The 5 lean principles:
- Define value
- Identify the value stream and eliminate waste
- "The critical starting point for lean thinking is value", which is defined by the customer, in terms of a product and/or service that meets the customer's need.
- "Lean thinking therefore must start with a conscious attempt to precisely define value in terms of specific products with specific capabilities offered at specific prices through a dialogue with specific customers." Align the organization toward products with dedicated product teams.
- Producers tend to continue making what they already are making, and customers tend to ask for products they are already getting, or minor variations thereon. Challenge this way of thinking to discover what customers truly need and want. Example: car manufacturers make cars, dealers sell cars, and customers ask for cars; however the actual product the customer needs is personal mobility. How can the extended enterprise better deliver personal mobility to customers?
- Determine the target cost of the product based on the resources required if all the muda (waste) is removed from the process; work toward achieving the target cost, allowing for reduced prices and/or better product features - leading to higher profit.
The value stream is all activities necessary to deliver a product to customers
- Problem solving: Concept to design and production
- Info management: order taking, scheduling, delivery
- Physical transformation of raw materials to delivered product
- Type 1 muda: create no value but unavoidable with current technology
- Type 2 muda: create no value and are avoidable
- After eliminating waste in the value stream, make the value-added steps flow together continuously, with no stoppages or rework.
- Just-in-time production
- Eliminate specialized departments and batches of work done in those departments
- Instead of having large, high-speed machines and putting all machines of the same type in one location, use smaller machines and put all the different machines required to produce a single product into closely located "cells" in the exact sequence required.
- focus on the end product itself and the steps required to complete a single product - via dedicated, cross-functional product teams
- Ignore existing boundaries between companies, departments, and individual roles to envision a lean enterprise focused on "removing all impediments to the continuous flow of the specific product."
- Redesign processes and tools to eliminate rework, scrap and stoppages so production of the product can flow continuously
- Deliver only what the customer wants, when the customer asks for it, rather than pushing products out and hoping customers want them
- "No one upstream should produce a good or service until the customer downstream asks for it."
- Downstream activities use kanban (simple signals) to indicate to upstream activities when more is needed.
- Right-size your tools and process so you don't need to produce massive quantities of intermediate parts; be able to switch tools and machines so they can be quickly adjusted (in minutes) to produce different parts or product.
Consider the counter-example of a printed book. Publishers produce a batch of books based on forecasted demand to fill the sales pipeline. Result: Long delay between orders and delivery, product shortages, or over-production.
- The improvements process never ends: you must always strive to offer a better product while reducing waste.
- Do kaikaku - radical transformation - to eliminate the largest sources of waste, and then do kaizen - continuous incremental improvement - to move toward perfection
- "Form a vision, select the two or three most important steps to get you there, and defer the other steps until later." Keep your efforts focused for better results.
- Don't settle for merely being better than your current competition; eventually someone will come along and beat you.
- Transparency across the entire value stream (suppliers, integrators, employees, distributors, etc.) is required to discover opportunities for improvement
The book includes a series of case studies of companies that made the lean transformation, from small family owned operations to huge companies in the US, Germany, and Japan. The case studies focus on manufacturing, but also include product development and order taking aspects of the business.
Revolution in Product Development process at Lantech
How does lean thinking apply to product development? Lantech made a single person clearly accountable for the success of a product over it's entire lifetime (profitability and customer satisfaction). The annual planning process ranked the major projects for the year. Lantech created dedicated (full time), cross-functional development teams for the year's top 2 projects. Teams included marketing, mechanical engineering, electrical engineering, manufacturing engineering, purchasing, and production (including hourly workers from the kaizen team), co-locating all team members.
- Manufactures wire routing systems and power protection devices
- 1400 employees in USA and Canada
- Unionized workforce (Int'l Brotherhood of Electrical Workers)
- Tried TQM (Total Quality Management) and JIT without success before adopting lean
- Sales per employee from$90,000 to $190,000
- Time to produce avg product from 35 days to 1.5 days
- Product development time from 3 years to 5 months
- Space required reduced by 50%
- Profit increased 500%
Pratt & Whitney, the jet engine manufacturer
- 29,000 employees and $5.8 billion revenue
- 1993 loss of $262 million, 1995 profit of $380 million, even with sagging sales
- Throughput time fell from 18 months to 6 months
- Inventory reduced by 70%
- Quality problems reduced by 50%
- Unit costs for parts reduced by 20% in real dollars even as production volume decreased 50%
- Combined lean thinking with German technik - the concept of superior technology
- Product development time reduced from 7 years to 3 years
- Throughput time reduced from 6 weeks to 3 days (from welding to finished car)
- Inventory reduced from 17 to 3.2 days supply on hand
- Effort to assemble Porsche 911 or its successor: from 120 hours to 45 hours
- Defects per vehicle reduced by 75%
- Profits in DM: 1991: 17 M; 193: LOSS of 239 M; 1995: 2 M
Showa manufacturing (Japan)
- Makes boilers and radiators, using large batches with long intervals between tool changes
- Invited Taiichi Ohno from Toyota to help in 1983
- First step was to "convert coil making and assembly from a batch process to single-piece flow"
- eliminated half the plant space required
- reduced in-process inventory by 95%
- Reduced human effort by 50%
- Reduced coil manufacturing time by 95%
- Improved quality
- Taiichi Ohno began formalizing the Toyota Production System in the 1940's
- Established the Shusa (chief engineer) product development system under Kiichiro Toyoda in late 1940s
- Began extending TPS to their supply chain in 1969. By demanding continuous price reductions from their 1st tier suppliers, those suppliers in turn pushed lean techniques farther down the supply chain.
- Applied lean thinking to parts production starting in early 1980s
- With the proliferation of different car models, having one shusa per product became unmanageable. In 1992, Toyota re-organized products into 3 product families to share common components, each group led by program managers
- Through Toyota persistent effort at improvement over many decades, it has achieved higher productivity, quality, and on-time delivery rates than it's Japanese, US and European competitors
How to put lean thinking into action
"The trick is to find the right leaders with the right knowledge and to begin with the value stream itself, quickly creating dramatic changes in the ways routine things are done every day. The sphere of change then must be steadily widened to include the entire organization and all of its business procedures. Once this is in hand and the process is irreversible inside your own firm, it's time to start looking up- and downstream far beyond the boundaries of individual firms to optimize the whole."The authors prescribe finding a change agent with a core of lean knowledge, and say it helps to have a crisis to serve as the catalyst for a change. Start with a map of your value stream(s) and be determined to kaikaku (make dramatic change) quickly to produce results the organization can't ignore. Reorganize the company by product family and value stream.