Introduction to Lean Principles for New Managers

Understanding Lean: Basics and History

You are successful by possessing valuable competencies that bring forth results. An excellent tool to guide operational effectiveness is to understand and apply Lean principles. Lean comes from eliminating waste and making work do more for less. You contribute by adding value and creating wealth. Understand and apply Lean principles. Get results. For your team, develop your skills and those around you so more can be done with less waste. Gain results from the people around you, and your company will flourish. The Basics Talking “Lean” is short for engaging in efforts just in time, at minimum costs, with no waste. It is common sense that is made common by effort and personal engagement. Difference comes from doing things with a bit more intelligence, curiosity, creativity, and sense of urgency. You add value when you do work that enhances a product, and usually, you do this by the most efficient means possible. You are proud when you make a real difference that helps a customer make a product they need or desire, helping them, in turn, contribute to society. Adding value is the essence of Lean. You are unsuccessful when you do work that is not value-added. Large sums of money are wasted if any of your efforts add no value or are less effective than necessary.

What is Lean?

Only a few people become managers by chance. Being a manager implies responsibility, appreciation, and investment in human capital. You've made it! Now is the time to consolidate your professional practice. The purpose of this book is to introduce you to the conduct in this function, essential concepts for your sustainability and development. At the end of your career, you will be able to do an analysis, and certainly with a sense of contribution to your organizational functions. One of the tasks performed by beginner managers is the review and the search for ways to improve the company's administrative procedures, especially in sectors that, in your view, can be leaner, that is, by identifying and eliminating non-value-added wastes to the products or services offered to customers. Somehow all managers have passed, pass, or will pass through the various functions of the company, each one with its delivery. Little by little, knowingly or not, you are creating managers for other positions, for other functions. Therefore, practicing Lean Thinking and contributing to the organization's systemic view will confer your reputation as a qualified professional, a transformer and builder of a better future for your company. What is good for the company is good for everyone. Lean is a competitive differential. Customer loyalty is a consequence. With Lean, you will structure your career with a focus on compliance with customer requirements, both internal and external. Improve service, merchandise, and reduce costs.

Origins and Evolution of Lean

There has been a great deal of confusion concerning the originator of "Lean Principles." With the development of Lean Sigma, the myth has grown that it was Motorola that had developed Lean management by combining a number of Japanese manufacturers. Historically, however, Lean principles are the evolution of a tradition of learning from the Japanese motorcycle market and the insights from benchmark studies and seminal books, which eventually led to the founding of the Lean Enterprise Institute. The person who has been confused with having coined the term Lean Principles is Jim Womack. This happened because the Lean Enterprise Institute published the book Lean Thinking with his name first in the book, so it is now tagged to him and his colleagues. This is very similar to the controversy over the false discovery of the Australian East Coast by the Dutch in 1615. As with many others, Jim Womack was looking for the secret to Toyota's success, and that search over many years led to the development of the present principles.

Key Principles of Lean Management

Lean culture is a management strategy in which every employee is expected to help eliminate waste by focusing on the customer. That's it in a nutshell. Everything else sprung from that core principle. It is important for management, and particularly the first-time manager, to know concretely how to go about supporting lean culture. There's no single "right" way or method to utilize, and it's an art that requires practice. But successful managers are those who understand the full meaning of lean, and who model that understanding through their own behaviors. In the next few paragraphs, I'll outline some of the strategies that lean organizations find to be the most effective.

Leaders, especially the first-time manager, will benefit greatly from understanding just what lean principles are and then practicing them! I highly recommend that you embrace these five principles as your own as they will serve you and the customer well. It's important to study and understand these principles and continually refine yourself as a lean leader. Lean organizations that are committed to engaging everyone to improve everything will provide you with ample opportunity to practice these principles and get immediate feedback.

Value Stream Mapping

Value Stream Mapping (VSM) is a way to show all activities that provide value to the customer while reducing waste, which makes the product take less time and cost. The technique is used to analyze and delineate every process within a company. VSM provides a high-level overview of how the company uses its resources and the process steps that contribute to delivering value to the customer. VSM helps organizations understand the relationships that exist between lead time issues, information flows, and the system, and helps them understand how lean principles and value-adding activities could help to get the organization in sync. VSM is also recognized as a learning tool to help people see the waste or non-value-adding activities in a company's process. VSM is also a tool for learning the basic principles of any lean system.

