How Does Lean Production Give a Competitive Advantage?
A lot of small business owners ask, “Ok, i know that it can make you more efficient, but exactly how does lean production give a competitive advantage?” Here’s a guide that’ll clarify exactly what you could expect from a successful lean program in your business.
So, how does lean production give a competitive advantage? Lean allows you to make more with less resource. This means less time needed in production and operations, less cash tied up in day-to-day activities, faster lead times, and better quality. All of which helps you offer services and products that are superior than your competitors: Better innovation, faster delivery, better quality, better customer support and longer warranties are all typical of a lean business. This is all achieved by reducing waste in processes, and building quality at source.
Lean production is a proven method that can get results. There is a lot to getting it right though. Unfortunately, it’s not always a case of just copying and pasting what someone else has done. Different companies, industries and cultures require slightly different ways of using lean to get a competitive advantage.
The 5 Principles of Lean
Lean production is built around 5 core principles. They form what lean is all about:
- Understand what the customer values – What is it that they want from your business? What are the factors that if you offered more of, you’d win more delighted customers?
- Understand your Value Stream – These are all the connecting processes from order to delivery across your business. How well do they go together? How well are they aligned at providing your customer with the value they’re after?
- Make the Value Stream Flow – If you can see the waste, and the areas that create poor quality, you can use lean to fix them. By seeing and then removing the waste, you can realign your processes to provide your customers with more value. This means more business and more happier customers, and at less cost to you.
- Pull Work Through the Business – Make only what the customer wants and when they want it. By focusing on pull, you’ll reduce inventory and cash tied up in work in progress. You’ll also be able to provide agile response times to customers and shorter lead times.
- Continuously improve – Repeat this every day and always look for ways to improve your processes. The secret comes when all people running their processes are doing this on a daily basis. They’re given empowerment to go find and fix problems.
Everything in lean is geared to these five principles. A company who utilises them successfully can expect big improvements, and greater market share.
They’ll be quite literally offer a better product and service to their customers.
It’s Not “Just How We Do It”
From a process perspective, in most companies, if you were new to the business, and asked,”why is it done this way?” You’d typically get the answer, “Well, that’s just how we’ve always done things.”
In a lean business, this approach of how things are done, is totally different. Processes are approached with a more scientific philosophy.
This then allows us to see that there’s a theory behind why we do what we do.
There’s a description of what we do and most importantly, there’s an opportunity to always question what we do and why we’re doing it, every day.
This in itself, is a radically different approach to traditional process thinking (and probably what your competitors are thinking, too).
This single mindset shift is huge. It’s literally a massive competitive advantage.
In this change of thinking, there’s an optimistic point of view about the people who work in the company. It says, “These people are very smart.”
And given the opportunity to change and improve, they will. They will improve their processes, if there’s a framework to help them do it.
This humanised approach allows companies who fully adopt lean production techniques to transform their processes, using the people in the business to do it every day (Principle 5). It means that processes continuously get improved and that all fixes are created with process improvement in mind.
And when processes are constantly improved, lead time, quality, service delivery, innovation and creative solutions become the standard way of working. They become “the way things are done round here.”
Put this against a company that’s stuck in its traditional ways, and it’s clear to see which one will be leaps and bounds ahead… and can offer more value to their market.
Reduced Lead Times
By identifying the wasteful activities (largely principles 1, 2, 3) and eliminate as much as you can across the value stream, you drastically reduce the time it takes the entire job to go through your whole business. This is often referred to as lead time.
Lead time Before a Value stream Has Been Improved:
(NVA stands for non value added activities. These are wasteful steps. VA stands for Value Added, and are the actual productive steps in a value stream). You’ll find them scattered across all of your processes. Most of the process time is spent on wasteful (NVA) tasks.
Lead time After a Value Stream Has Been Improved:
It’s not uncommon to transform your lead times using lean principles.You can literally go from a 6 month lead time, down to 7 days. Yes it takes a lot of work, but it can be done.
A furniture manufacturer i worked with, turning over £1.5 million sales, went from a lead time of 4-6 weeks, to 5 days. They achieved this within 6 months of starting their lean journey.
It meant that they could massively out-compete other companies in their market and as a result, they won more customers and a raving reputation. Who would you rather go for? Someone offering over 4 weeks wait or an alternative who’ll build and deliver it next week?
It’s a no-brainer.
On top of this, because they were so much more agile in their processes, they went from offering 10 different variations of product, to over 100.
Again, this added value meant they could not only get it to the customer faster than anyone else, but they could provide many more customisation options than the nearest competitor.
All because they were more agile in their production.
Ever wondered why and how a lot of automotive manufacturers offer long warranties? They improve the quality of what they produce to the point where they are totally confident that what comes off the lines is going to be right, without question.
And when quality is built into processes, so they repeat over and over again with little errors in between, they can offer a better service and longer warranties.
This advantage comes from the 5 principles of lean.
Effectively, by designing processes to suit the customer (principle 1 and 2) and reducing the wasteful activities (step 3), whilst empowering everyone to constantly improve what they’re doing (principle 5), you get a powerful framework to transform quality across the whole business.
It’s what Kia Motors did a few years back when they were the first to offer a 7 year guarantee. This sent a shcok wave through the automotive industry, allowing Kia to gain a competitive advantage.
Remember, find out what your customers value, and redesign your processes, so you can consistently achieve it with less time and cost.
Innovation and New Products and Services
When processes are highly efficient and the business is using its people to make daily improvements, leaders can look forward to planning for the future.
They can identify new ideas and offers to enhance their position in the market place, furthermore.
And with this lean becoming the norm, the business can benefit in the following ways:
- Quickly create new processes and systems for new products
- Adjust and change from what they do now, to working differently tomorrow
- Work together to improve value in the process
- Get a product or service to market, quicker
- Challenge traditional methods and think of novel new ways of working. to stay ahead.
How Does Lean Production Give a Competitive Advantage? – Death by a Thousand Cuts
And each time you achieve something positive in your lean production journey, you’re chipping away at your competitors’ resolve, bit by bit. You’re moving ahead a little bit at a time.
You may not take them out over night, but you can definitely keep attacking them. Eventually through constant improvements in quality, cost, delivery and lead time, you’ll out muscle most of them.
Which then leaves you more space in the market and healthier profits to fund further growth, and stay ahead of them
How can i use lean production methods in my business? Firstly, follow the 5 principles. Understand how to use each tool, too. There are a suite of lean methods that you need to learn to deliver lasting change. But the 5 principles underpin everything lean is. The challenge is working out how they fit in your specific business or industry.
For instance, in a repeatable manufacturing process, it’s a lot easier to implement lean and one piece flow. However, in a job shop, you’ll need a little more creativity, as one piece flow won’t work off the shelf.
Be prepared to try certain things and see if they work. Treat your process improvement efforts as a science. Study, make improvements, observe and learn what worked and what didn’t.
Find why things are happening and not settle on, “because they just do.” Use your people to challenge this every day.
Is Lean Production Easy to Do? It’s not easy. Nothing worth doing is easy. Will you make mistakes? Of course you will. Toyota who devised this whole system, took over 20 years to perfect it. What matters is to get it started, and get your leaders to embrace it and support the employees in making daily improvements.