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Importance Of Lean Management In An Organization

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Question:

Discuss about the the importance of lean management in an organization. 
 
 

Answer:

Introduction:

In the current scenario, lean management is used by the organization to not only be competitive but also make sure that its objectives and goals is achieved at an adequate cost. McDonald’s is the world’s leading and popular fast food chain company.  The core idea of lean management is maximizing the value of the customers besides reducing wastes (Goetsch and Davis 2014). It has more than 30,000 local restaurants that serve more than millions of peoples in 117 countries each day (Mcdonalds.com 2018). The main vision of the organization is to provide its customers the best quick service experience from its restaurant present all over the world. This means providing its customers with outstanding value and quality services. It operates five of their offices housing support departments leading from HR to marketing. The marketing strategy of McDonalds is related with the environment, internal resources and the basic competencies along with their shareholders. It also aims in serving best food in a more fun and friendly environment. The main motive is to provide its potential customers with food of high quality, value and standard. This approch furthermore provides a fair return to their shareholders. 

 


Operation management is the process of efficient production and distribution of process and services. This also includes development of product and services. This function is generally managed by the operation managers. McDonalds operation management involve both service and product management. Through lean management approach the organization is able to identify its business processes. It seeks in eliminating any waste of money, time and effort by properly identifying the business process (Distelhorst, Hainmueller and Locke 2016). This further involves revising or improving the steps that fails to create value. The main customer for the product and services are wide range of people from family to friends that love happy meals. Moreover, the workers or office goers prefers this restaurant for breakfast and beverages.

Process mapping within McDonalds:

Business process mapping is the activity that is generally involved in defining the procedures of business entity. The main objective behind the mapping of business process is to guide and assist the organizations to become more effective in the recent times (Martínez-Jurado and Moyano-Fuentes 2014). A clear business process map also allows the internal stakeholders of the organization to have clear view of the method. This encourages them in providing any improvement that is to be required in the current manufacturing process.

 


McDonalds uses lean production system that minimizes waste through accurate stock management. They develop correct demand forecasts for their products so that it does not need to be discarded. The business activity in these quick service restaurants involves purchasing of raw materials, semi-finished components and goods. Then the goods are further combined with services and changed into finished goods and is further sold to the customers.  Lean management concept was initiated to describe the management practices that are grounded generally on lean thinking (Fullerton Kennedy and Widener 2014). It is the system that entails large amount of outputs by only using very limited input. The concept of lean production was first introduced that follows a comparative study related to Japanese automobile industry and other parts of the world (Netland Schloetzer and Ferdows 2015). The supply model approach describes the practices that are grounded on lean thinking.

INPUTS

TRANSFORMATION ACTIVITIES

OUTPUTS

POTATOES

Sorting of potatoes is done and then the sorted potatoes are cleaned, peeled and cut according to the required size.

The potatoes are then passed through automatic grading system and heat treatment is given.

The potatoes are then frozen at 18 degree C and sent for packing.

Metal detection process is involved.

This further includes casing and labeling.

This is stored at low temperature and delivered to Mc Donald’s restaurants.

 

French Fries

Implementation of Lean Management:

Lean management is a systematic method involved for waste minimization in an organization. This process involves this also takes into account the wastes that is formed due to the over burden and wastes formed due to unevenness in the workloads (Samuel, Found and Williams 2015). Lean focuses on evaluating and delivering value to the customers that makes it a prime concern for management in an organization (Dave et al. 2016). The major concepts involving lean thinking are used as a framework for improvement of both manufacturing activities and also the upstream in non-recurring process that involves product development. The major focuses on efficient creation of values.  The implementation of lean techniques in an organization is usually done through the following ways:

  • Specifying value from the standpoint of the end customers
  • Identifying all the steps involved in value stream required for each product family. This also includes eliminating those steps that fails to create value (Krajewski, Malhotra and Ritzman 2015).
  • Making the value creating steps so that the products will flow smoothly towards the end customers.
  • As the flow is introduced this involves the customers to put value from their next upstream activities.
  • As the value is specified a state of perfection is achieved in which perfect value for the management is created with no wastage.

The first and major principle that the company must clearly defines is the value of its products as perceived by its customers. This means scrutinization of every product category for their excessive complexity, unnecessary features and performance overshoot (Eaidgah et al. 2016). The main aim is to deliver certain products that match the need of its customer without waste. The second principles of lean management deliver the value efficiently within the company. This involves identifying and creating value streams. Value stream are the sequence of activities and steps that is essential for the creation and delivery of a product (Garza-Reyes 2015). It is a complex network for interrelated activities that could transform a product from raw inputs to it delivered values.

