Lean Manufacturing is a concept derived from 'Toyota Production System'. After second world war, when most of the companies in US were going into loss, Toyota was making profits. When the reasons were studied, John Krafcik termed the concepts as Lean Manufacturing. Later James Womack and Daniel Jones defined the Five Philosophies in lean manufacturing.
Basically, "Lean" talks about 3M - Muda, Mura and Muri and offer conceptual ideas (known as Lean Tool set) to reduce or remove them. Muda- Operational Non Value Adding steps, Mura - is Unevenness in any Process and Muri- is Overburden on any Resource.
Lean defines all process steps into two main categories - Value and Non Value. All the process steps for which customer is 'ready to pay' are value steps. Those steps for which customer is 'not ready to pay' are non value adding steps.
In general, in any manufacturing setup, about 70% of steps are non value adding and only 30% are value adding steps. Thus, Lean tells to focus on Non Value adding steps and reduce them to improve profitability.
In any Manufacturing setup, there are four main factors to look at - Selling Price, Raw Material Price, Conversion Cost and Profit Margin. These all fit usually in below equation :
Selling Price = Raw Material Price + Conversion Cost + Profit Margins
Selling Price and Raw material Prices are majorly driven by Market conditions and competition. If we focus and reduce conversion cost, profit margins increase and this is the motive of any manufacturing industry.
Production quantities - Daily / Weekly / Monthly / Quarterly / Yearly and the productivity factors depending upon the manufacturing type are important driving factors for conversion costs.
The action or manufacturing process to convert input materials into sellable products is called Production.
Productivity is simply ratio of output to single input used for production. It is a parameter to calculate how efficiently you are manufacturing the sellable goods.It is calculated usually output per head, output per sq. ft, GDP per worker and such depending on the product and process.
Generally, in this service there are three approaches:
The approach to be used depends upon the products, processes and importantly client requirement.
The methodology also changes as per the product and processes and is not same for all clients