Lean Principles and Process Types in Operation Management

Executive Summary 

Lean manufacturing refers to a philosophy that reduces production costs, improves quality of the product and maximizes efficiency. Lean principles and process types can be used as tools in process manufacturing to improve efficiency and productivity while at the same time reducing costs. There are seven wastes in lean manufacturing that reduce productivity and increase total costs in organization. These wastes include waiting, transportation, movement, over production, over processing, defects and inventory. Waiting refers to the increase in the production cycle time without increasing the value. Transportation refers to the movement of materials without adding values. On the other hand, movement waste refers to the movement of operators without adding value in the organization. Overproduction refers to producing items that exceed the customer demand while over processing refers to the processing of materials beyond customer specifications. Inventory refers to all the components, finished products and the work in process. Defects refer to the production of materials that do not conform to what the customer asked for. If the seven wastes are not properly handled, then the organization is set to incur huge amounts of losses. There are three basic steps in accomplishing the principle of lean manufacturing and thoroughly reducing the wastes. These steps include; first design simple manufacturing systems. Secondly, realizing that there is always room for improvement and always working towards polishing the first step. The final step entails continual improvement of the lean manufacturing system design. 

Lean Principles and Process Types in Operation Management 

Lean manufacturing refers to a philosophy that reduces production costs, improves quality of the product and maximizes efficiency. It is a systematic technique that minimizes wastes during production without compromising productivity. Lean manufacturing considers the wastes created through irregular workloads and overburdening. Overburdening and irregular workloads can be created by the need of the manufacturer to work from the perspective of the paying customer. Basically, lean manufacturing reveals what adds value to production and reduces everything else that does not. Lean manufacturing takes an important look at how people in service and factory settings work. Furthermore, lean manufacturing is a significant technique during decision making in the organization of goods and services for production. This implies that process design and selection is a predominant factor within every system. It contributes directly to the general effectiveness and efficiency of operations. Ultimately, lean principles that are adopted during process design are not only beneficial in reducing the cost of production but also improve the levels of customer service (Holweg 2007, p. 428). This document will describe how lean principles can be implemented in a newly established hotel branch to reduce costs and improve productivity and efficiency. The newly established hotel is regal group of hotels newest branch in Hong Kong. 

Regal Hotels International is among the biggest and most renowned hotels in Hong Kong and across Asia. The hotel boosts of several hotel branches in Hong Kong, DE Zhou and Shanghai and real estate ventures. The hotel has over ten branches across the island and other cities and has generally high annual revenues. However, over the years, the hotel has lost some of its famous branches thus making people doubt their service rendering. Due to unavoidable circumstances, the group of hotel lost the Regal Constellation Hotel one of their largest properties. In addition to this, the hotel has lost several other branches over the years. As the hotel is set to open a new branch in the heart of Hong Kong, the officials must find different ways to avoid any other foreclosures from occurring, maximize their production and increase their annual revenues. In such a circumstance, lean manufacturing can be adopted. 

Regal Hotel International latest branch is located in the heart of causeway bay, near Times Square and Sogo. Causeway bay is the throbbing commercial site and shopping district in Hong Kong. The hotel is undisputed when it comes to its leisure output and stylish comforts. It is suitable for business, leisure travelers, adventurers and foodies. It offers 481 spacious guestrooms and 20 functions rooms, including 48 guestrooms and suites in their executive club floors. It contains a wide range of recreational facilities making it a versatile area. These facilities include a spectacular rooftop, swimming pool with panoramic views of Hong Kong Island and Victoria harbor. They also contain 20 function rooms including a grand ballroom with a LED wall, and The Forum Conference Centre. Regal hotel has four restaurants that offer a variety of meals including Cantonese, Western and Italian cuisines. They also offer drinks and snacks, (Tim and Yvonne 2007, p. B1). 

