Using Lean Manufacturing Solutions to Eliminate 7 Types of Waste
By: Jaime Bzdok
Lean manufacturing solutions can help reduce raw material costs as well the time and cost of manufacturing while minimizing returns and quality issues. The goal is to deliver products faster, with increased quality, at lower costs, when and where customers want them. The challenge, of course, is how to accomplish all of this.
In recent decades, many manufacturers have adopted lean manufacturing solutions to combat inefficiencies, optimize operations, improve business processes, lower operating costs, and increase profitability. The basic concept behind all of this is to essentially do more with less. That means processing fewer transactions with fewer resources such as people, machinery, materials, and energy. Fundamentally, lean is all about greater operational efficiency, continuous improvement and the elimination of waste throughout the organization.
Waste is the primary enemy of lean manufacturing solutions. The process of eliminating waste requires addressing seven key kinds of waste:
- Unnecessary or inefficient worker or machine motion
- Unnecessary material movement
- Inefficient or ineffective processes
- Rework and scrap
What makes eliminating waste particularly troublesome is the close inter-relationship between all seven forms of it. For example, if a company is over-producing due, say, to faulty forecasting or misplaced optimism, that causes excessive inventory which results in unnecessary material movement and worker/machine motion and, ultimately, products that don’t ship which impacts revenue and profits.
In fact, over-production is perhaps the leading type – as well as cause – of waste. Over-producing triggers excess in virtually every other aspect of manufacturing: work-in-process (WIP), inventory, and movement, all of which cause excess lead times because everything ends up sitting and waiting for other processes to be completed. Many organizations have trouble with this because they mistakenly believe if they manufacture more products they can set the process up once and amortize it out over more parts to reduce cost. What they’re not realizing is that it could actually cost less if they set up multiple times because they’re not paying for overtime or to have excess stock sitting on shelves.
The key to waste management: evaluating ALL the right metrics
What this scenario reveals is that companies utilizing lean manufacturing solutions often focus on a single waste-reduction solution – such as increasing efficiency – when there might be a number of solutions of equal or greater importance. For example, instead of concentrating solely on efficiencies (fewer set-ups) they might streamline operations and reduce waste and cost better with more set-ups. In fact, companies that focus on efficiencies tend to create larger batches because it appears to cost less money. In reality, the opposite is often true.
Instead, companies wrestling with waste caused by over-production should gain a better understanding of throughput accounting, focusing less on efficiencies and more on throughput. For anyone not familiar with throughput, it’s the amount of money left for labor costs after subtracting material and outside services costs from sales. So instead of over-producing to take advantage of efficiencies of scale, it’s more important to produce only what’s needed, ultimately increasing throughout and making room for more deliverable orders and more revenue. Throughput, total operating expenses, cycle times, delivery performance – these are all metrics that can be as equally important as efficiencies in achieving waste reduction when utilizing lean manufacturing solutions.