Mapping the company’s value stream helps in categorizing the activities and tasks into value added.  The third principle involves making the value flow from raw materials to its customers. The fourth principle involves pulling the production of the organization and not pushing it. Lastly lean management strives for perfection (Tortorella et al. 2015).  These are the five basic principles that is the backbone of lean management. This involves creation of value stream flow for meeting the requirement of its customers and further prevents wastes.  When the value streams are identified and wasted steps are removed in the management (Jasti and Kodali 2015). This lead to the introduction of flow and pull that begins the process again which continues until the step of perfection is reached.

Figure I: Lean Management Principles

Source: (Cherrafi et al. 2016)

Lean is generally the tools that help in identification and elimination of wastes. When wastes are eliminated the quality of product itself improves while the cost and production time are reduced. The tool includes kanban (pull system), elimination of time batching, total productive maintenance, single point scheduling, mixed model processing, redesigning working cells, control charts and multi process handling (Tenera and Pinto 2014). The main process within the lean management involves:

Elimination of waste:

One of the most vital principles for lean manufacturing is the elimination of wastes (also known as muda).  There are various kinds of waste involved in an organization in the manufacturing process. This includes wastes due to over production, unnecessary motion, waste of inventory, transportation, over processing etc.

Processing wastage: at McDonalds, speedy system is installed for sufficient assembly of the given order. The different operational processes are linked and united together according to the assembly line. Therefore reducing handling the items and thus reduces wastage during the order processing. Previously McDonalds used to prepare sandwiches in different times and batches and further kept them in warming bins to maintain its freshness but this increased their wastage, therefore decreasing their goodwill and lead to bad reputation. In the current situation everything like salad, patty and other required elements are kept ready and only combined together once, an order has been placed (Mcdonalds.com 2018). Therefore, reduces the risk of wastage and over production in the long-run.

 

Continuous improvement:

This is also referred as kaizen in Japanese and is the most vital principle of lean manufacturing. Without continuous improvement the progress is impossible. This process of continuous improvement promotes necessary and constant changes to be required in the achievement of the desired state. The required change can be generally big or small but to achieve the desired target it lend itself towards improvement. This process is generally continuous in nature and room for improvement is always there within the operating activities.

Design for manufacturing: Many considerations are taken into account by the producers related to the packing of the products by the producers (Jiménez-Jiménez et al. 2015). While preparing Big Mac, the primary thing that is needed to be done is to serve an empty cardboard packing as it is required for the lowest and first level of burger assembly.  In addition to this, each packing being involve in the bottom level of the burger serves as an easy means for transportation and ensures that the burger remains whole and proper within the various stations. This production process ensures that all materials are provided in small boxes, which can be easier to handle.

Just in Time (JIT)

This is a management practice of producing the goods and services as per the demands of the customer (Govindan et al 2015). In traditional time, the manufacturer usually predicted the wants of the customers and created a forecast in which the products will be produced. The customers had to even wait for weeks or months to get their desired products. On the other hand, a Just in Time system uses simple tools like Kanbans to pull its production as per the customers’ demands (Jacobs, Chase and Lummus, 2014). It greatly reduces the amount of available stocks and further reduces the lead time by a huge amount from weeks to only few hours and days.  The following advantages of Just in Time approach are as follows:

Reduction in order for payment deadline: JIT implementation helps in reducing the time period considerably to a large extent (Emiliani 2015). Many businesses also suffer cash flow problems as they require purchasing huge amounts of raw materials before the manufacturing process and subsequent payment from their customers.

Lead time reductions: the most affected areas are the time taken for the products to flow through the processes (Adebanjo, Laosirihongthong and Samaranayake 2016). Instead of months or weeks, this approach results in reducing the lead times for hours or few days as per the demand.

Improved quality: the removal of huge batch manufacturing and handling reduction often results in quality improvement of the products and services significantly. The workforce is empowered to tackle its problem with the support they require for other vital part of JIT and lean implementation.

Employee empowerment: the employees are highly involved in designing and application of the system.  The standard ways of working for all operation activities of employees are ascertained (Antony, Setijono and Dahlgaard 2016).  It ensures the processes to be predictable and reliable.

Application of Lean Management in McDonalds:

 One of the processes that could help management structure of McDonalds is Just In time (JIT).  The key benefits provided in application of JIT could help McDonalds in providing better food at minimum cost (Mcdonalds.com 2018). This strategy implementation would help in increasing the quality as well as reducing the costs (Bortolotti, Boscari and Danese 2015). JIT burger assembly would target the potential customers for high quality customer services. The company should wait until the other customer places their orders.

