Benefits of Lean Manufacturing

Various authorities tout improvements including margin, inventory reductions, waste eliminations, scheduling improvements, quality and customer satisfaction.  The following percentages depend upon the industry and the initial measurement base:  

50% to 99% Quality Improvement

30% to 80% Productivity Improvement

50% to 80% Inventory Reduction

50% to 85% Lead-times Reduction

Costs and Cash Flow

Lean projects that have effective planning and program execution are usually self-financing, i.e. the increased positive cash flow pays for the program of work as it is implemented. 

Unlike most business improvements such as IT systems or equipment, Lean requires little expenditure early in the program and the most dramatic results come early.  In the first few months of a program, costs are usually for some preliminary consultancy, a few kaizen events and changes in procedures. This results in significant inventory reductions that bring in a lot of cash. Productivity improvements require more time and the cash flow is less than the cash flow from reduced inventory.

As the program progresses, the costs are greater because the activities may include more in-depth consultancy and more investment in equipment and systems. However, by this time productivity improvements are contributing to the positive cash flow. Inventory reductions, while less than they were initially, are likely to continue for several years.