Just-in-Time (JIT) Production

JIT promoters claim that it is a method of making companies more competitive by reducing or cutting inventory costs. They argue that inventory sitting on a shelf does nothing to increase the value of a product; in fact, it decreases value over time as it might become outdated or obsolete, be damaged, or lose value as it is replaced by newer products. JIT eliminates non-value-adding activities by reducing batch sizes and cutting out the need for inventory and production setup time. In this way, the need for inventory is countered through a well-organized, tightly integrated chain of production processes linked to the customer's demands and the producer's capacity to respond.

An apparently more conservative view of JIT is that it is a management philosophy of continuous improvement introduced to eliminate waste, increase productivity and profitability, and thereby maintain the competitive edge. This seems to be similar to the wider definition of lean production. Lean is defined as the creation of the highest level of customer value at the least cost while providing the best possible quality of goods and services, in the most responsive manner to the demands of the market. No organization can survive the competition without ensuring evolving information through real-time access to operations and market information so that timely and appropriate decisions about inevitable changes can be implemented. Lean principles have been a distinguishing characteristic of the success of the UK supermarket chain Tesco and of the worldwide giant Wal-Mart.

Continuous Improvement (Kaizen)

The first element in manufacturing productivity can be defined as producing more with less. Lean refers to this element as continuous improvement. A leading automotive manufacturer became the worldwide leader in automotive manufacturing productivity by continuously improving production processes at a rate much faster than the rest of the automotive community. The role was not only to improve its own processes but to improve processes throughout the automotive community. The lean concept of continuous improvement has been shared with other manufacturing organizations.

Continuous improvement means keeping things moving. Continuous improvement is implemented in production by cycling. There are three critical time factors in production. The first factor is set-up time. Continuous improvement implements rapid changeover of equipment. The changeover time is designed to be very short. Many organizations report virtually instantaneous changeover times. The second factor is lead time. Production cycles are designed to be very short. A cycle can be one item produced, as with a semiconductor wafer; it may be to produce the smallest amount, as one gallon of paint. The essential factor in the lead time concept is to understand how long it takes to design, make, purchase, and schedule lots for a product, and to produce that product within the cycle time. The third factor is processing time. This time must be managed and controlled. The time value of all activities is challenged and continuously evaluated and improved.

Continuous improvement takes place at Tier One. The lowest level employee identifies a problem related to building a product to Tier Two. Management at Tier Two identifies the cause and solution and verifies that the problem has been resolved. The solution to a problem is often a change in the design of the product. Management takes the solution to the customer or supplier and implements the change. The data is shared with the supplier so that a similar problem can be identified and avoided in the future. The customer should realize a reduction in price plus improvements in quality and delivery. After satisfying the customer and supplier, management develops a database showing the frequency of occurrence of similar problems. Action is then taken at Tier Four to communicate the problem back to the supplier and to identify the corrective action that should be taken with all future orders. At Tier Five, a determination is made of the level of compliance with the corrective action plan. Finally, periodic audits of the corrective action are conducted to assure that the benefits will be maintained.

Lean Tools and Techniques

Business issues are often the result of management decisions. On the other hand, operational issues, which Lean helps to identify, are the result of management failure. Fundamentally, operational success springs from good strategic goals first and good methods second. Training, empowering, and recognizing the capabilities of employees contribute to operational success by detecting fact-based decisions early in the process. Lean tools help make processes transparent and capable of discovering fact-based decisions by documenting conditions, standards, flows, and causes. Capable employees will help detect and guide these issues so that operational goals are realized. Employees who detect fact-based decisions respond accordingly and help guide the achievement of business objectives. Their inherent operational wisdom will help address questions raised by the deployment of Lean tools. Essentially, the occurrence of completion variance signals a management failure somewhere. Did a customer change their mind? Were specifications unclear, leading to customer uncertainties? By monitoring internal and external defects and wastes in a process, companies gain insight into management's effectiveness and can more easily detect internal operational variance. Lean tools and a structured problem-solving approach can help put you back in the driver's seat while steering your organization in the right strategic direction. This focus will broaden your view and help you define appropriate business sanctions.

