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What Are Lean Operations?

“Lean” describes an approach to business management that delivers the greatest value to the customer with the most efficient use of resources. The lean philosophy is built on two main principles:

  • Identifying and creating value for the customer
  • Eliminating waste in processes

Here, “value” is defined as anything the customer would be willing to pay for, whether that’s a hard good, a service or time. “Waste” is defined as anything that does not add value to either the customer or the production process. When organizations prioritize these two objectives, they find they are able to do more with less — less time, fewer resources and fewer, more optimized people. As a result of this increased efficiency, profits increase and workforce morale improves.

However, companies that take a too-narrow approach to lean operations risk missing the bigger picture. If they become too focused on the details of their internal processes, customer value can become an afterthought. Every change made under a lean mindset should have a direct effect on increasing value for the customer.

When implemented properly, lean operations creates a perpetual state of continuous improvement, wherein team members are constantly seeking ways to streamline operations even further.

Why Do Lean Operations Matter?

When it comes to metrics, lean operations can:

  • Reduce operating costs
  • Yield greater profits
  • Reduce lead time
  • Improve product quality
  • Eliminate defects
  • Optimize physical space
  • Cut down on excess inventory
  • Improve an organization’s value proposition
  • Introduce and facilitate more sustainable solutions
  • Ensure long term industry viability

Aside from cutting costs and increasing revenue, lean operations have a proven impact on the people who execute them. A lean approach to business management:

  • Establishes a culture of improvement and innovation
  • Improves communication
  • Reduces safety hazards
  • Keeps organizations and their teams agile
  • Clarifies an organization’s values and mission
  • Helps teams identify waste
  • Fosters a passion for quality
  • Empowers employees to gain new skills

If they experience all of the above as a result of lean operations, employees tend to be more satisfied, more motivated to do their jobs well and more energized to seek personal development opportunities within their organizations.

The Benefits of Lean
Area of Operations Before Lean After Lean
Jobs
  • Employees are not utilized to their full potential
  • OR employees are stretched too thin
  • Employees are duplicating tasks, leading to unproductive downtime
  • Revenue cannot compete with salary expense
  • Each employee serves an essential function
  • Employees are trained adequately
  • Optimally placed employees minimize downtime
  • Lead times decrease while revenue increases
Inventory
  • Too much stock takes up valuable storage space
  • Supply outweighs demand
  • Excessive storage costs strain resources
  • Overstocked storage space causes safety hazards
  • Overstock risks becoming discontinued
  • Optimal stock minimizes storage needs
  • Adequate supply meets customer demand
  • Storage costs stabilize
  • Streamlined inventory creates a safer, more organized work environment
Production time
  • Inefficient processes cause delays
  • Non-standardized processes create confusion
  • Longer production schedule leads to higher facility & personnel costs
  • Customers are frustrated with long lead times
  • Streamlined processes reduce production time
  • Standardization minimizes miscommunication
  • “Just-in-time” approach: goods are produced as they are needed
  • Higher production rate increases revenue

 

How to Implement Lean Operations In Your Business

To be successful, lean must become a core value of your organization. While this may mean redefining your company’s mission or goals and communicating this to employees, a step-by-step implementation process will help mitigate confusion or dissatisfaction along the way. Remember that your people are the driving force behind lean operations — their support and comprehension of new initiatives is crucial.

1. Review your entire business. 
Every new approach to management begins with an in-depth assessment of your business. Examine every process with a critical eye, identifying areas for improvement and finding more efficient ways of accomplishing the same task. When in doubt of a task’s necessity, ask, “Does this step add value to the customer?” If it adds nothing to the end product (and wastes time, money or talent in the process), you don’t need it. Use your company’s mission statement as your guide; a lean consultant can help you connect your mission to your goals.

2. Tell your employees.
Once you’ve determined how your organization could benefit from lean management, communicate this need to your employees. More experienced team members may be confused at first, since a need for change can signal inadequate performance. Make it clear that lean is a tool to improve both employee and customer satisfaction, and explain how new processes will improve the experience of work. Transparency from leadership will reduce anxiety, so be as clear and specific as you can about proposed changes.

3. Eliminate waste in the physical workspace.
Look around — does your physical space support efficiency? Does the work environment prioritize workers’ safety and comfort? Consider whether the layout of your space causes workflow issues, and ask employees how they think design changes could maximize productivity. Take stock of your inventory at all stages of production to see if storage space could be used more efficiently.

4. Eliminate waste in product and process.
Map out your entire value stream, from customer request to delivery. Identify areas for potential streamlining and experiment with different waste-reducing strategies. Notice parts of the process where delays frequently occur, errors are made or resources are wasted. Programs like TWI Job Instruction (JI) can help communicate the best approach to each task.

5. Document new standards.
Once you identify the most efficient form of each process, write it down. Make this document accessible to all employees, from frontline workers to management to leadership. A digital portal can connect every member of the company to this resource, where they can access specific job-related information, process steps or protocol whenever they need them.

