Lean is a way of life in many organizations now. And, this is so because it has added value to the organizations. It originated at Toyota after the second world war when Japan was trying real hard to revive it’s economy. The benefits of implementing Lean were soon realized outside Japan and the credit goes to the book – The Machine that changed the world for bringing Lean to the limelight.
So, what is Lean all about? Lean is a way of conducting business in such a way that you create maximum value for your customer with minimum resources.
What does this mean? This means that the customer gets Quality product at a reasonable cost , hence the customer keeps coming back to you . This means more business and more turnover. Since you are providing good and services using minimum resources, this implies your costs are lesser and profit is more and who would not want this?
But, does this happen? This happens because Lean has five strong principles and it has excellent tools to drive those principles.
Lean Principle 1 : Identify Value
Value is best defined as what is the customer is willing to pay for. Value-adding activities transform the product closer to what the customer actually wants. An activity that does not add value is considered to be Thus, some processes that are done in organizations are value adding and some are non-value adding. In fact, majority are non-value adding. A value adding process step is the one that transforms or shapes a product or service which is eventually sold to a customer. Those process steps that take time, resources, or space, but do not add value to the product or service are termed as non-value adding. A Non-Value ding process that is required by law, regulation, or customer request to operate the business is known as Business Value adding Process
Let’s delve more deeply into what is waste. An activity that does not add value is considered to be waste
- Waste is called “muda” in Japanese
- Waste is strain on an organization’s time & resources
- Waste does not add value to the customers
- The more an organization can reduce waste, the better
How to identify Waste?
Use the following acronym to identify waste:
Transportation is the unnecessary movement of materials or information. For example :
- Movement of materials between Warehouses & Plants
- Moving materials, Files, documents & mails
Inventory is any material or supplies in excess of the appropriate quantity, at appropriate time. For example:
- Excess Raw material, In-process (WIP) and finished goods
- Long Cycle times, carrying cost
- Risk of obsolescence, damage
Motion is any movement of people that does not add value to the product or service. For example:
- In-efficient placement of frequently used supplies/tools that makes the operator to move from his workplace too frequently
- As per Lean, tools required by the Operator should be within his one arm-length reach
- It is seen that People spend more time moving around than adding value to customer
Waiting :Whenever goods are not moving or being processed, the waste of waiting occurs. Typically more than 99% of a product’s life in traditional batch-and-queue manufacture will be spent waiting to be processed. Much of a product’s lead time is tied up in waiting for the next operation; this is usually because material flow is poor, production runs are too long, and distances between work centers are too great. Examples of Waiting could be
- Customers waiting for products, services or information
- Excessive cycle time between process steps
- Waiting for files, information & approvals
Overproduction is to manufacture an item before it is actually required. Overproduction is highly costly to a manufacturing plant because it prohibits the smooth flow of materials and actually degrades quality and productivity. The Toyota Production System is also referred to as “Just in Time” (JIT) because every item is made just as it is needed. Overproduction manufacturing is referred to as “Just in Case.” This creates excessive lead times, results in high storage costs, and makes it difficult to detect defects. It’s the most dangerous of all types of wastes.
Over Processing: Often termed as “using a sledgehammer to crack a nut,” many organizations use expensive high precision equipment where simpler tools would be sufficient. This is what is Over-Processing. It can be termed as any effort that doesn’t add value to the product or service from customer’s perspective
- Complicated processes with un-necessary & redundant steps
- Multiple approvals / signatures, un-necessary forms/details
- Extra packing, Re-work loops
Defects: Having a direct impact to the bottom line, quality defects resulting in rework or scrap are a tremendous cost to organizations. Associated costs include quarantining inventory, re-inspecting, rescheduling, and capacity loss. In many organizations the total cost of defects is often a significant percentage of total manufacturing cost. Through employee involvement and Continuous Process Improvement , there is a huge opportunity to reduce defects at many facilities.
Skiils: In the latest edition of the Lean Manufacturing classic Lean Thinking, Underutilization of Employees has been added as an eighth waste to Ohno’s original seven wastes. Organizations employ their staff for their nimble fingers and strong muscles but forget they come to work everyday with a free brain. It is only by capitalizing on employees’ creativity that organizations can eliminate the other seven wastes and continuously improve their performance.
Some of the reasons for the under utilization of talent could be
- Lack of empowerment
- Lack of cross training
- Lack of people-centred culture which encourage participation & suggestions from employee
Lean Principle 2:
Map the Value Stream
All value produced by an organization is the end result of a complex process, a series of actions that lean thinkers call a value stream. What’s more, the customer, whether external or internal, is interested only in the value flowing to them, not in the weighted average of an organization’s efforts for all products or in value flowing to other customers. This being the case, it is surprising how hard it seems to be for managers to focus on the value stream for each product for each customer to improve it for the benefit both of the customer and the value-creating organization.
Value stream mapping is a lean manufacturing or lean enterprise technique used to document, analyze and improve the flow of information or materials required to produce a product or service for a customer.
It utilizes Special type of flow chart that uses symbols known as “the language of Lean” to depict and improve the flow of inventory and information
It aims at Providing optimum value to the customer through a complete value creation process with minimum waste in: – Design (concept to customer) – Build (order to delivery) – Sustain (in-use through life cycle to service)
Lean Principle 3 : Create Flow
As per Lean philosophy. we need to look to establish opportunities to create flow. Continuous flow is defined as producing or completing one item at a time and then passing the item immediately to the next step.
- Flow is defined as the Movement of materials, information, services and knowledge down the value stream
- A perfect process has continuous flow as information, service and knowledge are transformed continuously without delay from step to step
- Flow is created by eliminating queues and stops, facilitating improved process flexibility & reliability
- Using single piece flow by linking of all the activities and processes into the most efficient combinations maximizes value-added content while minimizing waste. The waiting time of work in progress between processes is eliminated, hence adding value more quickly.
Lean Principle 4 : Establish Pull
Now while we always strive for flow, flow may not always be possible .
Recall that definition of flow is Movement of materials, information, services and knowledge down the value stream.
In these instances we look to establish pull. Pull is a method of controlling how much you are creating or providing between flows – ensuring the downstream process is only getting exactly what it needs when it needs it.
Therefore, Pull is the response to the customer’s rate of demand i.e. the actual customer demand that drives the supply chain.
Couple processes with “pull” when flow is not possible
End Customer initiates pull process
Each step in the process takes the information or knowledge it needs, when needed from the preceding process
No action is taken until the downstream process initiates it
“Push ” means Make to Stock in which the production is not based on actual demand. “Pull ” means Make To Order in which the production is based on actual demand.
Push System is also known as Material Replenishment Planning or MRP. It is a complex, computerized inventory production planning system with rules and procedures that support push/batch manufacturing.
In Pull type system, Downstream processes fetch from upstream processes only the goods that are needed, when they are needed, and only in the required amounts. Use pull where you cannot flow for example if there are Long cure or Long lead time processes
Organization need to Keep the goal of continuous flow always in mind. While “pull” is the next best thing, pull is still a failure to flow.”
Lean Principle 5: Seek Perfection
The commitment to striving for perfection is a big part of the cultural change that needs to take place. We need to acknowledge that everything that we do can be done better and striving for perfection is how we make continuous improvement a part of our everyday lives.
Applying the five principles of Lean
Specify value from the standpoint of end customer.
Identify the value stream for each product family.
Make the product flow.
So the customer can pull.
As you manage towards perfection.
There are specific tools that you can employ to deploy the principles of Lean which I will talk about in my next blog.