Lean Business Model

Lean Business Model

What is Lean Business Model?

Definition

The lean business model strives to make the manufacturing process as efficient as possible. It does this by reducing waste, decreasing machine downtime, and trying to deliver the greatest possible value to the customer.

What does lean business model mean?

According to the tenets of the lean business model, manufacturing processes can be vastly improved by eliminating all types of waste. There is a need to focus on several broad areas:
  • Overproduction – if a product is manufactured before it is needed, it leads to the blocking of capital. It is also expensive to store the items that will be required at a later time. A solution to this problem is to follow a system of “just-in-time” manufacturing.
  • Waiting – the manufacturing process often involves waste in the form of waiting for raw materials to arrive. It is important to reduce waiting time so that the workflow can improve.
  • Transportation –moving materials between processes can be both time-consuming and expensive.
  • Inappropriate processing – very often products are over-engineered. It is possible to reduce costs by a significant margin by manufacturing products that meet customers’ requirements, but are not more complicated or robust than is necessary.
  • Unnecessary inventory –a “just-in-time” inventory strategy can free up storage space and reduce lead times.
  • Defects – the manufacturing process should ensure that rework is not necessary. This can lead to large cost savings.

Example of lean business model

The lean business model evolved from the Toyota Production System (TPS). Japanese car manufacturer, Toyota, has achieved tremendous success by implementing TPS, which is also known as “lean manufacturing.” It’s important to remember that TPS is not restricted to the manufacturing process. It encompasses the interaction with suppliers and customers as well. The lean business model has worked very well for Toyota. It is one of the largest companies in Japan and is consistently in the top three in the global car rankings.

Summary

Every business organization should try and implement lean practices into its work culture. This will result in lower waste, higher productivity, and a greater degree of customer satisfaction.