Comparison of Lean and Traditional Approaches in Operations and Supply Chain Management

2897 words (12 pages) Business Assignment

20th Apr 2020 Business Assignment Reference this

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Operations and supply chain management is a concept that has important implications across a wide variety of industries. There are two main approaches when it comes to managing operations and supply chains: lean and traditional. A lean approach in its simplest explanation is a mindset focused on eliminating waste to create value, whereas a traditional approach looks to enhance employee efficiency and production by maximizing the utility of all available resources. This paper will examine each approach, compare their advantages and disadvantages, and provide a brief discussion on the difficulties of transforming from a traditional approach to lean.

A traditional approach[1] is a theory of management that analyzes and synthesizes workflows with a primary objective to improve economic efficiencies with a focus on labor productivity[2]. A traditional approach to managing operations and supply chains is rooted in four principles[3]:

  1. Science, not rule of thumb: organizations should not get stuck in a routine with old techniques of doing work, rather they should be constantly experimenting to develop new techniques to make the work more efficient.
  2. Harmony, not discord: an atmosphere should be created where employees and management consider each other indispensable. Taylor referred to this as a ‘Mental Revolution’[4]. He firmly believed that the occurrence of a mental revolution would end all conflicts between the two parties.
  3. Cooperation, not individualism: all activities across the organization should be done with an understanding of cooperation. Taylor has suggested that the manager and employees should equally determine standards[5] to increase involvement and responsibility.
  4. Development of all employees to their greatest efficiency and prosperity: efficiency of all employees should be taken care of right from selection. Proper training needs to be made available to all employees.

These principles set the foundation for a traditional approach where managers work to enhance employee output and efficiency. The primary benefits of a traditional approach are listed below:

  • Enhanced production: a traditional approach is responsible for increased production as it concentrates on steady improvements in business operations. This allows for large-scale production that decreases cost per unit.
  • Ability to control: employees become specialists in their tasks as they are repeatable, managers have more control over production due to a specialized workforce.
  • Decreases inaccuracy: inaccuracy is decreased as a traditional approach is based on observations and experimentation for context-specific solutions. This collection of information ensures more informed decision making, greater accuracy is achieved.
  • Increased efficiency: scientific selection and training methods are followed, this leads to a workforce that is specialized, enhancing efficiency. Efficiency is also increased through standardization of techniques, tools, equipment and materials. The automation and the use of technology in the production of goods enhances productivity.
  • Best use of resources and development: with the use of scientific techniques, there is a better utilization of resources which leads to increased productivity. Waste and inefficiency of all means are minimized.
  • Beneficial to society: due to increased productivity, lower cost of production, and rapid industrial development associated with a traditional approach there is an increase of the quality of living due to the lower cost of goods and increased wages.

While a traditional approach offers many benefits to the management of operations and supply chains, there are some significant draw backs that organizations need to consider as part of their planning if they are looking to implement a traditional approach. Limitations include:

  • Requires massive capital, is time consuming, and bureaucratic: a traditional approach requires a large investment of capital and is costly to implement. It is considered time-consuming to implement as it requires a complete reorganization and ‘mental revision’. Once adopted there needs to be additional time for standardization, observation and specialization of employees. This often leads to a bureaucratic structure, which is major disadvantage to an organization.
  • Planning reduces productivity: though the capability to plan is an advantage, the downside of planning is that it makes work inflexible and ridged and may lead to carelessness and dissatisfaction— translating to less productivity.
  • Not suitable for teams, demotivating: there is no scope for individual preference as part a traditional approach. With the application of this approach employees are focused on how they perform in relation to defined company standards in terms of production. This rigidity in performance review can lead to alienation of employees and result in absenteeism.
  • Wrong assumption: according to Taylor’s theory of motivation employees do not naturally enjoy work and they require close observation and control[6]. Taylor assumed that employees are focused on and motivated by means of financial gains. Employees are not only motivated by financial gains, but non-financial incentives as well, such as work-life balance.
  • Follows narrow application: A traditional approach has a very a narrow application and can only be applied in situations where a quantitative measuring of employees is possible.