Pull process: The manageable techniques of fast food production are generally supported through the Kanban Pull-Process (Arnaboldi, Lapsley and Steccolini 2015). This is quite a simple process and McDonald’s production philosophy should include the pull process. This involves the preparation of burger requires only to place order after the payment has been done. The order received is then electrically sent to the kitchen and henceforth prepared by the cooks. Moreover, high frequented products like cheeseburger and hamburger are made in advance through push-process that results in stock and over production.

Obeyka/ lean layout: The production shop floor at McDonalds is highly standardized and the almost each branch of the restaurant looks similar. In lean management, the term Obeyaka usually means to describe an open field, where all the processes and operators are generally visible from any spot inside the restaurant (Martínez-Jurado Moyano-Fuentes and Jerez-Gómez 2014). The deep fryer is generally at same spot in each of the restaurant’s subsidiary. The same approach is fit for the drink and burger preparation. The front counter of McDonalds is generally stacked with cheeseburgers, hamburgers and other products. The products are organized in batches for delivering it to the respective customers. This system is beneficial till the time when there are enough customers wanting the prepared burgers (Cherrafi et al. 2016).

 

 Lean Management practiced within the Organization:

Elimination of waste:

 The standardized work process helps in the improvement of quality within the organization. As the work instruction provided to the employees provides them the instruction required to know what is to be done and when and how (Alves and Alves 2015). This further increases efficiency within the organization thereby reducing waste within the organization. The lean management techniques attack the major issue and further continue to investigate until the problem has been eliminated and henceforth helps in reducing waste. As waste will be eliminated space will be created (Ng, Low and Song 2015). Space will be created in the racking as well as the floor due to reduction in raw inventory and finished goods.

Continuous improvement:

This benefit is general not known in the initial stage of implementation but lean management leads to continuous improvement (Dubey et al. 2016). Quality is improved and the productivity rate is maximized within the organization. It helps in creating flow through visual design and efficient procedures. Improved visual management is possible within the organization, therefore reducing any abnormalities present within the organization. Moreover employee morale is also improved that is present within the organization as they feel empowered which further reduces any uncertainty in the workplace (van Dun, Hicks and Wilderom, 2017).

Just In Inventory

Achieving high quality of goods and services at low cost is the major goal. JIT approach leads to reduction in inventory costs of the products (Garza-Reyes 2015). One of the major aims of JIT implementation is to improve their stock turns as well as the quantity of stock being held. There is no need to move complex machinery and all the associated training and labor costs. Reduced planning complexity exists within the organization due to the use of Kanban that is a simple pull system significantly reduces the demand for any complex planning.  It improves the stock turns and the amount of stock being held (Bevilacqua, Ciarapica and Paciarotti 2015).

Conclusion:

Therefore, it can be concluded that satisfying the customers consistently by producing what they want, when they want it is the main goal.  This is only possible through pulling it from the value stream by using minimum resources. This includes involvement all its employees in a continual process for improvement. Lean management is a proven and organizational wide systematic approach for eliminating or minimizing wastes those results in the production of goods and services at lowest possible prices. McDonalds has applied lean management in each of its system to gain competitive advantage and reduce the overall operating costs. The production area of McDonalds is sufficient to provide enough food for its suppliers and to boost their objectives and maximize its growth in future.

 

References:

Adebanjo, D., Laosirihongthong, T. and Samaranayake, P., 2016. Prioritizing lean supply chain management initiatives in healthcare service operations: a fuzzy AHP approach. Production Planning & Control, 27(12), pp.953-966.

Alves, J.R.X. and Alves, J.M., 2015. Production management model integrating the principles of lean manufacturing and sustainability supported by the cultural transformation of a company. International Journal of Production Research, 53(17), pp.5320-5333.

Antony, J., Setijono, D. and Dahlgaard, J.J., 2016. Lean Six Sigma and Innovation–an exploratory study among UK organisations. Total Quality Management & Business Excellence, 27(1-2), pp.124-140.

Arnaboldi, M., Lapsley, I. and Steccolini, I., 2015. Performance management in the public sector: The ultimate challenge. Financial Accountability & Management, 31(1), pp.1-22.

Bevilacqua, M., Ciarapica, F.E. and Paciarotti, C., 2015. Implementing lean information management: the case study of an automotive company. Production Planning & Control, 26(10), pp.753-768.

