Lean business model is built to reduce waste running a business processes. If a corporation thoroughly integrates lean concepts into the operations, a likely outcome is usually a reduced need regarding cash, fewer problems, higher quality merchandise, and faster shipping to customers. This process works well regarding startup companies, which may have little excess cash to speculate, as well for companies interested in improving their market share.
There are a number of concepts that are included under the general umbrella of the lean business model, including the following:
- Just-in-time (JIT) production. Under a JIT system, production processes are only operated when a buyer has placed a order. This means of which batch sizes are typically very small, considering that only the portions immediately needed simply by customers are generated. This shrinks the particular investment in work-in-process products and finished products inventory. An added advantage is that production errors are often spotted at after, since each element is inspected with the next downstream workstation. The actual result is higher-quality products.
- Total quality managing (TQM). Under any TQM system, a number of tools are used to gradually improve operations throughout a facility. Examples of such tools are statistical process control, failure analysis, and product design control. After a while, the result is a gradual decline within waste and bills.
- Throughput operations. Under throughput operations, utilization of bottleneck operation is usually closely managed. This means there may be less need to buy fixed assets outside of the bottleneck, which reduces the total of cash invested in fixed assets.
- Lowest viable product. A startup business has to create successful merchandise before its capital runs out, and so issues a few rapid product iterations that are designed to test certain product features in the market at a cheap. The result is often a lower investment throughout product development, in addition to less time was required to devise products which are accepted in the market.