In contrast to a traditional approach a lean approach is a business methodology that aims to provide a new way to think about how to organize human activities to deliver more benefits to society. Lean acts as an enterprise-wide strategy for achieving excellence through creating customer value, a culture of continuous performance improvement, high-quality stable processes, eliminating all wasted resources, and creating and emphasizing respect for people throughout the organization. The best way to think of lean is by focusing on its five principles[7][8]:

  1. Define Value: value is determined by what the customer is willing to pay. As part of a lean approach it is essential to uncover the latent needs of the customer. An organization needs to use quantitative and qualitative techniques to uncover customers’ needs and the prices they are willing to pay for goods.
  2. Map the Value Stream: using the customer’s value as a point of reference, an organization can identify all the activities that contribute value. The activities that are considered ‘non-value added and unnecessary’ need to be eliminated and ‘non-value added but necessary’ activities need to be minimized. Through the reduction/elimination of processes or steps, an organization ensures that customer needs are met while reducing production time and costs.
  3. Create Flow: creating a process flow ensures that the supply chain can run smoothly with minimal interruptions and delays. Strategies that ensure that value-adding activities flow smoothly include: breaking down steps, reconfiguring the production steps, leveling out the workload, creating cross-functional departments, and training employees to be multi-skilled.
  4. Establish Pull: inventory is the biggest waste in a production system. A pull-based system allows for just-in-time delivery and manufacturing where products are created at the time that they are needed and in just the quantities needed. A pull-based system is established by working backwards through the supply chain starting with customer needs. The goal of a pull-based system is to limit inventory and work in process activities while ensuring that materials and information are available for a smooth workflow.
  5. Pursue Perfection: pursing perfection is arguably the more important step— it establishes a lean mindset of continuous improvement throughout the organization. As part of this step all employees need to strive for perfection while delivering value for the customer.

These principles set the foundation for a lean approach where organizations can focus on driving customer value through eliminating waste. The primary benefits of a lean approach are discussed below:

  • A Decrease in Cost:  the selling price of a good or service is impacted by external factors, lean practices focus on eliminating waste to decrease costs that can be passed on to the customer.
  • Improved Customer Interactions: a lean approach begins from the point of view of the customer. This means that organizations can work to tailor the way they interact with customers to provide a better experience. As part of Mapping the Value Stream organizations have data on customer sentiment and can adjust their approach accordingly.
  • Utilization of “Push and Pull”: a lean approach applies a strategy that manages a ‘pull’ over a ‘push’, meaning that inventory should not be stocked. The advantage of this is that later stages in the supply chain help to inform what is happing earlier in the chain. This helps organization eliminate problems related to overproduction and reduces high carrying costs.
  • Increased Quality: one of the primary goals of a lean approach is to decrease the number of defects in products. This means that processes are optimised to create high-quality products and avoid mistakes that create defects, saving both time and money
  • An Improvement Culture: when an organization implements a lean approach, it shifts the organization to a mindset that is more open to improvement and encourages its workforce to look for ways that consistently make the work they do more impactful.
  • Increased Employee Morale: a lean approach favors where managers are in regular communication with employees about their work and encourage them to feel empowered to make decisions.

There are a lot of pros to incorporating a management style that highlights continuous improvement. However, with any new process implementation there are factors leaders should be aware of:

  • Low Inventory: low amounts of inventory are kept on hand to decrease carrying costs, this causes organizations to rely heavily on the flexibility of suppliers to deliver goods when needed.
  • Difficult to Change Over: the transition to a lean approach is complex and needs to be managed effectively. Most lean transitions fail due to poor transition planning[9].
  • High Implementation Cost: generally, when lean is implemented an organization has never used it before. Therefore, it is likely that all systems and production process will have to be adjusted, increasing expenses for new equipment and training in the short term.
  • Temptation to Over-Structure:the challenge for leaders is to determine what needs to be incorporated into lean management and what does not. Leaders can push the processes beyond what they may be able to yield, a deep understanding of all incremental changes is essential to be successful.

