Leveraging Lean Principles to Increase Profits
For manufacturing companies to compete in a congested and competitive marketplace, they need to constantly improve the weaker aspects of their business.
Today, Manufacturers worldwide agree that Lean Principles, properly executed, have irrefutably helped their company attain a higher competitive advantage and increased levels of profit. How? Simply stated, Lean Principles provide a structured approach that helps manufacturers focus on identifying key strategic areas for improvement and then optimizing the processes in each area. This approach produces an adaptable culture focused on operating in the most efficient and effective manner to deliver the most value in products or services to customers, while generating maximum profits.
To better understand how Lean Manufacturing Principles can help your business processes gain efficiencies and, as a result, become more effective, competitive and profitable, it is important to understand how Lean impacts critical areas of your business.
Constant elimination of wastes and non-value-added activities in your processes increases productivity and throughput. Ensuring that machinery and equipment are properly maintained and operational allows you to keep producing without the worry of unscheduled downtime. When your factory capacity increases you have the ability to make more and sell more or you have freed up capacity for innovation of new products.
Lead Time Reduction
By implementing a pull system rather than batch, push type production, product moves through the system when it’s ready instead of waiting for the entire batch. A pull system allows you to start new work only when there is a customer demand or replenishment levels demand for it. This gives you the opportunity to reduce overhead and optimize storage costs which increases Gross Profit Margins.
Increase Product Quality
The entire reason for Lean Manufacturing is to focus on improving product quality through reducing waste. You spend more time on product production and less time on needless activities or waiting. Automatically your product quality will increase, and better products will make you more competitive in the marketplace. Additionally, you can produce better products for less money, and can sell them at a lower price. This gives you an edge over your competitors who may charge more for similar products that are not as high of quality.
Lean strives to help companies build a positive reputation, which is much more likely to attract high quality employees. Employing empowered, motivated staff with higher skill sets not only strengthens the business as a whole, but it also puts you in a much better position to challenge major competitors. And allowing employees to help with problem solving on the floor gives them autonomy in their work, making them happier. When workers contribute their ideas for saving time and overcoming problems, you can solve issues effectively and creatively, without spending too much time and money.
Regardless of your manufacturing model (make-to-stock, make-to-order, engineer-to-order) or size (large, mid-size, small) manufacturers worldwide have quickly learned that leveraging Lean Principles increases performance, employee satisfaction and profits.