Implementing LEAN principles is now common practice in many companies. However, implementation alone does not mean success. The key is to be able to measure the impact of these initiatives to know if they are actually leading to improved performance and delivering the expected results.
Many companies struggle with how to objectively evaluate the success of LEAN activities. There are several proven metrics and indicators that can help you measure the effectiveness and benefits of LEAN implementation.
1. Shortening the production cycle
One of the main goals of LEAN is to shorten the production leadtime. This metric measures how long it takes for a product to move through the entire manufacturing process – from order to shipment. Shortening the leadtime means that processes are smoother, faster and more efficient.
- Example: if you reduce the time it takes to complete an order from 10 days to 6 days, it means you’ve made a significant improvement by eliminating inefficiencies.
- And that you are able to respond faster to customer requests.
2. Reducing waste
One of the key principles of LEAN is the elimination of waste (muda). This includes redundant work, poor quality, unnecessary movement, excess inventory, waiting, overloading machines or not involving workers in the improvement process, and so on. To measure waste reduction, it is useful to focus on:
- Material waste: track how much material is unnecessarily processed or moved in the production process.
- Time waste: Measure the time employees spend on unproductive activities, waiting or searching for tools.
- Resource overload: Monitor whether your machines or people are overused or underused.
Improvements in these areas mean your business is operating at a lower loss and using resources more efficiently.
3. Improving quality (this is 1 of the 8 types of waste – I would include it after the previous point 2)
LEAN has a direct impact on quality, so tracking quality improvement is essential. Ask yourself: Are products being rejected less frequently? Has there been a decrease in the number of defective units per output? Product or service quality is a great indicator of a successful LEAN transformation.
- Example: You can track the number of complaints, the cost of poor quality, or the number of defects per 1,000 products. Each reduction in these numbers means an improvement in quality, as well as lower repair and rework costs.
4. Increased productivity
LEAN simplifies processes and eliminates inefficiencies, leading to increased productivity. Productivity can be measured in several ways:
- Output per worker: How many products are produced per employee in a given period of time?
- Equipment Utilization Rate: How efficiently are machines and equipment used?
- Work time vs. output: How efficiently are employees using their work time? For example, track productivity per manhour.
Improvements in these metrics will give you a clear signal that LEAN implementation is having a positive impact.
5. Employee satisfaction
LEAN is not just about streamlining processes, but also about employee engagement. Satisfied employees are often more effective and better engaged in continuous improvement. So keep an eye on:
- Employee turnover: A decrease in turnover can mean that employees are more satisfied.
- Engagement in improvement activities: How many employees are actively involved in process improvement? Higher employee engagement is often an indicator of a healthy LEAN-oriented company culture.
6. Financial benefits
Although LEAN is primarily aimed at improving processes, it should ultimately yield financial benefits as well. For example, you can track:
- Reduced production costs: How has LEAN affected your overall production costs?
- Increased profitability: What impact has LEAN had on your gross or net profit?
- Faster return on investment (ROI): How quickly does your investment in LEAN implementation pay for itself?
Tracking these metrics will help you quantify the financial benefits of LEAN implementation and demonstrate its effectiveness to management or shareholders.