2 min read
25 May 2021

Cost efficiency in production is of paramount importance in a competitive environment. Lowering costs in production through the elimination of redundancy and wastage enhances revenues for a business. It helps businesses sustain a healthy cash flow and undertake various growth initiatives. 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. The concept focuses on identifying and cutting down on repetitive and wasteful processes.

1. Overproduction

Producing goods ahead of time or beyond demand results in a higher cost for a business. When an organisation is unable to sell its goods, it loses revenue. Storing the goods also costs money. Lean manufacturing cuts overproduction, aiding businesses in saving money.

2. Unnecessary inventory

Unnecessary overstocking of products becomes a maintenance expense. Businesses using lean manufacturing can cut costs by stocking just enough inventory. Concepts like Just in Time inventory management techniques help eliminate the extra inventory carrying cost.

Additional read: How to grow a manufacturing business

3. Inappropriate processing

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

4. Unnecessary motion

Awkward motions on machines can cause wear and tear and injury to operators. It lengthens the entire production cycle, escalating costs.

5. Inefficient transportation

Inefficient transportation can result in loss and damage of goods in transit. This causes a business to bleed cash. Using proper supply chain management and changing the transportation layout according to principles of lean manufacturing can reduce costs.

6. High waiting time

A delay in the manufacturing process results in a higher waiting time. It creates bottlenecks and puts pressure on workers to deliver extra man-hours. Lean manufacturing cuts down the waiting period through improved efficiency across the production ecosystem. This helps businesses save money on overtime payments and machinery running costs.

7. Rejects and defects

Rejected products need close inspection to detect manufacturing defects. This can lead to repeating a process that costs more. Through improved efficiency, businesses can cut down on defective products, reducing costs on raw material usage and labour inputs. It is necessary to have the best machinery, as top-of-the-line equipment improves the overall quality of goods. However, such equipment can be expensive, requiring a machinery loan to purchase them.

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 manufacturing. It’s all about manufacturing products when customers want the quantity required. This helps businesses get rid of unnecessary inventory.

Total productive maintenance

It is a team-based system that aims to improve overall equipment effectiveness. The goal is to:

  • Avoid wastage
  • Produce better quality products
  • Produce small batches in the shortest possible time
  • Send non-defective goods to customers

Additional read: Types of business loan

Maintaining a 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 reduces waste and improves productivity.

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