CHAPTER 2: LEAN PRINCIPLES AND CONCEPTS
Overview
In the previous chapter we considered some of the key concepts for lean. But how do you actually complete a lean project? What are the tools and how are they used? We will consider these questions in this chapter.
Principles
Lean principles are used to methodically examine business and related processes focusing on customer value and the elimination of waste. The benefits of this approach include:
• Focusing on satisfying customers hence increasing future income streams.
• Identifying and evaluating potential bottlenecks or other problem areas.
• Increasing the efficiency of the organisation.
• Saving money, e.g. by reducing overheads.
• Simplifying processes.
• Being able to demonstrate conformity to internal business rules and external regulatory or reporting requirements.
Another principle often cited with lean is the kaizen philosophy of continuous improvement/change. This is a Japanese principle based on the following cycle:
1. Standardisation of operation
2. Measurement
3. Comparison of measurement to requirement
4. Make small changes to meet requirements/improve productivity
5. Repeat from step one.
Or to put it another way ‘Plan’, ‘Do’, ‘Check’ and ‘Act’ (PDCA).
The five key principles
The five key principles for lean:
1. Identify Customers and Specify Value
2. Identify and Map the Value Stream
3. Create Flow by Eliminating Waste
4. Respond to Customer Pull
5. Pursue Perfection.
These are described below.
Value
In the lean approach, value is defined by the customer – it is hence dependent on the price that they are willing to pay. By implication if it does not have a price it is waste and needs to be minimised. For public sector organisations, e.g. the NHS, it may not be possible to assess value in monetary terms – instead value needs to be assessed as the benefit to the patient or other stakeholders (e.g. their GP). The principle of identifying customers and specifying value will be explored further in Chapter 3.
Value stream
This is the core process of activities that deliver the value as identified above. It should cover the full end-to-end process, including all boundaries. So, this could be first contact for a potential sale, from any of a number of different channels, right through to final delivery and payment. There are processes in lean for mapping the value stream (see Chapter 4).
Flow
The value stream should flow from end to end with no blockages and with minimal hand-offs to other parties. To achieve this requires batching of activities, removal of processes adding little or no value, and the alignment of demand and capacity/production. A technique known as value stream mapping is used in agile to map existing and intended process flows. This enables the assessment of opportunities for improving flow efficiency, thereby reducing waste and cost (see Chapter 5).
Pull
The flow is pulled through the process (rather than being pushed) based on actual customer demand. Traditional production planning was based on estimating demand, both of the type of product needed and volumes. This often results in an insufficient product of the right model or specification being available if demand is higher than expected. Worse still, in some cases too much of the wrong specification can be made, leading to waste and a need to sell the excess at a vastly reduced price (e.g. books via remaindering channels).
In the push model, production is based on the supply of raw materials – with production pushed through each stage as it continues. Any surplus is stored, either at the end of the process or at each stage. In addition to waste, queues can form, where a production step is waiting for missing components. There is often poor synchronisation of these sub-processes, leading to each one working on different products at the same time. Also, the organisation will be failing to provide what the customer values, when they want it.
Instead of the push from raw material to finished product, lean is based on a pull – from the customer demand through the process, back to raw materials, stage by stage (see Chapter 6). Components, or raw materials, are only requested from the previous step by each stage as they are actually required. This enables organisations to produce in line with actual demand at that moment in time. This reduces work in progress stock inventory waste.
Perfection
The level of quality is the value defined by the customer, however, this can change over time as their expectations increase (particularly in a competitive marketplace). For this and other reasons, perfection is therefore an unattainable goal but should still be strived for. The aim of lean thinking is to pursue perfection by continuously improving the process flow, dependent on:
• constant incremental improvements
• best practice and willingness to experiment
• learning
• feedback from customers and other stakeholders
• innovation and technological changes.
(see Chapter 7).
Minimise waste
Businesses have to perform many tasks and activities. Some of these add real and direct benefit to the product or service provided. Benefit that the customer can see – a product they can buy, on sale in a way convenient to them, delivered when and where they need it. These are called ‘value added activities’ and are a good thing.