Types of Wastes in Lean Manufacturing 

There are seven distinct types of wastes that are defined in Lean manufacturing that cause inefficiencies in the production system as well as making it costly. These types of wastes include inventory, overproduction, transportation, movement, waiting, over- processing and defects. Inventory, over- production and transportation are associated with insufficient material flow. In process manufacturing, materials flow in and out from one sector to the next continuously without delays except for several areas of production such as during batch processing. Therefore, in the ideal lean manufacturing, materials flow occurs without evasion. The materials are processed and their flows occur smoothly within the organization. Consequently, in process manufacturing, inventory, transport and overproduction are minor issues or not issues at all. Similarly, the waste of movement is a non- issue in that, automated equipment are characteristically monitored in process manufacturing by the operators. As a result, movement rarely has an adverse effect on the capability of the equipment available to continuously process the material. Nevertheless, the three remaining types of wastes are a common occurrence in process manufacturing. Defects, waiting and over- processing provide a strong basis for the application of the lean principles (Lichtenberg, 2017). 

Over- production 

The first type of waste in process manufacturing is over- production. Overproduction occurs when the finished product is produced in higher quantities than required in a short period of time. In an impeccable value stream, goods and services are produced efficiently, reliably at the right quality and in sufficient amount. Adequate production should occur in individual process levels as well as throughout the value stream. In the hotel industry, overproduction may occur when the hotel overestimates the consumer turn out thereby producing more than is required (Lichtenberg, 2017). As a new hotel, Regal Hotel Hong Kong branch may overestimate the number of customers expected to turn up. As a result, produce the foods in higher amounts than the customer needs thereby leading to losses. Although this was not cited as a reason for the collapse of the former branches, it may have been a contributing factor if not closely monitored. It is however important to note that overproduction is not a common waste in most hotels because in most cases the final product can still be used in the next shift. Furthermore, there is not a flawless production value stream and although overproduction and sometimes underproduction may occur in the hotel, the condition will change overtime. As the management gets used to the customer behavior in the region, they will adjust their production with consideration of the peak and the low season thus reducing the waste of overproduction and underproduction. 

Overproduction causes increased inventory costs due to the increment in storage needs. As stated earlier, to minimize the costs of production, the organization must only produce according to the demands of the customer. Overproduction translates to buying more inventory than it is actually required. As a result, more money will be spent on warehousing and storage. In addition to this, other expenses will be incurred in transportation of the raw materials and paying for the extra labor to manage the extra inventory. These costs can be highly reduced by producing only what is necessary (Petersen 2009, p. 138). Even though it may take time for the management of the hotel to accurately estimate the amount of inventory required at any given time, the hotel will most probably still purchase their raw materials and put them in storage. Buying products in bulk ensures continuity of inventory when needed and most processing organizations prefer purchasing in bulk. However, as a world class hotel, regal hotel should shy from providing their customers will over stored produce. It would be wise to acquire fresh produce from the farmers market so as to entice more customers. 

Inventory 

Secondly, lean principles defines inventory as another type of waste that occurs in the process industry. Wastes in inventory occur when process variability requires to be cushioned by additional production. According to lean manufacturing principles, perfect flow of production without any interruptions implies lack of inventory. The principle states that if the features produced are only customer valued then the design of the product is tremendously simplified. This implies that all the effort expended will be utilized in the features the customer values (Krafcik 1988, p. 47). Just like over-production, waste of inventory is not such a big menace in most process industry because the inventory will still be used unless it spoils. In regal hotel, most of the produce used is acquired on either a daily basis or weekly basis. To ensure freshness, the perishable goods are stored in refrigeration while those that require room temperature are stored in the utmost conditions. Although lean manufacturing states that there should lack extra inventory in any given point, it is important to hold something that can eb used whenever need arises. Therefore, as much as it is wise for the hotel to avoid over production and overspending in inventory, it should also ensure that they do not reduce their inventory to the extent that they face shortages. 

