A lean organisation is the one that believes in creating more value for the customers by using minimum number of resources. The sole goal of a lean organisation is to create a system where there is zero wastage of resources and the customers receive the highest possible value against the money that they are paying to buy the product or service. Most of the organisations today have the goal of becoming lean. However, there are 7 widely known sources of wastes in the lean philosophy that may negatively affect the objective of the organisation. These sources of wastes are as mentioned below:
1) Overproduction
2) Transportation
3) Waiting
4) Inventory
5) Overprocessing
6) Motion or Unnecessary movement of resources
7) Rework or Defects
For a firm that is trying to achieve the lean philosophy, these wastes in the system act as a negative force. They are the unprofitable activity within the organisation that hinders the growth of an organisation to become lean. The primary source of all the other wastes is “overproduction”. Because of the unavailability of the exact demand or error in the forecasting methods, there is a mismatch in the supply and most of the companies end up producing or manufacturing goods in higher volume than what the market can actually consume. The overproduced goods then turn into unsold inventories resulting in wastage of money, raw material, human capital and other valuable resources used in production. Wastage in the lean philosophy deeply affects the bottomline of the organisation as the unsold inventories or overproduced goods adds to the losses of the company. Overproduction also leads to other wastes like unwanted motion or movement of goods, transportation and increases the inventory holding costs for the organisation. Toyota’s Just-in-time or JIT system was developed in order to control the problem of overproduction. The monitoring and controlling of the overproduction wastage automatically resulted into the reduction of other types of wastes.
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