Lean is a way of identifying, reducing and eliminating waste in business processes.
Lean principles give a powerful framework for delivering more value to customers at a lower cost, in shorter time, with fewer defects, and less human effort.
Also known as the Toyota Production System, Lean recognizes that the concept of “value” must be from your customer’s perspective, not yours.
Value is created only when three criteria are met
- The customer is willing to pay for the product or service
- The work transforms the product or service
- The work is done right the first time.
When one or more of these criteria are missing, the activity is considered waste, or “non-value added” activity. Many are surprised to learn that the typical business has about 95 percent activity waste. Even Toyota, which has been practicing Lean since the 1950s, estimates that 50 percent of their activity is still non-value added.
Companies applying Lean can typically improve productivity for a given process by 40–80 percent or more. They do this by viewing processes from the customer’s perspective, and eliminating waste wherever possible.
What is waste?
Toyota defines waste as seven types of activities that do not add value for the customer:
- Transportation: Any action that moves product, information or materials from one place to another results in waste.
- Inventory: Accumulating more than the minimum needed for a process.
- Motion: Movement of people.
- Waiting: When people wait, raw materials or product are idle.
- Over-processing: Doing things beyond the needs of the customer.
- Overproduction: Producing more than customers buy — or making it sooner than customers need it.
- Defects: When a process has to be repeated or reworked, fixed due to lack of information, or when mistakes occur.
The goal of Lean is to eliminate as much waste as possible, in a way that respects the people working in the company. When you see any of the above in your business, you’ve just found an opportunity to learn and improve.