5S Methodology

Sort – The first step is used to identify and eliminate what is not necessary. This includes bringing required materials to the workspace and discarding those items not required. Additionally, any tools that are seen as irrelevant in space and/or time, or that are currently not needed, are removed from the area temporarily or permanently. Set in order – This refers to having a place for everything in the workspace and putting everything in its place. Floors are marked in some fashion to visually identify where everything should be and where items can be found. The goal is to increase production by having a place for each employee. Shine – This step pertains to keeping the workplace clean and visually finding any issues that need attention. Daily maintenance procedures are followed, and cleaning is the responsibility of all who work there. Standardize – An agreement is made between all workers, and standard practice is developed. The aim is to use simple tools to improve standard conditions at the workstation so that everyone may be responsible for the continuous improvement of the Lean process. These standard conditions affect the environment, safety, efficiency, and quality of that process. To keep all workers informed, a response mechanism is developed that can be used to correct problems and errors on the spot. Sustain – The primary goal of the Sustain step is to maintain standards in the workplace and deal with both deteriorating and exceptional situations. Responses to abnormal situations should be developed to prevent any resulting problems that could potentially lead to a catastrophic failure in any tool, control, or work method that has been developed. Just like the Standardize step, there should be a quick response to any issues that need attention.

?Kanban System

Kanban is the technique that 'pulls' inventory through production processes the same way a supermarket pulls customers to its till. Each department along the building process provides a "supermarket" for the other departments that are further down the line. The effect of this system is first-in, first-out, minimum stock, and minimum defects, as all sorts of non-jamming management activities to increase production are made visible and can thus be acted upon. A Kanban provides a follow-up for a product or a production stage. After production begins, notes are placed with each piece that mentions the required operations and is then dispatched to the following operation or allotted zone, and the note stays there until the operation is completed, commanding the continuation of the product along the process line.

Poka-Yoke (Error Proofing)

Poka-yoke is a way of building quality into the process. Poka-yokes are impediments and are often small mechanical aids that keep a mistake from being made or that make a mistake obvious. They are one more way that we can reduce defects. Poka-yoke devices have been used to prevent backflow of transmission fluid in automobiles, missing roof panels on cars, and non-woven caps on oil filters. As a new manager, the concept of Poka-yoke is nothing new, but it doesn't hurt to be reminded. If you are managing a process and you "muda-fied" it by taking out all of the buffers, Poka-yoke is essential to keep the process from "breaking". The process might look good, but the risk of the process not being right is much higher without these types of idiot-proof devices.

The ability of a Poka-yoke to effectively prevent a defect needs to be verified through testing. Testing for the absence or presence of an error is a straightforward way to confirm that a Poka-yoke is doing its job. Testing and adjusting during validation will eliminate the need for periodic checks. If the source of a potential error cannot be eliminated and must be controlled, it is important to ensure that adding Poka-yoke will not hinder the operator from performing their job. Otherwise, Poka-yoke will not be effective in preventing errors.

Kiichiro Toyoda, founder of Toyota Motor Corporation, strongly believed in philosophy that “the ideal conditions for making things are created when machines, facilities, and people work together to add value without generating any waste.”

Implementing Lean in the Workplace

Ideally, as you transition to a new organization, you have taken a wide swath of materials specific to Lean principles, theories, and best practices under your belt before you walk into the new role. If this is not the case, or even if it is, the first thing you should do is to make a commitment to get smart on the subject as quickly as possible. The longer you wait to do so, the greater chance that problems, practices, or processes will fester. The whole idea of Lean is to tackle problems at their root or just prior to their emergence if you are proactive. These principles also imply a need to empower employees to make changes that seem an intuitive extension of their understanding of, and access to, the practical actions that plug into the organization. By encouraging and funding the training of employees, you send a very clear message that you are in this for the long haul. Empowerment is an essential ingredient for carrying out the goals and objectives of Lean. It starts with an education process that targets the tools, processes, and problem areas important to the team delivering products or services. With the right tools and the right opportunity, employees can work to support the goals and objectives of an organization. This culture shift takes time and patience but has the potential to result in a lean and much more efficient and effective way to do business.

Leadership and Culture Change

Leadership and culture change. As a new manager, you know that not much gets accomplished without people. No secret there. What is a surprise, however, to most new managers, are the differences between the leadership and people side of the job, and the technical side of the work. On the people side, the issues of communication, motivation, teamwork, maintaining performance, and achieving change may be far easier or far tougher than any part of the technical challenges you have encountered before. And when things go wrong on the people side, they go much worse than on the technical side. New managers have learned an incredible array of technical, empowerment, human resources, and coaching techniques to manage people. The question is how well and how soon you can master them, especially when you are under pressure to reshape the department or business of which you have recently become a part. In the words of one plant manager, 'Once lean starts, you’d better become a good manager. Fast, or you’ll be out. Fast.

