How Lean Manufacturing Principles Can Enhance Your Bottom Line

| Read Time: 13 minutes
Share This Post

If you’re looking to enhance your business efficiency, you may want to try an exercise in lean manufacturing principles. Using these principles, you can identify and focus on activities that create value for your customer, while minimizing or eliminating the processes that do not. As a result, you can realize an increase in profits. Read on to find out more about lean manufacturing and how to implement its principles for a positive effect on your bottom line.

What Is Lean Manufacturing?

Lean manufacturing stems from lean thinking — a system, school of thought and series of methods with the main aim of reducing or eliminating waste. Lean thinking methods do not necessarily need to apply only to manufacturing. The focus on lean manufacturing, in particular, is due to its historical origins in the manufacturing industry. No matter what industry you’re in, however, lean principles can be applied to cut down on waste while maintaining quality.

Origins of Lean Manufacturing

The historical origins of lean manufacturing can be traced back to Henry Ford. He fully integrated an entire production process, most notably captured in the image of the assembly line building Ford Model Ts. Ford’s production method, however, while highly efficient, was severely limited in its ability to offer variety to customers . Meanwhile, Ford’s competitors, who did aim for variety, ran into issues. They experienced slower production times and waste as they incorporated additional machines and personnel to keep up with the demand for variety. These issues persisted for some time until Japanese thinkers at Toyota —like Kiichiro Toyoda and Taiichi Ohno — developed what would be known as the Toyota Production System. This system essentially shifted the focus of the manufacturing engineer from individual machines and their use, to the flow of the product through the entire process. Toyota developed several novel ways to cut down on waste:

  • Converted machines for the appropriate and actual volume needed
  • Introduced self-monitoring machines to ensure quality
  • Organized machines in process sequence
  • Reduced setup times for machines
  • Had each process step signal the previous step of its current needs for materials

These were the basic conclusions of Toyota’s study and ones it would implement in its Toyota Production System. Using these methods, businesses could achieve rapid throughput times — the time it takes for a product to be manufactured — while doing so at a lower production cost with greater variety and higher quality. As a result, the business will become quicker at responding to changes in customer conditions. Find Out: How To Get a Business Loan

What Are Lean Manufacturing Principles?

Lean manufacturing principles date back to the engineers of the Toyota Production System. The name lean manufacturing, however, only dates from the 1990s when it became increasingly apparent and popular among Americans. Each of the lean manufacturing principles is mutually reinforcing and interrelated. They are also unified by an underlying theme, which the first principle spells out clearly.

1. Eliminate Waste

The basis of lean manufacturing is waste elimination. Waste can appear in various forms. However, it always consists of anything that does not add value from the perspective of your customer. Lean manufacturing principles are based on tools and techniques that have been effective in eliminating waste. Going back to the Toyota Production System, the creators originally identified a series of fundamental forms of waste that must be reduced or eliminated to run a business optimally . Here are seven of the principal forms of waste identified in lean manufacturing:

  • Overproduction: This typically refers to the largest form of waste, which occurs when something is made before it is really needed. An added danger of overproduction is that it leads to excess inventory — another form of waste discussed later.
  • Waiting: Also termed “waste of time on hand,” it’s when a work-in-process is waiting for the next step in production — a period that adds no value. A good tip is to review the time from order to shipment and think about how much of that time, if any, is spent on actual value-added manufacturing or production.
  • Transportation: An unnecessary movement of raw materials, work-in-process or finished goods. Transportation of your product to your customer doesn’t fall under this, unless it is done wastefully
  • Movement: An unnecessary movement of people that does not add value to your product for the customer. Movement in this sense comes from the original manufacturing context of people moving too much or too far to initiate the next part of production. in present time, it’s still relevant in terms of work area and organization.
  • Overprocessing: This principle deals with adding more value to a product than the customer actually requires, which constitutes a form of waste, due to work processes. A good example is painting areas of a product that will never be seen or exposed to corrosion.
  • Inventory: Also called waste of stock at hand, this prominent source of waste occurs when quantities of product — whether it’s raw materials, work-in-process or finished goods — exceed beyond supporting the immediate need.
  • Defects: This is simply the waste of making defective products since they’re not sellable and require reworking.

If waste elimination is the first principle, then all the other lean manufacturing principles flow from it. Each principle offers different ways of attacking these various forms of waste.

2. Kaizen: Continuous Improvement

Eliminating waste and continuous improvement are deeply interconnected in lean manufacturing principles. By continuously improving your business and its inner operations, you can reduce waste as much as possible by averting bottlenecks and inefficient processes. This is the essence of the principle of kaizen.

Methods and Tools of Kaizen

Here are some ways you can employ the principle of kaizen:

  • Process documentation: The first step to continuous improvement is to document and manage your processes and procedures. Process documentation allows you to see where gaps and inefficiencies exist in your business and determine what improvements would be most effective.
  • Standardized work: Using standardized work instructions can help ensure that consistent methods and consistent times are maintained for each of the levels of production. Standardization of processes can also help increase accuracy.
  • Total Quality Management: TQM is a management framework that calls on workers at all levels to focus on quality improvements. By avoiding top-down decisions made without employee insight, it introduces a greater level of democracy into your work processes.

