Lean, as the name suggests, is about identifying and eliminating the "flab" or waste in a process thereby improving the speed of it. Lean considers spending any kind of resource that does not add any value to the end customer, to achieve an outcome as waste. This waste needs to be eliminated to speed up the process and improve overall efficiency. Unlike Six Sigma, which addresses accuracy and consistency through its focus on reducing defects and variation in the process, Lean addresses the speed, time, and efficiency of a process through the elimination of waste.
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The history of Lean
Post World War II, the Japanese industry in general was grappling with a plethora of problems. There was no market. They had to compete against western companies that enjoyed economy of scale. There were severe credit restrictions imposed by occupying forces leading to non-availability of capital to invest in new plants. Organizations like Toyota were struggling to stay afloat. It was this gloomy backdrop that prompted Taichi Ohno, an executive at Toyota to redesign the production system. His vision was focussed on how to maximize the returns on limited investment. It zeroed down to three fundamental principles – i) Build only what is required, ii) Eliminate anything that does not add value, and iii) Stop if something goes wrong. These ideas along with total employee involvement formed the core of the famous Toyota Production system that catapulted Toyota from the brink of bankruptcy to the pedestal of industry leader. As Toyota and other large Japanese companies expanded worldwide, the world gradually came to know of the Toyota Production system that gradually evolved into Lean manufacturing. Now, the Lean principles have grown beyond traditional manufacturing and have been employed in diverse industries such as service and software.
You now have an understanding of the core concepts behind Six Sigma; you now need to do the same thing with Lean before you can try to bring them together.
As mentioned earlier, waste is anything that is part of a process, by design or by accident, that does not add any value in the eyes of the customer. Lean aims at identifying and eliminating waste from a specific process.
A quick mnemonic to remember waste in a process would be TIMWOODS: Transportation, Inventory, Motion, Waiting, Over-production, Over-processing, Defects, and (underutilized) Skills. We will go into more detail on these later in the book.
A value-added activity in a process is something that a customer would agree is essential for the end product or service. The activities that do not fulfill this criterion are called non-value adding activities. The proportion of value-added activities in any given process is an indicator of the efficiency of the process. Our aim, with Lean, is to eliminate non-value adding activities from a process and hence improve its speed and efficiency.
Process cycle efficiency is a metric that can be used to identify an area in which the efficiency of a process could be improved. It is defined by the ratio of the time taken by value-adding tasks to the total time it takes to carry out the process.
Process velocity is an indicator of the flexibility of a process. Flexibility refers to the ability of a process to respond to potential changes in a cost-effective manner. It is calculated as the number of activities in the process divided by the total time taken to complete the process, known as process lead time. Process lead time is directly proportional to the number of activities within a process. Hence if we eliminate non-value adding activities, the process velocity goes up automatically, thereby improving flexibility.