Lean Manufacturing is a philosophy to reduce waste in an organization. One tool to accomplish this is the implementation of a Pull System, which dictates that a product is not made or moved until it is consumed, and the authorization to move or build the product is through a Kanban replenishment signal. The Lean concept to reduce waste and remove non value-added activities can be applied throughout an entire organization and applies to every department. For the purposes of this article, I will focus on manufacturing and inventory.
The two basic manufacturing philosophies are Push Systems and Pull Systems. A Pull System is used in the Lean Environment. A Push System is used by most U.S. manufacturers that are Material Requirement Planning (MRP) driven. The difference is as the term applies, opposite from each other. Simply put, a Pull System is focused on customer consumption and then replenishment, while a Push System is focused on producing based on machine-process efficiency or an inaccurate MRP forecast, and then waiting for the customer to consume the product. The term "customer" applies to those both internal and external to the organization.
An example of a Push System is when a replenishment order is made, the quantity of the build is based on machine or process time and expected future customer demand. The quantity is generally larger than the immediate demand, and the balance remains in inventory waiting to be consumed, which could take months or may never occur. The benefit of focusing on machine or process efficiency is overshadowed by the risk of building additional inventory that may not sell, might require revisions, or could simply expire.
An example of a Pull System is establishing an appropriate inventory level with a focus on replenishment lead time to satisfy the actual customer consumption. A Pull Company builds only what is consumed and when it is consumed. The inventory level is only what is required for the customer demand, so the risk of inventory obsolescence or expiration is minimized. The need for a production schedule is removed as production only builds what is consumed in the sequence it is consumed. The mechanism used to inform production to fill an inventory position is called a Kanban Replenishment. Kanban is Japanese for "signal".
An additional benefit of a Pull System is that the rush to "push" orders through a system is removed, so work flows on actual demand "pulls" and quality improves naturally due to a smooth manufacturing process. Consider all of the valuable machine time, materials, manpower and effort required to build to a Push System when a Pull System redirects these resources to build only what is required and when it is needed. The company saves money in areas unrealized before, such as improved quality, fewer rejects, better customer service, less planning, and lower management overhead. By being Lean, the focus of profit per piece-produced is replaced with the actual net profit of the entire company’s through-put.
Is Lean Manufacturing another fad? Not really. Lean Manufacturing is an American name for a process that the Japanese have been using effectively for thirty years. To quickly review Japan's success, post WW2 they were known as manufacturers of cheap "knock-offs". However, starting in the 1970s, Japan became the world's leading supplier of affordable technology, putting the American camera, video and TV manufacturers (and almost the entire U.S. automotive industry) out of business. Keep in mind that Japan doesn't have cheap labor either. So perhaps Lean Manufacturing should be considered more of a necessity than a fad.
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