5 Principles of Lean Thinking

06 | 06 | 2016

Lean thinking is a business methodology that aims to provide a new way to think about how to organize human activities to deliver more benefits to society and value to individuals while eliminating waste.

The aim of lean thinking is to create a lean enterprise, one that sustains growth by aligning customer satisfaction with employee satisfaction, and that offers innovative products or services profitably while minimizing unnecessary over-costs to customers, suppliers and the environment. The basic insight of lean thinking is that if you train every person to identify wasted time and effort in their own job and to better work together to improve processes by eliminating such waste, the resulting enterprise will deliver more value at less expense while developing every employee’s confidence, competence and ability to work with others.

Lean thinking was born out of studying the rise of Toyota Motor Company from a bankrupt Japanese automaker in the early 1950s to today’s dominant global player. At every stage of its expansion, Toyota remained a puzzle by capturing new markets with products deemed relatively unattractive and with systematically lower costs while not following any of the usual management dictates. In studying the company firsthand it appeared that it had a unique group of elders (sensei) and coordinators (trainers from Japan) dedicated to help managers think differently. Contrarily to every other large company, Toyota’s training in its formative years was focused on developing people’s reasoning abilities rather than pushing them to execute specialist-derived systems.

The five-step thought process for guiding the implementation of lean techniques is easy to remember, but not always easy to achieve:

  1. Specify value from the standpoint of the end customer by product family.
  2. Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create value.
  3. Make the value-creating steps occur in tight sequence so the product will flow smoothly toward the customer.
  4. As flow is introduced, let customers pull value from the next upstream activity.
  5. As value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in which perfect value is created with no waste.

There are five basic principles of lean thinking highlighted by Womack and Jones.

1. Value
Every company needs to understand what value the customer places upon their products and services. It is this value that determines how much money the customer is willing to pay for the product and services. This leads to a top-down target costing approach that has been used by Toyota and others for many years. Target costing focuses on what the customer is willing to pay for certain products, features, and services. From this the required cost of these products and services can be determined. It is the company’s job to eliminate waste and cost from the business processes so that the customers price can be achieved at great profit to the company.

2. The Value Stream
The value stream is the entire flow of a product’s life-cycle from the origin of the raw materials used to make the product through to the customer’s cost of using and ultimately disposing of the product. Only by a study and clear understanding of the value stream and its value-add and waste can a company truly understand the waste associated with the manufacture and delivery of a product and/or service. Lean thinking advocates supplier and customer partnership and radical supply chain management to eliminate waste from the entire value stream.
3. Flow
One very significant key to the elimination of waste is flow. If the value chain stops moving forward for any reason, then waste will be occurring. The trick is to create a value-stream where the product (or its raw materials, components, sub-assemblies) never stop in the production process. Where each aspect of production and delivery is fully synchronized with the other elements. Carefully designed flow across the entire value chain will tend to minimize waste and increase value to the customer.

4. Pull
The way to ensure that nothing is made ahead of time and builds up work-in-process inventory that stops the synchronized flow is to use a pull approach. A traditional western manufacturer will use an MRPII or ERP style of production planning and control whereby production is "pushed" through the factory based upon a forecast and a schedule. A pull approach states that we do not make anything until the customer orders it. To achieve this requires great flexibility and very short cycle times of design, production, and delivery of the products and services. It also requires a mechanism for informing each step in the value chain what is required of them today, based upon meeting the customer’s needs.

5. Perfection
A lean manufacturer sets his/her targets for perfection. The idea of total quality management is to systematically and continuously remove the root causes of poor quality from the production processes so that the plant and its products are moving towards perfection. This relentless pursuit of the perfect is key attitude of an organization that is "going for lean".