How do the Elements of Lean Thinking Help Companies Manage Costs?

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Answered by: Jennifer, An Expert in the Cost Management Category
One of the most important parts of all organizations is the bottom line. Making a profit is one main purpose of all businesses, and ensures a company's continuity, offers resources for expansion and operations, and is an essential part of all businesses. Many businesses are turning to the lean thinking philosophy as a way to increase profits and manage costs.

This philosophy is based primarily on eliminating waste within an organization, and is a way of thinking. It focuses on improving customer value and must be organization wide. It cannot be accomplished through only one worker in an organization. Organizations, that use lean thinking, analyze each process within the company. They use flowcharts and other types of diagrams to help assist. After a company analyzes a process, it investigates any areas, within the process, that are wasteful. If a process offers zero value, the company considers it wasteful, and eliminates it or re-structures it.

Companies in all types of industries use the lean thinking philosophy; although it is most commonly used by manufacturing companies. It is an extremely useful technique that helps organizations manage costs, and is based on five key principles. Each principle serves a key purpose, and all five focus on customer value. The principles begin with identifying customers and specifying value. The remaining four are identifying and mapping the value stream, creating flow by eliminating waste, responding to customer pull and pursing perfection in each process.

By using these five principles, organizations are able to manage costs; which will play a large role in increasing company profits.

Lean thinking is a system created by Taiichi Ohno, around the time of WWII, but was first used by the Toyota Corporation. It is part of the Six Sigma methodology; which is a system used by thousands of companies today. It was developed as a way of eliminating waste, using the power of employees and managing costs.

One key element to lean thinking is the realization that employees possess a lot of power. The employees are the people in the company that are actually doing the work. Companies, operaing under this philosophy, realize the benefits of listening to employee's suggestions, coments and criticisms. This theory also focuses on giving power and control to the employees. This has been found to increase employee morale and loyalty. When employees feel a sense of ownership, they have more of an incentive to complete their job duties, and to complete them well.

The final important element in lean thinking is employee placement. Companies strive to place each employee in the best suited position. This will increase productivity, because every employee is able to use his full capabilities and complete their jobs thoroughly and accurately. Under this element, companies also train employees for multiple positions within the organization. With this, there is some job overlapping. This is vital to ensure that all business processes are completed each day, and also covers time periods where employees are not present at work.

The lean thinking philosophy ties together several key parts of business. Each part promotes managing costs, cutting waste and utilizing employee resources. Under this way of thinking, companies strive to make continuous improvements, always eliminating wasteful processes and looking for ways to increase customer value and company profits.

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