Lean Thinking for Process Improvement

Part 2 of aThree-Part Series

Part 1: Process Improvement Programs - Six Sigma?
Part 2: Lean Thinking for Process Improvement
Part 3: Theory of Constraints for Process Improvement

This month we are examining different process improvement programs on the market. Last week we discussed Six Sigma and its application in high technology, high transaction, or expensive error environments. But if you are in a mature industry, a service business, or an organization that handles few transactions, then perhaps Lean Thinking (waste reduction) or the Theory of Constraints (throughput improvement) would work better.

Lean Thinking

First, what is Lean Thinking anyway? As the name implies, it is really a mindset — a way of viewing the world. Lean is about focus, removing waste, and increasing customer value. Lean is about smooth process flows, doing only those activities that add customer value and eliminating all other activities that don’t.

Adding value is another way of saying generating revenue. If it doesn’t generate revenue then it must add cost, not value. Sounds easy doesn’t it, I mean after all, this is what we do every day… or is it? Let’s see.

Process Flow

There are five basic steps in assessing lean operations:

1. Identify the activities that create value
2. Determine the sequence of activities (also called the value stream)
3. Eliminate activities that do not add value
4. Allow the customer to “pull� products/services
5. Improve the process (start over)

For example, let’s take a look at the most fundamental cycle within a lean operation, the order-to-delivery cycle. The top level activities, in sequence, are taking an order, building the order, and delivering the order. The activities that do not add value are such things as: order entry, backlog, inventory, and shipping delays.

In a lean operation we could have the customer enter their own orders; products made on demand, so we would have no backlog or inventory, and then product could be shipped overnight for minimal shipping delay (or downloaded in the case of software).

Companies with very short order-to-delivery cycles (and not using inventory as a buffer) are lean operations. Lean operations have a strong cash cycle. In general, the shorter the cycle the leaner the operation. Do you know any companies like this?

Here at Bizmanualz we carry very little inventory, customers enter their own orders via the web, we make product on demand, and ship within 24 hours. Our order-to-delivery cycle is very short (within 24 hours or the same day if the order is in before 2pm).

5S System

Another important tool used in lean thinking is the 5S system of organization. The idea is that a messy workplace, desk, or manufacturing cell makes it hard to find things, easier to get distracted, and can introduce accidents or mistakes. The 5S’s stand for:

1. Sort – Sort needed and unneeded items
2. Set in Order – Arrange things in their proper place
3. Shine – Clean up the workplace
4. Standardize – Standardize the first three S’s
5. Sustain – Make 5S a part of the job

Note the visual nature of lean. Lean Thinking is very visual, picturesque, even Zen like. It is definitely a state of mind. Clean, clear, and focused at the task at hand and nothing else. It does not require a lot of mathematical analysis, unlike Six Sigma.

Six sigma vs Lean Thinking

Six Sigma is problem focused with a view that process variation is waste. Lean Thinking, on the other hand, is focused on process flow and views any activity that does not add value as waste. Six sigma uses statistics to understand variation. Lean uses visuals: process mapping, flowcharting, and value stream mapping, to understand the process flow.

Program	Six Sigma	Lean Thinking
View of Waste	Variation is waste	Non-value add is waste
Application	Define Measure Analyze Improve Control	Identify Value Define Value Stream Determine Flow Define Pull Improve Process
Tools	Math-Statistics	Visualization
Focus	Problem focused	Process flow focused

Taiichi Ohno is credited with creating the Toyota Production System (TPS), which is one of the better known implementations of Lean Thinking anywhere in the world. The concepts of lean were born out of the severe resource constraints in postwar Japan, which leads us to next week’s process improvement program - Theory of Constraints.

Lean Thinking is ideal for mature (energy), slow growth (automotive), low transaction industries (small business) or an organization where mathematical tools are not common. Lean begins to use systems thinking and considers all of the process interactions.

But lean is still a reductionist approach focused on eliminating waste (cutting costs). What is needed is to balance the resources released through Lean or Six Sigma improvement programs with an increase in throughput and need for resources. Otherwise you enter a cost cutting, job losing cycle and your process improvement program will grind to a halt.

If you are in a mature, slow growth, low transaction, or non-math business then Lean Thinking will work real well for your organization. So what’s left? Six Sigma and Lean use two different approaches to get the same end result – process improvement. The Theory of Constraints (throughput improvement) takes the concepts of Lean Thinking to another level of systems thinking.

Next week we will discuss throughput improvement and see how it ties the capacity or resources released through Lean or Six Sigma waste reduction programs to an increase in throughput without costing jobs while motivating people to keep improving.

To learn more about using process improvement programs for your organization, attend the next How to Align a System of People and Processes for Results class. If you are eager to learn more about creating more order out of the chaos you are feeling at work then the How to Create Well-Defined Processes class is right for you. ISO 9000 Quality Auditor classes are forming now for Internal Auditor or Lead Auditor.

Call for information on having your own private in-house classes today.

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Posted on Thursday, July 14th, 2005 under Business Process Improvement