This report provides an analysis of how lean management can be used to solve a business problem. It identifies particular business problems and uses the lean management concept to provide reasonable solutions. The report also gives a wider discourse of current literature reviews on the lean management concept.
Value Stream Map
As explained by Chen, Ye, and Brett (55), Value Stream Mapping is a typical flow chart that is designed to improve and depict the flow of information and inventory in an organization using symbols. The symbols are known as the Language of Lean. Value stream has the primary purpose of mapping is to increase the maximum value for a customer. It does this by using complete value process that minimizes wastes in the build, design, as well as sustainability. According to Ballard and Iris (88), most organizations pursue lean management because they have realized that improvement events are not enough in guaranteeing success. Value stream mapping fundamentally strengthens the organization’s gains by proving plans and visions that connect to its improvement activities. Furthermore, value stream mapping tool enables the company to identify, establish, as well as eliminate wastes.
As explained by Singh and Sharma (40), value stream mapping applies five simple principles namely value, perfection, value stream, flow and pull. First, the organization should identify specific value from the perspective of the end-customers. Second, it should identify the value stream associated with each of its product families. After that, the business needs to make the product flow smoothly. This enables the company to draw more customers into its business. Lastly, as customers pull, the business starts focusing on managing perfection. Attainment of perfection is a reliable indication that the business is achieving lean management.
Figure 1: Five Principles of Value Stream Map
This stepwise process can be used to prepare a Value Stream Map for a manufacturing company. Ideally, manufacturing companies use Value Stream Maps to identify various points of wastes in the process of production. This tool is also utilized by the manufacturing giant to provide a useful mechanism for eliminating wastage of resources by the company. The Value Stream Maps are used to show exactly where the company is pulling extra materials. When materials are delivered to a manufacturing company, they go straight to various processes of manufacturing. The materials are then moved passed smoothly to all stages of the production until the production of the final product is completed (Ries 34).
It is essential to deliver customers the complete products immediately. According to Duggan (65), this high degree of required efficiency is achieved if there is proper and detailed communication between the company and its suppliers and customers. The Value Stream Map is helpful in achieving this requirement. First, the company needs to create its current state diagrammatically. This diagram should clearly show how the manufacturing process is currently working in the organization. The next step is the proper identification manufacturing areas or processes that are problematic. Finally, the company creates a diagram of its future state. This future state diagram makes the company pinpoint easily the changes in the process that it can use to reduce wastage. The primary focus of the current state diagram is to create flows that will help identify and eliminate wastes. The figure below is a sample current state diagram for a typical manufacturing company applying the value stream mapping principles.
Figure 2: Current State Diagram
The figure below is a sample Future State Diagram for a typical manufacturing company applying the value stream mapping principles. The future state diagram is created from the current state. It is particularly designed to addresses various problems identified in the current state diagram.
Figure 3: Future State Diagram
Literature Review on Lean Management
Many industries in this current globalization era are adopting new techniques and tools that would enable a competent production of goods. In today’s business, manufacturers are faced with the most daunting issue of delivering quality products quickly and at low costs of production. As concluded by Hajmohammad et al. (102), one of the most promising methods that have been adopted by many manufacturing industries is lean management. In manufacturing, lean management considers the creation of value for the company’s end customers. Sarkar (33) further continued to argue that any company resources used outside this scope is considered waste thus a target for elimination to create lean management. Davis (44) firmly believed that this concept makes business to compete at a high level of efficiency.
As explained by Locher (12), the lean management principles were first developed and used by Toyota more than 50 years ago. The Toyota Company developed a lean management approach to help standardize their need for continuous improvement in the production system. In particular, they did this following the objective of ensuring that they efficiently and quickly provide vehicle ordered by their customers. The company established lean management based on two important concepts. The first concept, also referred to as jidoka is the automation of company products with the human touch. This concept specified the equipment to stop working immediately when a problem occurs thus preventing the company from producing defective products. The second concept is called ‘Just-in-Time’. As explained by Chiarini (98) this concept requires each manufacturing process to produce only what the next process needs. It sets a continuous flow of processes.
