13.4 Going Lean

Another organization-wide movement that has become popular at a global level during the last two decades is the concept of lean thinkingA management approach that seeks to eliminate all forms of waste from operations.. This concept was first introduced to American businesspeople in the book The Machine That Changed the World: The Story of Lean Production—Toyota’s Secret Weapon in the Global Car Wars That Is Now Revolutionizing World Industry.James P. Womack, Daniel T. Jones, and Daniel Roos, The Machine That Changed the World: The Story of Lean Production—Toyota’s Secret Weapon in the Global Car Wars That Is Now Revolutionizing World Industry (New York, Harper Perennial, 1990). This book focused on the global automobile industry. It highlighted the significant differences in productivity between Japanese firms, Toyota in particular, and their American and European rivals. At the time the book was written, Toyota was half the size of General Motors; today, on a global basis, Toyota is larger than General Motors. The book highlighted the approach adopted by Toyota, which is, as articulated by Taiichi Ohno, its developer, centered on “the absolute elimination of waste.”

Although lean is most closely associated with Toyota, its central principles are applicable for any small and midsize enterprise. Audubon Media Corporation is a publisher of cookbooks. It adopted a program that included a variety of lean techniques. In a two-year period, it increased sales by 25 percent without increasing staffing, reduced lead time by at least 50 percent, and increased available floor space by 20 percent through inventory reduction and more efficient redesign. Corporate Image, a manufacturer of packaging, adopted lean methods and reduced lead times by over 35 percent and reduced costs by nearly $180,000 in one year.Jim Black, “Kaizen (Continuous Improvement) for Small- and Medium-Sized Companies,” CIRAS News 33, no. 2 (1999), accessed February 4, 2012, www.ciras.iastate.edu/publications/management/Kaizen.asp.

Lean thinking is predicated on five major principles.“The Five Principles of Lean Thinking,” Cardiff University, accessed February 4, 2012, www.cardiff.ac.uk/lean/principles/index.html. The first principle can be summarized as follows: know who your customers are and know how they define value. This principle coincides nicely with the underlying philosophy of the quality movement, namely, placing the customer first. Without understanding what the customer wants and what the customer values, an organization runs the risk of producing a wasteful quantity of goods and services that the customer does not want or need.

The second principle of lean thinking centers on determining and visualizing the value stream. The value streamThe entire set of activities associated with the production of goods and services. is the entire set of activities associated with the production of goods and services. The goal of such mapping is to identify any and all activities that provide no value to the customer. Once those nonvalue activities have been identified, they are to be eliminated. Students are required, every semester, to go to their advisor and begin the process to register for the next semester or prepare for graduation. Imagine mapping out every step in that process. Having done that, colleges and universities could probably find some steps or activities that do not add value. In a lean operation, those steps would be eliminated. One could also think in terms of the process that most patients face when going to some type of medical facility. They are often required to fill out multiple forms that require the same information. In Figure 13.5 "Value Stream Map for Supplying Hospitals with Blood", we provide an example of a value stream map for the process of supplying hospitals with blood.

The third principle of lean thinking argues that every effort should be made to make the remaining steps flow. The term flow here refers to the notion that from design to delivery to the customer, all steps and activities should be structured in such a way that there will be minimal or nonexistent downtime, waste, or waiting within or between the steps.“The Principles of Lean Thinking: Tools and Techniques for Advanced Manufacturing,” Industial Technology Centre, accessed February 4, 2012, www.itc.mb.ca/downloads/resources_by_topic/princ_lean%20thinking/PrinciplesofLeanThinkingRevD2004.pdf. This is perhaps the most challenging of all the five principles of lean thinking. To make operations flow in a seamless manner often requires substantive changes in production and service processes. In fact, it may require substantive changes to the structure of a business.

The fourth principle involves a pull systemThe production of the goods and services are triggered by customer demand. triggered by customer needs. The term pull means that the production of goods and services is triggered by customer demand. This aspect of lean is what is commonly referred to as just-in-time inventory. The central idea is that the entire value stream is fired up only by customer demand. Thus inventory throughout the system is minimized.

