What is Lean Manufacturing?

For many people, the phrase “Lean manufacturing” is synonymous with removing waste – and eliminating waste is certainly a key element of any Lean practice. But the ultimate goal of practicing Lean manufacturing isn’t simply to eliminate waste – it’s to sustainably deliver value to the customer.

To achieve that goal, Lean manufacturing defines waste as anything that doesn’t add value to the customer. This can be a process, activity, product, or service; anything that requires an investment of time, money, and talent that does not create value for the customer is waste. Idle time, underutilized talent, excess inventory, and inefficient processes are all considered waste by the Lean definition.

Lean manufacturing provides a systematic method for minimizing waste within a manufacturing system, while staying within certain margins of control such as productivity and quality. In this article, we’ll discuss the:

• Origins of Lean manufacturing
• Importance of understanding Lean principles in any Lean practice
• Key concepts of modern Lean manufacturing practices

Lean manufacturing is not a new concept–early versions of the method can be dated back to the beginning of the 20th century, when large-scale assembly line manufacturing was beginning to take root. As companies were beginning to think beyond local and regional distribution, as they were competing with both domestic and foreign competitors for market share, the need for efficiency, consistency, and speed gave birth to the scientific study of how things are produced.

Toyota Production System (TPS)

The most noteworthy method to come from this time is now known as the Toyota Production System, or TPS. Taiichi Ohno and Eiji Toyoda, two Japanese industrial engineers largely considered to be the founders of the Toyota system, summarized the system with these three objectives:

• Design out muri (overburden)
• Design out mura (inconsistency)
• Eliminate muda (waste)

In other words, by focusing on process design and flow, companies can create a system that sustainably creates more value and less waste.

TPS explicitly defines eight types of waste, which provides a helpful framework that continues to be relevant in Lean manufacturing to this day:

• Waste of overproduction
• Waste of time on hand (waiting / idle time)
• Waste of transportation
• Waste of processing
• Waste of excess inventory
• Waste of movement
• Waste of making defective products
• Waste of underutilized workers

Honing in on how to systematically design out overburden and inconsistency and eliminate waste helped Toyota grow to the global giant that it is today. Many companies began implementing the Toyota model – also known as the Toyota Way – without a clear understanding of the philosophy that made it so successful.

More important than the Lean manufacturing practices of eliminating waste and designing out overburden and inconsistency are the management principles that underlie these practices.

The Toyota Way includes 14 principles, which are often organized into these four main ideas:

1. Long-Term Philosophy: Make management decisions based on long-term philosophy, even at the expense of short-term financial goals.
2. The Right Process Will Produce the Right Results: A relentless emphasis on process is critical for sustainably delivering value. This means creating a continuous process flow, using a “pull” system instead of a “push” system (as we’ll explain later), balancing capacity and demand, standardizing repeatable tasks and processes, and creating a culture of “stopping the line” when errors occur, so that problems can be fixed as soon as they arise.
3. Add Value to the Organization by Developing Your People: People are an organization’s greatest asset. Invest in them, support them, encourage their growth, and treat them with respect by continuously working to improve the environment in which they operate. This includes employees, customers, vendors, and suppliers.
4. Continuously Solving Root Problems Drives Organizational Learning: Every “mistake” is a teachable moment. By analyzing, studying, and openly discussing when and how things go wrong, organizations can learn and grow. The role of leaders is to prioritize learning over perfection – to experience and problem solve issues as they arise, and share learnings so that the same mistakes are not repeated.

All four of these concepts can be found in modern implementations of Lean manufacturing. However, throughout the twentieth century, TPS concepts were often left out as companies formed their own ideas of how Lean manufacturing could contribute to their success.

In attempts to emulate the success of Toyota, many companies translated “going Lean” to mean cutting waste, cutting corners, and cutting people: relentless elimination of waste with little regard for the health of the overall system.

Companies that implemented Lean practices more holistically rose to prominence – while those that didn’t, suffered from a crippling lack of agility and innovation, as well as poor morale.

This time gave rise to other methods and tools aimed at increasing efficiency, many of which continue to be used to this day.

Examples of Lean production methods in use today include SMED (Single Minute Exchange of Die), TPM (Total Productive Maintenance), and Kanban, while examples of methodologies used in Lean Manufacturing include Lean Six Sigma and DMAIC (Define, Measure, Analyze, Improve and Control). Each of those movements has its own unique merits, but it would be fair to say that the style of management they were aiming for is now generally thought of as Lean.

Jim Womack and Dan Jones finally captured the essence of why some Lean organizations thrived while others failed. First in The Machine that Changed the World and then in Lean Thinking, they raised our level of understanding from copying specific practices to seeing the underlying principles that make the entire system work.