For most new managers, mastering the people side is the most important imposition of a change on the remaining employees. The result is generally a set of changes with little credibility. A plant manager shares the common experience of managing the cultural conflict to achieve a foreign-owned plant's goal of teaching lean tools and culture to a workforce that has never been exposed to either knowledge or culture.

“The biggest room in the world is the room for improvement.”– Helmut Schmidt

Engaging Employees in Lean Practices

While Lean tools and techniques are critical components to achieving success in a Lean journey, people are the most important resource. Lean budgets and Lean projects can be set, Lean tools can be trained, and redundancy can be built through appropriate documentation techniques, but duplicated, motivated, and experienced personnel cannot be scheduled. People are the most important resource, transforming what Lean tools can do, such as removing waste, improving quality, or reducing delay. People innovate, improve, and drive success on an everyday basis. The successful implementation of any required change depends on the initiative, ability, and willingness to change people.

Therefore, a critical and primary part of your operational management role will be to engage those with whom you win during the planning, application, and extension phase of Lean initiatives. Meeting staff where they are is essential to the development of effective Lean practice. The middle and lower levels of business are overwhelmingly chaotic, responding to the endless flood of challenges that it presents. Those working meet and respond every day to those requests and solve a never-ending demand while making the most of the rare occasions to game, use their staff awareness, and creativity to improve key activities and deliver results that would otherwise be unmet.

Measuring Lean Success

When the company is mastering Lean concepts and techniques, a number of better diagnostic measurements from the Lean culture will clearly be evident. For starters, while stock prices vary, improved operating profit is a goal of every well-managed company. So take note of your company's next quarter operating profit performance versus the results of the same quarter a year earlier. This isn't the total solution. However, a trend with this measurement as one of many items being successfully managed should be monitored for a gradual improvement. The ultimate goal should be to try to determine how the company can signal to its shareholders and employees a bright long-term future and foster at least a temporary boost to the stock price. While continuous short-term improvement is desired, the Lean journey doesn't have a final end, just tough competitors in a different race for success.

Key Performance Indicators (KPIs)

Simple Lean metrics like quality, on-time delivery, safety, and productivity are frequently overlooked or undermeasured. But if you're just looking at "the numbers" for finding issues and successes, then you're only using a tool for half of its potential. Metrics are not intended to be the only method of finding out how your business is operating. Metrics are to be used to "verify" the effectiveness of your actions and decisions. Most of the important information on your business will be gained by walking the floor and observing. Key Performance Indicators actually give a limited amount of information about a business. They will point out problems in the business. They will also tell you where there are opportunities for improvement or new business. They will alert you when there are going to be catastrophic changes in your business. They will also tell you how successful you have been at reacting to these things in the past.

The big first question - who is responsible for a company's KPIs? The obvious answer is senior management. But, almost all companies create their KPIs without input from the employees who will eventually be evaluated by the KPIs. KPIs are communicated to the employees without disclosing how the KPIs were created or their relation to the company's goals. Very often, the reaction is disillusionment because the employees don't understand how the KPIs were created or their relationship to the company's goals.

“Perfection is not attainable. But if we chase perfection, we can catch excellence. “–?Vince Lombardi

Lean Metrics and Data Analysis

In this section, we will talk about lean metrics and data analysis. The key performance indicators should be revisited before employing them to evaluate and improve the affairs of the business. Conventional metrics such as inventory turnover, production efficiency, and so forth have limited power to help the leadership team understand and make necessary adjustments when things go wrong. For instance, the auto industry used to have a metric called Flash published weekly during the annual bargaining season. This Flash is an accounting of cost by the day. A favorable Flash indicates that the car company would soon be in a position to share the fruit of a prosperous season. The more fundamental problem is that the true story revealed by Flash may be the starting point of the things that go wrong in the routine costing process.

Too much looking through the windshield without a glance at the rearview mirror may quickly make you get lost. In other words, without historical record data, new data may be simply a flash in the pan. There is a gradual graceful degradation about plants that are struggling. Even if things go well, the record pertinent to things that went wrong can be worth their weight in gold, hence it is essential to be diligently searched for with well-defined data. Some possible out-of-the-box metrics are suggested in terms of simple math and more demanding thinking effort. What is the value stream ratio among all the activities in terms of total consumption and relative added value? How do they compare with the standard points such as inventory turns, asset turns, or even relative added value calculated by the finance department? Lean deals with difficulties arising from manufacturing at a strategic level.

