As an executive in Lean Manufacturing, you’re struggling to manage your budget. What’s the first step?

As per my experience, The best way to manage your budget is through managing the stock of Raw materials and all other input materials, this best done by having perfect knowledge of consumption and lead time and of course the quality of the same. Then the VSM , 5S and continuous improvement techniques will help in keeping the costs as low as possible in each manufacturing set up….

In Lean Manufacturing when we are struggling to manage our budget, the first step is indeed to identify and analyze our value streams. This involves mapping out all the processes and activities involved in delivering value to our customers, from raw material acquisition to product delivery. By identifying these value streams, we can assess the costs associated with each step and identify areas of waste, inefficiency, or unnecessary spending. This analysis helps prioritize improvement efforts that can have the most significant impact on cost reduction, resource optimization, and overall budget management.

Importance of budget in lean manufacturing projects mostly based on priority and risk to make a project plan. Firstly focus on the problems which is mostly occured and more effective than others. Secondly seggregate that particular improvements and estimate the budget and target of the projects and its importance. Thirdly, start to working on project which is at low budget and most prioritize to fullfill and resolve customer satisfaction and expectations to avoid wasting time and money on other non prioritize improvement projects.

A priorização de projetos de melhoria é sempre necessária, ainda mais em um cenário onde existe restrição financeira. O maior erro em casos como esse é a priorização pelo valor absoluto do projeto ao invés da utilização do valor relativo. O valor absoluto deve ser usado para executar aquele último projeto onde será utilizado o que sobrou de dinheiro. Até chegar neste momento o custo x benefício deve ser a chave de escolha. A melhor relação deve ser priorizada, e só deve ser descartada se a soma de outros projetos que tem o mesmo valor de custo entregarem somados um benefício maior. Outro fator que deve ser considerado é o tempo necessário para fazer todo o aporte R$ do projeto, pois normalmente as verbas são "perdidas" nas viradas de ano.

Como o colega disse acima, a priorização é necessária. Focar em projeto de alto impacto e baixo investimento. E fomentar a cultura de ideias de melhorias em todos os níveis. Dos níveis operacionais aparecem ideias simples mas com alto impacto e baixíssimo investimento. Buscar também focar em melhoria de processos. Normalmente traz excelentes ganhos.

I will follow this 8 steps diligently. 1) Work from Last year Budgets & take data for the last 3 to 5 years for the each line item. 2) Set realistic and measurable goals - Based on trends, forecast and data collection from previous performance. 3) Include Everything. Assumptions has no say here. 4) Avoid Sand - Bagging of expenses (playing safe)- might be, may be , could be, would be etc. 5) Segment it into Fixed Vs Variable Cost. Static vs dynamic cost. Static remains constant, dynamic changes as per situation & circumstances. 6) Be Flexible - Doesn't mean SAND-BAGGING AGAIN. 7) Monitor & Review it regularly by setting up steering committee. Assign ownership and accountability against COST Vs BUDGET. 8) TRACK IT, TRACE IT & TAG IT.

The first step in managing your budget as an executive in Lean Manufacturing is to conduct a comprehensive analysis of current expenses. Identify areas of potential waste, such as overproduction, inventory. Implementing a value stream mapping exercise can help visualize the flow of materials and information, aiding in the identification of non-value-added activities. Engage cross-functional teams to brainstorm cost-saving ideas and leverage employee expertise to streamline processes. Additionally, prioritize investments in technology and training that optimize efficiency and eliminate waste in the long term. This proactive approach aligns with lean principles and can lead to sustainable cost management.

The first thing is to analyze the project or product backlog by prioritizing stories by high-value, high-risk stories and setting up the sprint roadmap to add value, as stated in the agile manifesto. It also establishes customer collaborations for contracts considering “Money for nothing and Changes for free.”

Renault, a leading automotive manufacturer, employed Value Stream Mapping (VSM) to comprehensively map its production processes, supply chain activities, and supporting functions in vehicle manufacturing. This detailed mapping included all stages, resources, and timeframes from raw material acquisition to final vehicle delivery. By utilizing VSM, Renault conducted a thorough cost analysis for each step within the value streams, encompassing expenses like materials, labor, equipment, transportation, and overheads. Visualizing the workflow and associated costs enabled them to pinpoint areas of waste, bottlenecks, and non-value-added activities that were impacting budget management.