Lean has been used widely and successfully across the manufacturing and service sectors for many decades. This guide provides an introductory level overview of what Lean is and the value it adds to businesses.
In this guide:
- What is Lean?
- What are the differences and comparisons between Lean and Six Sigma?
- What is the origin of Lean?
- Which are the key Lean principles?
- What are the seven wastes of Lean?
- What is 5S?
- How Lean methodology is used by businesses
What is Lean?
Lean is a philosophical way of working that emphasizes the removal of waste within a process. At its core is the principle that expenditure of resources for any goal other than the creation of value for the end customer is wasteful and therefore should be a target for elimination. This principle is applied from the perspective of the customer who consumes a product or service.
Value is commonly defined as any action or process that a customer would be willing to pay for. Put simply, a Lean process actively focuses on preserving value with less work. The aim is to create enhanced efficiencies that result in improved process flow and ultimately increased speed across a process.
"A Lean process actively focuses on preserving value with less work"
Lean philosophies achieve this through applying a series of "tools" which assist in the identification and steady elimination of waste. As waste is eliminated, quality improves while production time and costs are also reduced.
A Lean process emphasizes getting the right things to the right place at the right time in the right quantity, to achieve a perfect, sustainable workflow while minimizing waste and being readily adaptable to change.
What are the differences and comparisons between Lean and Six Sigma?
Six Sigma involves a customer-centric methodology that focuses on reducing the extent of variation within manufacturing and/or service processes through rigorous data analysis to eliminate defects.
The extent of customer-centricity is reflected by the typically accepted Six Sigma definition of a defect being any process output that does not meet customer specifications.
Read more: Why Lean Six Sigma is poised for a comeback in 2023
The term "Sigma" originates from the Greek word that refers to the standard deviation within a data set population. Incorporating statistical theory, Six Sigma in a process context means there are six standard deviations between the process mean and the nearest specification limit that will yield just 3.4 defects per million opportunities.
Put another way, the process will perform defect-free 99.99966 percent of the time. Both Lean and Six Sigma focus upon continuously improving processes.
What is the origin of Lean?
It is widely accepted that Lean principles originate from the Japanese manufacturing industry, with the term "Lean" first being used by Bob Hartman in his 1988 article Triumph of the Lean production system.
The Toyota Production System (TPS), developed by the Japanese automotive manufacturer, is widely acknowledged as a key originator and influencer of contemporary Lean philosophy, particularly through the application of its Seven Wastes theory.
From the 1990s onwards, an increasing number of both services and manufacturing organizations throughout the world have successfully incorporated the application of Lean within their businesses.
Which are the key Lean principles?
The following items represent some of the most fundamental principles used in Lean philosophy:
Value-adding principles
- Steps that are essential
- They physically change the product and service
- The customer is willing to pay for them
- They need to be done right the first time
Non-value adding principles
- Steps that are non-essential
- The product or service does not meet the customer’s needs
- The customer is not willing or able to pay for them
- Work is not done correctly the first time
Value-enabling
- Steps that are not essential to customers
- They allow value-added tasks to be done better and faster
- A different type of non-value added work for which the customer is not willing to pay for
An example of a value-enabling activity would be obtaining a customer’s credit report. While a loan customer would not necessarily be prepared to pay for this activity, it does enable a more effective credit decision by the lender, resulting in acceptable levels of loan write-offs and avoiding good customers having to pay higher rates of interest to cover excessive losses.
What are the seven wastes of Lean?
The principles relating to the seven wastes of Lean involve the suboptimal utilization of process resources and/or activities. These were originally developed by Toyota’s Chief Engineer, Taiichi Ohno, as part of the Toyota Production System and have been successfully applied within both manufacturing and services environments.
The seven wastes of Lean are:
1. Overproduction. The principle whereby more resources than required to be delivered to your customer are expended. Overproduction is considered to be a particularly bad form of waste because it contributes to many of the others, especially excessive inventory.
