What Is Lean?
WHAT IS LEAN?
Lean is the common name for the Toyota Production System. It’s a collection of business best practices that when combined together create an operational culture that drives ever increasing levels of customer satisfaction through continuously improving processes.
There is not one formal widely-excepted definition of Lean. The definition we believe to be most applicable is:
“A Leadership Philosophy / Culture with the goal of creating an integrated system to accomplish business objectives that drive a competitive advantage, by delivering the most value from your customers’ perspective while consuming the fewest resources.”
The roots of Lean (the Toyota Production System) date back to the early-1900’s, but the explosion of Lean outside of Toyota started in 1990 with the book The Machine that Changed the World (Womack and Jones). While the roots of Lean lie in manufacturing, over the years it has proven to be equally as effective in any other type of business. In the last 30+ years Lean has success stories in a wide range of business applications including: manufacturing, supply chain management, warehouse operation, product development, systems development, heath care, finance, accounting, education, management and design, just to name a few.
This long history and wide ranging success comes from a deep-seated set of values, principles and capabilities that can be applied to any organization in any type of business. While Lean has many great tools, Lean is much more than just tools or the elimination of waste. The most successful implementations of Lean embrace a deep understanding of the values, principles and capabilities and use this to transform the culture of the organization.
History of Lean:
To understand the power of Lean it helps to understand the history of key elements and principles that make up the foundation of Lean thinking.
The fundamentals of Lean started in the early-1900’s when a young “engineer”, Sakichi Toyoda, watched his mother work weaving on a manual loom. Between 1890 and 1920 he worked to build increasing more efficient looms including Japans first automated loom. In 1924, working with his son Kiichori Toyoda, they developed the first fully automated and autonomous loom. Not only did this automatically feed in the horizontal yarn, but it also stopped automatically if one of the vertical or horizontal yarns were to break. The thinking behind this automated loom illuminated a key concept of Lean thinking, Jidoka – Build In Quality. This concept is that work is stopped immediately when an error is detected so it can be addressed. With machines this involves Autonomation – Intelligent Automation, this feature causes a machine to stop automatically when an error is detected so it does not have to be watched, inspected, constantly watched by a human. Along with the concept of “Build in Quality & Autonomation” there was also the application of “Visual Management” which indicated a problem. Another concept that was developed at the time which supported future efficiencies, was the idea of how the spools of yarn could be exchanged quickly when empty: SMED or Single Minute Exchange of Die.
In addition to inventing the automated loom, Kiichori Toyoda also began to assemble automated looms using the concepts of mass production. As part of his efforts to establish mass production and sell looms he visited the US and Europe. During these visits he fell in love with the concept of building automobiles in Japan. To make this a reality they sold the patent for the automated loom and focused on producing automobiles. To develop a more efficient mass production process he brought together concepts from the Ford Assemble Line (continuous flow) and the US supermarketsto develop the concept of Just In Time– delivering exactly what the customer wants; “The right material, at the right time, at the right place, and in the exact amount”. The first Toyota cars were mass-produced in 1936.
Post-World War II
Following World War II Japan had very few resources and nearly all the resources went into rebuilding the country. Because of this there was zero tolerance for waste and a need to strive for perfect quality. At this point Edward Deming went to Japan in search of a company interested in his ideas of Total Quality Management (TQM). Toyota was a welcome partner, combining Deming’s teaching with their own ideas of Build in Quality. For these efforts Toyota received the prestigious Deming Prize in 1965.
During this time in Japan there was also the influence the US Military. There are many examples of tools and techniques that were adopt from the US military, like Training Within Industry (TWI) – known at Toyota as Job Instruction Training.
