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Cost Reductions in Lean Manufacturing

February 21, 2010

When talking about lean manufacturing, the word cost does not mean cost cutting but cost management.  Many managers today believe that trying to reduce cost in their operations can only be accomplished by firing employees, restructuring, or beating up their supply base.   The consequences of these actions leads to deteriorated work standards that leads to process variation and ultimately quality deterioration.  So instead of cost cutting, maybe we as managers need to start practicing effective cost management of our processes.  This includes;

  1. Cost planning to maximize the margin between costs and revenues.
  2. Overall cost reductions in the work place
  3. Investment planning by top management

Our opportunities for cost reductions on the shop floor can be eliminated by focusing our efforts on muda elimination.  Everyday we use excess resources to carry out non-value added tasks in our operations that the customer is not paying for.  Our efforts should really be focused on;

  1. Improving quality
  2. Improving productivity
  3. Reducing inventory
  4. Shortening the production line
  5. Reducing machine downtime
  6. Reducing floorspace
  7. Reducing lead times

If we focus our efforts in these seven areas, we can effectively reduce costs in our organizations.

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