Lean manufacturing

Lean manufacturing is a management system built on three principles: produce only what is needed, when it is needed; correct abnormalities as soon as they occur; and empower workers to improve the process themselves. At its core, Lean eliminates activities that do not add value for the customer. Where just-in-time (JIT) manufacturing focuses on inventory strategy — receiving goods only as needed to reduce costs and waste — Lean goes further by reducing cycle time, flow time, and throughput time across the entire system, including marketing and customer service. According to one study: "While Just-In-Time manufacturing focuses on efficiency of inventory strategy to eliminate waste and enhance productivity, Lean manufacturing uses efficiency in its system setups to reduce cycle, flow, and throughput times being the added values to customers." By receiving goods only when needed, Lean reduces inventory costs and wastage, while increasing productivity and profit. A successful operation depends on producers having fast and high-quality processes that can generate on-demand, result of involving workers bottom-up.

Origins

Early foundations Frederick Winslow Taylor documented manufacturing efficiencies in Principles of Scientific Management (1911), and Henry Ford applied these ideas in the early 1900s. However, these methods addressed physical organization only, not management systems or culture. Before World War II, American statistician W. Edwards Deming and Walter A. Shewhart developed the earliest formalized modern manufacturing philosophies, applying statistical models to improve efficiency in large U.S. military manufacturers during the war. American industry largely rejected their methods at the time. Continuous production improvement and incentives for such were documented in Taylor's Principles of Scientific Management (1911):

"... whenever a workman proposes an improvement, it should be the policy of the management to make a careful analysis of the new method, and if necessary conduct a series of experiments to determine accurately the relative merit of the new suggestion and of the old standard. And whenever the new method is found to be markedly superior to the old, it should be adopted as the standard for the whole establishment." "...after a workman has had the price per piece of the work he is doing lowered two or three times as a result of his having worked harder and increased his output, he is likely entirely to lose sight of his employer's side of the case and become imbued with a grim determination to have no more cuts if soldiering [marking time, just doing what he is told] can prevent it." Shigeo Shingo cites reading Principles of Scientific Management in 1931 and being "greatly impressed to make the study and practice of scientific management his life's work".

Post-war Japan

After the war, Deming was assigned by General Douglas MacArthur to assist in Japan's reconstruction. Working as a manufacturing consultant for struggling heavy industries — including Toyota and Mitsubishi — Deming found the Japanese far more receptive to his methods than American industry had been. Japan's post-war conditions made efficiency essential. American supply chain specialist Gerhard Plenert has offered four reasons:

Japan's lack of cash made it difficult for industry to finance the big-batch, large inventory production methods common elsewhere. Japan lacked space to build big factories loaded with inventory. The Japanese islands lack natural resources with which to build products. Japan had high unemployment, which meant that labor efficiency methods were not an obvious pathway to industrial success. In response, Japanese manufacturers leaned out their processes: "They built smaller factories ... in which the only materials housed in the factory were those on which work was currently being done. In this way, inventory levels were kept low, investment in in-process inventories was at a minimum, and the investment in purchased natural resources was quickly turned around so that additional materials were purchased." Toyota's Shigeo Shingo and Taiichi Ohno, building on Deming's teachings, redesigned Toyota's manufacturing process after the war. Toyota — originally a textile company that moved into automobiles in 1934 — had struggled with wasted resources from poor-quality castings. In 1936, after winning its first government truck contract, Toyota developed Kaizen improvement teams in response to new production problems. These teams eventually evolved into the Toyota Production System (TPS), and later into what became known in the West as The Toyota Way. Levels of demand in the post-war economy of Japan were low; as a result, the focus of mass production on lowest cost per item via economies of scale had little application. Having visited supermarkets in the United States, Ohno recognized that the scheduling of work should not be driven by sales or production targets but by actual sales. Given the financial situation during this period, over-production had to be avoided, and thus the notion of "pull" (or "build-to-order" rather than target-driven "push") came to underpin production scheduling. Japan still recognizes Deming's contribution through the Deming Prize, awarded annually to the world's best manufacturers. American industrialists had recognized the threat of cheap offshore labor as early as the 1910s. Henry Towne, past president of the American Society of Mechanical Engineers, wrote in the foreword to Frederick Winslow Taylor's Shop Management (1911): "We are justly proud of the high wage rates which prevail throughout our country, and jealous of any interference with them by the products of the cheaper labor of other countries. To maintain this condition, to strengthen our control of home markets, and, above all, to broaden our opportunities in foreign markets where we must compete with the products of other industrial nations, we should welcome and encourage every influence tending to increase the efficiency of our productive processes."

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