An Overview

The concept of "Lean" in business processes has spurred a dramatic awakening among companies world-wide.  With a shock, companies have come to realize that many of the wonderful tools from "the technology age" have amazingly little to do with the kinds of productivity and quality improvement exemplified by industry leaders like Toyota and Dell.

In fact, the rush to adopt new ERP and other IT systems has been nothing more than a blip on the radar screen of manufacturing evolution.  Information technology got our attention because of short-term business stability concerns (Y2K) and  "promises" of business efficiency, but it has not proven to provide any world-class competitive edge.

So, why has "Lean" taken on an image like the "holy grail" of process management? 

Highlights of Lean History

You might be surprised to learn that Lean has been around for at least a century.  It wasn't called Lean in the beginning when industrial engineers developed the methods of "mass production" geared to low-cost production of things like cars and appliances, which  previously had been out of reach to the average consumer.  More ideas were added throughout the 20th century, including  Lean concepts in the 1980s when high interest rates, increased demand for product quality, a global recession, and global competition converged to require renewed emphasis on operating fundamentals that had been under-used for decades.

Notable dates in the history of Lean  are listed in attachment A.  You might notice two things in the list.  First, your own experience probably includes one or more of the fad-like phases that have led Lean to where it is today.  And second, the American strength in information technology was over-used during the boom times, and became a serious weakness as global competition intensified in the '80s and '90s.  The "silver bullet" promised by MRP/ERP gave way to almost an "albatross" image as Lean adopters perceived IT solutions to be more of an impediment than an enabler.  Finally, IT solutions are taking on the image of a useful support system when the core business process can't be configured with Lean methods to eliminate off-line, computerized controls altogether (via on-floor visual signals, "pull" methods, etc.).

Viewing Lean from a historical perspective helps explain why something “old” can all of a sudden look “new”.  But the economic factors that caused the "rediscovery" of Lean appear to be here to stay, so it is no surprise that Lean seems to be here to stay as well.  The mantra appears to be "Get Lean or watch your business go elsewhere."

What Is Lean All About?

To understand Lean, consider Toyota's metaphor of lowering the water level in a stream to expose the rocks at the bottom.  The water level represents the work-in-process inventory that "flows" (sort of) through a manufacturing plant.  It flows lazily when the water level is high, rising to the banks.  But the water will pick up speed when the dam is removed and the water level drops to the river bed. 

However, that speed is constrained by the "rocks" on the bottom that begin to appear as the water level drops.  The rocks represent non-productive elements in the production system, like unused and broken equipment, mistakes in production, and excessive production floor space that creates long travel distances through it.  It's easy to imagine how removing the "rocks" can lead to faster, more efficient flow in both the stream and the plant.

The rocks also illustrate the concept of "value-added" versus "waste."  Clearly the rocks add no value to enhancing  the water flow.  Similarly,  in many production plants it's easy to identify non-productive equipment and floor space that add no value to the product flow, and clearly impede the production process.  The complexity of production processes often becomes, defacto, an inertial barrier to improvement.  The complexity is viewed by traditional business cultures as unchangeable, "this is how it has to be done."  A topic of Lean implementation discussed later is team-based methods for continual business improvement.  These methods are especially effective in overcoming cultural barriers where "the 'impossible' is often merely the 'untried'."

The Lean approach challenges everything and accepts nothing as unchangeable.  It strives continuously to eliminate waste from the production process and to invest in nothing in excess of the exact customer requirements.

Inventories

In the early years of the Lean renaissance movement, inventories became the primary target.  Low inventories are indicative of Lean operations;  in a manufacturing plant, low inventory is visually obvious. 

The steps involved in reducing inventories are usually clear-cut.  In general, the reasons for large inventories can be traced to the perceived or potential cost of each replenishment transaction.  Therefore, the steps to reducing inventory focus on reducing equipment change-over times, order handling costs, and other replenishment transaction costs. 

The ideal  production system has almost no work-in-process inventory and is able to produce single-unit  quantities as cheaply as large quantities.  "Mass customization," the term used to describe this type of system, has become a reality in industries where product complexity dictated large lot sizes and resulting large inventories only a few years ago.  The key to mass-customization is short change-over times, which allow small lot sizes and immediate response to the next customer-configured order.

Huge Benefits for Little Cost

There have been thousands of well-documented, dramatic "before" and "after" examples  of production lines transitioned from traditional methods to Lean methods, including some truly amazing ones:

         •  On-Time Shipments increased from 87% to 99%, inventory down 23%

         •  4,000 ton injection mold (80,000#) change-overs reduced from 6 hours to 15 minutes

         •  Office equipment manufacturing time reduced from 5 days to 9 hours

         •  Appliance manufacturing output quadrupled with no change in crew size

The examples seem almost incredible, at least until you stop to analyze how existing  business processes have become so bloated with waste steps that removing the waste is like opening the floodgates.  But until you have experienced it first-hand, such quantum improvements can be difficult to grasp.

Lean Process Design Elements

The full array of Lean process elements (attachment B) can be daunting to newcomers.  In fact, however, few people, even engineers, had training in these elements during the mid-twentieth century when managers were unconcerned about high inventory levels and expected each new version of MRP/ERP to solve manufacturing problems that still never seemed to go away.

For a basic understanding of the Lean process principles, you might want to participate in one of the common hands-on Lean process demonstrations for conference-table use.  That experience will give you a solid mental image of the Lean process principles, and also the continual improvement efforts that lead to Lean business processes. 

As you develop Lean processes in your business, other Lean elements will come into play.  These elements  are described briefly in the attachment to this article.  Notice, that the elements are divided into three sections — Process Requirements, Process Design Criteria, Process Support Systems.  Those sections will be important for Lean implementation planning, which will have to be covered in other materials beyond the scope of this article.

