The core idea is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources.
A lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste.
To accomplish this, lean thinking changes the focus of management from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers.
Eliminating waste along entire value streams, instead of at isolated points, creates processes that need less human effort, less space, less capital, and less time to make products and services at far less costs and with much fewer defects, compared with traditional business systems. Companies are able to respond to changing customer desires with high variety, high quality, low cost, and with very fast throughput times. Also, information management becomes much simpler and more accurate.
Lean for Production and Services
A popular misconception is that lean is suited only for manufacturing. Not true. Lean applies in every business and every process. It is not a tactic or a cost reduction program, but a way of thinking and acting for an entire organization.
Businesses in all industries and services, including healthcare and governments, are using lean principles as the way they think and do. Many organizations choose not to use the word lean, but to label what they do as their own system, such as the Toyota Production System or the Danaher Business System. Why? To drive home the point that lean is not a program or short term cost reduction program, but the way the company operates. The word transformation or lean transformation is often used to characterize a company moving from an old way of thinking to lean thinking. It requires a complete transformation on how a company conducts business. This takes a long-term perspective and perseverance.
The term “lean” was coined to describe Toyota’s business during the late 1980s by a research team headed by Jim Womack, Ph.D., at MIT”s International Motor Vehicle Program.
The characteristics of a lean organization and supply chain are described in Lean Thinking (Lean Szemlélet), by Womack and Dan Jones, founders of the Lean Enterprise Institute and the Lean Enterprise Academy (UK), respectively. While there are many very good books about lean techniques, Lean Thinking (Lean Szemlélet) remains one of the best resources for understanding “what is lean” because it describes the thought process, the overarching key principles that must guide your actions when applying lean techniques and tools.
Purpose, Process, People
Womack and Jones recommend that managers and executives embarked on lean transformations think about three fundamental business issues that should guide the transformation of the entire organization:
- Purpose: What customer problems will the enterprise solve to achieve its own purpose of prospering?
- Process: How will the organization assess each major value stream to make sure each step is valuable, capable, available, adequate, flexible, and that all the steps are linked by flow, pull, and leveling?
- People: How can the organization insure that every important process has someone responsible for continually evaluating that value stream in terms of business purpose and lean process? How can everyone touching the value stream be actively engaged in operating it correctly and continually improving it?
“Just as a carpenter needs a vision of what to build in order to get the full benefit of a hammer, Lean Thinkers need a vision before picking up our lean tools,” said Womack. “Thinking deeply about purpose, process, people is the key to doing this.”
A Brief History of Lean
Although there are instances of rigorous process thinking in manufacturing all the way back to the Arsenal in Venice in the 1450s, the first person to truly integrate an entire production process was Henry Ford.
At Highland Park, MI, in 1913 he married consistently interchangeable parts with standard work and moving conveyance to create what he calledflow production. The public grasped this in the dramatic form of the moving assembly line, but from the standpoint of the manufacturing engineer the breakthroughs actually went much further.
Ford lined up fabrication steps in process sequence wherever possible using special-purpose machines and go/no-go gauges to fabricate and assemble the components going into the vehicle within a few minutes, and deliver perfectly fitting components directly to line-side. This was a truly revolutionary break from the shop practices of the American System that consisted of general-purpose machines grouped by process, which made parts that eventually found their way into finished products after a good bit of tinkering (fitting) in subassembly and final assembly.
The problem with Ford’s system was not the flow: He was able to turn the inventories of the entire company every few days. Rather it was his inability to provide variety. The Model T was not just limited to one color. It was also limited to one specification so that all Model T chassis were essentially identical up through the end of production in 1926. (The customer did have a choice of four or five body styles, a drop-on feature from outside suppliers added at the very end of the production line.) Indeed, it appears that practically every machine in the Ford Motor Company worked on a single part number, and there were essentially no changeovers.
When the world wanted variety, including model cycles shorter than the 19 years for the Model T, Ford seemed to lose his way. Other automakers responded to the need for many models, each with many options, but with production systems whose design and fabrication steps regressed toward process areas with much longer throughput times. Over time they populated their fabrication shops with larger and larger machines that ran faster and faster, apparently lowering costs per process step, but continually increasing throughput times and inventories except in the rare case—like engine machining lines—where all of the process steps could be linked and automated. Even worse, the time lags between process steps and the complex part routings required ever more sophisticated information management systems culminating in computerized Materials Requirements Planning(MRP) systems.
As Kiichiro Toyoda, Taiichi Ohno, and others at Toyota looked at this situation in the 1930s, and more intensely just after World War II, it occurred to them that a series of simple innovations might make it more possible to provide both continuity in process flow and a wide variety in product offerings. They therefore revisited Ford’s original thinking, and invented the Toyota Production System.
