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The Beginner’s Guide To Lean

Jones, Dan
12/1/2003

Toyota has just overtaken Ford as number two in the global motor industry, and at the Tokyo motor show confirmed its intentions to overtake General Motors to become number one by 2010.

It is a bold statement, but the company’s achievements so far have not been made through buying market share, far from it, Toyota is making record profits and could buy many of its competitors for cash.

A senior Toyota executive recently summarised the reason for the company’s relentless progress over the years. “Brilliant process management is our strategy. We get brilliant results from average people managing brilliant processes. We observe that our competitors often get average (or worse) results from brilliant people managing broken processes.” This sums up the real challenge of lean manufacturing: how to progress beyond eliminating waste in broken processes to creating brilliant processes.

Toyota is now moving forward and using this process advantage to introduce new hybrid engines that will redefine the core technology of the auto industry for the decades ahead. The rise of Toyota from nowhere fifty years ago to global leadership is a remarkable story that should make every industrialist stop and take notice. Why would you not want to be the Toyota for your industry, creating solid revenue growth through the business cycle by creating real value for customers?

Assuming that this is exactly what you are striving for, how do you start creating brilliant processes in your organization? The first thing to do is to learn from the experiences of the lean movement over the last decade. Many companies began their lean journey by recognizing that only a small fraction of the steps we carry out actually create the value the customer is paying for, the rest is muda (the Japanese word for waste). So they went on muda hunts and initiated 5S programmes to clear everything unnecessary out of the way. What they achieved was lots of easy improvements that yielded a quick benefit.

At the same time firms discovered that it was possible to make dramatic changes to an area in a short space of time through Kaizen breakthrough exercises. After a roller-coaster ride during the five days, teams typically report big leaps in performance. This brakes the “we have always done it this way” logjam and gets things moving. It also shows that you do not need to spend a lot of money to make these changes. Kaizen is hard work and exhilarating and a great way to open minds to change. However, when undertaken on their own in this way, they create islands of excellence which, if they are not linked together, make little difference to the bottom line.

Learning to see waste and to understand that rapid change is possible, however, are only preparatory steps for lean. The second thing to do is to learn to see your organization from a process perspective. Lean is a business system focused on managing processes and improving them by compressing time rather than keeping each of the assets busy.

Every organization is a collection of several primary value cresting processes (design and production) and a host of supporting processes (such as finance and maintenance). A process is a sequence of steps that must be carried out in proper order to create value for the customer and managed as a whole and not separately.

The best way to learn to see your processes is to take a product and follow its path from beginning to end—from order entry to delivery to the customer. Mapping what we call a value stream reveals how the current process operates today—not how it is supposed to operate. It also reveals all the wasted time and effort in the process. It is both a consciousness raising exercise for all those involved and a powerful diagnostic of how broken the current process is.

It is clear that lean is a journey which requires stamina and perseverance. Toyota made the fundamental switch from managing assets to creating flow and pull internally by 1960 and a decade later began to help its first tier suppliers do the same. This cascaded to the second and third tier suppliers during the 1980s and into the parts distribution system in the 1990s. Having made this switch it has been refining its processes ever since. It still sets very demanding improvement goals for each new product generation.

We are still on the threshold between managing assets and managing process flows. The changes that are required are in part a physical reconfiguration of our operations, but much more a change in consciousness and behavior by our employees and managers. This can only come about by learning by doing, and by working out your own answers for your own situation. It may be comforting to note that if you keep going down this path it will be very difficult for others to catch up. On the other hand if you are slow off the mark it might be difficult for you to survive!