Making It Happen

How do you get organized to use Lean concepts to improve business performance? 

The answers to that question are not as simple as buying the latest "magic system" and plugging it in.  Lean is not an object.  It is a business culture, top to bottom.

The Basic Lean Organization for implementation of Lean may include:

         •  Executive Leadership to set key business goals, allocate resources, and manage four Continual Improvement functions:

         -  Measurement (Msmt) of progress on Key Performance Indicators and process indicators

         -  Education (Ed) of the workforce about Lean, Quality and Productivity

         -  Search For Opportunities (SFO)

         -  Improvement Actions (IA) via individuals and teams (below)

         •  Improvement Action (IA) Projects with comprehensive project plans:

         -  Individuals or work teams

         -  ImpAct Teams, for local departmental, immediate opportunities

         -  Critical Process Teams, for large or cross-functional opportunities

         -  Six Sigma Teams, for deep process analysis and variance elimination

         •  Departments to adopt Lean methods in routine operations:

         -  Mid-Management

         -  Front-Line Supervision

         -  Work Teams

The overall size of the organization will determine how much Lean organization is necessary to launch and sustain a Lean business culture.  The basic organization outlined above is customized to fit each company and build on any related functions already in place. 

Final Thoughts

Two features about the Basic Lean Organization described above need special emphasis:

         •  Holistic Continual Improvement (CI) Process

         •  Team-Based Lean Implementation Methods

First, to make Lean sustainable in the long run, it must become a formal process of Continual Improvement (CI) imbedded in the business culture, actively managed to align the organization with the ever-changing key business goals.  When all four sub-processes are operational (Msmt, Ed, SFO, IA), then CI becomes a closed-loop, self-reinforcing process that guides the organization in the most productive direction for current business conditions — a characteristic of industry leaders that leave their competitors wondering "how do they do that?"

Second, most everything about Lean relies on team-based business methods.  A major reason for this is found in research findings from a few years ago, but not well-publicized:

         •  Technologies are easily copied by the competitors.

         •  People-based business differentiators are difficult to copy but provide sustainable competitive advantages.

If there is such power in team-based processes for continual improvement in products, services, business processes, and working relationships, why aren't they more universally applied? 

Perhaps the answer is in a behavior pattern most of us are guilty of:  Our technical backgrounds often cause us to over-emphasize whatever we've already mastered (technical processes, IT, etc.) and under-emphasize whatever we haven’t (people processes). 

Team-based business methods are not "feel-good team-building" exercises.  Rather, they are the "nuts-and-bolts of practical business team development," the crucial human dimension often overlooked in our Ready, Fire, Aim! American cowboy culture.  Industry leaders make sure that people processes and team-work are key elements in their continual improvement processes. 

Finally, a reminder about the visual nature of Lean processes.  If you see queues of materials, products, paperwork, files, etc. in any process — in a plant or office — then the process is not Lean and almost certainly has major opportunities for improvement, including:

         •  Reduced inventory (working capital investment)

         •  Reduced floor space (fixed assets and period expense)

         •  Quicker response times and shorter lead times

         •  Decreased defects, rework, scrap

         •  Increased overall productivity 

If better, faster, cheaper "flow" is our ultimate objective, then "lean" process methods are the surest route to achieve it.  Lean To Achieve Flow.

Enjoy the journey.  Good luck!  For additional information contact Rainmakers at 847/251-3327

History of Lean Process Methods

General recollections, approximate dates, some of the participants.

Early 1900s, Scientific Management

         •  Taylor, Sloan (GM), et al

         •  Applied to mass-production to lower costs

Late 1930s, Lean Production System Concepts

         •  Taichi Ohno, Shigeo Shingo at Toyota

         •  Demand “pull” methods standardized

Late 1940s, Process Management Added to Lean Concepts

         •  Deming, Juran, Feigenbaum bring SPC to Japan

         •  Total Quality Management (TQM) extends Lean/SPC concepts in Japan

         •  Japanese industry begins rise to global leadership

1950s thru 1970s, America Gets Fat, Dumb and Happy

         •  Business so good management stops worrying about fundamental processes

         •  P&L and Balance Sheet management becomes the norm in business schools

         •  Powerful computers enable "inventory management" and MRP

         •  “Keeping track of things” takes as much attention as “producing things”

         •  The ratio of total cost to value-adding cost begins to spiral out of control

         •  Two generations of "portfolio" managers unaware of operating fundamentals

Early 1980s Wake-Up Call

         •  ’79 – ’81 recession hits US industry hard

         •  1981 NBC documentary:  If Japan Can, Why Can’t We?

         •  Total Quality Management (TQM) superficially adopted by American managers

         •  1982, HP plants go public with videos about their lean efforts

         •  Yasahiro Monden writes The Toyota Production System about lean demand flow

         •  Shigeo Shingo’s text in English about single minute exchange of dies (SMED)

         •  1983? AME group breaks away from head-in-the-sand APICS

         •  Mid ‘80s, consultants begin offering training for Lean Flow Mfg, DFT, etc.

1990s, Getting Back to Fundamentals

         •  Early ‘90s business process reengineering (BPR) poor application of good idea

         •  Through ‘90s, thousands educated about Lean Flow Mfg, DFT, etc.

         •  Lean/DFT converts not armed with process to make change happen; deflated

         •  Late ‘90s, flow software products attempt to provide a Lean mgt. process

2000s, Global Competition, Lean Imperative

         •  2000, current software offerings inadequate for lean mixed-model production

         •  Lean enhanced with team-based continual improvement (CI) processe