How Lean Management can help SMEs and where things still go wrong

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Can you streamline your processes to achieve better results with fewer resources and minimal waste? What is a value stream, what does "Kaizen" mean and which industries can apply these methods? And why does the idea sometimes fail?

So many questions ;). Don’t worry.

We summarized everything you need to know about “Lean Management” and will explain why and how your company will also benefit from the idea.

Lean Management - A brief overview

Table of Contents

What is the goal of lean management, by whom and with which methods is it practiced?

The goal of lean management is to “streamline” processes and minimize “waste” in the company. The idea was first put in writing in the 1990s. In a book titled “The Second Revolution in the Auto Industry,” authors James P. Womack, Daniel T. Jones and Daniel Roos described what they first observed in manufacturing at Toyota. Toyota had set up a development and production system that was superior in terms of efficiency and quality. The ideas and methods behind this system would go on to be adopted worldwide in every conceivable industry over the next few years and to this day.

This article explains the 5 principles behind Lean Management and gives you an overview of some of the most important methods used in Lean companies. We also point out some of the stumbling blocks that can hinder the Lean idea in some companies and show you how to avoid mistakes when implementing the new strategy. Whether you are in the startup world or in an SME, the described methods can be successful across all industries and company sizes.

The 5 basic principles of lean management

According to Womack and Jones, you should follow 5 core ideas when setting up lean processes:

Define the value of your offer to the customer

The value of your product or service is identified by the price the customer is willing to pay. Customers will only accept your offer if it offers them added value. You must identify this added value for the customer in the first step of lean management. Put yourself in your customer’s shoes, try to understand their needs and tailor your offer to them.

Identify the value stream

After you have determined the value of your product, you now use the “value stream analysis” to determine which processes, people and activities contribute to the creation of the product. In the value stream analysis, you evaluate for all processes, resources and activities whether they contribute to the actual value creation. To make your process “lean”, you then stop everything that does not directly contribute to the value of the product. In lean management, anything that does not contribute to value creation is considered “waste”.

Create and maintain a workflow

Once it is clear where the value is created, the focus should be on making these value creation processes as fluid and efficient as possible. The best way to do this is to visualize the workflow with so-called Kanban boards. Here you record all pending tasks on a pin board and then let the employees pick out independently which ones they want to work on.

In other words, at this stage you should connect the various departments involved in the value creation process as closely as possible. The aim here is to eliminate bottlenecks, blockages or duplications within the company or department. When manufacturing is harmonized and aligned with the value stream, the company produces more flexibly, efficiently and in line with orders.

Set up a Pull-system

The workflow developed in the previous step can only be maintained in the long term with a pull system. In such a system, work is only done when there is a definite need. This saves resources and minimizes waste in other words. Think like a pizza maker who only starts working when the customer has already ordered and does not start production in advance without knowing how much demand there actually is.

Thus the pull principle is the counterpart to the push principle where the machines are always 100% loaded and simply as many products as possible are produced. With the pull principle, the company often also saves on warehousing and transport costs. It also guarantees delivery reliability and often relieves the personnel in production.

Aim for perfection

Kaizen – The constant pursuit of improvement is an essential component of Lean Thinking. Although it is clear that you and your company can never truly achieve perfection, striving for continuous development and improvement processes prevents stagnation. This is important because often, standing still means going backwards.

Employees themselves have the best overview of their work situation. Encourage them to keep coming up with ideas and to question themselves. A one-time Lean process is not static and never error-free. Problems can arise at all levels. Therefore, it is important that everyone involved in the workflow is constantly on the lookout for errors and potentials.

Which companies are lean management methods suitable for?

As mentioned, Lean Management philosophy was first introduced by Toyota. This also explains the many Japanese names for the methods. The automotive industry, and more broadly the entire logistics and production management industry was the first to adopt Lean methods and minimize waste. However, the idea then quickly spread to many areas and all countries.

Throughout the company, lean thinking is beneficial. The methods are used, for example, in process and quality management or in project management. No matter how big the company, whether DAX, SME or startup, time wasters and squanders can be eliminated everywhere without reducing the value of the end product. If you are particularly interested in learning more about lean management in startups, you might be curious to read our article on Lean Startup.

Lean thinking can be applied to companies and institutions in every conceivable industry. Even hospitals are increasingly trying to streamline processes and eliminate waste with ” Lean Hospital”. In other industries, the ideas are being applied as Lean Engineering, Lean Construction, Lean Selling, Lean Mining, Lean Administration, Lean Healthcare, Lean Office, Lean Government, Lean Medicine, or Lean Laboratory, for example.

These methods are used in Lean Management

When the five principles of Lean Management have been internalized and have arrived in the company, it is time for implementation. In the Lean world, there are many methods, i.e. tools. Three of the most important are explained below: Hansei, the 5s method and the PDCA cycle. If you want to learn even more about Lean methods, take a look at the terms GembaShuHaRi or Poka Yoke.

  • Hansei means something like self-reflection. The saying “self-knowledge is the first step to improvement” proves that the approach behind the Hansei philosophy is not completely foreign to english speakers aswell. The idea is that only the ability to reflect on one’s own actions enables one to recognize mistakes and initiate improvements. Hansei is actually not so much a concrete tool as a soft skill that should be exemplified in lean companies, especially by the management.
  • Behind the term PDCA cycle is the idea that in a company should at best follow the principle “Plan… Do… Check… Act…”. This method is part of lean thinking, because it prevents stagnation, eliminates errors and enalbes the applicant to learn new things during each cycle. In other words, in the long run, processes become more and more refined and a continuous improvement process as well as the striving for perfection, “Kaizen”, is made possible.
PDCA Cycel Lean Management
The PDCA Cycle
  • The 5S method is about keeping the work environment organized and tidy enough to avoid any waste. We all know how a messy desk can waste time and cause other problems. The 5 steps of the method are 1. sort, 2. systematize, 3. shine, 4. standardize and 5. self-discipline. This method directs the focus on the value adding processes and minimizes enough any waste.

What can cause lean management to fail?

Not all companies succeed in implementing the lean philosophy right away. One stumbling block on the way to becoming a lean company is, for example, if the methods are only introduced in one department, usually production or logistics. As long as not all departments in a company think lean, the approach remains open to improvement.

A further misunderstanding often arises when flat hierarchies are equated with thinned-out management levels. Keeping as few managers as possible in a company results in too large a management span. If management is then overburdened with the large number of employees, it is almost impossible to implement changes in a company.

Furthermore, it is important not to limit Lean Management to the methods alone. Only when the 5 principles are internalized and lived in a company will success be achieved. No matter how many methods you use, you can, for example, endlessly and repeatedly optimize a process that does not contribute to value creation. However, this will not lead to successful lean management, since neither the company nor the customer will ultimately benefit from the process.

In the long term, lean thinking can only become established in a company if it is presented from the outset not just as a temporary project, but as the new normal. This requires leaders and lean experts who are familiar with the methods, exemplify the principles, and are involved on the ground in introducing the new strategy. In the long term, lean management will only work if the employees can be carried along beyond the management.

In Conclusion

Lean management means streamlining the company so that only value-adding processes take place and any waste is minimized. Today, the Lean philosophy is successfully applied in all kinds of industries and worldwide. To establish Lean in your company, you and your team should not only internalize the methods, but also the 5 principles. 

Successful Lean Management is exemplified by leaders and then adopted by the whole team. The Lean idea guarantees that your company thinks in a customer-oriented way and brings only those processes and products to the market that create added value for the customer.

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