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What’s next for lean production?

20 Feb 2014, by Informa Insights

performance mgmtThe lean production system has been popular in engineering and manufacturing plants across the world for more than 50 years.

Lean approaches eliminate any processes that are deemed wasteful. In other words, resources used in anything but creating value for the end customer are targets for removal.

According to McKinsey & Company, lean production continues to evolve and is now becoming a rich, textured management style that helps organisations to transform the way they think about operations.

“Yet despite lean’s trajectory, broad influence, and level of general familiarity among senior executives, it would be a mistake to think that it has reached its full potential,” McKinsey stated.

“Indeed, we believe that as senior executives gain more exposure to lean and deepen their understanding of its principles and disciplines, they will seek to drive even more value from it.”

Lean drivers

So what is driving higher levels of efficiency in lean production?

Well, an increasing amount of new data sources are available, which when combined with sophisticated analytics tools and frontline problem solving, become powerful resources for companies to draw upon.

Energy efficiency is another area where lean is being implemented, with multinationals showing the leadership skills needed to pioneer environmentally friendly manufacturing processes.

“Toyota itself is pushing the boundaries of lean, rethinking the art of the possible in production-line changeovers, for example, and bringing customer input more directly into factories,” McKinsey added.

Customer data is now making it easier for business leaders to learn what drives consumer buying. This provides a baseline for understanding value creation and further improves existing lean ideologies.

Service-based companies, such as Amazon, are also using lean techniques outside of the traditional manufacturing realm. Instead, these organisations are encompassing lean as an integrated approach to bring together traditionally siloed departments such as marketing, product development and operations.

The new lean

McKinsey noted that the above drivers of lean changes are profound because they overcome a traditional hurdle – understanding customers.

However, this is not the first time lean has found its way into the services industry. Many organisations that never previously considered themselves ‘factory-like’ have still benefited from this kind of process efficiency.

This includes the handling of credit card slips and cheques in retail banking facilities and the movement of patients in hospitals and care facilities.

“As these examples suggest, lean is hardly stationary,” McKinsey argued.

“Indeed, as senior managers’ understanding of lean continues to develop, we expect it to further permeate service environments around the world.”

In fact, this is already beginning to happen. Lean is currently applied in mortgage processing structures in India, while also providing customer experience benefits for Colombian pension fund holders.

The future of lean

Performance_Management_Skills_for_Managers_P13GC14banner-1Despite developments in lean production, the need to reduce waste remains a top target for many organisations. This is especially true in challenging economic conditions.

A recent survey by the Australian Industry Group showed CEOs are pessimistic about growth in 2014. Just 37 per cent felt this year would be more productive than last year, while 35 per cent thought business opportunities would deteriorate further over the next 10 months.

However, McKinsey noted that advances in technology and better integration across organisational structures could lead to the lean improvements that give businesses a much-needed revenue boost.

The application of market- and consumer-insight tools in particular are expected to give enterprises a solid understanding of customer needs – even ones that they may not be aware of themselves.

“The future of lean is exciting,” the consultancy said.

“The contrast between where companies are now and where they’ll be 20 years on will seem as stark as the difference between a static colour photograph and a high-definition, three-dimensional video.”

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