Lean Thinking is a methodology for improving processes through the creation of Value and the elimination of Waste.
The goal in Lean Thinking is the elimination of waste, defined as any activity which uses resources and does not create Value.
In order to achieve Lean thinking, you must start by defining the Value of the product or service in the eyes of the customer. Value is only relevant at a specific price and point in time. Value represents the need of the customer, the voice of the customer.
The problem most organisations have in specifying value is that they tend to concentrate on what they are able to deliver, rather than what it is that the customers really want, the fallacy of “we know their needs better than they do.”Of course, when they then try to improve the design or delivery process, the result can be more efficient waste, but waste none the same. The use of hubs by the airline industry is a great example of this, cited frequently by Womack and Jones. The hubs serve the airlines need to use their existing resources well, but do not provide what the customer really wants: a hassle free journey directly from point A to point B.
Once value has been determined for a given product or service, its value stream can be identified. The value stream represents the steps taken to deliver the specific product or service. (In this way it is different from a value chain, which is usually defined over broad functional areas rather than a specific product).
Value streams may be generated a number of ways. A Process Map is a useful tool for displaying the value streams, particularly when movement into functional departments and cycle times are shown.
Once the processes are mapped out, each process step will fall into one of the following categories:
- Steps which create value for the customer
- Steps that create no customer value, but are required by one or more required activities (including design, order processing, production and delivery). These are termed Type I muda.
- Steps that create no customer value. These are termed Type 2 muda and represent the proverbial low hanging fruit. They should and can be eliminated immediately.
Although it may be your initial tendency, do not limit your value stream to the walls of your organization. Fantastic sums of money have been saved by evaluating value streams as they move from supplier to customer, often because of mistaken concepts of value or attempts to achieve operational savings that diminish the customer value.
Taiichi Ochno of Toyota defined the following types of waste (Womack and Jones added the last):
- Errors requiring rework
- Work with no immediate customer, either internal or external, resulting in work in progress and finished goods inventory
- Unnecessary process steps
- Unnecessary movement of personnel or materials
- Waiting by employees as unfinished work in an upstream process is completed
- Design of product or processes that do not meet the customer needs
The implementation of Lean thinking results in a departure from batch scheduling and a movement to continuous flow of single units of product. Lean Thinking seeks to eliminate waste with application of the following five steps:
- Specify Value
- Identify Value Stream
- Make the Value Stream Flow
- Replace Push Scheduling with Pull Scheduling
- Achieve Perfection
Lean thinking has been shown to reap dramatic benefits in organizations. Organizations are able to sustain production levels with half the manpower, improving quality and reducing cycle times from 50-90% (Womack and Jones, 1996).
Once the non-value added, unnecessary steps (the Type 2 muda) have been eliminated, we can look for flow of the remaining steps. In this step, we seek to eliminate wait times and the compartmentalization of the workflow.
As ironic as it may seem, a major reason our processes contain waste is because of our historical attempts to make them more efficient. The fallacy we have accepted is that we can make processes more efficient by creating specialized departments that process work in batches. These departments become efficient at what they do from a process standpoint, with economic lot quantities designed to minimize set-up time or material delivery costs, but they lack efficiency relative to specific product value streams. Waste is created in waiting for the batch to begin its departmental processing, and waste is additionally created when particular units of product, for which customers are waiting, must wait for the remainder of the batch to be processed. See also: Level Load Balancing and Setup Reduction
The attempts to improve the departmental efficiency can create additional waste in the product value stream if the departmental efficiency produces outcomes that do not serve the customer needs, or requires inputs that increase costs for suppliers without adding value. While standardization of product components make the individual processes more efficient, this efficiency can come at the cost of customer value. Think about the usual new car purchase experience. You buy “the package” which includes things you are paying for but do not need, because it is more efficient for the production and delivery processes.
This batch-imposed waste is compounded if changes occur in design or customer needs, as the WIP or final good inventories require rework or become scrap. Note that these concepts are not limited to manufacturing; businesses in the service sector can also generate muda. Think of the hamburgers cooked in advance, waiting for an order, or checking account statements that come at the end of the month, long after you could possibly prevent an overdraw. Transparency helps to increase the awareness of these types of waste.
Pull ensures that resources are used only when a customer makes an actual demand for the product or service. Pull moves the organization from producing for inventory to producing for customers, resulting in inventory cost reductions and reduced muda from making product that the market may not want, now or in the future.
The final step in Lean implementation is Perfection, which is not the endpoint that you might think, but rather a call to continuously repeat the Lean cycle. In practice, it has been found that subsequent Lean improvements can reap additional benefits of the same magnitudes discovered in earlier applications of the Lean methodology.