Moving to Lean

Insightful implementation of lean is essential for any organization looking to streamline their supply chain and is complementary to strategic decision making. However, implementing lean is no easy task—lean implementation is a transformational process and needs to support both organizational development and process improvement. Typically, a lean implementation begins with mapping the value stream as discussed above. Next an organization needs to ‘organize the house’, which includes examining flexible work systems and the 5Ss[10], after this process other organizational specific tools are implemented (e.g. standard work, total productivity maintenance, mistake proofing, just-in-time systems, etc). Then an organization needs to consider the integration between lean and supply chain planning, such as materials resource planning, this can be particularly difficult in a lean implementation due to a lean approach’s focus on ‘pull’, when many organizations benefit from a hybrid production flow[11]. A weakness in a transformation from traditional to lean can be in the fixation of the tools discussed above as an end in themselves. They promote isolated improvements vs the optimization of the entire supply chain, which is not in line with a lean approach.

In a lean system the respect for employees is as important as the elimination of waste[12]. A true lean approach entails focusing on the employees of an organization and creating a culture the empowers the entire workforce to think innovatively and make changes that improve productivity by reducing waste. The creates an organization that is more adaptive to change. Effective communication enables collaboration and consensus in addition to a shared vision are essential in a transformation to a lean approach, ensuring that respect for employees goes hand-in-hand with the elimination of waste. Ignoring the employee as aspect is a major weakness of a lean transformation, it impacts the ability to sustain the transformation. A good representation of this is the iceberg model of Hines et al.[13], with the lean tools, processes, and techniques being visible above the waterline, with the unseen supporting functions being strategy, leadership, and employee behaviour and engagement.

Deciding to transform to lean is a decision made by senior leadership and to successfully transform and be sustainable the transformation needs to be thought of as an organizational strategy that changes the culture of an organization over time through the selective and progressive implementation of a lean mindset is right for an organization. The inability to view lean as an organizational strategy and move past lean tool implementation into managing the people aspect of the transformation are the two greatest weakness as part of this shift from a traditional approach to lean. If these are not successfully managed the lean implementation is not possible.

Bibliography

  • Do, Doanh. 2017. The Five Principles of Lean . https://theleanway.net/The-Five-Principles-of-Lean.
  • Expert Program Management. 2018. Taylor’s Motivation Theory- Scientific Management. https://expertprogrammanagement.com/2018/05/taylors-scientific-management/.
  • Hines, P, P Found, G Griffiths, and R Harrison. 2008. Staying Lean-Thriving, Not Just Surviving. Cardiff, UK: Lean Enterprise Research Centre.
  • Lean Enterprise Institute. 2017. Principles of Lean. https://www.lean.org/WhatsLean/Principles.cfm.
  • Mind Tools Team . 2018. Frederick Taylor and Scientific Management . https://www.mindtools.com/pages/article/newTMM_Taylor.htm.
  • Ohno, T. 1988. Toyota Production System: Beyond Large-Scale Production. New York: Productivity Press.
  • Pons, Dirk. 2010. “System Model of Production Inventory Control.” International Journal of Manufacturing Technology and Management 120-155.
  • The Conference Board of Canada. 2015. “Mapping the Journey. Success and Failure with Lean .” The Conference Board of Canada. https://www.conferenceboard.ca/temp/829fcc2f-4a41-4459-b18a-e71a0b6ed0a6/7547_MappingJourneySuccess_RPT.pdf.

[1] A traditional approach is also commonly referred to as Taylorism or Scientific Management

[2] (Mind Tools Team , 2018)

[3] (Mind Tools Team , 2018)

[4] Taylor viewed a Mental Revolution as change in thinking on both the part of management and employees.

[5] (Mind Tools Team , 2018)

[6] (Expert Program Management, 2018)

[7] (Lean Enterprise Institute, 2017)

[8] (Do, 2017)

[9] (The Conference Board of Canada, 2015)

[10] The 5Ss stands for: sorting, straightening, systematic cleaning, standardizing, and sustaining

[11] (Pons, 2010)

[12] (Ohno, 1988)

[13] (Hines, Found, Griffiths, & Harrison, 2008)

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