Since Henry Ford launched the assembly line, business leaders have been applying Lean principles to boost profitability.
But what is Lean methodology?
Simply put, Lean means using fewer resources to create more value, accomplished by minimizing waste while maximizing value for the customer. To achieve this kind of efficiency, the methodology is both customer-centric and focuses on continuously improving the process end-to-end, as opposed to only improving isolated areas. The Lean methodology can be applied to any industry looking to decrease waste and improve customer value.
Overall, Lean is built on the following core principles:
- Focus on effectively delivering value to the customer, which also includes understanding your customers and what they value.
- Respect and engage the people involved in the process
- Eliminate all types of waste
- Establish and maintain a flow to the customer
- Pull through the process in response to customer demand
- Continuously strive to improve
Lean vs. Six Sigma
Although Lean and Six Sigma may be leveraged simultaneously, they are not the same methodology. Six Sigma, a metrics-driven approach, emphasizes reducing error and removing defects in processes. In some cases, these two approaches are combined to create Lean Six Sigma, which focuses on both eliminating the variance in the process and improving the overall value.
In the healthcare sector, proponents like healthcare organization Virginia Mason tout Lean for its flexibility to be implemented by anyone and dependence on incorporating all team members at the institution. Lean enables organizations to apply adjustments little by little, with an emphasis on healthcare rooted in value each time a patient is treated.
In Lean methodology, the customer defines value and elements that add value. For something to provide value, it must:
- Transform the service or product
- Entice the customer to pay
- Be completed correctly on the first time
To understand value as part of Lean, organizations must continuously seek feedback and assess the process, to learn from both successful outcomes and failed ones.
Overall, activities within a process can be classified into three groups as part of determining the value stream. The value stream encompasses the entire lifecycle of a product, from raw materials’ origin through customers using and discarding it. Activities in the value stream can be classified in these ways:
- Non-value activity: These activities do not add value, and a customer would not willingly pay for associated costs. And, if these activities were to occur excessively, they could result in dissatisfaction for customers. These activities are waste.
- Value-added activity>: These activities are an essential part of the process and add value to the process overall, for productivity and quality.
- Enabling value-added activity: Although these activities do not add value for the customer, they are necessary for the continuity of the process.
In applying Lean methodology, waste is anything that doesn’t add value. Overall, waste takes three forms, first named in the 1960s by Toyota Engineer Taiichi Ohno.
- Mura, which stems from variation
- Muri, which occurs when people, equipment or systems are stressed or overburdened
- Muda, or process wastes, which includes:
- Extra processing: when extra work occurs beyond what the customer needs as a standard
- Defects: when defects occur, the product or a part of the process can be waste, or a customer can reject the item.
- Inventory: when raw materials, partially complete, or fully completed goods are waiting and not adding value
- Overproduction: production that exceeds customer demand also yields high inventory
- Transportation: when excess movement occurs moving parts, materials or information through the process
- Idle waste: when the process results in systems, people, or parts waiting for another work cycle.
- Movement: unnecessarily moving people, a process, or a material during the overall process. This can create time waste or increase risk of injury.
- Under-utilized talent: when an organization doesn’t maximize an employee’s skills and creativity.
Muda waste can be remembered with the acronym DOWNTIME (Defects, Overproduction, Waiting, Non-Utilized Talent, Transportation, Inventory, Motion, Extra Processing).
Other Key Concepts
Overall, Lean is accomplished through Kaizen, a term derived from two Japanese characters: kai, which means change, and zen, for the good. As the name suggests, through Kaizen, a dynamic process of eliminating waste is constantly occurring. This is executed through the PDCA Cycle, a simple four-step process:
- Plan: Establish a plan for the change, including what needs to change, the steps required to make the change, and anticipated outcomes that will result from the change.
- Do: Execute the plan in a test environment on a smaller scale first, generally under controlled conditions.
- Review: Examine the results from your test to ensure your change improves the process. If the process isn’t better, you’ll need to begin again. If it is, you’re on to the next step.
- Act: Now, you can implement your plan broadly, updating standard operating procedure.
Kaizen isn’t the only tool that can be employed to execute Lean methodology. You can leverage value stream mapping (VSM) to identify process wastes and their causes to provide a visual for value-added activities and the time required by the overall process. Or, you can employ Kanban to manage inventory levels in real time. With a Kanban board, inventory is managed in real time, alerting management when inventory reaches an excess point.
Going to Gemba, a Japanese term for “the real place,” allows leaders to go to the hub of where the work is occurring to really understanding work, learn what is happening, and see how the work is conducted. Through a “waste walk,” leaders can observe the process in real-time and see opportunities for change themselves as they watch the work, record observations, and engage with the team.
For business leaders committed to continuous improvement, Lean Methodology offers a practical approach for making impactful changes all while emphasizing the people – both internal and external. It’s a win for everyone.