Abstract

The purpose of this report is to study the main principles behind lean concepts and tools

applicable to manufacturing and services sectors. Literature reviews were carried out to find

principles and tools of lean. According to the analysts’ lean principles and tools started in

manufacturing environment especially in Japan after Second World War, they have

penetrated to other sectors like health care and banking. Toyota production system is based

on fourteen principles and the main methods used are Just-in-time, one piece flow, Jodoka,

and Heijunka. Lean concept started in Motorola is called lean six sigma. The main difference

of these two principles are rigid control focus of Motorola and employee commitment focus

of Toyota. After studying these Womack and Jones’ latter has formulated five principles of

lean applicable to manufacturing sector and six additional principles applicable to services

sector. Any organization has a social and technical system. If a company wants to become a

lean one they should start a technical change in line with lean principles suited to the

organization depending upon whether company concern is a discrete manufacturing,

continuous manufacturing or service organization. The best way a company can develop this

is through action to improve the company’s value stream, supported by committed leaders

who reinforce culture change.

Key words: Lean, TPS, Just-in-time, Tools, Principles

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Acknowledgement

We owe a great many thanks to many people who helped and supported us during the study.

Our sincere gratitude to Professor Chandana Perera and Senior Lecturer, Mr.Sanjeewa De

Silva for valuable guidance and assistance extended towards us.

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Contents

Abstract………………………………………………………………..I

Acknowledgement.....................................................…………………ii

Contents………………………………………………………………iii

1. Introduction ………………………………………………………1

2. Objectives ………………………………………………………...1

3. Methodology……………………………………………………...1

4. Origin, Diffusion and adoption of lean…………………………...2

5. Lean Principles……………………………………………………3

5.1. Womack and Jones’ 5 Principles of lean…………………..3-4

5.2. Lean Six Sigma Principles…………………………………4-6

5.3. Toyota Production System…………………………………6-7

6. Lean Tools……………………………………………………….7-12

7. Approaches to Implementation of lean…………………………..13

8. Conclusions………………………………………………………14

9. Bibliography…….………………………………………………..15

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1. Introduction

Today, many large manufacturers are demanding that suppliers adopt lean practices. Lean

organizations are able to be more responsive to market trends, deliver products and services

faster, and provide products and services less expensively than their non-lean counterparts.

Lean crosses all industry boundaries, addresses all organizational functions. Before

discussing the concept of lean it is important to look at the definition of the term lean.

Definition of lean, as developed by national institute of standards and technology

manufacturing extension partnership’s lean network of United States of America(cited in

Jerry Kilpatric,2003), “ A systematic approach to identifying waste through continuous

improvement, flowing the product at the pull of the customer in pursuit of perfection.

Lean is about developing principles that are right for your organization and diligently

practicing them to achieve high performance that continue to add value to customers and

society (Jeffrey K.Liker, 2004)

Purpose of this report is to explore the principles and application of lean concepts in different

sectors. Extensive literature reviews were carried out to find out the origin of the concept and

tools and techniques used to achieve the objectives of the principles.

2. Objectives

Objective of this paper is to study the evolution of lean concepts in manufacturing and service sector and its implication for future successes. Following objectives could be broadly classified.

o To identify the main principles of this concept applicable to all industries.

o To identify the application of lean tools in manufacturing industry

o To identify the application of lean tools in services sector.

o To discuss the future implications of these principles

3. Methodology

Method adapted to study was mainly the literature reviews.

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4. Origin, Diffusion and adoption of lean

According to analyst of lean application history it is a concept popularized in 1980’s and

1990 ‘s with number of approaches to managing manufacturing companies that included an

emphasis on systems producing exactly what the customer wants at the lowest cost and with

no waste. Researchers have found that many lean ideas were developed after Second World

War by Toyota. Their main focus had been on producing cars of best quality, at the lowest

cost and with the shortest lead time through the systematic elimination of waste. The other

organization which developed the lean ideas was the Motorola. Their concept is called lean

six sigma which is a combination of the lean concepts of speed and elimination of waste with

quality focus of six sigma concept. These two companies are discrete manufacturing

companies and therefore the subsequent evolution and development of these two

methodologies has focused mostly on improvements in discrete manufacturing. Each

methodology has a central focus that has been the basis for its structure and tools. According

to Toyota way finding’s discrete manufacturing has identified seven deadly wastes of

logistics of which over production, inventory, and transportation are special to discrete

manufacturing because in case of process manufacturing these wastes are naturally avoided.

