Lean Thinking Generates Value — And Profits

Posted on24. Apr, 2009 by carolesf.

The Value of Lean Thinking

What does the “Lean” in “Lean Six Sigma” stand for? And what is “Lean Thinking”?

Both Lean and Six Sigma have their roots in manufacturing process improvement. Over the past decade or so, they have been integrated into a combined approach that has been applied to the full range of business processes, not just manufacturing.

The term “Lean” originated in “Lean manufacturing.” This is a manufacturing method which was famously pioneered by Toyota, as documented in the 1990 book “The Machine That Changed the World” by James Womack, Daniel Jones, and Daniel Roos. Womack and Jones later released another influential book titled “Lean Thinking” (1996) which sets forth the basic principles of the lean model of business.

The core concepts of Lean could be summed up as: (1) Add nothing but value. (2) Value is in the eyes of the customer. (3) Therefore, the enterprise should be oriented along lines that enable the customer’s needs to “pull” raw materials, services, and information along the most-efficient, least-wasteful path or “flow.” At the end of this flow, the customer has received the product or service he or she wanted.

Clear enough, but what does a Lean Thinking company look like in practice? And can it work in a non-manufacturing firm?

In the simplest terms, a Lean organization has a short order-to-delivery cycle. The shorter the cycle, the leaner the company.

It doesn’t really matter what the customer is ordering. It could be rapid transportation to a distant city (airline tickets). It could be showerheads (Home Depot). It could be the opportunity to buy or sell something at the best possible price (eBay). A sense of connectedness to friends and family (Twitter). In all cases, the customer wants to obtain something that he or she values, and some organization is trying to deliver whatever that something is.

What adds value to the order-to-delivery cycle? The activities of receiving the order, preparing the product or service to fulfill the order, and delivering the order.

What does not add value? In other words, what would customers not be willing to pay for, if they knew it was going on behind the scenes? How about stockpiling raw materials to enable the company to produce someone else’s order (inventory)? How about not having enough capacity to fulfill the customer’s order right away (backlog)? (A non-manufacturing example of this: Overbooking an airline flight.) How about an order entered incorrectly? Or a lost shipment? What if a particular webmail service kept crashing your web browser whenever you tried to check your email?

Lean Thinking is a mindset that doesn’t so much seek to avoid wasteful mistakes in a step as to eliminate a wasteful step entirely.

For example, if an order is entered incorrectly, the Lean approach would ask, “Do we need to do order-entry at all?” Maybe if the customer orders on-line, then we automate the order-entry process and eliminate that wasteful step in the process. On the other hand, maybe your particular customers want to “be taken care of” and would resent an expectation that they “do it themselves.” If that is the case, then, yes, we must continue to do order-entry and moreover, it should provide a personal touch to these customers. This is why understanding the customer’s wants and needs is so central to designing Lean processes. One customer’s trash is another one’s treasure — and you need to know which customer you’re dealing with.

In embracing Lean Thinking, a company is dedicated to discovering what their customers want, and providing it to them in a way that adds nothing but value — that the customers will pay for. By doing so, the company will create value (profits) for itself as well.

Welcome back to Lean Six Sigma Source! Thanks for your continued support.

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