2.3 What Is Lean: The Big Picture

Lean Defined

A lean system is one that strives to minimize the use of resources used to achieve the organization’s goals. Five principles encompass the lean mode of thinking:

1. Value is defined by the customer.

2. All actions should be value-added.

3. Value-adding activities should be structured to achieve smooth, uninterrupted production flows.

4. Resources should be prescribed by the pull production system.

5. There is an organization-wide commitment to continuous improvement.

A firm that is able to achieve lean will be more responsive and flexible to customer demands, use fewer resources—lowering costs—and experience higher quality levels and faster lead times than a firm that is not lean. Let’s take a closer look at how they accomplish this, starting with an explanation of the pull system of production.

Push versus Pull Systems

Many manufacturing processes are managed as “push” production systems, meaning they mass produce goods in a way that maximizes utilization of people and equipment. For example, if there is enough time in a shift to run 10,000 units of production, then 10,000 units of production are created. Lean manufacturing prioritizes resources differently and produces only what is demanded by the customer. These customer demands work their way backward throughout the system, meaning each step in the process is producing to actual demand of the external or internal customer following it. This type of a “pull” system, which therefore produces only what is needed when needed and uses the balance of time to conduct other critical activities within the facility, such as housekeeping tasks, machine maintenance, and worker training.

The difference between “push” and “pull” systems can be found at your local supermarket delicatessen (see Figure 2.2).

Let’s say you need to pick up some lunch meat for the week, but you are in a hurry. In a cold case in the deli area, you find ham and turkey already sliced, packaged, and labeled for weight and sales price. Select what you need and head to the checkout! Workers in the deli area use previous sales to estimate demand and package these items in bulk before store opening hours. This exemplifies a “push” system of production.

Alternatively, you may choose to go to the deli counter, take a number, and when it is your turn, have the meat of your choosing carved to your desired thickness and weight specifications in real-time. The process takes a bit more time, but you get exactly what you want when you want it. This is a “pull” system of production. Both offer the customer value, so the “correct” approach depends on a variety of factors, including production lead times, forecast accuracy, and customer needs.

Lean as a Methodology and a Philosophy

Lean management is both a methodology and a philosophy.

Lean management methodology involves reducing wastes so that process complexity is minimized and end-to-end process flows are streamlined and enhanced. Lean management philosophy involves development of an organizational culture wherein all members are committed and encouraged to engage in high levels of quality and continuous improvement.

Lean is different from traditional American methods of mass production, described above as a push system. Lean management adopts a systems viewpoint, meaning that as a manager you want to consider the end-to-end system when making decisions about what is best for the organization. On the opposite side, mass production focuses on efficiency of individual-level operations; each worker or workstation is expected to maximize production in the time available.

The difference means that lean operations are more coordinated and can achieve balanced systems of streamlined flow, whereas mass production systems tend to be unbalanced and accumulate large inventories as a result. The ultimate goal of a lean system is single-piece flow with zero inventory accumulation anywhere in the process.

This also points to why both the methodology and philosophy are integral components of a lean system. A flow system must be uninhibited; any disruptions cause the flow to stop, much like a dam stops the flow of water. Any disruptions present in such a system are revealed as waste and need to be eliminated. Workers, therefore, need to be trained to continuously improve operations; they have to be able to identify and eliminate waste by solving problems in real-time as they appear in the flow system. Let’s take a closer look at what waste is in a production system, and how continuous improvement is facilitated by a respect for people working the system.

Eliminate Waste

Lean processes focus on the customer—everything a process does should be something the customer is willing to pay for. Anything else is waste. In sum, waste is defined by Fujio Cho of Toyota as “anything other than the minimum amount of equipment, materials, parts, and workers (working time) that are absolutely essential to production.”1 Lean systems strive to eliminate that non-value-adding waste, because waste uses up precious resources and does not lead to outcomes desired by the customer. The customer will not pay for your company’s waste!

We can categorize waste into its seven most frequently occurring forms: transportation, inventory, motion, waiting, over-production, over-processing, and defects (see Figure 2.3). The Tools section of this topic delves further into these different forms of waste and provides common examples of their occurrence.

Respect People

Respect for people is an essential aspect of a lean management system. Because a lean system requires continuous improvement and a commitment to minimize waste, the enactment of a learning environment is critical. Employees at all levels of the organization need to be taught scientific methods of problem-solving and then apply them at their workstations (see Figure 2.4).

After all, who is better suited to improve a process than the individuals who work that very process day in and day out? Managers in a lean system are viewed as coaches. They are not meant to solve workers’ problems for them. Employees have to be empowered to make changes to their work, with the understanding that not all changes will result in positive outcomes. The scientific approach helps structure these improvement efforts and enables workers to learn even from those ideas that do not work as anticipated.

Prioritizing respect for people extends not just to workers within the organization, but also to suppliers in the organization’s network. Lean organizations tend to minimize the number of suppliers they work with so that they can work more closely and develop stronger relationships with those few suppliers. This increases the expectations for those suppliers, as there are not back-ups standing by ready to make up for quantity shortages or quality issues. Because of this, buying firm’s engineering and quality improvement teams often provide intense process improvement initiatives for their key suppliers. This improves quality and reduces cost at the suppliers’ processes, both of which are advantageous to the buying company. The supplier benefits because it can use improved quality products and services to win new business with other customers—often at a premium price!