Case Studies and Best Practices

Case Studies and Best Practices of Lean Supplies

Best Practice of a Supply Manager of a Large European Retail Company

ID Data

Geographical location: Limerick, Ireland

Firm type: Retail

Sales turnover (US$): More than 40 billion

Employees: 390,000

Supply Chain Relevance

The company sources products (85% manufactured in Asia) in three main business areas: grocery, clothing, and general merchandise. The products are then delivered to warehouses and stores on a global basis. The company serves nine million customers every week from 2,400 stores and is continuing to grow.

Lean Application Information

Discussion with the supply manager, attendance at a meeting on a reorder flow management issue, review of email communications.

General approach: The supply manager is a strong advocate and driver of lean profitable growth, which is the company’s growth and profit strategy. PG involves the launch of new ranges, such as fashions and home products, and developing new systems and processes that can provide improved performance. Lean is only one part of PG, but all PG systems are designed with a lean thinking philosophy. In fact, improvements made within PG can have longer-lasting benefits because they are made platform-wide and implemented so that standard work can be produced. In terms of lean principles, the focus is on value stream identification, flow, and pull. The company uses its leverage with suppliers.

The Supply Manager’s Special Collection: Seconds-first quality clothing, retailed at a discount, for sale in the UK. This business now has the same annual throughput as a top-10 UK fashion retailer and is still growing. There are six points here that provide a good reminder to all.

Because we are lean practitioners, we can efficiently provide these “extra mile” services. The PG team produces a quality job every season to ensure the infrastructure is there for the marketing activation. With leverage, our negotiation team has made sure the quality is controlled and available on time.

Commitment to lean thinking: We constantly challenge ourselves for the fit-for-purpose items and delivery processes rather than having a “one size fits all” solution. We work cross-functionally with our depot and store colleagues to build a seamless in-room process that allows space to be eliminated in our warehouse.

Total quality is everything: We started our eyes and feel the quality in these areas this year. This again ensures the benefit has a solid foundation for continuous improvement in the future.

Lessons Learned: Internal sales are about 10% down, but we have had a positive impact from having better fitting and less exclusive product and brand, which has increased interest in our website. Locations of promotion: Decisions based on historical data did not work. Specials are promoted nearest the front of the store, especially for generally successful newcomers. Remaining availability is often carried over to the main aisle to allow the credit selection. Time of day was important; a cross-functional approach was required, and future deletion was in question. The focus of attention was “Will it still be in stock in 2/3 weeks’ time?”

Real-world Examples of Lean Implementation

Following are two examples of how lean principles were implemented in real organizations: Company A and Company B.

Company A (electronics company)

This company had several problems in various aspects of its operations and management: product design, fabrication, material handling, inventory control, change orders, and documentation of its products. Among some of the immediate symptoms of these problems were excessive defects, high scrap, long manufacturing lead time, frequent customer schedule changes, and a high percentage of direct labor for documentation and testing.

The company decided to apply lean principles by:

Creating a lean manufacturing cell-based organization. ?Eliminating the assembly test technician position. ?Creating a partnership between craft workers and supervisors; their roles would change even though they would be doing the same job. ?Addressing the work area issues, including exceptionally high levels of scrap and damage to components. ?Changing the focus of the direct labor work from putting out scrap to producing quality components. ?Creating a process flow path for each job that was simple and understandable by individuals who performed the work. ?Training workers to identify issues that slowed down their process and to solve those problems. ?Making activities with much waste visible.

Lessons Learned and Success Stories

When first assessing the environment and attempting to determine the direction we wanted to go, we underestimated resistance. By focusing on tradition and standard metrics that have typically been the focus and focal point of managers, there will be some resistance. This was probably the most important and eye-opening aspect of the Lean management philosophies that was a big surprise to us. The other aspect was the increase of creativity by employees. This factor is probably the most rewarding from our perspective.

We saw immediate successes early that we did not even realize until we accidentally looked back. We had a little waste can that was always emptied daily, or even more than once daily. It was like a light bulb clicked on when we realized that it had not been emptied in weeks. We have no useful metrics historically to reflect this process improvement. It was subtle and quiet. Our customer spaces have been consistently clean and organized, with little fault. We worried about how much clutter the technician would have within their own work area with the space at nearly its minimum size. It seems this aspect still has not been addressed, and it has been an annoyance to me. Our second shift technicians, with whom we often work side by side at our satellite locations, have become our biggest fans. Their comfort and satisfaction level at the maximum seems to have no ceiling. Their input and creativity seem endless. Simply, the concepts appear to work well and will be beneficial long term.

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