7 Insights on Lean Management to Reduce Costs and Increase Profit for Factory Operators

7 Insights on Lean Management to Reduce Costs and Increase Profit for Factory Operators

7 Insights on Lean Management to Reduce Costs and Increase Profit for Factory Operators

The lean system (LEAN) is an ideal practice for factory operations. It helps decrease avoidable losses and replace waste to value. It also fosters successful management and helps creates an efficient production process. Implementing this management has benefited small and large companies alike to lower their overall costs. This prominent practice enhances the internal effectiveness of companies.

What is a lean system?

Lean system (LEAN) improves work efficiency in the factory. This concept in the industrial process concentrates on eliminating wasteful and unsalable elements in your work process. Also, it changes wasteful factors either in management or operation to something of value. When applying this system, your activities and productivities would become more efficient and fluid. Hence, your company can be more profitable and competitive in the long run.

How does the lean system help reduce costs (LEAN)?

From the above definition of Lean operation, this concept caters to seven operation areas to mitigate waste and improve profitability. These seven areas (also known as seven waste) can occur due to the following reasons:

1. Losses due to overproduction (Overproduction)

2. Losses due to inventory

3. Losses due to transportation (Transporation)

4. Losses due to motion

5. Losses due to processing

6. Losses due to delay

7. Losses due to wasteful defects

These costs typically occurred in these seven avoidable areas. In this article, we would examine how waste occurs in these areas and illustrate ways to eliminate them.

7 Insights on Lean Management to Reduce Costs and Increase Profit for Factory Operators

Lean practice to eliminate seven waste.

1. Losses due to overproduction

In the production process, the traditional ideology is that, since you have already invested in your factory, machinery, salary, and other variable costs, you should produce your products as much as possible. This overproduction is excessive and can hamper your profitability. The production costs per unit may rise due to the excessive resources you have to utilize, plus the oversupply unsellable products can have severe adverse effects on your profitability.

Furthermore, overproduction spoils the firm's performance with numerous problems. For example, the company has to pay extravagantly for work hours and overstaffs. Also, when your company has overstocked products, spoilage can financially hurt your business. Another associated problem from overproduction is that your machines may deteriorate more rapidly than necessary, and you have to face increased maintenance and replacement costs. Thus, you should appropriately allocate your resources and productivity to meet the demand of your market.

2. Losses due to inventory

Another pitfall in your productivity is the loss caused by the surplus inventory. When factory operators place their orders on materials for their manufacturing, they can mistakenly order more than they require. They fall into this pitfall because of two reasons. First, they inaccurately predict their required materials and place their order, which exceeds their use. Second, their suppliers offer them to buy in excess in exchange for discounts. These surplus materials force the factory operators to find extra space for storage, and can quickly become expired and dated.

This loss presents the management with the problem of extra storage space, which obviously can lead to unnecessary expensive costs. Also, they may have to store such materials without knowing when you can use them.

To resolve the waste in this area, you should have a more accurate forecast on your purchasing plan, which should be consistent with your production. Furthermore, you can apply the first-in-first-out regime to subdue the number of surplus materials.

3. Losses due to transportation

Transport losses can occur when your transportation network surpasses the necessary ordinary distances. The transport costs can rise exorbitantly from fuel, labor, maintenance costs for your vehicles.

You can resolve this problem by carefully study transportation routes and select the most appropriate courses. Also, you can improve your shipments by loading your products and materials with maximum efficiency (without compromising delivery time). When you have numerous production locations at various sites, you should meticulously select your positions to lower your transportation costs. These methods can help you decrease your wasteful costs from transportation.

4. Loss due to movement or motion

This type of loss arises from unneedful movements that employees have to engage in their production lines. For example, your factory may unintentionally place objects far away from the manufacturing station. Or, you may set your stored materials inappropriately, and your staffs have to engage in additional bending and lifting activities. These unsuitable locations can slow down your operations as well as cause fatigue and possibly injury to your workers.

You can eliminate this problem by keeping your items close together. It will also help if you thoroughly examine your factory lay-out plans and optimize the interplay of work processes within your factory.

7 Insights on Lean Management to Reduce Costs and Increase Profit for Factory Operators

5. Loss due to processing

Redundancy in the production processes is another common problem. The unnecessary steps result in avoidable costs as well as slowing down the work processes. You can resolve this predicament by applying the 5W1H Principles. This principle determines what, when, where, who, why, and how to analyze the work and manage it appropriately.

6. Loss due to delays.

The delays in the manufacturing lines can come from the machines and employees. Such delays unnecessary for production add wasteful costs to your machinery as well as labor costs. Also, these delays can refrain your firm from many opportunities.

You can improve this challenge by prioritizing your production and allocate your labor proportionately. Moreover, you should ensure that your workforce is enough to buffer when a particular unit is absent. With the ability to create work substitution, the training of skilled labor is essential to support the production line continuously.

7. Loss due to defects.

The final wasteful area is from defects. You have to recreate and dispose of these defects prodigally. This problem results in the duplication of work, which drains your time and resources.

You can fortify against this difficulty by improving production standards. Additionally, it would help if you continually monitor the defect rates and find innovative ways to help your production team reduce these defects.

In sum, we hope our article on the Lean method can offer your relevant insights on how you can improve your operation processes. This superior practice can help your operations reduce losses, reduce costs, and increase profitability, and, ultimately, competitiveness for your business.


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