Assessing changes towards lean production

Christer Karlsson and Pär Åhlström

Stockholm School of Economics, Sweden

The purpose of the lean production philosophy that was developed at Toyota Motor Company following
the Second World War, is to lower costs. This is done through the elimination of waste – everything that
does not add value to the product. Waste is something that the customer is not willing to pay for and it
should therefore be eliminated.

The most important source of waste is inventory. Keeping parts and products in stock does not add
value to them, and should be eliminated. In manufacturing, inventory in the form of work in progress is
especially wasteful, and should therefore be reduced. The effects of reducing work in progress,
therefore, go beyond that of reducing capital employed. However, it is not advisable to eliminate
inventory mindlessly. Instead, the reasons for the existence of inventory must first be removed. One
important way of doing this is by minimizing down time in machines. Another efficient way of keeping
inventory down is through reducing lot sizes.

Continuous Improvement