Through this period a key executive named Taiichi Ohno rose to prominence within Toyota. Ohno was a member of the Toyota team since the 1930’s and is credited developing, documenting and teaching many of the key concepts of the Toyota Production System (Lean). Examples of his key contributions include Kaizen (Continuous Improvement), Kanbans (visual pull signals), the identification of the 7 wastes and many of the management practices. Ohno not only developed TPS for manufacturing, he was also a leader in the efforts to expand its use in all aspects of the business. In 1970’s he was challenged with developing an organization that could teach TPS outside of Toyota, beginning with their suppliers and customers.
1980s and beyond
In the 1980’s Toyota began to expand the implementation beyond Japan. They started in the US with the Service Parts organization and a NUMMI (a joint manufacturing venture with General Motors). Toyota expanded the implementation across all types of business from Product Design, to Systems Development, to Human Resource Development. The successes of these initial implementations lead to an explosion of Lean (TPS) across the US and the world. While initial efforts outside of Toyota were primarily in the area of manufacturing, the range of business and applications continue to grow and expand. There are now many successful implementations in industries as diverse as Health Care and Systems Development; Supply Chain Management and Education; Financial Services and Construction Management.
With this long track record of success many books have been written that describe the Lean business practices and culture created by Toyota. If you are interested in expanding your knowledge base, we would recommend:
The High Velocity Edge – Steven Spear
The Machine That Changed the World – Womack and Jones
Lean Thinking – Womack and Jones
The Toyota Way – Liker
House of Lean:
Lean often uses the analogy of a house to portray the key components of Lean.
At the base of the house are the Lean Values. It is from these core values that all other aspects of Lean are derived. These values also provide the stability of people, processes, systems and information. On this foundation of values are the Lean Principles. The principles of Lean provide guidance for how all things in Lean are developed and improved. Many of the principles have roots in the history of Lean described above. For example:
Build In Quality and the Automated Loom
Just In Time and the Ford Assembly Line and US Supermarkets.
The principles and values of Lean are all there to support and empower the Customer Driven Metrics of Quality, Cost and Delivery.
Values are the fundamental beliefs upon which your business and its behavior are based. In a Lean organization there are three core values from which everything else is derived.
Customer First means that the needs of the customer are always the priority. Delivering exactly what the customer wants, when they want it, at the desired level of quality. By focusing on the needs of the customers we are able to understand which activities add value to the customers and which are waste. When considering the needs of customers, Lean addresses the needs of all customers, both external and internal. Most organizations understand the need to focus on their external customers, but few organizations place the same focus on internal customers. It is the understanding and focus on internal customers that drive teamwork, identification of waste, and process improvement.
Respect for People
Respect of People is the core value that releases the energy, knowledge and capabilities of the people in the organization. While it includes the human values of trust and honesty, it goes past that to the point: that the people are considered the most valuable asset of the organization. In Lean the people doing the job are the experts and these experts are used to improve and enhance the processes. Because of these understandings, there is clear belief in Lean that the problems are in the processes not with the people. It is this trust in people that empowers the drive to be bold and drive improvement.
Continuous Improvement is the drive / desire to always be looking for a better way. In Lean we are always striving to identify and solve problems. This continuous cycle of discovering and solving problems drive improvement across the organization. Ideally you find something to improve everyday. The most effective large changes come from a series of aligned small changes. The Customers provide the focus for what needs to improve; Lean Principles provide guidance on how to improve; and people provide the expertise and energy to drive Continuous Improvement.
Principles are fundamental to an organization’s Lean culture. The Lean principles provide guidance for how all things in Lean are developed and improved. This provides a unifying element that provides direction for the organization. With these principles as the guide, continuous improvement can take place at many levels in a decentralized environment without ending up in chaos. With everyone working to advance the principles you will have alignment across the organization. Many of the books written about Toyota have documented different versions of the principle they observed. Some combine values and principles; while others break the principles into their sub-elements. Through our many years of working within Toyota we’ve learned that there are six Lean Principles:
Build In Quality
Just In Time
Fact Based Decisions
Go Look, Go See
Build In Quality
Build In Quality starts with Quality (kind, count, condition, cost, velocity, etc.) that is defined by or tied directly to the Customer. The only way to achieve true quality with the fewest number of errors & defects is to strengthen the source process so that errors are not created in the first place. This is accomplished by error proofing at the source (autonomous or self-inspection) by building preventative measures into the processes that highlight “errors” & “defects”. Detecting “errors” & “defects” is critical so they are be corrected before reaching the customer and the processes can be improved immediately.
