Lean 4.0: Better business through a combination of smarter and leaner production methods
Lean Management with its motto 'avoiding waste through lean production', was invented in Japan more than three decades ago. Since then it has established itself as one of the guiding principles of operational value creation. Within this context a new study by Fraunhofer ISI analyzes the current state and level of implementation of Lean 4.0 principles in the manufacturing sector in Germany. The study also looks at the reciprocal effects between Lean Management and Industry 4.0 and shows that the two principles are not contradictory, but have synergetic effects.
The concept of digitally networked production, also known as Industry 4.0 or I4.0, has become increasingly widespread in recent years. In this context, Fraunhofer ISI has developed a I4.0 Readiness Index that records the development status of manufacturing companies in Germany with regard to their digitalization. The new study now uses a similar principle to examine the emerging management discipline of Lean 4.0, which is a combination of the concepts of I4.0 and Lean Management.
Lean-Management in operational practice
Seven lean concepts were selected for the empirical analysis of the use of lean production principles in the manufacturing sector. The most widespread are quality control methods, which are currently used by six out of ten companies. Production control based on the "pull" system, on the other hand, is used by just under three out of ten companies. This has the lowest prevalence among the seven concepts considered. Not every concept for lean production can be usefully applied to all companies, as companies also differ in their production structures. On the whole, the researchers conclude that despite this fact, it is not possible to speak of a high prevalence of lean concepts.
The new Lean Index shows: a great deal of potential remains unused
A new index has now been developed at Fraunhofer ISI for measuring the degree of implementation of lean production, which can be used to represent the full potential of the use of the concept for each company. A company with an index value of 0 does not use any lean production methods at all, while a company with a maximum value of 7 fully uses all the lean principles considered in the survey. Thus, the higher the Lean Index in a company, the greater the implementation of the lean principles.
The results for all companies show a rather low degree of implementation with an average score of just 2.2 - a lot of potential therefore remains untapped. Just under one in five companies does not use any of the seven selected lean principles in its production, while the top five percent of companies were able to show a Lean Index value of over 5.7. The study primarily sees reasons for these large differences in the size of the company as well as in the scale and type of production. While smaller companies with fewer than 50 employees have a very low average Lean Index score of 1.6, larger companies with more than 500 employees have an average score of 4.3.
First lean, then smart: companies with lean production are better equipped for the digital future
Furthermore, it can be seen that a higher degree of implementation of lean principles is also associated on average with a higher readiness by the companies for Industry 4.0: 38 percent of the companies without any use of lean production methods end up in the group of non-users in the I4.0 index, while the top group in the I4.0 index has a high degree of lean implementation. A more in-depth analysis of the chronological sequence of the implementation of digitization and lean principles shows that new I4.0 technologies are often only introduced after the streamlining of production processes, so the implementation of lean principles can be an important prerequisite for the digitization of production.
Lean and smart enterprises with higher operational performance
The study also compares Lean 4.0 implementation with operational performance. It clearly shows that productivity and innovation potential increase with a growing orientation toward Lean 4.0. Another finding is that the introduction of basic digitization without streamlining production can already noticeably increase the value added per employee in a company. More extensive implementation of lean production also increases labor productivity, but is characterized primarily by a higher rate of product innovation. The top group in terms of digital performance can be achieved only through the use of lean principles.
Dr. Christian Lerch, Head of the Business Unit "Industrial Change and New Business Models" at Fraunhofer ISI, summarizes the results as follows: "Basically, smart and lean production are not mutually exclusive, but rather conditional. Almost three out of four companies in the manufacturing sector are already engaged in the new management discipline Lean 4.0, meaning that it has long since been adopted in practice. Reaching the top in digital terms is hardly possible without the use of Lean 4.0. However, our study reveals that in practice many companies are still leaving a lot of potential untapped."
The Fraunhofer Institute for Systems and Innovation Research ISI analyzes the origins and impacts of innovations. We research the short- and long-term developments of innovation processes and the impacts of new technologies and services on society. On this basis, we are able to provide our clients from industry, politics and science with recommendations for action and perspectives for key decisions. Our expertise is founded on our scientific competence as well as an interdisciplinary and systemic research approach.