When implemented properly, as a way of thinking as well as a set of tools and practices, Lean manufacturing offers a holistic approach to continuous improvement, with the methods, tools and cultural ideals that companies need to stay innovative and agile.

While you might not think of them as principles specific to Lean manufacturing, you may recognize some of these concepts from their work:

• Value stream mapping
• Demand-based (pull) system
• Continuous improvement
• Measurement, KPIs, and Visualization

These Lean manufacturing concepts and tools enable organizations to become nimbler and more innovative, while improving quality and production time.

Value stream mapping

The term “value stream” refers to the process it takes to turn a customer request into a deliverable piece of value. Value stream mapping is the analysis of that process, and can be used to improve any process where there are repeatable steps, and especially when there are multiple handoffs. The purpose of value stream mapping is to be able to analyze the overall process and each of its steps, to be able to design out (to borrow from TPS) overburden, inconsistency, and waste.

To understand the role that a value stream plays in Lean manufacturing, think of the concept of an assembly line: There are specific steps that need to be done in order for a collection of raw parts to be turned into a functional product. Mapping out this value stream involves defining each of those steps and where handoffs occur between them.

But modern manufacturing value streams are more complex, combining the work of mechanical and software engineers, scientists, chemists, designers, and others. The actual manufacture of the physical product is just one part of a much larger value stream. Defining and visualizing each of these steps is critical to practicing process improvement.

Much of the waste in knowledge work occurs in the handoffs (or wait time) between team members, not within the steps themselves.

Inefficient handoffs in knowledge work may not look like bottlenecks on a car assembly line, but they produce the same effect: decreased productivity, overwhelmed workers, and lower work quality.

Analyzing inefficiencies and taking steps to eliminate them at the organizational level is the first step toward becoming leaner. Lean actions can be focused on specific logistical processes, or cover the entire supply chain.

For example, an analysis of a SKU would look like this: First the path is visualized, and all the participants from material suppliers to the consumer are evaluated, before a gap analysis is conducted to determine necessary next steps to improve the value stream and achieve the objective. Then small improvements are made, over time, throughout the supply chain, increasing organizational learning and streamlining the process of creating that SKU.

Demand-based flow (pull) manufacturing

Lean manufacturing is all about optimizing flow: Creating a system that sustainably, consistently delivers value. The sustainability part of this relies on effectively managing capacity – making sure that the workload is balanced and manageable throughout the value stream. Implementing a demand-based, or (pull) manufacturing system is key to effectively managing capacity.

In a pull manufacturing system, inventory is only pulled through each production center when it is needed to meet a customer’s order. Pull systems allow “just-in-time” delivery of work. Unlike other work methods that allow for an unlimited amount of work at once, a pull system enables everyone at a specific organizational level to focus on one thing (or just a few things) at one time.

Benefits of using a Kanban control system or pull system include:

• Ability to manage change
• Ability to quickly adapt work to new information
• Increased ability to scale the team to the appropriate size for the project

As they work through a list of “to-do” items in a backlog, team members pull new tasks only as old tasks are completed. This way, when something changes that impacts the business requirements (as it always does), the team can quickly adapt, knowing that the majority of work they have already completed can still be applied to the project.

Finally, because teams using a pull system are self-managed to a certain degree, pull systems contribute to the scalability of a team, or the ability for a team to accommodate different sized projects while remaining cohesive.

For manufacturers, this means teams can be more agile, deliver faster, and innovate faster and more strategically. Organizations that adopt a Lean pull system are also able to significantly improve the reliability and accuracy of forecasting for their suppliers and customers.

Continuous improvement

An organization-wide commitment to continuous improvement is essential for sustainable success with Lean manufacturing. At its core, Lean is continuous improvement – it’s improving product and process while eliminating redundant, excessive, or inefficient activities.

Continuous improvement can be viewed as a formal practice or an informal set of guidelines – but it must be well integrated into the culture of an organization in order to make a meaningful and lasting difference.

Measurement, KPIs, and visualization

A famous quote by management expert and consultant Peter Drucker says, “You can’t manage what you can’t measure.”

Lean manufacturing metrics, such as lead time, cycle time, throughput, and cumulative flow help organizations measure the impact of their improvement efforts. Collecting, analyzing, visualizing, and socializing these metrics (through shared dashboards) is essential to promoting transparency and driving change.

Successful Lean manufacturers use up-to-date dashboards at the team, leader, and executive levels to paint an accurate picture of the impact that changed processes are having. It should be noted that the emphasis is on surfacing key performance indicators of processes – not people. This reinforces a collective responsibility by teams to pursue opportunities for improvement and focus on value creation for customers.