What is Lean? – Part 1: The “What”

What is Lean? – Part 1: The “What”

“Lean” was a term first used to describe the Toyota Production System (TPS) by John F. Krafcik of the MIT International Motor Vehicle Program back in 1988. He used this term in his Sloan Management Review paper “Triumph of the Lean Production System” which can be found here. But the term did not gain general acceptance at that time and the TPS philosophy continued to spread, slowly but very successfully, under the guise of “Just in Time” (JIT) and TPS. (JIT was more common than TPS in the U.S. at that time, at least based on my experience).

Of course James Womack was also a researcher in this same MIT program and used the term “Lean” in his 1990 book The Machine that Changed the World. But the use of “Lean” as a substitute for JIT/TPS did not really take off until Womack published his second book Lean Thinking in 1996.

By 1998 I finally succumbed and started using “Lean” instead of “JIT/TPS” in my discussions and correspondence with colleagues. Since then “Lean” has taken on a life of its own, for good and bad. Good because the underlying philosophy has spread to many more organizations than it did under the JIT/TPS mantra.  Bad because a tidal wave of academics and consultants swept in and, in an attempt to make a buck, have often made the Lean/TPS concepts undecipherable. C’est la vie!

But for the purpose of this discussion section: Lean = TPS. We have to start with the basics.

I have been following various discussions and blog posts on “what is Lean?” for some time now. All I can say is there is much confusion out there. I think some of the confusion surrounding Lean today is derived from a mixing of the “what” and “how” of the Lean philosophy. “What Lean is” is one thing and “how to do Lean” is another. (The other important concept of “why Lean works” is rarely discussed by anyone – and getting to the “why” is the ultimate purpose of this blog)

So let’s start with the “What”. The most important “what” is right there in the roof of the basic “TPS House”:

TPS House
Source

Toyota was very clear about this. The Goal is: “Highest quality, lowest cost, and shortest lead time”.

Almost everyone has seen this and most have probably reacted as I originally did by saying “yeah, we all know that” and then quickly move on elsewhere. But it wasn’t until much later that I realized the singular importance of these goals and that these three goals are rigorously interrelated. They are not independent goals. In fact, the last goal “shortest lead time” is the key to the other two. You need shortest lead time to achieve highest quality and lowest cost. And you can’t achieve lowest cost without highest quality and vice versa. It is a systems approach to the business. I will cover this relationship in more detail in later posts.

(It is probably worth noting here that “cost” in the days of Taiichi Ohno at Toyota did not mean unit product cost pulled from the P&L as is common today. “Cost” reflected total business system cost. The primary fundamental business metric in use in Ohno’s day was “Return-on-Investment” (ROI). ROI is basically the P&L divided by the balance sheet and “cost” applied to both entities. Thus, in the time period of the development of TPS, reducing “cost” applied equally to the items in the balance sheet (primarily inventory) as it did to material, labor and overhead in the P&L. Cash invested was as important as cash spent. You can see this in the “Schematic Diagram of TPS” in the chapter by Maseo Nemoto in the book The Birth of Lean.)

The second most important “what” is contained in a quote from Taiichi Ohno to Norman Bodek, after Ohno retired from Toyota. This can be found in the Forward to Ohno’s book Toyota Production System. (In my opinion many of Ohno’s most illuminating quotes came after he retired since he no longer had anything to hide – in fact Bodek hints at this in his Foreword.). Ohno says:

“All we are doing is looking at the time line from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added waste.”

This is actually a “what” (reduce timeline) and a “how to” (remove waste). But the important concept is that if you can reduce the time line (lead time), and you will do this by removing waste, you will also increase quality and reduce cost because these variables are waste related. If you analyze Ohno’s seven wastes you can see that they all can be related to either cost or quality, or both. (By the way, the only magical thing about the seven wastes is the number 7 – I will try to cover this later).