Carrying unnecessary inventory can create unnecessary costs for the company. Inventory refers to all the components available in production, the finished product and the work in process. According to Andrew Dillon, most people refer to inventory as goods although they can prove to be disastrous if enough care is not taken. People expect that inventory will be sold in the meantime. In most scenarios, the purchasing department will buy goods in bulk because it will cost them cheaper to do so. However, Dillon warns against this common practice. He states that, buying in bulk can be disastrous to a business especially when there is no occasion for the extra baggage (Dillon 1987, p. 70). In regal hotels, inventory is acquired in bulk to reduce the amount of transportation in addition to the discounts provided when buying in bulk. Nonetheless, in lean manufacturing, this behavior is discouraged. It is wise to acquire only enough inventory to ensure that production is optimum and with accordance with the consumer demands. This will reduce amount of wastes from spoilage, pilferage and price fluctuations. 

A simple manufacturing system entails creating a demand- based flow manufacturing. In this lean principle; inventory is only pulled in each sector of production when it is needed to meet the specific customer’s directive. This principle does not only reduce costs of inventory but also decreases the cycle time. Furthermore, the principle of demand- based flow manufacturing increases productivity as well as increases the utilization of the capital equipment. In this simple principle, inventory is only taken in the processes of production when the customer asks for it. The only features produces are what the customer demands. Cycle time is reduced when the operators only focus on specific items. All the efforts are focused on the specific item thereby the time taken in production is reduced. For example, in the hotel, the chef can reduce the cycle time by only producing the meals that the customer asks for and not necessarily what they feel they can make best. Similarly, productivity is increased by reducing the effort that would have been expended in overproduction. When the hotel only concentrates on what the customer requires, it is most probable that the customer will purchase what they need thus reduce the amount that remains in storage. 

Transportation 

Another waste that is defined in the Lean principles is transportation. Transportation in process manufacturing refers to the process of moving materials without adding any value to the item. Raw materials can be transported from the producer to the organization for processing, materials undergoing processing can move from one sector to the next during production and finally, finished products can move from the organization to the consumer or to storage. In process manufacturing, materials flow in a continuous manner from one area of production to the next. In cases of overproduction and poor inventory management, the cost of transportation is unnecessarily increased (Ker, et al. 2014, p. 558). In regal hotels, the transport costs are miscellaneous costs and are no close attention is paid to this section of production. However, as much as the costs of transportation are negligible, efficient transportation determines efficiency in production. Perishable goods need the best transportation lest they undergo spoilage. Furthermore, pilferage remains a factor that may occur during transportation. While transporting adds no value to a product, it surely can leads to its deterioration. 

Movement 

Other than transportation, movement is another waste that occurs in process organization. Unlike transportation that refers to the movement of materials, the waste of movement refers to the movement of operators in the organization without adding value to the organization. These movements may be incurred during unwarranted breaks and other forms of laziness. When employees spend a lot of time moving out and about instead of concentrating on the work they are assigned, then they lose time for production. This translates to paying the employees for work they have not done (Akinlawon 2017). People working in the service should eb n their toes all the time. Regal hotel should employ self- driven employees to ensure that they can work under minimum supervision. When staff in hotels lag in providing services, they are most likely sending the customer away. Managers in Regal Hotel can find a way to always keep their waiter and waitresses on toes without taking unnecessary breaks. For instance, the hotel may decide to pay their waiters and waitresses a certain commission of what they have served rather than paying them a fixed monthly salary. Some employees misuse the safety net of a fixed monthly income. They laze around; move about without any necessary reason because they are assured of a monthly salary. However, if they are paid in accordance to the number of people that they serve, they will try to serve as many people as they can in order to increase their monthly income. 