Businesses also need to undertake other activities to stay in business and operate in a legal way – for example, support board activities, financial accounting, health and safety, IT infrastructure and regulatory/compliance activities. This is referred to as ‘incidental work’ and can be seen as an overhead to the main activity. As such, they still need to be provided in a way that minimises waste.
If activities are undertaken that do not add real value to the customer, or are required to operate the business, they are referred to as ‘non-value added’ and can be seen as potential waste.
There are eight areas of waste identified for lean that can be remembered using the acronym ‘DOWNTIME’:
1. Defects
2. Overproduction
3. Waiting
4. Not utilising talent
5. Transportation
6. Inventory excess
7. Motion waste
8. Excess processing.
Lean approaches and tools
A number of tools, approaches and techniques have been developed to assist with lean projects. Some of these are applied to specific principles (e.g. the Kano model for customer value) and these will be considered in the specific chapter where they apply. Other general tools include:
• value stream mapping
• root cause analysis
the 5 Whys
fishbone diagrams.
These are described below.
Value stream mapping
All organisations take some form of raw material or basic service, add to it, and then sell on the basis of the value added. This process could be very complex, such as taking metal ore and converting it into steel girders, or it could be as simple as re-selling bought goods in a different marketplace, or performing an audit or software development project. The journey from beginning to end is referred to as a ‘value stream’ and is key to lean thinking. As a customer, I am not generally interested in how complex or difficult the process is. I am merely interested in the value to me as an individual – and that will determine the price I am willing to pay. So the business needs to balance the costs of operating the process, with the value that I place on the final outcome – hopefully leaving an element of profit for them.
It is wasteful to spend millions of pounds on equipment to produce a limited number of low value items (e.g. paper clips). Likewise, it is unlikely to be worthwhile to spend large sums on new software systems that will only be used by a few who will only receive a very limited benefit.
Toyota were aware of the significance of the value stream and used information and material flow diagrams to represent the process. James Womack, Mike Rother and John Shook brought these together to create Value Stream Mapping (Lean Enterprise Institute LEI Workbook Learning to See 1998). The five main steps are summarised below.
We will consider the process for identifying and mapping the value chain, and how to audit this process, further in Chapter 5.
Root cause analysis
If I don’t deal with a weed in my garden it will spread. If I cut it off at ground level, it will grow back again – maybe not there but somewhere else. The same is true of issues and problems we may identify in a lean review. Without identifying the cause, it could spread, even if we deal with the immediate problem. The method of identifying the real cause is referred to as root cause analysis (RCA).
If the lights in my house go out, I can reset the fuse or circuit breaker but without knowing why it tripped or blew and resolving that issue, the problem is only temporarily resolved. The loss of power is referred to as the ‘proximate’ or ‘direct’, or immediate cause. A root cause could be manifest in a number of different proximate causes. Resolving the root cause will resolve the proximate cause. NASA have been leading thinkers in the area of RCA. This process involves helping to identify:
• What happened? – including an analysis of all available data
• What led to the occurrence?
• Where it happened – including all locations and timings/timelines.
• How it happened and why it happened.
• What are the likely solutions and how cost-effective will each be?
RCA can be used in response to incidents, as a preventative measure to predict failures, or as part of a lessons learnt exercise.
RCA needs to be conducted in a systematic and robust way – otherwise there is a risk that the root cause identified is not the end of the chain and there are other causes below it. The aim is to permanently resolve the issue in the medium to longer term – not necessarily to find a temporary short term immediate fix.
If auditors report only on the immediate cause and not the root cause they are ‘failing to add insights that improve the longer-term effectiveness and efficiency of business processes and thus, the overall governance, risk, and control environment’ (see The IIA’s International Professional Practices Framework (IPPF) Practice Advisory titled 2320-2: Root Cause Analysis).