Process manufacturing is fundamentally different from discrete manufacturing in the way

material flows. Material flows in a continuous stream in process manufacturing, while parts

move in discrete batches in discrete. Since there has been so much work done in developing

these methodologies in discrete manufacturing and very little in process, it might seem

logical to apply them “as-is” to process-manufacturing industries. However, in latter

developments analyst had found that process manufacturing firms have also adopted these

concepts by identifying various forms of waste in process manufacturing value stream, and

have managed the wastes with the appropriate concepts and tools.

Very recent research findings have shown that lean principles have developed to suit the

services sector like health care industry and banking industry. Identifying what customer

value in service industry is important in developing lean concepts and tools for the sector.

Researchers have found that time, timeliness, completeness, courtesy, accessibility and

convenience, accuracy, and responsiveness are the main factors to be considered in

developing these concepts and tools.

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5. Lean Principles

5.1. Womack and Jones’ 5 Principles of lean

According to Womack and Jones’ the basic idea of lean is attractively simple, it is that the

organization should be obsessively focused on the most effective means of producing value

for their customers. An organization using lean will approach this challenge by: applying 5

basic lean principles; focusing on understanding waste and value in its work and; training

staff who go and manage the work to act as improvement teams to bring about change.

As made popularized by Womack & Jones (1996) Lean manufacturing is underpinned by 5

principles mention below.

Specify what creates value from the customers perspective

Value is what customer wants and only what the customer wants. This requires a

precise understanding of the specific needs of the customer. It is said that most of the

process activities are non-value adding.

Identify all the steps along the process chain

The steam are thouse activities that, when done correctly and right order, produce the

product or service that the customer values. Lean organization traces and manages all

activities in the organization that deliver value wherever they are and whichever

department they are in. activities add value to customer could be improved while the

activities that are partly or wholly unnecessary could be eliminated and supporting

activities to value adding activities has to be minimized.

Make those processes flow

In a lean organization work should flow steadily and without interruption from one

value adding or supporting activity to the next.

Make only what is pulled by the customer

The system should react to customer demand, in other words, customers pull the work

through the system. In non lean organizations work is pushed through the system at

the convenience of operators and produced the outputs that are not required. Most

service organizations are naturally operated on pull systems.

Strive for perfection by continually removing wastes

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As the first four principles are implemented organizations should get to understand

the system ever better and from this understanding more ideas should be generated for

more improvement. By doing so leaner systems become more leaner and faster and

waste identification and elimination becomes more and more easier.

The same authors in a recent article for the Harvard business Review on lean consumption

have set out six additional principles of what they call lean consumption that correspond

closely with thouse of lean production.(cited in Brendan MccCarron,2006)

1. Solve the customers problem completely by ensuring that all the goods and services

work, and work together

2. Don’t waste the customer’s time

3. Provide exactly what customer wants

4. Provide what’s wanted exactly where it’s wanted

5. Provide what’s wanted where it’s wanted exactly when it’s wanted

6. Continuously aggregate solutions to reduce the customer’s time and hassle.

These principles reshape the traditional lean principles to suit the service sector organizations

taking customer eyed-view of services.

5.2. Lean Six Sigma Principles

Review of six sigma literature shows that Lean Six Sigma (LSS) combines the Lean emphasis

on speed and eliminating waste with the process quality focus of Six Sigma. It incorporates

the concepts, principles and tools of both methodologies to provide businesses with a

powerful data-driven system to satisfy customers, reduce costs, make best use of resources

and create quality products and services.

