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LEAN manufacturing implementation: helping manufacturing corporations address their financial KPI’s

Lee August 23rd, 2011
By Lee

LEAN is basically a process of “getting the right things, to the right place, at the right time, in the right quality whilst minimising waste.”  Lean manufacturing principles/ tools includes 5’S, JIT (just in time). Kaizen, Kanban, and Value Stream Mapping.  Using the thought process of LEAN and its capabilities, it can be utilised to look at a businesses financial side and influence the KPI’s being set.

Lean manufacturing principles/ tools includes 5’S, JIT (just in time). Kaizen, Kanban, and Value Stream Mapping

Shareholders of manufacturing and engineering companies are usually interested in ROA – return on assets- which are usually over a period of time, while the major KPI of the day to day running of a business is Margin per unit.  It is evident that this later KPI of Margin per unit has many limiting factors- it fails to take into account the speed in which a product goes through the manufacturing process- the run rate.

Nowadays there has been an improvement in software available to manufacturing and engineering companies and they are able to calculate a profit per minute figure which will then correlate to the shareholders KPI of ROA, as it is time based.  This literally means that the ROA can be brought onto the manufacturing shop floor and thus a once financial aspect of a business (only discussed in board/ senior level meetings) has been transformed by LEAN methodology and can typically increase profits by 2-5%.

LEAN methodology and tools without question effects the operational side of manufacturing and engineering companies but it is also being adopted when businesses are examining their financial strategies.  Get the 4 simple questions of What products do we make- Who are our customers- Where do we make our products- Price of products- answered and include the profit per minute KPI in place and all employees involved will be adopting LEAN tools and way of thinking in no time.

For more information on LEAN methodology, Continuous Improvement, Six Sigma and general manufacturing and engineering news please visit www.dudleychild.co.uk

For the latest vacancies in manufacturing and engineering please also visit www.dudleychild.co.uk or call 0113 246 8600 and speak to one of our team.

Key words- LEAN, Continuous Improvement, CI, KPI’s Manufacturing, Engineering, Finace, ROA.

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