This system in essence shifted the focus of the manufacturing engineer from individual machines and their utilization, to the flow of the product through the total process. Toyota concluded that by right-sizing machines for the actual volume needed, introducing self-monitoring machines to ensure quality, lining the machines up in process sequence, pioneering quick setups so each machine could make small volumes of many part numbers, and having each process step notify the previous step of its current needs for materials, it would be possible to obtain low cost, high variety, high quality, and very rapid throughput times to respond to changing customer desires. Also, information management could be made much simpler and more accurate.
The thought process of lean was thoroughly described in the book The Machine That Changed the World (1990) by James P. Womack, Daniel Roos, and Daniel T. Jones. In a subsequent volume, Lean Thinking (Lean Szemlélet) (1996), James P. Womack and Daniel T. Jones distilled these lean principles even further to five:
- Specify the value desired by the customer
- Identify the value stream for each product providing that value and challenge all of the wasted steps (generally nine out of ten) currently necessary to provide it
- Make the product flow continuously through the remaining value-added steps
- Introduce pull between all steps where continuous flow is possible
- Manage toward perfection so that the number of steps and the amount of time and information needed to serve the customer continually falls
The five-step thought process for guiding the implementation of lean techniques is easy to remember, but not always easy to achieve:
- Specify value from the standpoint of the end customer by product family.
- Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create value.
- Make the value-creating steps occur in tight sequence so the product will flowsmoothly toward the customer.
- As flow is introduced, let customers pull value from the next upstream activity.
- As value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state ofperfection is reached in which perfect value is created with no waste.
While every individual or company embarking on a lean journey will have different challenges based on their particular set of circumstances, there are several crucial steps that can help reduce resistance, spread the right learning, and engender the type of commitment necessary for lean enterprise.
- Find a change agent, a leader who will take personal responsibility for the lean transformation.
- Get the lean knowledge, via a sensei or consultant, who can teach lean techniques and how to implement them as part of a system, not as isolated programs.
- Find a lever by seizing a crisis or by creating one to begin the transformation. If your company currently isn’t in crisis, focus attention on a lean competitor or find a lean customer or supplier who will make demands for dramatically better performance.
- Forget grand strategy for the moment.
- Map the value streams, beginning with the current state of how material and information flow now, then drawing a leaner future state of how they should flow and creating an implementation plan with timetable.
- Begin as soon as possible with an important and visible activity.
- Demand immediate results.
- As soon as you’ve got momentum, expand your scope to link improvements in the value streams and move beyond the shop floor to office processes.
Creating an Organization to Channel Your Value Streams
- Reorganize your firm by product family and value stream.
- Create a lean promotion function.
- Deal with excess people at the outset, and then promise that no one will lose their job in the future due to the introduction of lean techniques.
- Devise a growth strategy.
- Remove the anchor-draggers.
- Once you’ve fixed something, fix it again.
- “Two steps forward and one step backward is O.K.; no steps forward is not O.K.”
Install Business Systems to Encourage Lean Thinking
- Utilize policy deployment.
- Create a lean accounting system.
- Pay your people in relation to the performance of your firm.
- Make performance measures transparent.
- Teach lean thinking and skills to everyone.
- Right-size your tools, such as production equipment and information systems.
Completing the Transformation
- Convince your suppliers and customers to take the steps just described.
- Develop a lean global strategy.
- Convert from top-down leadership to leadership based on questioning, coaching, and teaching and rooted in the scientific method of plan-do-check-act.
Common Lean Questions
- How do I get started?
- How does lean apply to non-manufacturing settings?
- What are the most common mistakes in implementing lean?
- How does lean compare to other improvement processes such as Six Sigma or Theory of Constraints?
- How do I convince my leaders and associates to practice lean?
- What are the best lean resources?
How does lean apply to non-manufacturing settings?
Every core lean principle applies just as strongly, if not more so, beyond the shop floor. In fact, many of the most exciting breakthroughs are taking place in areas such as services, healthcare and government.
As John Shook LEI senior advisor and co-author of Learning to See, says, “TPS is described as a manufacturing system, but the thinking of TPS or lean applies to any function. Whether you¹re dealing with 15,000 parts, 15 parts, or just providing a service, lean works. It works because it is a way of thinking, a whole systems philosophy. Techniques aside, lean thinking gives you a broad perspective on providing goods and services that goes beyond the bottom line, beyond the stodgy principles of mass-producing capitalism. It is a human system, customer focused, customer driven; wherein employees within and outside the workplace are also customers.”
What are the most common mistakes in implementing lean?
To start with, lean must never be seen as a tool for headcount reduction or mindless cost-cutting. This fundamentally misses the purpose of lean, which is to create value through eliminating waste. As companies improve their processes they should be able to reallocate their productive resources to new value-creating work.
