Lean management is an offshoot of lean manufacturing principles. Companies develop strategies to reduce their business operations to only those necessary activities to produce goods and services. Many organizations attempt to reduce the amount of money spent on operations, which often increases the cost of consumer products. Overspending on business operations will also reduce the amount of capital a company can spend on developing strategies. Lean management allows individuals to apply lean principles to every aspect of a company’s operations.
Lean management typically focuses on reducing the waste of a company’s economic resources, which are typically raw materials and labor. For example, if the company requires a single 10-foot steel rod to make 50 screws and the production process currently uses 15-feet of steel rods to make 50 screws, waste may be in the production process. Managers must discover if the equipment is faulty and producing unusable screws, if employees cannot accurately load the steel rod into the machinery or if poor-quality materials lead to more usage to produce the minimum requirements for production output.
Defects are finished goods that have significant flaws that do not meet the company’s production standards. Lean management principles help managers focus on what process is causing the defects or has a penchant for allowing higher defects than other steps in the production process. Although it is impossible to completely rid the company’s production process of defects, reducing the number of defects is a focus of lean management, similar to Six Sigma.
Overproduction occurs when companies produce too many goods that will remain unsold. This can occur from poor economic forecasts or the company attempting to lower costs by producing more goods to lower the individual average unit cost. Lean management helps companies plan forecasts by measuring the total production output and comparing it to previous sales history. This can help managers focus on how much to produce to meet consumer demand, with a safety net for producing more if necessary.