Waiting 

Waiting is a type of waste that is highly experienced in organizations. Waiting refers to the increase in the cycle time during production without adding any value to the product. Waiting waste may be created during product substitutions that occur in process manufacturing. Product changeovers can take more than eighteen hours without adding value to the product. Waiting occurs when a product waits for the subsequent production step. Furthermore, waiting may occur during interruptions of production such as during shift change. Waiting in the hotel industry can be reduced by conveniently placing the time for shift change (Womack 2003, p. 352). Currently, the shift change of the hotel is at 6pm. During this time, people are trickling in for their dinner and trying to get a drink on their way home from work. Therefore, it is prudent for the hotel to avoid placing shift changes during peak hours. During these periods, the hotel is fully packed with customers. When shift changes during these periods, the customers will have to wait longer to get their foods prepared and then get served. This may seem as an obvious aspect of hotel management but it easily creates customer satisfaction. Furthermore, the necessary inventory required during production should be readily available to ensure that there are no interruptions in productions. For instance, the hotel should ensure that all the raw materials required to make a meal are readily available whenever the customer needs them and the equipment are fully functioning at any given point. 

Defects and over-processing 

The final two wastes created in organization are defects and over processing. In defects, products produced do not conform to the specifications of the customer. In hotel settings, this can be a common mistake especially without the right chef making the meals. Every customer has a specific way that they need their meals, it is imperative for the chef to ensure that they produce a meal that is as close to the customer’s specifications as possible. If the meal produced does not conform to what the customer wants, then this is incurred in losses. Similarly, in over processing, the material is processed more than what the customer specified for (Dombrowski and Mielke 2015, p. 568). Although the customer may still appreciate the over processed items, it is extra cost on the organization. For instance, the hotel may feel obligated to provide a certain amenity to the customer in order to impress them though the customer did not act for the specific amenity. It is not guaranteed that the customer will appreciate the amenity although the organization will still have expended more than they are paid for. New hotels try different things to impress the consumer. However, in doing so, they may be spending more than they are selling thus causing losses. It is therefore wise to only spend on what the customer needs and avoid over processing and making simple mistakes. 

Steps in Accomplishing Lean Principles 

Lean principles and process types in operation management are important tools that any organization can use to reduce avoidable costs without compromising efficiency and productivity. These principles can be used to reduce the seven types of wastes that occur in organizations including movement, waiting, transportation, overproduction, defects, over- processing and inventory. Fundamentally, three simple steps are involved in accomplishing the principles of Lean manufacturing. These steps include designing simple manufacturing systems. These designs have to be as simple as possible to maximize efficiency. Secondly, an organization should always realize that there is room for improvement. No single organization has reached its epitome and realized that everything they are doing is to perfection; there are aspects that will always need improvement. Organizations should always try to polish on the first step and improve on whatever they can. The final step entails continual improvement of lean manufacturing system design (Akinlawon, 2017). 

References

Holwig, M. (2007). The Genealogy of Lean Production . Journal of Operations Management, 25 (2): 420 -437 

Lichtenberg, H. (2017). Applying Lean Principles in Process Industries . [Online] (Updated 2017) Available At: www.reliableplant.com/read/13156/lean-principles-process-industries [Accessed June 13, 2017] 

Womack, J. P. (2003). Lean Thinking. Free Press: 352 

Akinlawon, A. O. (2017). Thinking Of Lean Manufacturing Systems. [Online] (Updated 2017) Available At: www.sae.org/manufacturing/lean/column/leandec01.htm [Accessed June 13, 2017] 

Petersen, J. (2009). Defining Lean Production: Some Conceptual and Practical Issues. The TQM Journal, 21 (2): 127- 142 

Dillon, A. (1987). The Sayings of Shiego Shingo: Key Strategies For Plant Improvement : 70 

Krafcik, J. F. (1988). Triumph of the Lean Production System. Sloan Management Review, 30 (1): 41- 52 

Ker, J. L., Wang, Y., Haji M. N., Song J., and Ker C. W. (2014). Deploying Lean in Healthcare: Evaluating Information Technology Effectiveness in U.S. Hospital Pharmacies. International Journal of Information Management, 34 (4): 556- 560 

Dombrowski, u., Mielke, t., (2015). Lean leadership: 15 rules for a sustained lean implementation. Procedia CIRP, 17: 565- 570 

Tim Leemaster and Yvonne Liu, “Swire Considers Festival Walk Reith”, Page B1, South China Posting12 July 2007