MSMEs face challenges running day-to-day operations to achieve a sustainable growth rate. Lean manufacturing is a strategy implemented by companies which follow the principle of minimising waste and maximising productivity in a manufacturing process. The efficiency generated due to the implementation of lean manufacturing is visible. MSMEs who have adapted to this system have higher chances of achieving better quality, reduction in cycle time and less waste production. In this blog, MSMEs learn how lean manufacturing adds a competitive advantage to their business.
Implementing Lean Manufacturing in MSME Manufacturing Sector
Developing this system requires proper planning and execution, which needs to be followed by all the employees from top to bottom in an organisation. To run a successful business, understanding what the customer wants is important, along with the value stream of the enterprise. Once an MSME entrepreneur recognises the areas which need improvement or a different strategy, apply it to have a better value stream flow and give customers exactly what they are looking for. By giving customers what they want, there is a less non-value added product produced, decreasing rejection. This is a process which needs to be done continuously to have a healthy success rate.
The MSME manufacturing sector constitutes around 40% of total industrial production and they face challenges such as supply chain inefficiencies, sub-optimal scale of operation, technological issues and fund shortages. With the implementation of lean manufacturing, small business manufacturers will produce higher quality output cost-effectively.
Techniques Used in Lean Manufacturing
There are several techniques used in lean manufacturing to improve efficiency, reduce waste, and increase quality. Some of the most commonly used techniques include:
Value Stream Mapping (VSM)
This is a process mapping technique that helps identify the value stream, which is the series of steps that a product or service goes through from conception to delivery. VSM helps identify waste and inefficiencies in the process and can be used to identify areas for improvement.
Just-in-Time (JIT) Production
JIT production is a technique used to minimise inventory levels by producing only what is needed when it is needed and in quantity needed. This helps reduce waste and frees up capital that would otherwise be tied up in inventory.
Continuous Flow
Continuous flow is a technique used to keep the production process moving without interruption. By reducing the time it takes to set up and changeover production processes, companies can achieve a smoother flow of work and reduce waste.
Kaizen
Kaizen is a continuous improvement technique that involves making small, incremental changes to processes, products, and people. This approach helps identify and address problems before they become bigger issues and encourages a culture of continuous improvement.
Poka-yoke
Poka-yoke is a technique used to build safeguards into the production process to prevent defects from occurring. This can include using visual cues or physical barriers to ensure that parts are assembled correctly or that the correct amount of material is used.
Kanban
Kanban is a visual signalling system that helps regulate the flow of materials and products through the production process. By using visual cues such as cards or signs, workers can quickly and easily identify what needs to be produced and when.
These techniques, when used together, can help companies reduce waste, increase efficiency, and improve quality, ultimately leading to increased profitability and competitiveness in the marketplace.
Lean Manufacturing for MSMEs
Micro Small and Medium Enterprises (MSMEs) are the backbone of India’s economy, contributing significantly to employment generation and economic growth. However, these enterprises often face challenges such as resource constraints, limited access to capital, and a highly competitive market environment. In such a scenario, adopting lean manufacturing principles can provide significant advantages for MSMEs.
Lean manufacturing is a philosophy that emphasises the elimination of waste in all forms from the production process. The goal is to maximise value for customers while minimising costs. For MSMEs, this can mean reducing costs, improving efficiency, enhancing quality, and increasing customer satisfaction. By adopting lean manufacturing principles, MSMEs can optimise the resources of their products and services, which can help them become more competitive in the market.
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9 Competitive Advantage for MSMEs
Lean manufacturing principles can provide several advantages for MSMEs in India. Here are some of the key advantages of implementing lean manufacturing principles in MSMEs:
1. Downsized Costs
Lean manufacturing can help MSMEs reduce costs by identifying and eliminating waste in their production processes. This includes activities such as overproduction, waiting time, unnecessary motion, defects, and overprocessing. By eliminating these activities, MSMEs can reduce their production costs, increase efficiency, and improve profitability.
2. Reduced Inventory Expenses
MSME lean manufacturing follows this system to stock up the resources as per the requirement, just enough to complete orders. Based on the demand from the customers, they purchase the materials and supplies necessary to fulfil orders with minimum waste. Investing in unnecessary resources will only tie up funds in inventory costs. Hence by doing this, the additional funds can be used for the particular MSME’s development.
3. Receded Lead Time
By eliminating the wasteful activities in the manufacturing process, MSMEs reduce the overall time in attaining the end product. A certain method known as the ‘pull method’ is followed, which requires the product only to be moved to the next stage in a manufacturing process only after it is prepared. This system reduces lead time, further increasing customer services which helps build reputation giving a competitive advantage to MSME entrepreneurs in the market.
4. Increased Efficiency
Lean manufacturing principles such as Just-in-Time (JIT) production, continuous flow, and standardised work can help MSMEs improve their productivity and efficiency. JIT production ensures that the right amount of material is delivered at the right time, reducing inventory and increasing production efficiency. Continuous flow ensures that production processes move without interruption, reducing cycle time and increasing throughput. Standardised work ensures that employees follow the same procedures, reducing variability in the production process and increasing efficiency.
