Best practice report: Lean Thinking

May 26, 2014 by BPIR.com Limited

Expert Opinion

 

Lean ManufacturingLean manufacturing is a methodology based on the Toyota Production System (TPS), which was created by Taiichi Ohno of Japan. [1]

Through the elimination of waste, the TPS aims to provide the best quality, lowest cost and shortest lead time.Taiichi Ohno defined seven “wastes” to be minimised or eliminated from within Toyota’s production system. These are:

  • transport waste, i.e. the relocation of materials not actually required for processing
  • inventory waste, i.e. excess components, work in process, and finished products
  • motion waste, i.e. the movement of more people or equipment than needed to undertake the actual processing
  • delay waste, i.e. waiting for the next production step, or interruptions to production during shift changes
  • overproduction waste, i.e. production ahead of demand
  • over-processing waste, which is usually related to poor tool or product design. [2]

Lean Thinking

There is a popular misconception that lean is only suited to manufacturing environments: this is not true. Lean principles may be applied beneficially to every business and process. Lean is not simply a tactic or cost reduction programme; it is a way of thinking and acting that can be applied to an entire organisation. All types of industries and services—including healthcare and government departments—employ lean principles. However, some organisations may not actually use the term “lean” to describe the particular system they use. This is because they do not want the system they implement to be seen as a mere short-term cost reduction programme; rather, they want it to be embraced as the primary way their company operates. The term “lean transformation” is often used to characterise the fact that a company intends to move away completely from its old ways of thinking. [3]

Writing  in  The  British  Journal  of  Administrative Management, Wilma Tulloch asked her readers to imagine:

running a retail operation where the application of lean principles enabled an organisation to shed 90 per cent of its previously required warehousing capacity

  • running a hospital where it was possible to manage the existing patient population with 30 per cent fewer beds
  • or working at a university where approval letters for students were issued in two minutes, when previously this had taken two weeks.

All of these examples are factual outcomes from the implementation of lean principles. Lean is a total business system characterised by three distinguishing features:

  1. Lean respects people and engages the whole enterprise in improvement.
  2. Lean uses a fact-based approach and has its roots in the Quality Movement pioneered by the American statisticians Deming and Shewhart.
  3. Lean takes an “end-to-end” look at every process within an enterprise that creates value for customers.[4]

Lean thinking is a methodology enabling organi- sations to focus on maximising the added value of processes when considered from the viewpoint of their customers. Lean practitioners examine “value chains” within processes, and ask how a process might be structured so that value is added—and that the value is added as rapidly as possible. Lean thinking seeks to eliminate all wasteful—i.e. non- value-adding—steps, time and labour. The ultimate objective of lean thinking is to be left with only the time, people and activities that add value in the eyes of
the customer. [5]

The following five “lean thinking” principles were published by Cardiff University in the United Kingdom:

  1. Identify Value. It is important to recognise that only a small fraction of the time and effort expended within an organisation normally adds value to the end customer. By clearly defining value for a specific product or service from the end customer’s perspective, all non-value-adding activities (which, using lean terminology, are called “waste”) can be targeted for removal wherever possible.
  2. Identify and Map the Value Stream. The value stream is defined as the entire set of activities within an organisation that are necessary to deliver a product or service. This is the end-to-end process delivering value to the customer. Having determined what the customer wants, the next step is to identify how well the organisation delivers this to the customer.
  3. Create Flow by Eliminating Waste. Usually, when a value stream is mapped in a manufacturing organisation, just 5 per cent of processing activities actually contribute value (in a service organisation, this is typically around 45 per cent). By eliminating waste, products or services will then “flow” through to the customer without unnecessary interruptions.
  4. Respond to Customer Pull. This relates to having an understanding about customer demand for services and thereby being able to create suitable processes to respond to the identified customer demand or “pull”. Lean methodologies seek to produce only what the customer wants, at precisely the time the customer needs it.
  5. Pursue Perfection: Creating flow—and responding to customer pull—begins with the radical reorganisation of each individual process step. Gains become truly significant when all the process steps are linked together. As more and more layers of waste are uncovered, the process moves progressively towards theoretical perfection. When it has reached this point, every asset and every action adds value for the end customer.