Delight the Customer

All businesses want to satisfy their customers, but LSS aims to go beyond customer

satisfaction. Its driving principle is to delight the customer. This means giving customers the

right products and services at the right time, for the right price and at the right quality.

Customers have a few requirements that are critical to quality and a successful LSS project

must identify and address those vital few requirements. Customers have requirements for the

final process output and for service, which reflect how the customer expects to be treated.

Identify Value

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The steps in a process may be value adding, value enabling or non-value adding. Value-

adding steps are those steps the customer cares about that help produce the final process

output. Value-enabling steps are those that must be done but do not necessarily add value for

the customer. For example, steps added for financial, administrative or compliance reasons

are necessary but unimportant to the customer.

Understand the Process

Before a process can be improved, it must be understood by those working to improve it. In

LSS, understanding the process flow involves identifying the customers, the work flow and

who is responsible for each step in the process. It also involves collecting and analyzing data

about the process. The goal is to identify disconnects--points in a process where hand-offs or

communications may break down; bottlenecks where work backs up; redundancies--repeated

steps; and re-work where work must be re-done because of missing or defective parts or

information.

Eliminate Waste

Waste is an activity that uses resources but does not add value to the process. LSS identifies

several types of waste that must be eliminated from a process in order to delight the

customer. These include overproduction, waiting, over-processing (non-value-added steps),

excess inventory, defects and errors. Unused employee creativity is also a form of waste. This

includes lost time, ideas, skills, improvements and learning opportunities lost by not

involving or listening to employees regarding process work flow and improvement.

Reduce Process Variation

Variation is a change that affects the expected outcome of a process. It is the gap between the

operating standard and the actual end result of the process. There will always be some

variation in a process and the key issue is how and to what extent that variation affects the

final outcome. A process can be improved by reducing its variation so that it produces

consistent end results that delight the customer.

5.3. Toyota Production System

According to Jeffrey K.Liker Toyota’s distinctive approach to manufacturing is the basis of “lean production” revolution it helped spawn. Author has further highlighted that though Toyota is using such tools and quality improvement methods as Just-in- time, One piece flow, Jidoka and Heijunka its continued success at implementing these tools comes from its

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philosophy “ the Toyota way” which is base on an understanding of people and what motives them.

The Toyota way 14 principles

Section I: Long-Term Philosophy

Principle 1: Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.

Section II: The Right Process Will Produce the Right Results

Principle 2: Create a continuous process flow to bring problems to the surface.

Principle 3: Use “pull” systems to avoid overproduction.

Principle 4: Level out the workload (heijunka). (Work like the tortoise, not the hare.)

Principle 5: Build a culture of stopping to fix problems, to get quality right the first time.

Principle 6: Standardized tasks and processes are the foundation for continuous improvement and employee empowerment.

Principle 7: Use visual control so no problems are hidden.

Principle 8: Use only reliable, thoroughly tested technology that serves your people and processes.

Section III: Add Value to the Organization by Developing Your People

Principle 9: Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.

Principle 10: Develop exceptional people and teams who follow your company’s philosophy.

Principle 11: Respect your extended network of partners and suppliers by challenging them and helping them improve.

Section IV: Continuously Solving Root Problems Drives Organizational Learning

Principle 12: Go and see for yourself to thoroughly understand the situation(genchi

genbutsu).

Principle 13: Make decisions slowly by consensus, thoroughly considering all options;

implement decisions rapidly (nemawashi).

Principle 14: Become a learning organization through relentless reflection (hansei) and

continuous improvement (kaizen).

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Seven deadly wastes of logistics identified in TPS

1. Over production: Delivering products before they are needed.

2. Delay/Waiting: Any delay between the end of one activity and the start of the next

activity.

3. Transportation/Conveyance: Unnecessary transport that results in added cost.

4. Motion: Unnecessary movement of people.

5. Inventory: Any logistics activity that results in more inventories being positioned

than needed or in a location other than where needed.

