Defining Lean Production: The 5 Key Principles

Written by: Leah Gourley

Read Time: 3 min

Lean production is an approach to management that aims to cut out waste while maintaining quality. It makes businesses more efficient, reduces operating costs, and increases profits. With digital manufacturing tools, it is now easier and more effective than ever to implement.

Lean production: a continuous cycle of improvement

At its simplest, lean production is a framework for creating an efficient and effective organization. Its aim is to minimize the resources used in production by making the most efficient use of labor, materials, machinery, and time. It allows organizations to look for inefficiencies – or ‘waste’ – and remove these. Lean production is not a one-time event, though. The goal is to create a culture of ongoing improvement, where organizations are continuously identifying and eradicating waste.

Five principles for lean production

Lean production consists of five principles which cover every part of the production process. Each principle builds on the last and when they’re put together, they create the cycle of continuous improvement.

1. Customer value

This is the value a customer places on a particular product and therefore, how much they are willing to pay for it. Knowing the value allows companies to identify a target price and then work out how much waste needs to be eliminated from the production process to create the highest profit margins.

2. The value stream

The value stream is the entire lifecycle of the product – all the processes, steps, and materials that are needed to get the product to the customer. To identify and eliminate waste, companies need to map and analyze everything that goes into making the end-product. Typically, this will highlight one of three things: steps which clearly add value, steps which don’t add value but are required because of technological or other constraints, or steps which add no value, and should immediately be eliminated.

3. Continuous flow

The flow is essentially how the value stream moves from one stage to another. The goal of lean production is to enable the value stream to flow freely from start to finish. Anything that interrupts the flow will slow down production, and inevitably lead to waste.

4. Customer pull

Similar to just-in-time production, the principle of customer pull is that nothing is made before a customer actually orders it. This is a shift from traditional production planning, which is based on sales forecasts or schedules, and typically results in wasted inventory or work in process.

5. Perfection

Waste is eliminated by following the first four principles. Relentlessly pursuing perfection means constantly striving to find ways to improve: to reduce costs, do things more quickly, and cut out mistakes. An ongoing pursuit of perfection creates a culture of continuous improvement so that the time, cost, and effort of production continually drops.

Lean production in the digital age

The fundamental principle of lean production has always been about making manufacturing and production processes more efficient.

Industry 4.0 doesn't replace it. Instead, it offers game-changing opportunities to make efficiencies that would be unthinkable using humans. Companies that enhance their lean approaches with the use of next-generation technologies immediately have a competitive advantage.

Lean production relies on having accurate data about production processes. Digital manufacturing techniques mean companies have vast amounts of data about their people, processes, and assets at their fingertips. They have the tools to visualize, analyze, and interrogate it, and to model the impact process changes have.

The advanced analytics offered through digital manufacturing and the Industrial Internet of Things (IIoT) allows companies to assess customer value according to actual, rather than predicted, usage. More data that can be visualized offers the opportunity to perfect both the value stream and flow. And digital tools significantly improve supply chain communication – essential for effective customer pull.

Lean production: the bottom line

The culture of continuous improvement that lean production instils in companies enables them to remain agile. In a globalized world where competition gets tougher, supply chains are more complicated and customer expectations are ever higher, the ability to adapt is the ability to survive.

Though it may not be a new concept, next-generation technology means that the reduced operational costs, improved asset efficiency, and higher revenue growth that lean production offers are more achievable than ever.


Tags: Industrial Internet of Things Industry 4.0 Industrial Connectivity Automotive Electronics and High Tech Industrial Equipment

About the Author

Leah Gourley

Leah Gourley is a Digital Content Marketing Specialist based out of PTC's Boston office. She enjoys creating and sharing content surrounding the latest technologies that are transforming industries, including augmented reality and the industrial internet of things.