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Lean 101
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This document provides an overview of Lean fundamentals to aid in driving
down costs and designing process improvements
Lean principles provide a method to drive cost, quality and timing improvements throughout
an organization
Companies that devote the resources to embed Lean principles within their culture see
improvements in customer satisfaction and cost performance year after year
Lean, used alone or in conjunction with Six Sigma, provides useful tools to manage processes in
order to reduce waste and increase customer satisfaction
Lean 101
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Implementing Lean can provide several benefits in terms of increasing
revenue, decreasing costs and improving asset utilization
Firm Value
Operating Income
Revenue
Benefits
from Lean
Lean 101
Increases revenue by
increasing production
and lowering the price
of a product/service
by increasing
throughput/efficiencies
Asset Utilization
Cost
Reduces costs
through waste
elimination, zero
defects, less takt
time, etc.
Reduces overhead
Inventory
Reduces inventory
held through use of
Lean tools such as
WIP, JIT, Kanban,
Poka Yoke
IT Systems
Improves IT systems
utilization, while
reducing complexity
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Steps of Lean thinking
Lean 101
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Lean is a continuous process to reduce waste executed in five distinct but
interconnected steps
Define value from the
customers perspective
and express value in terms
of a specific product.
Complete the elimination of
waste in steps/tasks/elements
so as many activities as
possible create value for the
customer. Ensure ongoing
compliance and quality
control.
Map all process steps that bring a
product or service to the customer
identify which are value added and
which are non-value added.
1
Specify Value
2
Map the Value
Stream
5
Work to
Perfection
3
Establish Flow
4
Implement Pull
Measure continuous
movement of products,
services and information
end-to-end through the
process.
Implement pull strategy
(vs. push) since nothing is done
by the upstream process until the
downstream customer signals
the need.
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The first step is defining value in the eyes of the customer
Definition of Value
Value is anything that:
The customer is willing to pay for,
and that
Transforms the products toward
completion
Whats important
to you?
Customer satisfaction
with what you provide today
Waste is anything that does not add value
Voice of Customer (VOC)
Collect VOC data, which reveals the
customers perspective
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What the customer wants,
based on his/her true need
(regardless of what your process
is capable of producing)
How am I doing?
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The next step is using value stream mapping to identify waste throughout
a process
Production
Sales
Suppliers
High
variation
VA
Customer
Demand
Forecasts
Typically only 5% of total process
time is value added
High
defect
rate
Forecasts
Subassembly
Components
4 weeks
Long
setup
times
Forecasts
Excessive
inventory
Test
Final Assembly
Ship
42 days of
processing
with 192
minutes of
valueadded time
42 days
10 days
5 days
3 days
4 days
Stage
5%
192 minutes
120 min
42 min
10 min
15 min
5 min
BNVA
30%
65%
NVA
Non-Value Add (NVA): Pure waste
Business Non-Value Add (BNVA):
Necessary now but still waste
Our goal is to eliminate NVA activities wherever possible and
minimize the BNVA (eliminate waste)
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Waste comes in seven different forms and can be found in any activity
Elements of Waste
Why a Waste?
Related to:
Transportation
+
Motion
Lower productivity
Longer lead times
Possible part damage
Higher work in progress
Consumes floor space
Layout (badly designed process)
Organization
Poor housekeeping
Sharing of equipment
Overproduction
+
Waiting time
+
Inventory
Extra resource to manage
Hides shortages and defects
Consumes resources ahead of necessity
Difficult to identify source of quality
problems
Poor production planning
Breakdowns
Long setup times
Availability of suitable skills
Consumes resources
Increases production time
Lower return on capital employed
Higher product cost
Materials/out-of-date standards
Inadequate training/skills
Lack of innovation and improvement/product
design
Lack of standard operating procedures (SOPs)
Incomplete design and engineering information
Overprocessing
+
Defects
Lean 101
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Once the value stream is identified, the next step is to establish flow by
mapping continuous movement of products, services and information
through the process
Batch Processing
One Minute Per Piece
Continuous Flow
Make One, Move One
Lead Time = 30++ Min
(maybe even weeks)
Lead Time = 12 Min
Continuous Flow
Single-Piece Flow
Benefits of Single-Piece Flow
Key to having improved flow is eliminating
batch operations and focusing on single-piece
flow
Key benefit: catches defects immediately
You only have one
You know where it occurred
Resolve the root cause immediately
Lean 101
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Key to improving flow is instituting single-piece flow continuous processing,
wherein each step of the process meets the calculated takt time
Takt Time
The Heartbeat of the Business
Takt time is the pace that every
operation follows; calculated as follows:
TAKT TIME = Available Time
Demand or Forecast
AVAILABLE TIME: Total amount of time
actually available for production (less
breaks, lunch, etc.)
