LEAN ENTERPRISE

...What is it and why it is essential to business survival in the new millennium?

(The first in a 9 part series on Lean Enterprise and the tools and techniques employed to affect change). By Patrick Lucansky, Robert Burke and Lee Ducharme.

What is this thing called Lean? Is it different from JIT, TQM, Reengineering or World Class? Why do we need to change the way we are working, we are profitable? Are these questions that have crossed your mind? Many have wrestled with these and other similar concerns over the last couple years. The first thing we need to do is understand what Lean is all about.

Lean has it origins in the teaching and writings of TQM and JIT, which espouse the idea of "delighting the customer through a continuous stream of value adding activities." Specifically, it is an extension of the phrase "world class" as define by Dr. Richard Schonberger as "… adhering to the highest standards of business performance as measured by the customer. In other words, Value is always defined from the customer's perspective. Understanding your customer's needs is a prerequisite for driving Lean principles and methodologies.

A commonly held definition of Lean Enterprise is, "a group of individuals, functions, and sometimes legally separate but operationally synchronized organizations." The "value stream" defines the Lean Enterprise. The objectives of the Lean Enterprise are to:

• correctly identify and specify "value to the ultimate customer / consumer" in all its products and services
  
• analyze and focus the value stream so that it does everything from product development and production to sales and service in a way that activities that do not create value are removed and actions that do create value proceed in a continuous flow as pulled by the customer.

From the time a customer need is recognized until it is satisfied, the process and all its elements must add value for the "value stream" to be meaningful. The basic components of this Lean system are waste elimination, continuous flow, and customer pull.

As defined by John Krafcik, in his book, The Machine that Changed the World "Lean production is "lean" because it uses less of everything compared with mass production: half the human effort in the factory, half the factory space, half the investment in tools, half the engineering hours to develop a new product in half the time. Also, it requires far less than half of the needed inventory on site. The expected results are fewer defects, while producing a greater and ever growing variety of products."

Lean applies to any organizational type and can be applied to all areas within the business. Essentially, Lean is a three-pronged approach incorporating A Quality Belief, Waste Elimination and Employee Involvementt supported by a Structured Management System (See diagram 1).
Basically, we've taken simple processes and complicated them resulting in longer lead-times, reduced flexibility, increased inventories and the inability to meet customer demands.

The lean objective is a continuous rapid flow of "Value-Adding Activities."
The first principle of Lean is to satisfy the needs of the customer by performing only those activities that add value in the eyes of the customer. Put yourself in your customer's shoes, peer into your organization and look around. You will find many activities occurring which add no value and often times prevent you from meeting customer demands. Identifying both value added and non-value added activities provide you with a visual map of your processes. (see diagram 2)

The second principle is to define the "Value Stream". The goal is to identify material and information flows currently required to deliver a product or service. This activity will highlight bottlenecks, handoffs, lead-time and where inventory. The result is a pictorial of your current processes from start to finish and all parts in-between. The key is to focus on the 65-95% of non-value added actions occurring.

The third principle of lean is to eliminate waste. Waste in the value stream is any activity, which the customer is not willing to pay for since it adds no value to the product or service and often times, is consuming resources. Waste exists in all parts of the business – front office to the factory. This effort results in redefining the current value stream to one of value adding activities and what we call "Sustaining" (SNVA) activities. Sustaining steps are defined as, non-value-added activities performed for one of two reasons,

1. required to by law or regulation or
2. because it contributes to business effectiveness.

This provides an outward focus and responsiveness to ever-changing customer needs as opposed to traditional redesigns which are outward focused as they relate to your inward focused needs.

This article was originally published in the January Issue of PharmaChem Magazine through B5srl. http://www.b5srl.com/