ARTICLE

What Does It Mean to Operate “Lean”?

by: Smith and Howard

December 9, 2016

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Thirty years ago, “lean” manufacturing was an innovative concept, imported from Japan. The theory was intuitive: Make products as efficiently as possible, using the least possible staff time, equipment and working capital. Borrowers who mastered lean fundamentals increased profits and used assets with greater efficiency. The secret to staying lean, however, is continuous improvement.

Lean manufacturing is just as relevant today as it was in the 1980s. Remind your borrowers that it’s critical to continuously rethink their operations and find ways to operate leaner. Here’s a brief overview of the four cornerstones for building a leaner foundation.

1. Minimal waste

Lean manufacturing limits the amount of resources that are required to produce a finished product. If a borrower’s dumpsters are full each week, there may be an opportunity to reduce the amount of materials it uses to manufacture products. But it’s important to think beyond materials; waste also involves underused labor and inventory, defective products, and disorganized assembly line layout.

Lean manufacturers organize workspaces to expedite workflow, which limits unnecessary movements or steps employees must make to complete repetitive tasks. For example, suppose an employee spends an hour of each eight-hour day walking back and forth to an outside storage facility to obtain parts. This unnecessary transport time results in a 12.5% reduction in productivity.

2. Maximum quality

Poor or inconsistent quality can destroy a business. Yet ensuring the highest possible quality for every product shipped out the door is easier said than done, especially if a borrower’s operations are streamlined.

Quality is everyone’s job, but it starts with your top executives. Management must share customer feedback with subordinates and provide frontline workers with effective quality control (QC) tools. Effective QC procedures are necessary to ensure product defects are caught and corrected before products ship to customers. Have your borrowers implemented training programs to teach employees how to use equipment properly, spot defects and errors, fix today’s mistakes — and prevent the same mistakes from happening tomorrow?

For example, suppose a small aftermarket automobile manufacturer installs a sophisticated computerized system for detecting defects in its precision milled products. This QC tool will help catch problems early in the manufacturing process. However, employees can’t become complacent. They still need training on how to spot packaging errors, with the aid of the computerized QC system, as parts roll down the assembly line. Such standardization will improve workflow and increase efficiency in the workplace.

3. Consistent workflow

Lean manufacturing principles discourage dramatic production fluctuations that can lead to overtime pay, sloppy workmanship and stressed-out workers. Lean borrowers can accurately forecast demand and then use those forecasts to produce consistent output each period. Ideally, inventory on hand, not additional output, should be used to shore up gaps when large customer orders arrive.

Accurate forecasts require your borrowers to work closely with their customers. Some customers grant suppliers access to their enterprise resource systems to monitor inventory levels and anticipate demand. Salespeople can also forewarn plant managers of large orders in the pipeline, so the factory can gradually ramp up production, as well as informing them about the loss of a major customer that will significantly lower demand.

4. People

Successful lean endeavors encourage happier workforces. A happy worker is typically a productive worker, who is likely to show up on time and take pride in his or her work. Tour your borrower’s facilities and assess morale; it can be a strong indicator of whether the plant is operating efficiently.

Lean manufacturing is a continuous improvement process that relies on everyone in the organization to identify opportunities to enhance efficiency. Successful lean initiatives hinge on people who are armed with common sense and accountability — and who are empowered to make improvements.

For more information on how lean manufacturing can help your borrowers, contact Melissa Horne at 404-874-6244.

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