Lean production is a philosophy or organizational culture about streamlining production processes in order to increase efficiency and reduce waste. It is the deliberate approach to management that focuses on eliminating waste without compromising quality. This approach can be applied to all aspects of a business, including its functional areas (human resource management, marketing, finance and accounts, and operations management).

Lean production aims to minimize costs by eliminating waste, making the organization more efficient, and more responsive to changing market needs. In the context of production, waste refers to any source of operational inefficieny.

There are two features of lean production:

• Less waste, and

• Greater efficiency.

1.  Less waste

Lean production originated in Japanese manufacturing, in its strive to cut out all sources of waste and to achieve efficiency gains. It requires getting things done correctly, the first time round, and using fewer resources or using them more effectively to achieve the same output.

The 7 sources of waste (or ‘muda’ in Japanese) can be remembered by the acronym WOMDOTS:

• Waiting times - This refers to delays in the production process. This might be due to disorganised procedures, a lack of training, and/or inefficient machinery.

• Overproduction - This means producing more than necessary (the amount demanded by customers), which ultimately leads to waste.

• Motion - This refers to excess worker movement between workstations, for example, which wastes time and reduces productivity.

• Defects - This refers to output that is substandard, so has to be re-produced. This wastes the firm's time, resources, and money.

• Over-processing - This means adding more features or functions to a product than is necessary to meet the needs of customers. Over-processing does not add value, but adds to the firm’s production costs.

• Transportation - Unnecessary and excessive transportation adds to a firm's production costs yet reduces efficiency. This would represent waste (muda) to an organization.

• Stockpiling (excess inventories) - Having too much stock (inventory) is wasteful as it ties up liquidity and requires improved stock control. This can be extremely costly, such as the costs of insurance and maintenance, or the stocks being damaged, stolen, or becoming obsolete. In any case, there is an oopportunity cost involved.

Excess stock (inventory) is a source of waste

2.  Greater efficiency

Efficiency means using resources more productively in order to generate output. There is greater efficiency if an organization can produce more goods and/or services (increasing its output) by using the same or fewer resources (its inputs). Efficiency can be measured in a number of ways, depending on the context of the business organization. Some examples include:

Greater efficiency can be achieved in a number of ways, such as:

• Improved level of motivation in the workplace.

• Improved technologies and capital equipment.

• Improved provision of training and development for all employees.

Training & Development help to improve efficiency

Lean production aims to increase resource flexibility, e.g. through developing a multi-skilled workforce. It also aims to improve efficiency by eliminating production processes that do not add any value to output. Finally, lean production involves managing the supply chain in order to improve operational efficiency (and eliminate waste in the process).

Not only is lean production good for economic sustainability (and hence profits), it is also good for ecological sustainability.