But the most important characteristic about Ohno’s seven wastes, which is completely overlooked by almost everyone, is that all seven wastes are a waste of “time”. Elimination of the waste of “time” is the foundation for the TPS/Lean system of continuous improvement leading to the highest quality and the lowest cost.

This all translates into the third “what” of Lean, which is found in the “Just-In-Time” pillar of the Toyota House, “continuous flow”. “Flow” is a time based metric (units per time) reflecting the efficacy and efficiency of a given system’s processes. The more important “continuous flow”, found in the JIT pillar, is also a time based metric (lead time) and reflects how well the various processes are integrated within the system itself. “Continuous flow”, as measured by lead time, is the key to making Lean work. The fundamental importance of these flow metrics is too often overlooked in today’s “Lean”.

 

Thus the underlying principle behind TPS/Lean is the systemic creation of the shortest possible lead time for the continuous flow of materials and information in order to generate the highest quality and lowest cost.

 

At its core, this is “What Lean Is”! No more, no less. But it is the foundation as to why Lean works. (I will cover the interrelationship between “lead time” and “quality” and “cost” in greater detail in future posts). Please note that I have emphasized the word “systemic”. This principle applies to the system as a whole – not to the sum of its parts. This is an important distinction that I will also address later.

So, as we proceed down the road of our “Lean transformation”, no matter how early or advanced we are in that journey, it is imperative to frequently step back and ask ourselves if this underlying principle is being applied. If not, or if we are unsure, it would be wise to start asking “why” (five times would be good!).

Now that we have addressed the “what”, I will delve into the “how” in the next post.


6 thoughts on “What is Lean? – Part 1: The “What”

  1. “But it wasn’t until much later that I realized the singular importance of these goals and that these three goals are rigorously interrelated. They are not independent goals. In fact, the last goal “shortest lead time” is the key to the other two.”
    This statement is the key to what is missing in today’s Lean. I feel that the data in my article Lean’s Trinity is the best statistically significant example of this, followed closely by the Proof of Concept work I did in conjunction with the Wisconsin MEP. Please feel free to use/cite either as you find useful.

    Paul

    1. Paul, you are exactly right. The singular importance of shorter lead times as a fundamental principle of Lean/TPS appears to have been totally forgotten in Today’s Lean community. I’m not sure exactly when it was forgotten, but I have a very good idea. Your article “Lean’s Trinity” provides stark, real data to support the fact that shorter lead times leads to higher quality and lower costs. You reduced supplier lead times by 78% and unexpectedly reaped the benefits of a 84% reduction in quality defects, a 73% reduction in delivery defects and a 11 – 20% reduction in internal supplier costs. I wish I had seen your article earlier and I would have included it in several posts. But that’s OK, I am currently working on a future post where your work will fit in nicely.

  2. “It is probably worth noting here that “cost” in the days of Taiichi Ohno at Toyota did not mean unit product cost pulled from the P&L as is common today. “Cost” reflected total business system cost.”
    This position aligns very closely with my discussion that today’s Lean Practitioners focus on “local” Kaizen-based Cost-of-Goods-Sold impacts rather all costs associated with Order Fulfillment. The one area that I think I have developed further than Toyota is formalizing the importance of supply chain order fulfillment impacts (not just piece price) on total cost.

    Paul

    1. Yes, today’s overwhelming reliance on Cost-of-Goods-Sold and other P&L metrics have often misled our efforts to reduce total system costs. I cover this in some detail in later posts, especially in those posts dealing with ROI.

  3. “Toyota Production System. (In my opinion many of Ohno’s most illuminating quotes came after he retired since he no longer had anything to hide – in fact Bodek hints at this in his Foreword.”
    This position also aligns with what the authors of the PowerPoint I referenced in the last article of my series on NGL. In other words, until he retired, Ohno (and Toyota) consciously decided not to share important aspects of TPS with benchmarking manufacturers. This isn’t hard to imagine — when I was with Deere I had internal critiques that wanted to muzzle me about MCT, MCT Reduction and their relationship with Lean practice.
    Paul

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