The fifth and last principle is pursuing perfection. This clearly shows that lean thinking is not totally separate and divorced from the concepts of total quality management or Six Sigma. This last principle advocates that removing the impediments to quality will mean a significant reduction in waste. Like Crosby’s work, lean advocates often talk of striving for zero defects.

One of the first steps in any lean program is identifying where waste exists within the system. Taiichi Ohno and Shigeo Shingo, the two cofounders of the Toyota Production System, identified seven possible sources of waste: transportation, inventory, motion, waiting, overprocessing, overproduction, and defects. (A nice mnemonic to remember these seven sources is TIM WOOD.) Table 13.4 "Seven Sources of Manufacturing Wastes" identifies and gives examples of the original seven sources of waste used throughout Toyota.

The continued references to the Toyota Production System might lead the reader to believe that lean thinking is appropriate only for the manufacturing environment. That would be profoundly misleading because lean has tremendous applicability to service, particularly in the areas of health care, banking, and retail. Some authors believe that these seven sources of waste are absolutely applicable to service environments.Michael George, Lean Six Sigma for Service: How to Use Lean Speed and Six Sigma Quality to Improve Services and Transactions (New York: McGraw-Hill, 2003), 76. Others have suggested that the original seven sources of manufacturing waste be modified to cover the service environment, as follows: delay, duplication, unnecessary motion, unclear communication, incorrect inventory, errors, and opportunity lost.“Seven Wastes of Service | Customer Perception,” Lean Manufacturing Tools, accessed February 5, 2012, leanmanufacturingtools.org/81/seven-wastes-of-service -customer-perceptio. These seven sources and corresponding examples are described in Table 13.5 "Seven Sources of Service Waste".

Lean thinking uses several techniques to achieve its ends. We have mentioned value stream mapping. Other techniques include just-in-time inventory control, quick changeoverA program to reduce setup times to make it more attractive to produce in smaller batches. (a program to reduce setup times to make it more attractive to produce in smaller batches), KaisenA Japanese term that refers to any program that seeks small improvements on a regular basis rather than a huge quality initiative. (a Japanese term that refers to any program that seeks small improvements on a regular basis rather than a huge quality initiative), and visual managementA program where key metrics are presented visually to all personnel so they can be aware of any and all progress. (a program of visually presenting key metrics to all personnel so that they can be aware of any and all progress). One technique that has broad application in both manufacturing and service environments is known as the 5 Ss. The five Ss refer to Japanese terms for, in effect, housekeeping.“5S Check List,” Systems2win, accessed March 9, 2012, www.systems2win.com/solutions/5S.htm. The five Ss, which together strive for simplicity and neatness to improve efficiency and effectiveness, are as follows:

• Seiei or organization. Only those tools and equipment that are absolutely needed are available at any one time. All other equipment is stored away until needed.
• Seiton or orderliness. Every part is in its correct place. The Japanese use pegboards to store tools. They sometime draw an outline of the tool on the board so that it is returned to its correct place.
• Seiso or cleanliness. Work environments are kept immaculate. This is done to reinforce the notion of perfect. Some factory floors are painted white so that anything dropped or any litter becomes immediately apparent.
• Seitetsu or standardized cleanup. This is a reinforcement of the prior three points. Starting in Japanese kindergartens, children are required to clean their classroom—together—before they are released to go home.
• Shitsuke or discipline. A program to adhere to set procedures because of pride in one’s own work.

More and more businesses are realizing that lean thinking and quality are not two distinct management approaches but two extremely complementary models. One finds more and more references to a concept known as Lean Six Sigma, which is a program that combines aspects of both lean thinking and quality management. It recognizes that lean by itself cannot bring processes under control, and Six Sigma significantly reduces process time or capital investment.Michael George, Lean Six Sigma for Service: How to Use Lean Speed and Six Sigma Quality to Improve Services and Transactions (New York: McGraw-Hill, 2003), 6. Both approaches offer benefits to small businesses that cannot be ignored if these businesses want to remain viable in an increasingly competitive world.