Just In Time
The highly specified & highly connected coordination of customer requirements, pathways, processes, and connections that deliver the right item or service in the right quantity at the right quality to the right place at the right time…every time! Just In Time is used to synchronize the entire system / value stream around delivering value to the customer. The synchronization of JIT is achieved through the optimization of 4 components:
Level & Balance: The smoothing of workload over time and between processes
Continuous Flow Processing: The movement of materials and information such that it moves through to the customer with the absolute minimum stoppages or delays
Pull System: Aligning the system based on the request of the customer pulling what/when ready vs. the uncontrolled pushing by the supplier
Takt Time: The optimal Pace required by the operation to meet the customer demand requirements with minimal waste
Standardized Work is the balanced, sustained relationship between Standard Sequence, Standard Time, and Standard In-Process Stock (the connection between activities). It defines the standard content, sequence, timing and expected outcome of an activity, event or process. Standardized Work represents the current best, simplest, and safest way of doing the work by setting. These combine to set expectations for how tasks should be performed. Having clear expectations is critical in identifying and solving problems.
Visual Management supports all the other Principles by making normal expectations visual to all, so that problems can be identified. It promotes work areas that are self-explaining and self-regulating. Visual Management creates synergy by allowing everyone to See Together, Know Together, and Act Together, all keys to highly specified, standardized work environments.
Fact Based Decisions
Decisions are made based on facts in order to properly react to changing customer and business requirements. Decision-making without facts increases cost and creates risk. Facts drive effective problem solving and problem solving drives improvement. Fact Based Decision-making and problem solving are key to establishing an environment that can effectively change and adapt to the needs of the business and its customers rapidly.
Go Look, Go See
Go Look, Go See, in Japanese Genchi Genbutsu, means going to the workplace to see and understand. Sometimes known as “management by walking around” with the intent of closing the gap between Leaders and the place where value-added activities take place and associated information resides. This connects Leaders to Team Members and the Leaders & Team Members to Customers building trust by ensuring “fact-based decision-making” on the “right things”.
Lean is a leadership driven, business management philosophy & culture with the goal of creating an integrated system to accomplish all cost, capital, customer, and culture objectives that drive a competitive advantage. Culture, as defined by Edgar Schein (Organizational Development, MIT), represents the pattern of shared basic assumptions that groups learned as they solved their problems. Culture, in a business context, is a reflection of the way organizations actually do things. The Lean Capabilities characterize the critical proficiencies and tangible experiences that define the way things are to be done. Understanding and implementing these Lean Capabilities is the key a successful Lean implementation. It is through these capabilities that the Lean Value and Lean Principle are brought to life. The Lean Capabilities are:*
Design and operate work to reveal problems
Contain and solve problems close in person, place and time
Accumulate and share knowledge
Leaders that coach and develop the previous capabilities in others
* Note: These capabilities have been adapted from the work of Dr. Steven Spear. Of all the researchers that studied Toyota and the Toyota Production System Dr. Spear most accurately captured the culture and how the business is executed. His 1999 Harvard Business Review article, “Decoding the DNA of the Toyota Production System,” and his book, “The High Velocity Edge” are excellent reads on this topic.
Capability 1: Design and operate work to reveal problems:
The process of synchronizing all elements of a larger system in order to deliver products or services efficiently, effectively, and consistently while purposely exposing problems through both architectural design and functional means.