The continual application of these five lean thinking principles within an organisation, as set out below in Figure 1, will lead to the lean philosophy becoming embedded within its culture. [6]

Lean Culture
According to Philip Atkinson and Lance Nicholls, Lean Six Sigma (LSS) consultants from the United Kingdom, a lean culture change is a sustained commitment to drive continuous, ceaseless improvement. Lean is both a strategic and an operational methodology, which can bring about significant and long-lasting change. Lean thinking transcends all business sectors, with its simple guiding principles of “focusing on the end in mind” and “seeing through the  eyes of  the  customer”,  to create  error-free, waste-free processes that support delivery to an organisation’s internal and external customers. [7]

To sustain lean implementations, organisations must develop a strong culture of accountability. Quint Studer, founder of the Studer Group, a health-care consultancy in the United States, describes the characteristics of an organisation with a successful lean culture in the following way:

  • The organisation is aligned from top to bottom. Everyone works together to achieve a common outcome, and understands the organisation’s mission and its actionable goals.
  • Leaders are well trained and able to cascade training to their staff. Even the best clinicians do not automatically have the skills to lead. Organisations that consistently provide high-quality healthcare also provide leadership training.
  • Everyone in the organisation practises specific behaviours proven to achieve results. Leaders make an effort to standardise behaviours to ensure all patients receive a consistent experience. Desired staff behaviours are validated and rewarded so they are repeated and become hardwired within the organisation.
  • The organisation is geared for innovation. People at all levels understand the need to constantly improve, and strive for ever greater efficiency and cost reduction. A willingness to change is built into the organisation’s culture.
  • All personnel in the organisation are held account- able for their performance. High-quality, high-reliability organisations base their evaluation systems on objective, weighted performance metrics that are aligned with the organisation’s overall goals. Low performance is not tolerated and high performance is
    rewarded. [8]

Lean Implementation

An outline of various tools used by lean practitioners is provided in the “Lean Tools” and “Self-Assessment” sections of this Best Practice Report. These tools are also further described on the BPIR.com website. The example shown below shows the strategic application of lean thinking towards developing a lean culture within an organisation.

According to Greg Lashley, continuous improvement manager, and Maria Clark, quality manager, both with Nike IHM, “the proper use of lean tools can transform a company’s strategic plan into an actionable system”; this, in turn, can lead to improved profitability.

Balanced scorecards (such as the one shown below in Figure 2) are useful for enabling lean practitioners to visually communicate organisational strategic goals and action plans. This particular scorecard is aligned to a lean environment. Scorecards usually consist of four quadrants containing various categories used to set specific, measurable, attainable, relevant and time-bound (or SMART) goals. These categories also serve as place-holders for an organisation’s key performance measures.

A dashboard is also a powerful high-level visual tool, which consolidates the key things teams need to review. It is reasonably simple to construct a dash-board by using linked spreadsheets or reports, and displaying the, in a systematic format. Figure 3, see below, is an example of the types of measures and indicators used in a typical lean dashboard.

Notes:  OEE  =  Overall Equipment  Effectiveness; OLE = Overall Labour Effectiveness

The Plan-Do-Check-Act (PDCA) diagram shown below in Figure 4, frequently used in quality improvement projects, has been adapted for strategic planning purposes. Each stage in the PDCA cycle plots the progress of the lean implementation as follows:

 

  • Plan: leadership teams establish direction
  • Do: Kaizen teams, or cross-functional teams, solve problems Check: use scorecards, metric reviews and audits to monitor performance
  • Act: make adjustments in accordance with results revealed by measurements.
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