Companies understand that they need to be more customer-focused in order to gain and maintain a competitive advantage. This is why organizations are adopting lean management. Lean thinking begins with one simple thing – identifying value. This allows companies to understand what their customers are willing to pay. Meanwhile, organizations can develop a value stream where they can identify wasteful activities and eliminate them from the workflow. This helps organizations generate the value that customers expect and optimize profitability.
Lean management, which started as a philosophy in the manufacturing industry, has now gained popularity across various industries due to its positive impact on the overall performance. It supports organizations in many aspects like cost savings, quality assurance, optimizing processes, and so on.
The concept of lean can be applied in any business or production, manufacturing, marketing, and software development processes and it is not surprising that we are seeing organizations shifting towards lean management.
Lean Management depends on 5 basic principles
To understand the first concept of identifying customer value, it is necessary to understand what value is. “Value is what the customer is willing to pay for”. It is important to discover customer’s actual or latent needs. It is possible that customers may not know what they want or are unable to convey their needs to the organization. This is mostly seen when it comes to innovative products or technologies. To identify value, organizations use techniques like surveys, interviews, web analytics, and demographic information allowing them to figure out and discover what customers find valuable.
Value stream mapping
The second principle of lean is to identify and map the value stream. In this step, the main aim is to use the customer’s rating of the value of a certain process as a reference point and identify all the actions that contribute to these values. Activities that do not add any value to the end-user are considered waste. The waste can be divided into two categories – a) non-valuable but required and b) non-valuable but not required. The first one is the waste that should be minimized and the second one is pure waste which should be completely removed. Organizations make sure that customers are receiving exactly what they want by eliminating and reducing unnecessary procedures or steps, in a cost-efficient manner.
Create a continuous workflow
After eliminating the waste from the value stream, the next action is to ensure that the flow of the remaining steps runs smoothly without interruptions. Some methods to ensure the smooth flow of value-adding activities include breaking down steps, reconfiguring steps in production, leveling out the workload, establishing cross-functional teams, and training and educating employees to be multi-skilled and flexible.
Create a pull system
Organizations having a stable workflow guarantee that their teams can deliver work tasks much faster with less effort. In lean methodology, to establish a stable workflow it is necessary to create a pull system. In this, the work is pulled only if there is a demand for it. The purpose of a pull-based system is to control items of inventory and work in process (WIP) while ensuring that the necessary materials and data are available for a smooth workflow.
Waste is avoided by achieving the above four principles. But the last and most important step is continuous improvement. This makes lean thinking and continuous improvement a part of the organizations’ culture. Each employee should aim for excellence when delivering goods based on customer requirements.
Lean management acts as a manual for creating a stable organization that constantly evolves and helps to detect and eliminate real issues. The main objective of lean management is to create value for the customers by optimizing resources. Based on the actual demand of the customer it helps to create a stable workflow. By practicing all 5 principles an organization will stay competitive, increase the value offered to consumers, reduce the cost of doing business, and increase their profitability.