There are a number of techniques for performing RCA. The two most common ones are:
1. The 5 Whys
2. Ishikawa (fishbone) diagram.
The 5 Whys
Taiichi Ohno, of Toyota summed up this approach well:
‘Ask “why” five times about every matter.’ That’s it. The whole approach is based on asking one question (‘Why?’) repetitively. Each repetition gives additional insights to reach the core of the problem – the root cause – each time getting to a more finite level of detail. The key is to take methodical steps in the process and not to jump to conclusions. This enables resources to be focused on the root cause.
Stating and documenting the problem helps to agree what the actual problem is. Brainstorming is then used to identify the cause of the problem by asking the first ‘Why’ – the second loop is based on the way to this first response and then the process is repeated until the root cause is found.
The following grid can be used as a template for analysis. In practice we would include more detail. The example is taken from Taiichi Ohno’s example of a welding robot that stopped working (see www.toyota-global.com/company/toyota_traditions/quality/mar_apr_2006.html)
Table 2: 5 Whys example
| What happened? | Robot stopped working |
| 1. Why did the robot stop? | Circuit overload |
| 2. Why did the circuit overload? | Insufficient bearing lubrication |
| 3. Why was there insufficient bearing lubrication? | Oil pump failure |
| 4. Why did the oil pump fail? | Pump intake clogged |
| 5. Why did the pump intake clog? | No filter on pump |
So by fitting and maintaining a pump filter, the problem will be fully resolved.
The 5 Whys are sometimes supplemented by the use of a cause and effect diagram (see Ishikawa diagrams below). The 5 Whys approach is a simple to use and imaginative approach. So simple it always reminds me of the way a 5-year old child may try to wear down their parent when they are refused something they want (‘Why can’t I have an ice cream?’, etc.). It also helps to identify other associated issues that may not yet be apparent, or to connect two issues where the relationship has not yet been identified. It does need to be robustly applied to ensure:
1. The final root cause has been identified.
2. There is minimum bias towards the answer that everyone was expecting.
Ishikawa (fishbone) diagram
The Ishikawa (fishbone) diagram provides a basis for cause and effect analysis to help consider a problem in-depth, to identify and resolve the main cause. The problem is expressed in the form of an effect. The tool helps to identify and record the main causes so that these can be evaluated to find the ones most worthwhile to resolve. This is usually achieved in workshops. The technique was first invented by Professor Kaoru Ishikawa of Tokyo University. The diagrams created resembled the bone structure of a fish.
The tool is very good at discovering causes that may not be immediately apparent. By taking a team approach, it brings in different skills, knowledge and perspectives and allows greater analysis of real root causes. The approach could be:
• identify and obtain consensus on issue
• identify four or more major factors
• brainstorm each of the main categories to identify cause of causes.
The technique is highly structured and can work well but it requires consensus on the definition of the problem. The tool helps to identify multiple causes and highlights connections between them. There is a risk that some factors may be missed so it is often useful to perform a show and tell to get additional viewpoints.
Lean governance
As with agile, there is a risk that project and other activity teams assume that there is no governance requirement for lean activities. However, given the strategic impact on the organisation and the changes that will be made, this is incorrect. There still needs to be governance frameworks to ensure that the objectives are achieved, at reasonable cost and timeline, and that teams work within their (defined and adequate) levels of delegation. There may also be specific legal and regulatory compliance issues to consider. Governance and audit should ensure that these are achieved and that the process of continuous improvement is effective (see Chapters 9 and 10).
Audit considerations
When auditing or providing other assurance for a specific lean project or activity, the first step is to consider the questions you would use for any other approach, applying the principles described above. For example:
1. Is there sufficient, but not excessive, project governance that the project will complete in budget and the timelines set, whilst achieving the financial and other business benefits identified?
2. Is the project likely to adversely impact another area of the business?
3. Is the project run in accordance with the organisation’s policies, practices, processes/methodology and standards for this type of activity?
Summary
In this chapter we have explored the five main principles for lean (identify customers and specify value, identify and map the value stream, create flow by eliminating waste, respond to customer pull, pursue perfection). We have also considered the significance of lean principles and some of the main tools used for root cause analysis (the 5 Whys and fishbone analysis).
Over the next few chapters we will consider the concepts in more depth.