept focuses on the need to identify and cut down on repetitive and wasteful processes.

i) Overproduction

Producing goods ahead of time or beyond demand results in higher cost for a business. When an organisation is unable to sell its goods, it impacts its revenues. Money is also spent on storing the product. Lean cuts overproduction, thereby aiding businesses to save money.

ii) Unnecessary inventory

Unnecessary or overstock of products results in cash outflow for maintaining them. Businesses using lean manufacturing can cut down on costs on stocking products. Using concepts like Just In Time (JIT) inventory management techniques, the extra inventory carrying cost can be eliminated to a large extent.

Additional Read: How To Grow a Manufacturing Business

iii) Inappropriate processing

Inappropriate processing results in implementing unnecessary procedures in production. This escalates costs manifold. Lean cuts down such processes, helping businesses reduce costs.

iv) Unnecessary motion

Awkward motions on machines and human bodies can result in wear and tear and injury. It adds to unnecessary time in the entire production cycle, escalating costs.

v) Inefficient transportation

Inefficient transportation can result in loss and damage of goods in transit. This results in haemorrhage of money for a business. Using proper supply chain management and changing transportation layout according to principals of lean manufacturing can reduce costs manifold.

vi) High waiting time

A delay in the manufacturing process results in higher waiting time. Alongside creating bottlenecks, it also puts pressure on workers to deliver extra man-hours. Lean cuts down waiting period through improved efficiency across the production eco-system. This aids businesspeople in saving costs through reduced overtime payment and machinery running cost.

vii) Rejects and defects

Defective and rejected products need a close inspection to address manufacturing defects. This can lead to repeating a process that results in higher cost for businesses. Through improved efficiency, businesses can cut down on defective products, thereby reducing costs on raw material usage and labour input cost. It is necessary to have the best machinery, as top-of-the-line equipment results in better quality goods overall. However, such equipment can be expensive, necessitating a machinery loan in order to purchase them.

Additional Read: How To Reduce Manufacturing Waste

Implementing Lean Manufacturing

Some effective tools and techniques for implementing lean manufacturing are:

Cellular Manufacturing

Cellular manufacturing facilitates a flow of materials with minimal delay. It helps to reduce:
- Setup time
- Material handling cost and time
- Material flow distance

Just-in-Time Production

Just-in-time production is one of the fundamental pillars of lean. It's all about manufacturing products when customers want the quantity required. This helps businesses get rid of unnecessary inventory.

Total Productive Maintenance (TPM)

It is a team-based system that aims to improve overall equipment effectiveness (OEE). The goal is to:
- Avoid wastage
- Produce better quality products
- Produce low batch quantity within as shortest possible time
- Send non-defective goods to customers

Additional Read: Types of Business Loan

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Maintaining 5S Organisation

5S is one of the most powerful lean manufacturing techniques. 5S stands for the following Japanese words:
-Seiri - Sort, Classify, Clearing
-Seiton - Set in Order, Configure, Simplify, Straighten
-Seiso - Shine, Sweep, Scrub, Check, Clean
-Seiketsu - Standardise, Conformity, Stability
-Shitsuke - Sustain, Self-Discipline, Custom, Practice

Before implementing lean manufacturing, businesses should identify what is a waste. Once done, they can design a system that cuts down on waste and improves productivity.

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