DEMAND: Quantity of scheduled parts for a
given time frame
Takt time example:
Typically for an eight-hour shift, there will be 6.5
hours of actual production time (Available Time)
Assuming that you had two shifts running, that
would result in 13 hours of Available Time
If daily demand was 780 pieces per day:
Takt time = 13 hours/780 pieces = 780 minutes/
780 pieces = 1 minute
Every process would need to complete in
one minute to support the flow
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Standardized work and error proofing are two of the main enablers that
ensure flow is maintained at takt time
1
Standardized Work
Error Proofing (Poka-Yoke)
Defines what normal work looks like:
Prevents defects by design:
Describes the optimal process for people and
machines to complete tasks
Designed to catch errors at the source rather
than at a later inspection
Allows for easy visualization of waste in the
defined process
Typically either a shut-out (prevents further
processing) or attention (requires operator
response) type
Enables identification of variation or changes in
the process
Lean 101
Can be anything from a fixture that prevents bad
parts from proceeding to a counter to checks for
all process steps being completed
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The next step is to implement pull to align the firm around customer needs,
thereby producing only what is needed
Push (Traditional Approach)
Pull (Just-in-Time Approach)
Definition
Couples production with forecasted demand
More proactive driven off production planning
Couples production with actual customer demand
More reactive in response to customer needs
Capacity
Utilization
High-capacity utilization
More production at each stage
Lower-capacity utilization
Focuses on producing only what is needed
Workflow
More stoppages
Extra production goes into inventory because of
continuing stoppages
High inventory, resulting in less chance of
problems being exposed and solved
Fewer stoppages
No surplus production goes into inventory
Low inventory, so problems are exposed and solved
Characteristics
Stage
A
Inventory
(buffer)
Stage
B
Inventory
(buffer)
Buffer-separated stages
Order Signal
Order Signal
Stage
C
Stage
A
Deliveries
Stage
B
Stage
C
Deliveries
Deliveries are made on request
Preferred Approach
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Customer demand often must be leveled to operate efficiently
Typically, customer demand is variable, which causes problems throughout the supply chain
Customer
Demand
Supply Chain Impacts
Quality Issues
Inventory Swings
Reactive Nature Driven into Culture!
Shop Floor Impacts
UNITS
Actual
Production
Excess Overtime
Increased Inventory/No Inventory
Customer/Delivery Issues
Shortages
Work Around Culture Results
Average
Production
TIME
Apply leveling to reduce the effect
Customer
Demand
Leveled
Production
Supply Chain Benefits
Customer
Demand
Deplete
FG Inv.
Creates Environment for
Standardized Inventory Balances
Shop Floor Benefits
Perform Std. Work to Takt Time
LEVELING
Setting Pace for Supply Chain/Production
UNITS
Actual
Production
TIME
Lean 101
Build to Fcst . Actual Production
Timely Signaling POs to Supply Chain
Inventory Levels Relative to Takt Time,
Standardized!
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The last step is instituting a process to obtain continuous incremental
improvements
Continuous improvement never stops
Lean
Vision
Next
future
state
Next
future
state
n
Kaize
n
Kaize
ku
n
Kaize
Time
Lean 101
Kaik
a
Improvement
Future
state
Need Both!
n
Kaize
Kaizen = Evolutionary Change
Kaikaku = Revolutionary Change
en
Kaiz
Preferred
Approach
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which is the essence of Lean, i.e., Kaizen
Kaizen Approach
What does Kaizen mean?
