The purpose of this thesis is to develop a model for assessing cost effectiveness of applying lean tools. The
model consists of eight phases: it starts by understanding customers' requirements using Voice of Customer
(VOC) and Quality Function Deployment (QFD) tools. In phase 2, the current state of plant is assessed
using lean profile charts based on Balanced Scorecard (BSC) measures. In phase 3 and phase 4,
identification of critical problem(s) and generating of improvement suggestion(s) are performed. Phase 5
provide evaluation of the cost effectiveness of implementing the suggested lean methods based on life cycle
cost analysis (LCCA) and phase 6 prefers the right alternative based on multiple criteria decision making
(MCDM). In phase 7 the selected alternative is supposed to be implemented and finally the user should
monitor and control the process to make sure that the improvement is going as planned. The model was
verified successfully using a case study methodology at one Swedish sawmill called Södra Timber in
Ramkvilla, one part of Södra group. Results obtained from the study showed that the production and human
resources perspectives are the most critical problem areas that need to be improved. They got the lowest
scores in the lean profile, 63% and 68%, respectively. Using value stream mapping (VSM) it was found that
the non value added (NVA) ratios for the core and side products are 87.4% and 90.4%, respectively. Using
the model, three improvement alternatives were suggested and evaluated using LCCA and MCDM.
Consequently, implementing 5S got the highest score, second came redesigning the facility layout.
However, it was estimated that 4.7 % of NVA for the side product would be reduced by redesigning the
facility layout. The recommendations were suggested for the company to improve their performance. The
novelty of the thesis is based on the fact that it addresses two main issues related to lean manufacturing:
firstly, suggesting lean techniques based on assessment of lean profile that is based on BSC and QFD, and
secondly assessing the cost effectiveness of the suggested lean methods based on LCCA and MCDM. This
thesis provides a generalized model that enables the decision-maker to know and measure, holistically, the
company performance with respect to customer requirements. This will enable the company to analyze the
critical problems, suggest solutions, evaluate them and make a cost effective decision. Thus, the company
can improve its competitiveness.