Creating a plan, with as much detail as possible, for how the operation / system is supposed to work; then executing this plan with tests built into the activities and processes to identify when the plan is working and when it’s not. If the plan works, then the practices are repeated and sustained. If plan is not working, then a problem has been identified and the plan / activity / process is improved using Capability 2.
Capability 2: Contain and Solve problems close in person, place and time:
Once a problem is detected, no matter the size, team members who are affected swarm the problem at the time and place of its occurrence. Through this urgent, automatic response, the problem is immediately contained before it has a chance to spread either downstream or upstream. It is then diagnosed in real time and treated in a mandatory, systematic & disciplined fashion using the “scientific method,” – Plan Do Check Act.
Capability 3: Accumulate and Share Knowledge:
Lean organizations multiply the power of new knowledge gained, particularly through the actions taken via Capability 2, by making it available wisely and smartly throughout the broader organization. They do this by sharing not only the solutions (results) that are discovered, but also the “processes by which they were discovered”, both “what was learned” and “how it was learned”.
Capability 4: Leaders that coach and develop the previous capabilities in others:
Leaders are responsible for developing the organization’s ability to see problems, solve problems where they are seen, in order to build knowledge, and spread that knowledge so that it is “useful” throughout the entire organization. The ongoing appreciation, expectation, and pursuit of Leader’s developing those that they are responsible for; in order to create the long-term organizational capacity to be self-correcting, self-improving, and self-innovating as a consistently developed practice. Lean Leaders must ensure that a regular part of their work is both the delivery of products & services as well as the continuous improvement of the processes by which those products & services are delivered. They must teach team members and other leaders: how to make continuous improvement part of their jobs and dedicate the time and resources to do so.
Implementing a Lean Culture requires significant change across the organization. The most important underlying question in any change initiative is “Why?”. Why do we need to change? Why should we do things differently? Why can’t we just keep doing what we are doing? Why is this the right path forward?
We are often asked “Why should we embark on a Lean Journey?”.
People that don’t fully understand Lean answer this question in a number of different ways, like: Lean is all about removing waste; Or Lean is for improving manufacturing; Or Lean is about reducing inventory levels with JIT (Just In Time); Or Lean is a part of TQM (Total Quality Management); Or Lean is about creating Continuous Improvement. While these are all partially correct, none of them are accurate. The overriding reason to implement Lean is the same reason businesses exist, to make a Profit. The formula for Profit is very simple:
SALES – COSTS = PROFIT
The drivers of Lean act directly on the first two elements of this formula to improve the result - Profit.
Reduced Lead Times improves Customer Responsiveness & Customer Satisfaction and reduces Costs
Improved Quality improves Customer Satisfaction and reduces Costs
Reduced Wastes reduces Costs and, improves Quality and improves associate engagement
Increased Continuous Improvement reduces Costs, improves Customer Satisfaction and improves associate engagement
These drivers have a direct impact on the Customer by improving Customer Satisfaction and driving more Value through the combination of better satisfaction and reduced prices (available through reduced costs). This positive impact for the customer results in improved Customer Retention and easier Customer Acquisition, ultimately increasing your Market Share. While the idea of improving the customer experience to drive increased Market Share is significant, it becomes even more powerful when it’s linked with an ever-improving Cost Structure. Reduced Waste and Continuous Improvement activities drive a reduction of Cost across the organization that endlessly improves over time. This emphasis on cost control creates an environment of ever-increasing Margins. And the combination of increasing Margins and increasing Sales creates the Profit that all companies are looking for.
In fact, the definition of Profit is built into the definition of Lean.
Public / Government organizations and Non-Profits use different language (they don’t seek “profit”), but the concepts are the same. By reducing cost and improving service to their constituencies; they can better carry out their mission and allow their limited budgets to have a greater impact.
It is this alignment between the goals of the organization and the drivers of Lean that has given Lean its longevity. Lean is not something that is a fad or flavor of the month. It is a tried and true set of business practices aligned by a set of principles that have been proven for more than 100 years to drive success and profits.