Kaizen is Japanese for change for the
better
Start
Establish and
Evaluate
Current State
In practice and simply put, Kaizen is
synonymous with continuous improvement
Generate
Improvement
Ideas
Sustain
The Kaizen process includes small, gradual,
incremental changes applied over a long
period that add up to a major impact on
business results
Implement
Improved State
Verify/Adjust
Implemented
Ideas
Kaizen is continuous improvement
prescribed and practiced by the people
Benefits of
Kaizen
Lean 101
Increases value-added activities by eliminating waste from business processes, which results in improving
product quality, cost and delivery to achieve customer satisfaction
Focuses on improving business processes to get results aligned with organizational objectives involving
everyone top management, managers and workers
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Key takeaways
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Key takeaways
Lean focuses on reducing waste and meeting customer expectations
Determining what customers need and want helps identify where value lies in any process
Once value is identified, value stream mapping pinpoints where waste can be found
Eliminating batch processes and implementing single-piece flow reduces waste in the system
Moving from scheduled push systems to customer-pull systems further reduces waste and
improves responsiveness to customer needs
Lean is a continuous improvement philosophy based on regular, incremental improvements
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Resources if you want to know more
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Other sources of information
Organizations
Lean Institute [Link]
The Ohio State University Center for Operational Excellence [Link]
Books
Learning to See by Mike Rother and John Shook
Creating Level Pull by Art Smalley
Creating Continuous Flow by Mike Rother and Rick Harris
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Appendix
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Glossary
5S: Building blocks for process discipline and control: Sort, Sweep, Standardize, Self-Discipline, Sustain.
Action Workout: (Kaizen) 3-5 day team-based activity focused on quickly solving problems through physical
simulation and evaluation.
Andon: A visual device (light) or pin-pan-pon that operators use to call attention to an abnormality. The use
of this is to request immediate attention to the problem.
Automation: The use of machines/systems that work independently of people.
Autonomation: The process of separating the work of man and machines/systems, characterized by work,
not movement; quality built into the process; visual management. (See Jidoka)
Bottleneck: Any activity or process that limits flow or capacity.
Cell: The optimal physical or digital layout of machines/systems and people for a product or product family,
which identifies and eliminates waste.
Chaku-Chaku: A method of conducting single-piece flow in which the operator proceeds from machine/
systems to machine/systems (in a counterclockwise fashion), taking a part from the previous operation and
loading it in the next machine/systems. Then taking the part just removed from that machine/systems,
checking it and loading it into the following machines/systems, etc.
Continuous Flow Processing: Carrying out one-piece-at-a-time processing in order to eliminate stagnation
of work (queue) in and between processing steps. (See Flow)
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Glossary
Cycle Time: The total time required for a task to be completed. Elements include manual and travel times,
automated or machine/system run time.
DPU: Defects per unit.
Flow: Work done simultaneously with or in conjunction with transportation or conveyance: e.g., (1) an
assembly is moving down a line while a person is performing work, (2) a person acts as a conveyor carrying
a part to the next machine/system in a Chaku-chaku fashion. The main purpose of flow is to quickly and
continuously identify and eliminate waste.
Frequent Conveyance: Increasing the delivery frequency of parts, such as parts from outside vendors, in
order to keep inventory to a minimum.
Heijunka: The process of level loading and sequencing the timing of production/processing.
Jidoka: Machines/systems that have human intelligence built into them, giving them the ability to shut
down automatically in the case of an abnormality in order to stop defective products from flowing into the
next process. Jidoka measures are incorporated in the assembly process by use of Andons and Pin-Pan-Pon;
stopping when abnormality is detected.
JIT (Just in Time): Theory of production characterized by (1) single-piece flow, (2) producing according to takt
time, (3) pulling of material/information from upstream process and keeping inventory at minimum,
established levels.
Kaizen: Change for the better; a process quality tool for improvement, involving a series of activities
whereby instances of waste are eliminated one by one at minimal cost by workers pooling their ideas and
increasing efficiency in a timely manner. It emphasizes manual work operations rather than equipment. (See
Action Workout)
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