6. Space: Use of space that is less than optimal.

7. Errors: Any activity that causes rework, unnecessary adjustments or returns.

6. Lean Tools

In order to reduce or eliminate the above wastes, Lean practitioners utilize many tools or

Lean Building Blocks. Successful practitioners recognize that, although most of these may be

implemented as stand-alone programs, few have significant impact when used alone.

Additionally, the sequence of implementation affects the overall impact, and implementing

some out of order may actually produce negative results (for example, you should address

quick changeover and quality before reducing batch sizes). The more common building

blocks are listed below. Some are used only in manufacturing organizations, but most apply

equally to service industries.

Pull System – The technique for producing parts at customer demand. Service

organizations operate this way by their very nature. Manufacturers, on the other hand,

have historically operated by a Push System, building products to stock (per sales

forecast), without firm customer orders.

Quality at the Source: To eliminate product defects, they must be discovered and

corrected as soon as possible.  Since workers are at the best position to discover a

defect and to immediately fix it, they are assigned this responsibility. If a defect

cannot be readily fixed, any worker can halt the entire line by pulling a cord (called

Jidoka).

Kanban – A method for maintaining an orderly flow of material. Kanban cards are

used to indicate material order points, how much material is needed, from where the

material is ordered, and to where it should be delivered. Kanban stands for Kan –

card, Ban – signal. The essence of the kanban concept is that a supplier, the

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warehouse or manufacturing should only deliver components as and when they are

needed, so that there is no excess inventory. Within this system, work stations are

located along production lines only produce/deliver desired components when they

receive a card and a empty container, indicating that more parts are needed in

production. In case of line interruptions, each workstation will only produce enough

components to fill the container and then stop. In addition, kanban limits the amount

of inventory in the process by acting as an authorization to produce more inventories.

Since kanban is a chain process in which orders flow from one process to another, the

production or delivery of components are pulled to the production line, in contrast to

the traditional forecast oriented push systems.

Work Cells – The technique of arranging operations and/or people in a cell (U-

shaped, etc.) rather than in a traditional straight assembly line. Cellular, or flow,

manufacturing is when all of the resources required to complete the product are

grouped together. Cellular manufacturing is the opposite of the traditional

departmentalized layout, in which all machines of the same type are grouped together.

In a cellular arrangement, a company may have equipment such as CNC lathes,

milling machines, grinders, vibratory finishing machines and parts washers all located

in the same area. Furthermore, assembly operations are often completed within a cell.

Manufacturing cells are frequently organized in a U-shape so that operators can

manage different machines. A cellular layout can more easily accommodate a single

piece flow by eliminating the handling and queue times inherent to a traditional

departmentalized layout. The cellular concept allows for better utilization of people

and improves communication.

Total Productive Maintenance – TPM capitalizes on proactive and progressive

maintenance methodologies and calls upon the knowledge and cooperation of

operators, equipment vendors, engineering, and support personnel to optimize

machine performance. Results of this optimized performance include; elimination of

breakdowns, reduction of unscheduled and scheduled downtime, improved utilization,

higher throughput, and better product quality. Bottom-line results include; lower

operating costs, longer equipment life, and lower overall maintenance costs.

Total Quality Management – Total Quality Management is a management system

used to continuously improve all areas of a company's operation. TQM is applicable

to every operation in the company and recognizes the strength of employee

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involvement. It is defined as a mutual way of doing business that focuses on relying

on the knowledge, skills and abilities (KSAs) of the laborers as well as the

management in order to bring a continuous improvement in the quality and

productivity of the organization by working in the form of teams (Drucker, 1996,

1994, 1993 cited by Tiffany L. Jordan, 2001). There are seven statistical tools which

help to improve quality; Course and effect diagram ( Fishbone diagram), Run chart,

Scatter diagram, Flow chart, Control chart, Histogram, pareto chart

Point-Of-Use-Storage – Point-of-use storage of parts means that every part needed to

do a job is stored in the area that uses it. This will require some management

discipline, especially when inventory items are involved, but the storage of parts at

their point of use offers reduced search time, minimal travel and material handling,

and simplified storage.