5. Innovative Ideas and Continuous Improvement
Lean manufacturing system allows for continuous improvement at each stage of the process involved, employees are required to meet the standards set for the businesses. In addition to this, new ideas are implemented based on what the consumers are looking for in order to increase the satisfaction level, thereby making adjustments and changes. All this leads to improving the quality of the product, too and setting the standards high allows them to sell valuable products at competitive prices.
6. Enhanced Flexibility
Lean manufacturing principles can help MSMEs become more flexible and responsive to changes in customer demand and market conditions. By reducing lead times and implementing flexible production processes, MSMEs can quickly adapt to changing customer requirements and market trends.
7. Employee Involvement and Customer Satisfaction
Improving the quality of the product sets and more involvement of the employees in the manufacturing process create a positive environment and morale is positively impacted in the organisation. As small business entrepreneurs strive to build a good reputation, it also attracts high-quality employees, which strengthens the business, giving opportunities to challenge competitors. All these factors are interlinked, hence automatically fueling customer services, enhancing a positive customer experience and boosting revenue and profitability of manufacturing MSMEs in India.
8. Improved Quality
Lean manufacturing emphasises the need for continuous improvement, which can help MSMEs identify and address quality issues in their products or services. By continuously improving their production processes, MSMEs can reduce defects and improve the quality of their products or services, which can help increase customer satisfaction and loyalty.
9. Better Impact on the Environment
Lean manufacturing system promotes MSMEs to be environment friendly. Reducing waste production naturally creates sustainable growth, showcasing that the company promotes a green business giving an advantage over competitors.
Lean manufacturing practices can benefit MSMEs in India in a number of ways, including lower prices, more efficiency, improved quality, increased flexibility, and motivated workers. However, the implementation of lean manufacturing requires a significant cultural shift, and MSMEs may need to invest in training and support to successfully implement these principles.
Lean Manufacturing Competitive Scheme
The MSME Competitive (LEAN) Scheme has been launched by the Union Government to back MSMEs, with the belief that it can transform into a national movement and provide a path to global competitiveness for MSMEs in India.
Under this scheme MSMEs are supported to apply the following techniques:
- Total Productive Maintenance (TPM)
- 5S
- Visual control
- Standard Operation Procedures
- Just in Time
- Kanban System
- Cellular Layout
- Poka Yoke
In order to assist MSMEs, the ministry stated that the government will cover 90% of the implementation cost for handholding and consultancy fees. Furthermore, there will be an added contribution of 5% for MSMEs situated in SFURTI clusters, owned by women/SC/ST, and located in NER.
In addition to the aforementioned, there will be an extra 5% contribution for MSMEs that register through Industry Associations/Overall Equipment Manufacturing (OEM) organisations upon completing all levels.
Lastly, for MSMEs to have a competitive advantage, they have to focus on new innovations to upgrade and transform their products and services. This can be practised by adapting to the latest technology and gaining an advantage over competitors. Lean manufacturing will help in the growth of small businesses and their increased revenue.
Role of Kinara Capital
Finding funds to invest in machinery or assets for the latest technology might seem hard. Kinara Capital offers working capital loans to empower MSME manufacturing businesses. Small business entrepreneurs can seize this opportunity and grow their business by using funds to purchase equipment, install and repair existing machinery and other business expenses. Check your loan eligibility in 1-minute in the myKinara application to avail a quick business loan to grow your business exponentially.
Conclusion
Lean manufacturing is an excellent principle to implement in order to increase efficiency and reduce waste. For MSMEs in particular, LEAN manufacturing principles can be a great way to help these businesses optimize the resources available to them. It can also help them align with environmentally responsible practices, reducing their footprint and improving overall efficiency. Lean management principles also cut down on costs and improve time efficiency for MSMEs, allowing them to maximize their profits and stay competitive in dynamic markets. Lean manufacturing examples demonstrate that these principles can be seamlessly integrated with the existing business processes of MSMEs and steadily improve their operations. MSME entrepreneurs should familiarize themselves with lean manufacturing principles and can avail of financing from new-age fintechs like Kinara Capital to avail of timely financing to invest in integrating these principles into their operations to take their business operations to the next level.
FAQs
1. How does lean manufacturing help MSMEs reduce operational costs?
Lean manufacturing minimizes waste in operations and optimizes resource use by streamlining processes. This results in a significant reduction in operational costs for MSMEs.
2. What are the key principles of lean manufacturing that MSMEs can apply?
MSMEs can apply key lean manufacturing principles like value stream mapping, continuous improvement (Kaizen), and standardized workflows.
3. Can small and medium enterprises implement lean manufacturing with limited resources?
Small and medium enterprises can start small in adopting lean manufacturing principles by implementing simple methods like 5S or Kanban, which don’t require significant resources or investment.
4. How does lean manufacturing improve customer satisfaction for MSMEs?
Lean manufacturing helps MSMEs meet customer expectations more effectively by enhancing quality, reducing defects, and ensuring timely deliveries.
5. Are there specific lean tools that work well for MSMEs?
Lean manufacturing tools like 5S and Kanban are very effective for MSMEs because of their simplicity and low implementation costs.
