Last updated on April 2nd, 2024 at 05:30 am
Lean management has become a very popular domain in recent years and is being used in a lot of work areas. Lean management has also become an integral part of the financial industry and it is extremely important for finance professionals to know the concept and applications of lean management. One can learn everything about lean management with an effective CFO course that will help professionals to become successful CFOs in the future.
Every business process either adds some value to the organisation or generates some kind of waste. The main objective of involving lean management in business processes is to eliminate anything that results in waste and increase the operations that add value to the business. Eliminating waste has proven to be effective in improving product quality while lowering manufacturing time and expenses.
Read on to know how lean management can help emerging CFOs in streamlining business processes and eliminating waste.
What are the Wastes of Lean?
Lean management always tries to make business processes as efficient as they can be. Here, efficiency is about achieving the target objectives and reaching the peak performance of the business by optimal use of resources. It helps to add value to the organisation as well as reduces the amount of waste generated. Eliminating waste in lean management allows companies to yield the highest output with just the right amount of resources.
Waste in lean management is said to be operational and accounting waste that can be categorised as follows:
Inventory
An important aspect of eliminating waste in lean management is to do away with excess inventory. Keeping more than the required inventory results in over utilisation of resources and capital. In terms of production, keeping excess inventory in hand results in wastage of the products as they may get absolute or damaged. Hence, the amount of inventory should be kept as per requirement.
In the case of deduction analysts, the best way is to eliminate the inventory of invalid deductions so that the system must be capable of robust classification of deductions into various categories.
Transportation
In manufacturing and production, transportation is about providing the data to the concerned individuals and rightly extracting information from various spreadsheets and databases. The major waste in transportation is spending a lot of time retrieving information about Proof of Delivery. Such documents should be available at hand and not much time should be spent on collecting this information.
Deduction analysts devote almost 60% of their time to classifying deductions and carrying out backup retrieval whereas more time should be invested in investigating and validating deduction claims.
Overproduction
Overproduction means producing more items than the consumer has ordered and it is considered as a waste activity in manufacturing. There is no point in spending time, effort and resources introducing more than the actual order amount. Hence, overproduction needs to be eliminated for building an effective lean management system.
Poor forecasts of market demand can lead to overproduction and poor automation is a major cause of this calamity. Analysts need to prepare proper production schedules as per the results of conducting a thorough analysis of the market.
Waiting
Sometimes, business processes are not optimally synchronised with each other and create a lot of waiting time. It is a waste of time which results in unproductiveness. waiting time is a result of improper synchronisation of two business processes that should have occurred one after the other.
Poor planning of layouts and processes is the major cause of waiting time. Managers need to optimise and connect the business processes in a manner that leads to minimum or no waiting time. Output will be standardised and no wastage of resources and time will occur.
Over-processing
Over-processing is when any product is given more attention than a consumer value. According to the lean management strategy, only the required amount of processing should be done on a product, neither less nor more. Overprocessing an item does not add any value to the business and only results in a waste of time and resources.
The major cause of processing is unnecessary manufacturing steps and the absence of standard procedures. Hence, analyse what the customer wants and invest keeping in mind what the customer is willing to pay for an item.
Excess motion
The movement of all products and equipment should be done in the easiest and the most convenient way possible. But many times the movement of products takes place without analysing the easiest way possible. It causes immense wastage of resources.
Excessive motion in the business process involves huge expenses, labour and time. The major form of motion waste in businesses is the expenses incurred for lifting heavy items, doing a lot of paperwork, etc. Companies should try to simplify and optimise business processes and minimise the motion of equipment as much as possible. Motion waste results in delays in the completion of work and disrupts the progress of work.
Defects
The most obvious kind of waste that can be eliminated with lean management is the defects and errors in the business procedures. A defective item requires replacement or repair which creates additional pressure on the organisation and leads to a poor customer experience. As a result of which the company loses view of their valuable customers.
Inefficient machinery and management systems can be a major cause of these defects. Additionally, human errors cannot be neglected either. It is always better to minimise the occurrence of defects than to repair them later. Better quality control can be exercised with the help of a lean management system that can do away with such defects.
Conclusion
Eliminating waste and streamlining business processes is a major objective of lean management systems. It is also a great means of performing capital budgeting and setting the workflow just as it should be without any delays. Is important to know what exactly is causing the waste and then start working towards eliminating it.
Lean management is an inseparable part of the financial industry and if you want to become a successful CFO in the future, it is a must for you to have in-depth knowledge of line management. Consider signing up for the Postgraduate Certificate Programme for Emerging CFOs by Imarticus and inculcate the essential skillset. Measuring the waste in a business and getting rid of the same is a great way of ensuring optimal use of resources and building a lean management system in the company.
