Lean: Relentless Pursuit of Product Value and No Waste

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By Jim Fishbein and Kimberly Watson-Hemphill

Lean, like other process improvement methodologies, is based on the big idea from the 1980s that a business is composed of a series of processes, a value stream, that delivers value to its customers. A process is Lean if it uses only the absolute minimum of resources (material, machines and labor) to add value to the product.

Everybody involved in the process performs only value-added tasks – there is no waste. Value is defined as an activity or step the customer cares about and is willing to pay for when done right the first time. Lean methods are very powerful at identifying the non-value-added efforts and costs inherent in every business process. A core concept of Lean is: "If it doesn't add value, it just adds cost or delay."

Lean evolved during the last hundred years as an approach to improving business operations. It started in manufacturing then was translated in the 1980s into office processes and services industries. Every Lean concept applies equally well to the factory floor as well as to the office and service industries.

The Basics of Lean: TIM WOOD

Lean is about reducing the steps in the process that do not add value and in eliminating the seven types of waste that are found in all office, service and transactional processes. The types of waste are easy to remember as they form the acronym "TIM WOOD." The seven types of waste are:

• Transportation: Moving an item/product/information from one place to another. For example, walking a customer request form to another department in a call center.
• Inventory: Item/product waiting to be processed. For example, allowing orders to accumulate waiting to be processed, or allowing transactions to queue up ahead of other steps.
• Motion: Excess movement and/or poor ergonomics. For example, requiring extra movement because of a poor workplace layout.
• Waiting: Delays caused by shortages, approvals or downtime. For example, idle time in any process waiting for action, or orders in the in-box waiting for credit approval by a supervisor.
• Over-processing: Adding more work than the customer is willing to pay for. For example, inspecting work to make sure it is done right, or doing more than is necessary when the customer does not want the service.
• Over-production: Making or processing more than needed. For example, printing extra copies of an order just in case it's needed.
• Defects/Rework: Correcting mistakes. For example, correcting an omission from an order.

Lean Models: The Principles of Lean

To reduce waste, Lean models can be applied to processes – some call these the principles of Lean. They are:

1. Flow of material and information should be continuous… Ideally neither material or information stops or waits. If it does, it is considered inventory, which is generally undesirable. Inventory might be necessary during the transition to Lean, especially where customer demand cannot be smoothly met by production or services. In the office, continuous flow might mean assigning tasks to one person instead of several so this person can do the end-to-end task for a customer at once, without the costs of hand-offs or idle assets.

2. Produce or act only upon actual customer demand… This means introducing pull systems that pull services when the customer orders, not build to inventory. This avoids the wastes of over-production/inventory.

3. Ensure quality at the source… This ideal asks every worker to make things right the first time. Lean, acknowledging that humans make mistakes, focuses on avoiding mistakes turning into defects and of minimizing mistakes from the get-go, through methods called poke-yoke, or mistake-proofing. An example is the use of transparent windows on envelopes, which eliminates any mismatch between a separate label and the enclosed invoice. First time quality avoids the wastes of inspection, rework and inventory/delay, as well as bureaucratic reviews and logs to check quality.

4. Minimum lot sizing, with the ideal being one... Lean methods drive down the minimum safe lot size as far as possible, towards the ideal one-piece flow. This avoids the costs and delays of batching by dramatically reducing the changeover or set up costs of processes, and is an important enabler of continuous flow. While an obvious application in the factory where machines often have long changeover times, it also has value in the office where, for instance, getting everything ready to prepare a report can take quite long or where an underwriter has to change from processing one type of mortgage to another with different rules. This principle is sometimes met with specialized or dedicated processes, where demand can be segregated so one work group focuses on one type of service or product, hence avoiding changeovers. Bank tellers for instance handle only short-cycle, short-changeover transactions, leaving other bank officers at desks to handle lengthier services for customers.

5. Develop and operate to standard work… Industrial engineering takes the lead here, defining and documenting very clearly how a process should be done, including the predictable failure modes. Lean seeks best practices from the work group and continually makes new ones the standard practice. Methods such as the "5S Approach" refine the workplace so everything is in the right place (straighten), it's ready to be used (shine), and nothing extraneous is in the way (sort). In the office, standard work makes it possible to vary the workforce readily as volumes change, to hone quality towards the Lean ideal, and to drive productivity to new levels.

6. Expect continuous improvement, involving every member of the workforce… One of the most powerful Lean methods is the Kaizen event, which is a 2-5 day session for those who run a process where they identify the wastes in the current process and then identify and implement solutions. Additionally Lean builds into the culture that each person continuously improves their own workspace and part of the processes, hence generates many short improvements, all within the control of standard work.  By making this universal and part of the work expectation between employer and employee, continuous improvement of quality, productivity and responsiveness are ensured.

Besides these six principles, the Lean gurus have quite a few others beyond these basics.

Does Lean work?

Kaizen events have:

• In call centers, reduced handling time of inbound calls 30 percent and abandon rates 50 percent.
• In an order entry unit, freed up labor previously wasted on non-value-added work by 25 percent.
• In a residential mortgage consolidator, reduced response time to customers from two weeks to next day.
• In insurance card processing, reduced errors "to get it right the first time" by 75 percent.

Lean Transformation Results: Small and Big

Smaller Lean projects make dramatic tactical improvements, but when a carefully coordinated, comprehensive change effort is mounted at all levels of a business, major strategic improvement results. A couple of cases:

• In the office processes of a major pharmaceuticals company, 53 Kaizen events in the first five months of their program slashed $24 million from costs.
• In an information flow process of a Fortune 500 Wall Street firm, a mountain of financial documents was received daily, and operators had to access hundreds of documents each day. The transformation to work cells and continuous flow cut access (response) times from days to hours, changed jobs from stressful to routine and predictable, and improved labor productivity by more than 20 percent in two months.

Is a Lean transformation easy? Yes and no. The mechanical parts, things like value stream mapping are easy to use and implement. Some projects are really obvious after a bit of training. But it is more complicated to orchestrate all projects so they are aligned to the business strategy. And it takes time and perseverance to educate the workforce, gain their active support and willingness to continuously improve. And most importantly, it is necessary to get leaders to act differently themselves so they foster change rather than inhibit it.

But after nearly 29 years of refining Lean in the United States, the art is becoming a science and successful transformation approaches are known. One refinement of merit is the use of some of the management systems introduced by Lean Six Sigma, especially those that sustain the gains of projects and contribute useful project selection and leadership methodologies.

Lean methods are a particularly good starting point in both manufacturing and office environments, but each transformation must be prudently and carefully planned to suit the culture and business goals of each situation.

About the Authors: Jim Fishbein is a principal in the Operational Excellence Commercial Practice at George Group. He leads client engagements to help business leaders improve operational performance. He has experience in transactional, service and manufacturing businesses as a senior operations executive. He can be reached at jfishbein@georgegroup.com. Kimberly Watson-Hemphill is a client services vice president of George Group. During the last 12 years, she has built a reputation as a leader in the field of innovation and design across many different product, service and business model applications. She specializes in working with Global 2000 companies and is co-author of the book Fast Innovation. She can be reached at kwatson@georgegroup.com.

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