Read: 12 Things Startups Should Know About Equipment Financing

Ways it Reduces Waste

Kaizen techniques can be used to help fight overprocessing by comparing customer requirements to manufacturing specifications. They can also help by looking for potential simplifications to the manufacturing process. Continuous improvement techniques like standardized work create work instructions that provide a consistent method of manufacturing the part, which helps fight waste caused by overproduction.

Respect Human Elements

As much as lean manufacturing is about using scientific methods to reduce waste, it’s equally about maximizing human potential to carry out the core principles of lean manufacturing. Without respect for your employees , there’s little likelihood you’ll be able to perform consistently at a high level. Some basic ways to respect and reinforce respect for the human element at your business include:

  • Not overworking employees
  • Showing employees the purpose behind their work and what it achieves
  • Aligning each purpose with the employee’s own goals
  • Maintaining high accountability for success and failures
  • Identifying the root cause of a problem by taking time to talk to employees
  • Making sure employee tasks cause as little friction as possible
  • Challenging employees without being demanding
  • Providing stability and variety in employee tasks

Success with this principle comes down to your communication skills and the relationships between your team and managers. In turn, this principle depends on your employees getting along and supporting each other. Engaged and respected employees will produce a more consistent output, which is often also of a higher quality. Compare: Bank of America Business Credit Cards

Ways it Reduces Waste

Respect for human elements is an important part of total quality management, mentioned under kaizen. Every time your staff or business has to redo, rework or reprocess an item, waste results. To implement lean manufacturing principles, every staff member has to be involved in finding ways to achieve perfection consistently. Involve your employees at every level to help combat waste.

3. Just In Time Production

JIT is one of the principal methods of process innovation focused on reducing waste. JIT production is focused on working on a task or item to meet demand and nothing more. That’s the critical point of JIT production: Nothing is produced in excess because it could lead to a buildup of standing inventory, which is considered waste. The ideal goal is to have absolutely no inventory, whether that be raw resources, work-in-process items or finished products. This is an ideal state that should be aimed for, if not wholly attainable. Applying JIT to an existing manufacturing operation requires the managers to rethink and retool the entire organization. Fortunately, there are some useful tools to help you implement JIT production. Compare: Business Line of Credit vs. Loans — Which One Is Right For Your Business?


Kanban is a workflow management tool created to help you visualize your work, maximize efficiency and be flexible. The word kanban is a Japanese term literally translated as billboard or signboard, which originates from the names for the cards that track production in a factory. Like other aspects of lean manufacturing principles, it moved beyond the factory and later became an integral part of agile techniques and agile software development teams. Now, it’s increasingly incorporated across a range of business types. The aim of kanban is to align inventory levels with actual consumption of your product by customers. The origins of this actually came from studying supermarkets: In supermarket shopping, customers typically grab what they need at the required time — no more and no less. At the same time, the stock is reshelved based on what the store expects to sell at a given time. In kanban, inventory is controlled by a signal that tells a supplier to produce and deliver a product once it has been consumed. If there’s no signal that a product was consumed or sold, then another product won’t be produced.

Takt Time

To counteract overproduction, the rate of manufacturing needs to match the rate of customer demand. Takt time is a way to measure the rate at which a finished product needs to be completed to meet customer demand. If a company has a takt time of two days, this means every two days a complete product is produced because, on average, a customer buys this finished product every two days. Learn: 6 Invoicing Best Practices For Small And Midsize Businesses

Ways it Reduces Waste

JIT production can be used to combat all sorts of waste. JIT can help reduce overproduction and inventory waste by bringing raw materials in only as they are needed. These two areas are where JIT production has probably made its biggest impact in changing manufacturing methods. Kanban and takt time are key tools in trying to eliminate these two forms of waste.

4. Heijunka: Level Production

Heijunka is a Japanese word that means “leveling production,” which means that no matter what happens, your output remains the same every day. This lean manufacturing principle is useful to tackle overproduction and buildup of inventory. Implementing heijunka takes a lot of organizational skill. Determine your average order amount to keep your production consistent, and avoid having to rush to meet a particular order. At times when you produce more than you sell, you can put the excess into a fluctuation stock. When the opposite occurs, you’ll then draw from that fluctuation stock. Check Out: The 20 Fastest Growing Industries For 2020 and Beyond

Ways it Reduces Waste

Heijunka can help reduce or eliminate waste in several ways. For one, its fluctuation stock is a far better move than the alternative, which is building up excess standing inventory, aka inventory waste. Level production is also related to overproduction, which it can help avoid. Heijunka also helps prevent burn out by keeping production consistent, an important aspect of respecting the human element at work. Kanban is useful in heijunka as it is JIT production. You can combat waste of overproduction and inventory with kanban, by using a pull system to control how much is manufactured.

