Whatever “it” is, there is only value if there is current demand for it. If not, it's just going to sit around doing nothing at your expense until the demand miraculously appears, or it becomes obsolete and you have to give it, or throw it, away, wasting all that hard work which went into producing it in the first place.
A good example of this happened at a well-known fashion company, which embarked on a Lean Manufacturing programme that was an outstanding success: their productivity and production increased enormously and production costs plummeted. Unfortunately, they forgot about the demand-driven bit and linked their highly efficient production machine to the sales forecast created ahead of the season. Inevitably, actual sales did not match the forecast and they were left with frustrated customers who couldn't get the hot stuff they wanted, and warehouses full of the stuff that didn't really catch on. The result was that the lost orders and the cost of carrying and then writing off that excess inventory was ten times the savings they had made in the factory. When they looked back, they discovered that their shiny Lean factory actually wasn't agile enough to be capable of responding to the real demand as and when it materialised. They just did not think about Lean as something useful outside of the factory. We'll discuss the broader application of Lean compared to Lean Manufacturing a bit later.
So, the first principle of Lean is: do nothing, unless the customer requires you to do something, which usually comes in the form of an order. This is very hard sometimes, especially in an environment which is driven by traditional financial drivers, like overhead absorption, the killer of many a promising Lean programme. The pressure is on to keep the machines running, drive up utilisation and Overall Equipment Effectiveness (OEE). Lean is not necessarily in opposition to this, but puts a caveat on it: “if there is demand from the customer.”
So, let's try to put a “real life” angle on this to see if it all stacks up. Ask yourself these simple questions, would you:
• Drive to pick up a friend from the other side of town on the off-chance they might want to come and visit you?
• Make a meal when no one is hungry?
• Go to fill up the tank when you're on full already, but it's Tuesday, fill-up day?
The answers here are obvious (hopefully!). The key thing here is to ask the question: Is there a real need for me to do this? Does someone need it?
This is very simple in concept, but sometimes hard in practice. As mentioned above, this means that once you get the signal from the customer to start, stoke up the boilers, get the engines running and don't let anything get in the way until it's in the hands of the customer. At a local level this isn't too hard to do, but for a whole business, it isn't that easy. Look around the countryside at all the massive buildings dotted around with hundreds of truck-docking bays – those are warehouses. Each one filled to the gunwales with products waiting for somewhere to go or to be asked for by someone. In short: a testament to the failure of a business to maintain flow. To implement Lean properly, and get the full benefit for both you and your customers, the whole supply chain must be Lean, not just parts of it. If not, then you end up squeezing a balloon. One part gets thinner as you work on it and all that happens is that the waste you worked so hard to eliminate just pops out somewhere else and the net result is zero. I've seen so many times, Lean teams, site leaders and even COOs, clapping each other on the back saying how great their Lean programme is going and citing all the benefits delivered. However, the miserable old CFO is sitting in the corner looking at the company annual report, shaking his head and muttering to himself, “I don't see it here”. And of course, the miserable old goat is right. All that's happened is that the waste has been redistributed and changed form, not been expelled from the business, largely because flow was not maximised along the whole supply chain.
But flow is not all about eliminating waste and reducing inventory and cost, it makes your whole business more agile. With less to move around, it's a whole lot easier to change direction when the market changes or something new emerges from your R&D machine. I hear people talking all the time about Lean and Agile as if they are two different things. In my view they are one and the same thing: you can't be one without the other. I like the Agile term personally, as I think it conveys a better image of what it is all about. However, it's sometimes difficult to get the right message across given the common misconception mentioned above. An explanation I like and that seems to fit well is one that was thought up by Patrick Rigoni, a Founding Partner of SmartChain International, and goes as follows:
“True agility – combines responsiveness with flexibility to deliver flow and is ‘designed in’ with Lean and Demand Driven Replenishment.”
In Figure 1 it's all about finding ways to widen a) and shorten b). Notice too that this can apply to anything; here it is just termed “Operating Parameter”. This is deliberate as the business requirement should drive what exactly it is that you need to be Agile in: speed to market; delivery to customers; processing claims; getting round the supermarket.
I like this explanation a lot. I remember our team agonising over this for some time, trying to capture the essence of what agility was in relation to Lean in a way that is simple and easy to get your head around – after all, that's the mantra of Lean. Isn't it?
The secret to maximising flow is to identify the constraint, what's stopping you doing whatever it is, and eliminate it. Not much of a secret really, but it's surprising how difficult this can be when you don't have a good view of the end-to-end supply chain and, on top of that, the pesky thing keeps moving around! More on this later.
Before we can start taking steps to eliminate waste, we need to learn how to recognise waste when we see it. To do this we have to come back to our old friend, value. By definition, if what we are doing creates or adds value, as we have defined it above, then what we are doing is not waste. That's fairly simple. Also, by the same token, anything we do that is not adding value is waste. So all we need to do is look around for all the things that are not adding value and stop doing them. Sounds very straightforward, but there is so much of it that it's very easy to get confused and overwhelmed. This is why we categorise waste into seven different types called, funnily enough: “The 7 Wastes”. These are shown in Figure 2. In order to further help look for them, they are grouped into what they apply to: people, processes and products or services. This approach has been around for a long time and there are many articles and book chapters on the subject of waste, which define and categorise them far better than I could do here, so while not wanting to skate over such an important subject, I'll encourage you to look up one of the established texts on the subject when you have time, rather than repeat it all here. However, in simple terms, this is what they are, with a brief everyday example included:
Motion – People moving themselves, or parts of themselves, around. Having the fridge, the worktable and the cooker too far apart in the kitchen. Taking the plates from the dishwasher to the cupboard one at a time.
Waiting Time – People waiting for something to arrive or something to happen: Going and standing at the bus stop for 30 minutes when you knew there wasn't a bus due. Waiting for the kettle to boil.
Overproduction – Making more than was needed: The three extra copies of a report you printed just in case a few uninvited people showed up to the meeting. Overfilling the kettle – see Waiting Time above!
Overprocessing – Doing more than is necessary for the purpose: Polishing the underside of the table – no one's going to look! Cutting, then trimming a fence post to exactly 125.25centimetres.
Defects
