The last 18 months have taught organisations that, to maintain operations and become market leaders, they must anticipate market changes and get ahead of any disruptions.
Increased focus in this area has highlighted the requirement for organisations to bolster capacity to ensure they are equipped to absorb any changes effectively. The key to maximising capacity is reducing waste, which involves eliminating activities that don’t add value to the organisation or its customers.
There is a misconception that eradicating waste means cutting jobs and slashing budgets; however, Lean business methodology pinpoints eight particular types of waste that will inevitably differ from business to business:
- Overproduction – Making something before it is needed
- Waiting – When work-in-process is held up for the next step
- Transport – When materials, work-in-process or finished goods are moved unnecessarily
- Motion – The unnecessary movement of people
- Overprocessing – The inclusion of unnecessary steps to produce what the customer requires
- Inventory – When the quantity of materials, work-in-process or finished goods exceed the immediate need
- Defects – When production or processes require rework
- Non-utilised talent – The ineffective use of human capability and resources.
To help combat waste in each of these areas, organisations are increasingly embracing Lean business methodologies so they can grow and scale in a disciplined, principled way. The five Lean principles that deliver better value for customers, reduce waste, increase productivity, bolster competitive advantage and boost profits are:
1. Defining value
What does value look like in your organisation? What are your customers/clients willing to pay for? It’s crucial to, first of all, identify the actual or latent needs of your customers. You can do this by conducting interviews, distributing surveys, and analysing demographic and market information. This can help you uncover what they want from your product or service, how they want it to be delivered, and the price they’re willing to pay for it.
2. Mapping the value stream
Now you must identify all of the activities within the organisation that contribute to value. Any that do not directly add value to your customer could be considered waste. You can organise waste into two categories: non-value added but necessary (to be reduced as much as possible) and non-value and unnecessary (to be eliminated). Making these changes will ensure customers are getting precisely what they want while reducing the cost of producing the product or service.
3. Creating flow
This step involves making sure all processes in the organisation run smoothly to reduce the risk of interruptions and delays while still adding value at every step. A good place to start is breaking down each stage of a process to see if it requires fine-tuning, distributing the required workload to relevant teams and reskilling employees or finding external resources to carry out essential tasks.
4. Establishing pull
In its simplest form, pull means you’re responding to customer demands as quickly as possible without creating excess inventory. With inventory seen as one of the biggest wastes, a pull-based system can help eliminate it as you only start new work when there is customer demand. This will enable you to reduce overheads and optimise storage costs if you produce products rather than services.
5. Pursuing perfection
By following the first four steps in the Lean process, organisations can effectively reduce and eliminate waste. The fifth step may sound grandiose, but it’s a critical element that should be followed for long term success. It places Lean thinking and continuous improvement at the organisation’s core, with each process constantly analysed to identify ways to increase value.
The word perfection is misleading. The real goal is to create a culture of improvement, which will become self-sustaining once truly embedded.
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