Why Is Lean Needed in Production?

Lean production, such as small batch, cellular manufacturing, and kanban systems, requires minimizing setup times. Manufacturers typically adhere to the Economic Order Quantity (EOQ) principle. EOQ refers to the inventory order quantity that minimizes the total cost of production and storage. In actual production, significant time is spent preparing for production, but this cost can be offset by arranging for large batch production, which is the essence of EOQ. Products produced are stored as inventory before being ordered by customers.

Traditional production believes long setup times and large inventories are necessary, but lean production opposes this approach because storing goods also incurs costs. If defective items are placed in inventory instead of being sold to customers, a large quantity of flawed parts can affect the entire batch, leading to the scrapping of all inventory parts. Additionally, there’s a risk that customers may no longer need these parts, leaving them permanently in inventory, unsellable.

When the volume of parts is excessive, customers often have to wait until the entire batch is produced and equipment is changed to produce what they truly need. When applying lean principles in traditional production, measures must be taken to reduce setup times appropriately.