2. Unnecessary transportation. Each time a product is moved, it stands the risk of being damaged, lost, or delayed, as well as being a cost for no added value.
3. Excessive inventory. Inventory, in any of its stages of use, represents a capital outlay that has not yet produced an income, either by the manufacturer or for the consumer. Inventory not being actively processed to add value is considered waste.
4. Excessive motion. Compared to transportation, here motion is considered in the context of the producer, worker or equipment. Excessive motion contributes towards increased risks of damage, wear and safety. It also extends to fixed assets and expenses incurred in the production process.
5. Defects. Process defects result in additional costs ultimately being incurred in areas like rework, repair, re-processing, and rescheduling production.
6. Over-processing. This is considered to occur any time more work is performed upon a good or service than what is required by the customer. This includes using tools, materials and/or systems that are more precise, complex, excessive, or expensive than absolutely necessary.
7. Waiting. Whenever goods are not in transport or being processed, they are waiting. This is also applied to workers who are waiting for something in order to perform a process or activity.
What is 5S?
Derived from Japanese manufacturing practices, 5S pillars – Sort (Seiri), Set in order (Seiton), Shine (Seiso), Standardize (Seiketsu), and Sustain (Shitsuke) – are workplace organization principles that describe how key process resources are to be stored, along with how the supporting operating disciplines will be sustainably maintained.
These are described as follows:
1. Sort. The elimination of all unnecessary tools, parts and ancillary materials. Only essential items are retained within the work area, with everything else being stored or discarded.
2. Set in order. There should be a place for everything and everything should be in its place. The place for each item should be clearly labeled or marked. Items should be arranged in a manner that promotes efficient work flow. Each tool, part, supply and piece of equipment should be kept close to where it will be used ito optimize the flow path.
3. Shine. Keep the workplace tidy and organized. At the end of each shift, clean the work area and be sure everything is restored to its place. This makes it easy to know what goes where and ensures that everything is where it belongs. A key point is that maintaining cleanliness should be part of the daily work routine and not an occasional activity initiated when things become untidy.
4. Standardize. Work practices should be consistent and standardized. Everyone should know exactly what their respective and group responsibilities are for adhering to the first 3 S's.
5. Sustain. This involves the ongoing maintenance and review of standards once the previous 4 S's have been established as the only way to operate. This approach enables continuous improvement outcomes to be achieved through genuine engagement and participation with the workers.
How Lean methodology is used by businesses
While having originated in the Japanese manufacturing sector, Lean philosophies have been successfully applied across a myriad of manufacturing and services sectors the world over, delivering ($US) billions in organizational benefits as a result.
Provided that Lean principles are correctly applied and with appropriate levels of executive level sponsorship, significant and sustainable improvements in manufacturing and service delivery efficiencies can be realized.
Read more: What is operational excellence?
Here are some examples of businesses that have successfully implemented Lean principles to improve their operations and increase their competitiveness:
Amazon. Known for its lean approach to logistics and supply chain management, the company uses sophisticated algorithms and data analysis to optimize its inventory management, transportation and distribution networks. This has allowed Amazon to reduce waste, increase efficiency, and offer faster delivery times to its customers.
General Electric (GE). GE has implemented lean principles across all its business units. One example is the use of Value Stream Mapping (VSM) to identify and eliminate waste in its manufacturing processes. This has led to significant cost savings and improved quality control.
Starbucks. The multinational coffee shop chain has implemented lean principles by developing a standard operating procedure for making espresso drinks, which allows its baristas to consistently deliver high-quality drinks while minimizing waste and errors.
Nike. Nike uses VSM to identify bottlenecks and inefficiencies, as well as
Just-in-Time (JIT) production, an approach that enables the company to minimize inventory and reduce waste. By producing goods in small batches based on customer demand, the amount of inventory is reduced, along with the the associated costs of holding and managing inventory.
- This article was originally published on June 8, 2010 and updated on March 23, 2023.
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