Lean and Digitalisation: Innovative Business 2022 | Herbst Software Herbst Software

Lean and Digitalisation: Innovative Business 2022

A brief introduction to Lean thinking

I had been living “Lean” for about 25 years before I ever knew what Lean was and I am sure I am not the exception. Having grown up on a farm in the West of Ireland, nothing was ever thrown out and there was a use for everything. Undoubtedly this mentality had been passed to me from my father born in the 50’s, a very different time in Ireland.

When a job had to be done on the farm pre the days of tractors and Jeeps, everything was done with an ass & cart or on foot. If you had a job to do in the far field and you forgot a tool, that meant a long walk back to the farmhouse to get your supplies. There was a timely penalty for a lack of planning. When a job had to be done, you made sure you had what you needed before you set out, a robust mental checklist was perfected over time and experience. Every aspect of a job was thoroughly analysed, every step and process imagined before you ever left the comfort of the house. The  donkey could only carry so much after all.

As part of a Supply Chain Management module in my Masters I was first introduced to the concept of Lean. Lean manufacturing was at the heart of this course and I quickly drew parallels between the revolutionary methods used  in Japanese car factories ( Toyota) and the modus operandi of farm life in the west of Ireland. The same forethought, analysis and intent applied. Raw materials were treated with respect and value had to be added with each stage of the process. Waste in all forms was penalised.

Lean thinking is a way of thinking about an activity and seeing the waste inadvertently generated by the way the process is organised.

I have always liked things to be done efficiently, my favourite part of cooking is sharpening the knife.I like to think I can dice an onion as quickly as any professional chef. I don’t think there is anything inherently difficult in this activity, you just have to follow the procedure and practise a little.

In many ways lean thinking is similar. You have to think about your process, why do we do this? How can we make it more efficient? Do we need to do this step? Is there a better way? Is there a more cost effective way?

As we are potentially looking at double digit inflation in Ireland this year, it will undoubtedly change business priorities. Commodity and labour costs are skyrocketing and what were once acceptable levels of waste can no longer be sustained. Business needs to shift to doing more with less as necessitated by changing economic outlook.

 

The 5 principles of Lean provide a framework for organisations to establish the process needed to run a Lean manufacturing operation as follows:

The 5 principles of Lean

  • Identify Value: Distinguish the value-adding from waste activities in your process (see 7 wastes below)
  • Map Value Stream: Visualise the value created and how it reaches the customer 
  • Flow: Waiting is waste, ensure smooth delivery from the second you receive an order to the moment when you deliver it to the customer.
  • Pull: Produce the value that is actually needed by your customers and avoid overproduction.
  • Improve: Constantly improve every process in your team by focusing on enhancing the activities that generate the most value for your customer while removing as many waste activities as possible

Those 7 wastes are:

  • Transportation: The unnecessary moving around of material, people, and equipment often resulting in wasted time and possible damage.
  • Inventory: Excessive inventory that takes up valuable space, requires resources to manage it and ties up capital dollars.
  • Motion: Unnecessary and dangerous movement that can cause harm to people, damage to equipment, or defects in the product. This is different from Transportation,in the case of people, we are talking about the ergonomic issues rather than the mere relocation of them.
  • Waiting: The waste of time waiting for people, equipment, materials, and information to arrive so that you can do your work.
  • Overproduction: Producing more than the customer or your process needs results in excess inventory and all the expenses described above under Inventory.
  • Overprocessing: Doing more than the customer wants, needs, or is willing to pay for.
  • Defects: The production of a defective product or delivery of service will require either a rework or a scraping of the product. The customer will not pay for either.

How Digitalisation and Lean intersect

Innovative businesses realise that in an increasingly digital world they will be out competed if they do not adapt to the changing business landscape. Both Digital and Lean transformation create increased efficiency and profitability for your company. 

Both Digital and Lean transformations require a break from the status quo and an analysis of how your business is run. Fortunately these transformations go hand in hand as Digitalisation of your business provides the means to collate and analyse data providing the  Business Intelligence required to implement a successful lean transformation. 

As the management guru Peter Drucker famously said, “If you can’t measure it, you can’t manage it.”If you don’t measure, then how do you know how you are doing?

Digitalisation of your business processes from Accounts, Inventory Management & Production Scheduling to Sales and Marketing allows for information to be seamlessly be passed from one department to the next in real time. 

How is this an advantage? Let’s start way down stream, consider a Sales Representative on the road taking orders for customers, surely it would help  to know exactly what is in stock or when it will be next available. A Sales app integrated with inventory management and production  gives the relevant Business intelligence to make these calls on the road.

Further a collated view of all previous sales data allows for accurate forecasting, which in turn leads to tighter inventory management, more efficient production scheduling, more efficient use of staff, lowering transport costs etc.

The Business intelligence gained by using integrated digital solutions creates a real picture of your company’s health at any moment. When you have this data you can enact your lean principles to adjust, alter and change processes to improve KPI’s. 

For Business leaders and managers the ability to alter their strategy /procedures based on live data is an incredibly powerful tool. There is no need to wait for a quarterly or bi annual review to change what may be an unprofitable strategy or procedure. Readily available data allows for the constant improvement and optimisation of your business.

For a deeper dive into this topic, why sign up for our webinar on THIS LINK

 

5 Benefits Of Removing Paper From Your Business

 

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