How to Reduce Waste in the Workplace

Waste takes different forms depending on the industry or organization, but there are a few best practices that encourage waste identification and reduction in any workplace:

  1. Clearly document the necessary steps of existing and new processes. Make this record available to all members of the organization, and update as processes change.
  2. Train employees thoroughly on new processes. Encourage them to identify upskilling or reskilling opportunities, which could further optimize your existing talent.
  3. Stock inventory — raw, in-process and finished goods — on an as-needed basis.
  4. Digitize documents and processes whenever possible.
  5. Automate processes if you have the opportunity.
  6. Establish a schedule of incremental check-ins for both processes and people to assess their efficiency.
  7. Make small, incremental improvements as needed.

Even seemingly minor changes can reduce waste, such as switching from paper pay stubs to a digital payroll system.

How Lean Operations Empower Employees

Employees equipped with the right training and resources are more likely to support their organization as a whole. Empowered employees are productive employees, motivated to seek out opportunities for improvement — not just in processes, but in their own professional development. Even when customer demand ebbs, multiskilled employees can easily move between roles, decreasing downtime and adding value to their organization.

Though they may be skeptical of new processes at first, employees come to understand the purpose of lean operations when they understand their own value within them. Optimizing workflow means that every employee becomes essential; their value increases further when they learn to spot waste and defects in processes and propose ideas for improvement.

Employee input is crucial when deploying a lean initiative. Ask for employee feedback when redesigning or designing new job methods, and provide employees with opportunities to manage or lead process improvements. With increased collaboration comes increased communication, which fosters a culture of improvement, proactive problem-solving and mutual support.

Above all, employees who understand their part in delivering value to the customer are more dedicated to creating a high-quality product or service.

Example of Lean Operations

Perhaps the most well-known example of lean operations is Toyota. Production at Toyota plants is driven by the principle of continuous improvement, or kaizen, as well as a relentless pursuit of efficiency. The Toyota Production System (TPS) was founded by process innovator Taiichi Ohno as a “socio-technical” system, or one that focuses on the interactions between employees and equipment.

TPS embodies a lean philosophy in the following ways:

  • Workflows do not expend excess energy or use unnecessary materials.
  • Production lines make only what they need, when they need it (just-in-time).
  • Documented processes establish and maintain an organizational mindset of efficiency and continuous improvement.

TPS is grounded in Training Within Industry (TWI), which remains one of the global models for workplace training. This approach to work has made Toyota one of the most competitive entities in the global automotive industry and the gold standard for continuous improvement.

Which Industries Benefit Most from Lean Operations?

This is a bit of a trick question — truly, any organization that serves a customer can benefit from shorter lead times and higher product quality. That said, there are a few industries in which lean has proven successful time and again.

Manufacturing
Lean principles were first introduced in the automotive industry, where both Henry Ford and engineers at Toyota experimented with streamlined processes based on observations from the factory floor. To this day, lean manufacturing is the most familiar example of lean operations, where tools like the assembly line, standardization and “just-in-time” production are essential parts of the business.

Retail
B2C retail transactions are the most clear-cut demonstration of customer value: a customer identifies a need, finds a product or service to meet that need and exchanges their money or time to obtain it from the producer. Besides streamlining processes to get a product into a customer’s hands faster, a lean approach to customer service can address a need before the customer even identifies it themselves. For example, a salesperson equipped with a series of leading questions can make appropriate product recommendations in a fraction of the time it takes for a customer to browse products themselves, bringing them that much closer to a sale.

Service
While lean is often applied to production-based industries, it can also help to eliminate waste in service industries. Distribution centers, call centers and transportation hubs can deliver faster and more reliable service when they establish clear-cut processes and eliminate roadblocks that delay customer fulfillment.

Healthcare 
In hospitals and other healthcare settings, employees who adopt streamlined, standardized processes can deliver high-quality care to patients while maximizing time and resources. If a healthcare professional’s first duty is to do no harm, they will understand the value in eliminating waste or inefficiencies that put the patient at risk.

Of course, how an organization deploys lean management is unique from case to case, though the waste eradication principles remain the same. This is why it’s helpful to partner with an experienced training consultant who can tailor an approach to meet your company’s specific goals.

 

Frequently Asked Questions: Lean Operations

Q: How do I know if lean is right for my business?
A: If your business provides a product or service to a customer, some aspect of your process would likely benefit from streamlining. Lean seeks to eradicate any unnecessary materials or steps in work processes, which is important to even the smallest, single-person business. For mid-sized to large organizations, evaluate whether you’ve lost customers due to sub-par product quality, excessive lead time or miscommunication. If so, a lean approach could prevent any of these from happening again.

Q: Can I implement lean operations myself?
A: Lean philosophy and methodology is widely available to all, but the written word is no substitute for hands-on training. Furthermore, embarking on a lean initiative is no small feat, and crucial areas for improvement may be overlooked by internal teams. An experienced training consultant can assess your organization holistically to identify sources of waste you may not be aware of, and can lead your teams through proven training exercises.

Q: What if my employees push back against lean initiatives?
A: Change can be uncomfortable, and some employees may view a change in process as a reflection of their performance. It’s crucial that employees understand the need for change before adopting it, and employees who become involved in the lean process are more likely to support it. If employees express doubt about lean, ask for their input — their answers will likely reveal valuable information about their needs and experience of work.

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