As explained by Abuthakeer, Mohanram, and Mohan (22) lean management is all about eliminating materials that are considered waste so that more value can be created for customers. When applied to a company lean principle targets for elimination any activity or process that does not create value for customers but instead contribute to increased cost or time. To achieve this, lean management uses specific concepts that are developed to create exceptional products, deliver products on time, as well as lower the total cost of a particular product required by a customer. Ideally, lean management is a composite of a different set of elements, tools, and rules that are developed to focus on value. Its basis is the principle of continuous incremental improvement and elimination of wastes.
After conducting a review of the current empirical literature, Goriwondo et al. (65) concluded that there are many views about exactly what lean management constitutes. He asserted that most people consider the root of lean management to Toyota car production system. However, he noted the considerable development in the concept of lean management over the past few decades. At the moment, as asserted by Bhasin (77), the concept of Lean management is not limited to manufacturing or production companies only. The concept is being widely applied in the service industry, procurement, management, office operations as well as sales and marketing. According to Rother (15), Womack and Jones, who are regarded as the originators of the term ‘lean management’ developed five fundamental principles of lean management. Most companies have widely applied these five principles. They include (1) specifying the value that customer desires, (2) identifying the value stream for each product, (3) making the production flows continuously, (4) introducing pull between all steps, (5) and lastly managing towards perfection.
Belokar, Vikas, and Sandeep (99) asserted that, in practical terms, lean management is governed by the underlying assumption that every organization consists of several processes. Lean management improves the operation by focusing on the optimization of processes. Therefore, the lean concept ideally optimizes the process or customer’s journey. Essentially, lean management does not relate with optimization of the individual departments in an organization. This perspective of lean management is based on the view of the organizational processes. Asefeso (66) presented two perspectives of lean management similar to what the Toyota Company did, namely the strategic level and the operational level perspectives. The focus of strategic perspective is on principles used in lean management. On the other hand, the focus of operational perspective is on tools and techniques used in lean management. The figure below illustrates the framework for lean management proposed by Asefeso (76).
Figure 4: Framework for Lean Management
Esfandyari et al. (122) argues that lean management provides a set of management methods and principles that differentiate between waste and value in an organization. He defined ‘waste’ as any kind of human activity has no value for the company but continuously absorb company resources. On the other hand, he set ‘value’ as the capability that the organization provides to a customer at the right time and appropriate price as required by the client. Examples of wastes in a company may include extra processing, motion, inventory, defects, overproduction, waiting, as well as transport. Therefore, a lean organization is one that has understood its customer values. Such organization focuses on using its critical processes to increase the customer values continuously. Its ultimate goal is to create the best value for customers through the utilization of a value creation process that has a high capability of reducing waste.
There are many operational benefits of using the concept of lean management. For manufacturing companies such as Gapco Ltd, the fundamental philosophy of lean management helps provide superior and quality products to customers. As explained by Chen and Ryan (33), another excellent operational benefit is that the use of lean management concept significantly lowers the production price. This significantly contributes to a high level of the firm’s profitability and long-term success in the market. In essence, it also contributes to a more prosperous society. The use of lean management concept rationalizes the production process by eliminating waste in the manufacturing process. The company thus remains with a ‘lean’ process that is less costly to operate.
Another operational benefit of using lean management concept in manufacturing is that it helps build quality for the products. Essential, quality is an essentialaspect of production not only in manufacturing companies. Lean management also helps develop a unique approach for operation and corporate management, which is beneficial for the long-term growth and sustainability of the company. Through the use of this concept, companies can create and develop integrated methods and techniques that have the potential of significantly contributing to efficient corporate operation. This is beneficial for a company that is aiming at satisfying the specific needs of a customer. Another operational benefit of lean management is that it helps the company to create conditions that eventually guarantee high product quality. As pointed by Cima et al. (83), production of high-quality products is the first commandment of manufacturing companies.
There is potential for massive development in the field of lean management. The current perception that lean management is only suitable for manufacturing companies is misconceived. Due to the rapid development in this field of management, we expect to see the massive application of lean management conception in other industries outside manufacturing. The service industry will be the greatest beneficiary of lean management over the next five due to the numerous opportunities available there. Over the next five years, the application of lean management concept in the service industry will substantially grow by more than 20%. As concluded by Plenert (22), lean management concept is applicable in every business as well as every business process. This is what will drive the growth of lean management concept over the next five years.