Bortolotti, T., Boscari, S. and Danese, P., 2015. Successful lean implementation: Organizational culture and soft lean practices. International Journal of Production Economics, 160, pp.182-201.

Cherrafi, A., Elfezazi, S., Chiarini, A., Mokhlis, A. and Benhida, K., 2016. The integration of lean manufacturing, Six Sigma and sustainability: A literature review and future research directions for developing a specific model. Journal of Cleaner Production, 139, pp.828-846.

Dave, B., Kubler, S., Främling, K. and Koskela, L., 2016. Opportunities for enhanced lean construction management using Internet of Things standards. Automation in construction, 61, pp.86-97.

Distelhorst, G., Hainmueller, J. and Locke, R.M., 2016. Does lean improve labor standards? Management and social performance in the Nike supply chain. Management Science, 63(3), pp.707-728.

Dubey, R., Gunasekaran, A., Childe, S.J., Wamba, S.F. and Papadopoulos, T., 2016. The impact of big data on world-class sustainable manufacturing. The International Journal of Advanced Manufacturing Technology, 84(1-4), pp.631-645.

Eaidgah, Y., Maki, A.A., Kurczewski, K. and Abdekhodaee, A., 2016. Visual management, performance management and continuous improvement: a lean manufacturing approach. International Journal of Lean Six Sigma, 7(2), pp.187-210.

Emiliani, M.L., 2015. Engaging faculty in lean teaching. International Journal of Lean Six Sigma, 6(1).

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management, 32(7-8), pp.414-428.

Garza-Reyes, J.A., 2015. Green lean and the need for Six Sigma. International Journal of Lean Six Sigma, 6(3), pp.226-248.

Garza-Reyes, J.A., 2015. Lean and green–a systematic review of the state of the art literature. Journal of Cleaner Production, 102, pp.18-29.

Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper Saddle River, NJ: pearson.

Govindan, K., Azevedo, S.G., Carvalho, H. and Cruz-Machado, V., 2015. Lean, green and resilient practices influence on supply chain performance: interpretive structural modeling approach. International Journal of Environmental Science and Technology, 12(1), pp.15-34.

Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.

Jasti, N.V.K. and Kodali, R., 2015. Lean production: literature review and trends. International Journal of Production Research, 53(3), pp.867-885.

Jiménez-Jiménez, D., Martinez-Costa, M., Martínez-Lorente, A.R. and Rabeh, H.A.D., 2015. Total quality management performance in multinational companies: A learning perspective. The TQM Journal, 27(3), pp.328-340.

Krajewski, L.J., Malhotra, M.K. and Ritzman, L.P., 2015. Operations management: processes and supply chains. Pearson.

Martínez-Jurado, P.J. and Moyano-Fuentes, J., 2014. Lean management, supply chain management and sustainability: a literature review. Journal of Cleaner Production, 85, pp.134-150.

Martínez-Jurado, P.J., Moyano-Fuentes, J. and Jerez-Gómez, P., 2014. Human resource management in lean production adoption and implementation processes: success factors in the aeronautics industry. BRQ Business Research Quarterly, 17(1), pp.47-68.

Mcdonalds.com (2018). McDonald's: Burgers, Fries & More. Quality Ingredients.. [online] Mcdonalds.com. Available at: https://www.mcdonalds.com/us/en-us.html [Accessed 31 Jan. 2018].

Netland, T.H., Schloetzer, J.D. and Ferdows, K., 2015. Implementing corporate lean programs: The effect of management control practices. Journal of Operations Management, 36, pp.90-102.

Ng, R., Low, J.S.C. and Song, B., 2015. Integrating and implementing Lean and Green practices based on proposition of Carbon-Value Efficiency metric. Journal of Cleaner Production, 95, pp.242-255.

Samuel, D., Found, P. and Williams, S.J., 2015. How did the publication of the book The Machine That Changed The World change management thinking? Exploring 25 years of lean literature. International Journal of Operations & Production Management, 35(10), pp.1386-1407.

Tenera, A. and Pinto, L.C., 2014. A Lean Six Sigma (LSS) project management improvement model. Procedia-Social and Behavioral Sciences, 119, pp.912-920.

Tortorella, G.L., Marodin, G.A., Fogliatto, F.S. and Miorando, R., 2015. Learning organisation and human resources management practices: An exploratory research in medium-sized enterprises undergoing a lean implementation. International Journal of Production Research, 53(13), pp.3989-4000.

van Dun, D.H., Hicks, J.N. and Wilderom, C.P., 2017. Values and behaviors of effective lean managers: Mixed-methods exploratory research. European management journal, 35(2), pp.174-186.

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