5. One-Piece Flow

One-piece flow, or continuous flow, is the lean approach to production queues and work-in-process products. The idea with one-piece flow is that you limit your WIP to a single item because you can increase your efficiency and quality of the final product. The continuous flow aspect is that by focusing on a single item in a single step, you keep the process moving by avoiding bottlenecks. A tool used in one-piece flow is called value stream mapping — a process that documents, analyzes and improves information or material flows required to produce a product or service. Using this kind of approach, you can design a linear, sequential flow from raw materials to finished goods to help fight waste of transportation. Value stream mapping can also help reduce waste of movement by identifying alternate configurations of equipment that cut down motion. Find Out: 8 Tips For Building a Better Business Budget In analyzing your value stream, forget about different departments. Instead, zone in on the processes your product goes through before it reaches the consumer. It’s vital that you list every single step your product goes through, including wasteful processes like movement or storage, along with the processes that actually add value from a consumer perspective. Value stream mapping can be used to design systems based on one piece flow: An item is moved into the first workstation, worked on and moved to the next station. Then, the next item for production is moved to the first workstation, and so on. With this approach, one piece is always being worked on at each station at any one time. Plus, one product is always being worked on at any given stage of the process, and nothing is left waiting for a station to be free.

Ways it Reduces Waste

Continuous flow can help with inventory waste by reducing or eliminating buffers between steps in production. It also can help combat waste of waiting or time on hand. Use one-piece flow to design processes, so that the flow is continuous and there are minimal or no buffers between steps in production. With transport waste, it can help by making sure work-in-process is not placed into inventory. Lastly, it can be utilized to reduce movement waste by ensuring that work areas are logically organized. See: How Hard Is It To Get a Business Loan?

6. Quality Built-In

The concept of having quality built into your manufacturing processes is key to running an efficient, yet successful business. There’s no point in making quick, cheap products if the final results are plagued by defects and aren’t sellable. You can build quality into your processes by considering the value and product that you’re giving to your customers. From there, it’s about making sure that your efficiency-saving methods are not impacting the quality involved in providing that value.

Ways it Reduces Waste

Building in quality entails creating smooth value-adding processes than can flow from one to the next, adding greater efficiency to your business. Now that you know which steps actually add value, you can begin analyzing your business processes to achieve the most efficient flow from one process to the next. Value-adding steps shouldn’t have to wait for steps that don’t add any value at all. Read: How To Know When It’s Time to Expand Your Business

7. Poka-Yoke: Mistake Proofing

Related to building in quality is the lean manufacturing principle of poka-yoke — a Japanese term roughly meaning “mistake proofing.” With it, every process can be engineered to inherently prevent mistakes. This can be done a number of ways, such as reengineering tasks to fit a standard format or by including specific measures that ensure that mistakes are caught early and corrected immediately. It might be easiest to understand poka-yoke applications with examples from everyday life. For instance, poka-yoke processes work similarly to how a washing machine will not start unless the door is properly closed to prevent flooding. Another analogy to poka-yoke is how an automatic car won’t start unless you are in park or neutral; conversely, you usually cannot turn the key and car totally off while in drive. In both cases, the mechanical processes are inherently preventing human error, which is the essence of poka-yoke or mistake proofing in lean manufacturing principles. Learn: 4 Habits To Get Your Business Approved for More Financing

Ways it Reduces Waste

Poka-yoke is probably most associated with preventing the waste of defective products. The built-in mistake proofing is engineered to catch problems, especially those introduced by humans. By preventing defective waste, poka-yoke can avert a cascade of other wasteful results, such as transport and movement waste, due to having to relocate defective products. Following poka-yoke principles entails designing processes so they are less likely to produce defects.

8. Jidoka: Detecting Defects Through Automation

Jidoka is sometimes known or described as autonomation, intelligent automation or automation with a human touch. Jidoka aims to avoid the production of defective products and counteract overproduction. It focuses attention on identifying the root causes of problems and forming preventative measures to stop them from recurring. Jidoka is based on the idea that most defects can be detected automatically to completely remove human error from the equation. However, jidoka doesn’t usually mean automation replaces humans in production, but instead, automation is used in a supervisory function. For example, the automation would detect an abnormality and shut down the machine. Then, a human worker would stop the production line, inspect the system to correct it and identify root causes and countermeasures. This important human element is the reason why jidoka is described as automation with a human touch.

Ways it Reduces Waste

Jidoka plays a big part in combating waste due to defects. Using jidoka principles means designing processes to detect abnormalities so they can be immediately corrected. See: 4 Ways You’re Unknowingly Ruining Your Business Credit

The Bottom Line

Once you’ve determined the ideal value flow for your business, you may have to invest in its implementation. Your facilities may need to be modified, you may need equipment to complete processes quickly and efficiently — or you may even need to restructure your business from scratch. The good news is that lean businesses generally require less staff, less investment in production inputs and less money tied up in products that may or may not sell. All the same, plan your transition carefully and determine whether you will have additional financing needs to get started. If so, you may want to consider a startup business loan . It may seem like a big step for you, but in an increasingly competitive market, the leaner you can be, the more mean you’ll be in optimizing the profitability of your business model. Lean manufacturing principles and lean concepts, in general, become easier to understand and more intuitive when you can trace them back to the ultimate goal — eliminating waste. More From Seek

Business Loan Resources

Photo credit: Pressmaster/

Did You Know?
We've funded over $400 million for small business owners since 2015