How to Apply Lean Management Concepts
This section of the report applies the principles of lean management to improve the value stream Gapco Manufacturing Limited. The primary objective of doing this is to solve the identified problems in the manufacturing process. Gapco Ltd is a small electrical manufacturing company in the United States of America. The company has a broad range of customers coming from Latin America. Their customers come from different industries such as industrial facilities, general contractors, as well as commercial power grids. Their major products are industrial switchboards and switchgears. All their products are made according to the specifications of the customers.
During the last four years, Gapco Ltd has been applying lean management concept, especially Value Team Mapping in the manufacturing areas. Various problems have emerged in the process of manufacture. There is a problem with the lead-time. There is also a shortage in supply to its retailers. According to the company manager, the manufacturing area has a lead-time of one week unlike the previous process, which had a lead-time of about four weeks. The high lead-times have significantly impacted customer satisfaction. For instance, customers are kept waiting for orders. This is not healthy for the company. Therefore, there is a need to transform the process of manufacturing. As explained by Fliedner (56), lean management concepts can be used to increase the efficiency of manufacturing companies such as Gapco Ltd.
The company can use the concept of lean management to correct the poor customer satisfaction, lead-time, and performance. This concept can also be used to improve its value stream. The first step in using lean management concept is to set an expectation as well as a select sponsor. This is someone from the organization who is responsible for making decisions, planning the project as well as providing arbitrate solutions. The work of the sponsor is to select the manufacturing processes to be mapped. Several employees will be selected from Electrical Design, Purchasing, and Structural Design departments to act as sponsors. Next step is to select manufacturing processes to be value mapped. Data on the current state map and procedure are then collected from inventory information, process times, as well as customer requirements. The collected information is used to create the future state maps.
The team of sponsors is then encouraged to look for gray areas of waste as well as make suggestions for improving the manufacturing process. The future state map is then compiled as based on the current state map and the critiques of the sponsors. After this, create and deploy an action plan that could change the current state if implemented to the current process. It is imperative to ensure that the expected benefits are measurable and obtainable. The team them focuses on how each department communicates with each another and use that data to draw linkage of material and information follow in the company. After collecting and rechecking the data, the lean project team can embark on creating both current value map and future value map for Gapco Manufacturing Limited.
Figure 5: Gapco Manufacturing Limited Current State Diagram
Figure 6: Gapco Manufacturing Limited Future State Diagram
The lean management team proposed many changes for improving efficiency at Gapco Ltd. First, the electrical designers should ensure accuracy by crosschecking each other’s designs. In addition, the company should increase its purchasing process before commencing the product design phase. If implemented well, these recommendations will help Gapco Manufacturing Limited in achieving its required manufacturing efficiency.
Evidence of the Problems and Its Risks
Gapco Manufacturing Limited is currently suffering from three major problems that affect its performance, profitability, and long-term growth prospects. They include poor long lead-time, customer dissatisfaction, as well as the shortage of enough supply to retailers. It is obvious that the company has a poor lead-time. In particular, the current lead-time is longer thus causing serious delays in production and delivery of finished product. According to the reviews of past orders, Gapco Manufacturing Limited receives about 180 new orders every year. The company’s working time is 8 hour per day. Second, the longer lead-time is also leads to high level of customer dissatisfaction. Many customers wait for long before their orders are delivered.
There are significant potential losses to Gapco Manufacturing Limited if the company continues without addressing these problems. First, as illustrated by Garcia et al. (121), longer lead-time leads to production inefficiency. In particular, it minimizes the level of production. Thus, Gapco Ltd is not maximizing its production due to longer lead-time. This eventually leads to reduced profitability and increased costs to the company. Customer satisfaction is another significant factor affecting profitability level and long-term growth of the company. Due to low levels of satisfaction, mots customers are not considering buying products from Gapco Ltd. This has eventually reducing the amount of sales and level of profitability. It is essential if Gapco maintains its clients. Losing customers is detrimental to the long-term growth prospects of the company. Improving performance by using lean management principles will ensure that Gapco Ltd to improve its income and profit levels.
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