Another important attitude to avoid from the beginning is the impulse to implement individual lean tools without seeking to understand the system in which they fit. This is hard to avoid, since many tools, like 5S, deliver immediate payoffs. But ultimately all lean workers must understand the “why” behind the tools, or their value will be lost.
Lean beginners should also limit the scope of their initial project so as to better insure success, be sure that they have a leader with deep knowledge and a gemba attitude i.e. always base one’s thinking on a close observation of the work itself, and never relax in their efforts. Indeed, one of the hardest challenges they will face is the degree to which individual lean successes will invariably uncover new problems and greater challenges. So in this regard, simply be aware of how difficult this work will be.
There are more detailed responses in the article Misunderstandings About Value-Stream Mapping, Flow Analysis and Takt Time about other common mistakes, by John Shook and Mike Rother.
How does lean compare to other improvement processes such as Six Sigma or Theory of Constraints?
While there are many specific differences among the different schools of thought, Jim Womack cautions against getting lost in the competing schools. For veterans of each practice often get lost in finely detailed arguments over technical or even philosophical differences. In an e-letter outlining the key differences, he nonetheless grounds the discussion by saying, “At the end of the day we are all trying to achieve the same thing: The perfect value stream.” His letter gives a nice overview of how to view each approach.
Quality Progress magazine published an artcle How To Compare Six Sigma, Lean and the Theory of Constraints which offers a very good overview that can help you choose the best framework for your organization.
How do I convince my leaders and associates to practice lean?
This paramount challenge transcends lean itself. Here’s how authors Michael and Freddy Balle respond to this question. (For more on this, read their book The Gold Mine.)
“We find it hard to distinguish “technical” issues from “people” issues. Indeed, the two cannot be separated. And so the real question that matters is this: what does it take for lean to become part of the company’s culture? The answer is: a critical mass of people who both think lean and act lean. Regardless of how much has been published about the topic, thinking lean is not that obvious. Most people who observe their operations conclude that while they might understand this lean concept very well, it just doesn’t apply to their particular circumstance. They need help in seeing the connection.”
“One of the most powerful insights from Womack and Jones is that lean is not simply a toolbox, but a total perspective. In other words, you must trust people to solve their problems, regardless of the way the problem has been defined. A plant manager, for example, typically defines a problem as, Hit your numbers, keep the factory loaded, and avoid too much union or vendor problems. This effectively forces him to stay in his office, manage by the numbers, run large batches and so on. A lean approach redefines the problem completely. His new goals would be: produce only what has been consumed (or ordered), never by-pass a problem or let an operator face a problem alone and continuously improve all processes. This has dramatic implications for the work of the same plant manager. The only way to solve problems in this lean perspective is to spend most of his or her time on the shop floor trying to understand what goes on, and challenging teams to be more precise and to improve their operations.”
“So the first real difficulty with lean deals with both technical and people challenges. The change begins by framing the problem, which one recognizes in the factory from a lean perspective.”
In order to get started, people need to, in essence, develop a lean eye. John Shook and Mike Rother’s book, Learning to See (Tanulj meg látni), refers to the genchi gembutsu, which is translated as “go see for yourself.” The Gold Mine starts from this perspective. Before being exposed to lean ideas, Phil Jenkinson (a co-founder of the example company) has to learn to see his factory in much greater detail and understand how the different elements affect each other.
Developing this discipline remains an extraordinary challenge for all individuals, regardless of their background or the lean level of the plant. This is what folks call a moving target. Consider a plant that has managed to achieve pull, flow, with a supermarket after the cell, a truck preparation area, kanban, and so on. All’s well. Right? Now, imagine that the material handler comes to pick up a container from the supermarket with a kanban card, but the box isn’t there. The truck still needs to be prepared, so the system now tells her to get the container from the safety stock. This choice, however, would not be using the principle of pull correctly. The properly operating pull system would in fact create the right tension that forces the individual to solve the root cause-in this case, to determine what caused the container not to be there in the first place.
However, it takes a sensei level of lean observation to see beyond what appears to be happening in the flow. Most of us would be impressed by the technique of lean, the kanban, the supermarket, the truck preparation, and not see that all of this is failing to do what it’s supposed to, which is solve the problems. So learning to see is a pretty big challenge, both on the technical and people front, at whatever lean level you are.
What are the best lean resources?
On lean.org Lean Enterprise Institute offers many of the best tools for learning about and implementing lean. We would recommend starting with the LEI workbooks and trainings. Of course there are many other terrific resources, many of which LEI carries in their online Store. In the meantime, you might try asking other members in the Lean Community for their recommendations in LEI’s Forum pages.
For books in Hungarian please visit LEI Hungary’s Bookstore.