Quick Changeover – The technique of reducing the amount of time to change a

process from running one specific type of product to another. The purpose for

reducing changeover time is not for increasing production capacity, but to allow for

more frequent changeovers in order to increase production flexibility. Quicker

changeovers allow for smaller batch sizes.

Batch Size Reduction – Historically, manufacturing companies have operated with

large batch sizes in order to maximize machine utilization, assuming that changeover

times were “fixed” and could not be reduced. Because Lean calls for the production of

parts to customer demand, the ideal batch size is ONE.

However, a batch size of one is not always practical, so the goal is to practice

continuous improvement to reduce the batch size as low as possible. Reducing batch

sizes reduces the amount of work-in-process inventory (WIP). Not only does this

reduce inventory-carrying costs, but also production lead-time or cycle time is

approximately directly proportional to the amount of WIP. Therefore, smaller batch

sizes shorten the overall production cycle, enabling companies to deliver more

quickly and to invoice sooner (for improved cash flow). Shorter production cycles

increases inventory turns and allows the company to operate profitably at lower

margins, which enables price reductions, which increases sales and market share.

5S or Workplace Organization – This tool is a systematic method for organizing

and standardizing the workplace. It’s one of the simplest Lean tools to implement,

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provides immediate return on investment, crosses all industry boundaries, and is

applicable to every function with an organization. Because of these attributes, it’s

usually the first recommendation for a company implementing Lean.

Visual Controls – These are simple signals that provide an immediate and readily

apparent understanding of a condition or situation. Visual controls enable someone to

walk into the workplace and know within a short period of time (usually thirty

seconds) what’s happening with regards to production schedule, backlog, workflow,

inventory levels, resource utilization, and quality. These controls should be efficient,

self regulating, and worker managed, and includes kanban cards, lights, color-coded

tools, lines delineating work areas and product flow, etc.

Concurrent Engineering – This is a technique of using cross-functional teams

(rather than sequential departmental assignments) to develop and bring new products

to market. In many instances, researchers have found that implementing concurrent

engineering has reduced time-to-market by 50%; the automotive and computer

industries are good examples. Time-to-market is one of the most important tools for

capturing and maintaining market share.

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Value Steam mapping

Value stream mapping is a lean manufacturing technique used to analyze and design

the flow of materials and information required to bring a product or service to a

consumer. At Toyota, where the technique originated, it is known as "material and

information flow mapping" It can be applied to nearly any value chain.

1. Identify the target product, product family, or service.

2. Draw while on the shop floor a current state value stream map, which shows the

current steps, delays, and information flows required to deliver the target product or

service. This may be a production flow (raw materials to consumer) or a design flow

(concept to launch). There are 'standard' symbols for representing supply chain

entities.

3. Assess the current state value stream map in terms of creating flow by eliminating

waste.

4. Draw a future state value stream map.

5. Work toward the future state condition.

Where is it used?

Value stream mapping is two supporting methods that are often used in Lean

environments to analyze and design flows at the system level (across multiple

processes). A key metric associated with value stream mapping is lead time.

Although value stream mapping is often associated with manufacturing, it is also used

in logistics, supply chain, service related industries, healthcare, software development,

and product development.

In a build-to-the-standard form Shigeo Shingo (cited in Wikipedia for value

stream mapping) suggests that the value-adding steps be drawn across the centre

of the map and the non-value-adding steps be represented in vertical lines at right

angles to the value stream. Thus the activities become easily separated into the value

stream which is the focus of one type of attention and the 'waste' steps another type.

He calls the value stream the process and the non-value streams the operations. The

thinking here is that the non-value-adding steps are often preparatory or tidying up to

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the value-adding step and are closely associated with the person or

machine/workstation that executes that value-adding step. Therefore each vertical line

is the 'story' of a person or workstation whilst the horizontal line represents the 'story'

of the product being created.

