What Is Lean?

Wondering what's behind Toyota overtaking GM as the largest auto manufacturer on the planet or how about the incessant rise in the price of Danaher's stock? At Ultriva, we think it's Lean.

The origins of Lean probably go back as far as the factory, but it probably makes sense to begin our historical overview with Henry Ford and the moving assembly line which significantly reduced standardized production times. The success of Ford, led to a transformation in global manufacturing. Processes evolved and improved, taking a significant leap forward with Toyota's quest for increased efficiency after the Second World War. One man who rightfully gets a lot of credit in the birth of Lean is Toyota executive, Taichii Ohno.

Legend has it than when Ohno came to the Unitied States to examine American assembly lines, he was less impressed by the factories he saw than the American supermarket What did he observe there? Real-time replenishment of inventory. A product was removed from the refrigerator and what happened? Another one took it's place. It did not take shelf-space until it was needed and demand for the product drove it's replenishment. It was likely only a small driver in the insipiration behind the Toyota Production System (TPS), but it's a great story and, as you'll see shortly, it's a great illustration of the principles of Lean.

TPS with its emphasis on waste reduction, continuous improvement and doing more with less was, in a way, a culmination of many of the principles of Lean, even if Lean did not yet have a name. Finally, in the 1990s, Jim Womack coined the term and Lean as a philosophy, methodology, and discipline was born.

So what is Lean? Search the web and you'll find many related, but varied definitions. We too have ours. Combined with the genesis story above, we think the spirit, if not the definition, of Lean can be reduced to 3 basic tenets:

1) Lean is first and foremost about the elimination of waste. Waste can be wasted shelf-space, wasted time, wasted money, wasted effort... it's all waste. In the supermarket example, the grocer eliminated wasted shelf-space through a demand-driven system of replenishment. A mik is taken, another takes its place. Which leads to our second tenet of Lean:
2) The elimination of waste transforms an organization, a process, an operation... into a demand-driven one. What this basically means is that if someone doesn't want IT, IT is not produced, because producing IT would be wasteful if no one wants IT. Demand for a carton of milk drives the replenishment of milk on the store shelf. That milk was not "produced" on the shelf until it there was demand for it. This then leads to our final tenet:
3) Demand driven businesses cost less to run than their forecast-driven counterparts. This should be intuitive. If you aren't wasteful in your operations, you should have lower costs than your competitor.

Lean principles are frequently applied in manufacturing. We'll touch on this in greater detail in future posts, but Lean manufacturers produce based on demand signals. Demand signal production is visible throughout a Lean manufacturing operation. A line worker demands a part from the supply room when he's depleted (or nearly depleted) what he has (often using a Kanban card, which we'll discuss later). As the stockroom depletes to satisfy the line worker, demand should drive the replenishment of that part from the supplier. Demand drives replenishment throughout and in doing so, waste is eliminated. Perhaps the line requires less space because unneeded parts aren't stacked up or the supply room is smaller because the part is acquired from the supplier only when needed. Less wasted space means lower costs. Or maybe there is less wasted communication based on estimates of needed parts, helping to save additional time and money. As our expertise is in manufacturing software, we believe that the more automated the process is, deploying, for example, electronic kanban software to send signals, typically the more efficient an operation will ultimately be.

Lean principles can be successfully applied in other industries. There is a burgeoning movement, for example, to apply Lean in the healthcare sector (covered here). As waste elimination is smart business, Lean has applications across industries. Today, Lean is being adopted by companies across the globe and driving impressive business results.