Figure 6.1: Value steam mapping Example,

Source: http://en.wikipedia.org/wiki/File:Vsm-epa.gif

Techniques used in six sigma

In brief, three techniques are used in Six Sigma:

1. DMAIC, which stands for Define, Measure, Analyze, Improve and Control;

2. DMADV, which stands for Define, Measure, Analyze, Design and Verify;

3. Lean.

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7. Approaches to Implementation of lean

The success of an improvement initiative depends to a large extent on the initial choice of what to improve and how to improve and how to go about it. Researchers have found that in implementing lean concepts five stages of Preparation, Plan, Do, Check, and Act cycle for it to be successful.

Figure 7.1: Stage of implementation of lean concepts and tools, Source: Brendan MaCarron,2006

According to researchers Implementation of lean has failed in many organizations and

anticipated benefits were not achieved. Some companies fail to get the support needed to the

efforts due to not communicating it properly to the employees. Some other companies start to

implement the lean tools and techniques in wrong sequence. For example, if batch sizes are

reduced prior to reducing changeover time, and changeover times are lengthy, equipment

utilization will drop, and the ability to serve customers will be reduced. On the other hand out

comes are not significant for some manufacturing environments. For example continuous

process manufacturers like high volume chemical manufacturers do not have big impact of

implementing lean on their environments.

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Plan

Preparation

DoCheck

Act

8. Conclusions

Even though the lean principles and tools started in manufacturing environment especially in

Japan after Second World War, they have penetrated to other sectors like health care and

banking. Any organization that is looking forward to implement lean concepts should first

study their work place activities and identify the areas where improvements are necessary.

Then select the tools that mostly relevant to their environment. In this situation the important

thing to remember is that lean six sigma is concentrating on quality through rigid controls and

lean concepts originated in Japan concentrate quality through commitment building. The five

principles of lean presented by Womack and Jones for manufacturing environment and their

recent introduction of additional six principles applicable to production environment has

widely accepted by the organizations. The Toyota production system is basically build on

four main lean concepts which is Just in-time, One piece flow, Jidoka and heijunka. The

other important tools developed by Toyota is pull systems, cellular work cell concept, quality

at source, kanban, 5S, TQM, total productive maintenance, quick change over, and batch size

reduction etc.

Any organization has a social and technical system. If a company wants to become a lean one

they should start a technical change in line with lean principles suited to the organization

depending upon whether company concern is a discrete manufacturing, continuous

manufacturing or service organization. The best way a company can develop this is through

action to improve the company’s value stream, supported by committed leaders who

reinforce culture change.

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9. Bibliography

Chandana Perera, 2011. Operations Management concepts & applications. 2nd ed. Ethul

Kotte. Institute of Operations management (Pvt) Ltd, Sri Lanka.

Joel Sutherland and Bob Bennett, The seven Deadly wastes of logistics, 2007, Lehigh

University, [online] Available at:

http://www.distributiongroup.com/articles/SevenWastesofLogistics.pdf [15th September

2011]

Jeffrey K Liker, “The Toyota way” Tata-Mcgraw-Hill, 2004, [online] Available at:

http://www.learnership.co.uk/archive/38.pdf

The 14 Principles of the Toyota way, 2001, [online] Available at:

http://icos.groups.si.umich.edu/Liker04.pdf [accessed 14th September 2011]

The Toyota way, 2004, [online] Available at: http://en.wikipedia.org/wiki/The_Toyota_Way

[14th September 2011]

Silva, M.W.S.S., 2011. Lecture notes on Operations Management. PDBA/MBA 108. University of Ruhuna, unpublished

Tiffany A. Jordan, 2001, Total quality management and the Japanese Poka-Yoke style, [online] Available at: http;//www.decpoint.com/tqmelem.htm/poka-yoka.pdf

Value stream mapping, [online] Available at: http://en.wikipedia.org/wiki/File:Vsm-epa.gif

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