Five Lean Principles

It is not solely the automobile industry that has been experiencing changes in operation- al practices. In fact, nowadays all industries exposed to global competition and chang- ing technological possibilities are facing similar pressures to transform their practices in ways that are better attuned to the changing environment (Kochan et al., 1997). Global- ization has put serious competitive pressure on the old mass production model in the West. In their book Lean Thinking (1996), Womack and Jones renewed their lean mes- sage, extending it beyond the automotive industry. In doing so, they proposed five lean principles:

1. Specify value from the point of view of the customer; 2. Identify the value-stream and eliminate waste; 3. Make value flow;

4. Pull at the customer’s rate of demand;

Value

“The critical starting point for lean thinking is value. Value can only be defined by the ultimate customer. And it’s only meaningful when expressed in terms of a specific prod- uct (a good or a service, and often both at once), which meets the customer’s needs at a specific price at a specific time” (Womack and Jones, 1996 p.16)

Defining value from the point of view of the customer is of great importance when it comes to lean production. Williams (2010) suggests that most lean practitioners have failed to properly understand and apply the first and most important lean tenet – to truly and deeply understand what customers value, and will value. By selecting a forward looking long-term strategic view of customer value rather than a backward looking short-term tactical view on customer satisfaction, manufacturers can better understand the requirements for customer value creation. In a mass production, product-focused approach, an organisation attempts to find customers for its products by using mass marketing efforts, whilst with lean production, a customer centric approach requires products and services to be developed to fit customer requirements (Powell, 2011). We suggest that the definition of value is a critical step towards the identification and elimi- nation of waste within the manufacturing enterprise.

Value stream

“The value stream is the set of all the specific actions required to bring a specific prod- uct through the problem solving task from concept through detailed design and engi- neering to production launch, the information management task running from order- taking through detailed scheduling to delivery, and the physical transformation task proceeding from raw materials to a finished product to the hands of the customer”

(Womack and Jones, 1996 p.19)

Having defined value from the point of view of the customer, the next task is to identify the value stream. Though it is called the value stream, it is actually made up of all of the activities that are involved in making a product, both value-adding and non-value add- ing. And while many take an internal “door-to-door” plant view of the value stream, we suggest that the term “value stream” can also include external suppliers and customers. That’s to say material flow to and from customers and suppliers, and likewise infor- mation flow.

Flow

“Once value has been precisely defined, the value stream for a specific product family fully mapped by the lean enterprise, and obviously wasteful steps eliminated, it’s time for the next step in lean thinking…make the remaining, value-creating steps flow”

(Womack and Jones, 1996 p.21)

It is clear that flow is an essential element of lean production. If we can imagine lean representing “the continuous flow of product to the customer” on one end of a scale, traditional “batch-and-queue” production would be placed at the opposing end, with frequent and excessive waiting as batches move slowly through the value stream. With an emphasis on waste elimination, the objective with lean production is to continuously reduce throughput time by cutting batch sizes and balancing production operations.

Pull

“Pull in simplest terms means that no one upstream should produce a good or service until the customer downstream asks for it” (Womack and Jones, 1996 p.67)

Following on from the concept of flow, the next step is to synchronize the already bal- anced production operations to the rate of demand of the customer. This is pull in a nut- shell, and Kanban is a mechanism that is typically used to control the pull system. Kan- ban is a Japanese term for card or signal, and represents a simple authorisation mecha- nism to enforce pull production. When an operator receives a Kanban card, it gives him authorisation to produce or move products or materials (production Kanban or transport Kanban). Kanban cards can also be sent to suppliers to replenish component parts (sup- plier Kanban). I consider pull production to be the absolute ideal of lean production.

Perfection

“As organizations begin to accurately specify value, identify the entire value stream, make the value-creating steps for specific products flow continuously, and let customers pull value from the enterprise, something very odd begins to happen…suddenly perfec- tion doesn’t seem like a crazy idea” (Womack and Jones, 1996 p.25).

The final of the five lean principles is perfection, which represents the culture of contin- uous improvement that is required for lean production to succeed. Continuous im- provement, or Kaizen (Imai, 1986) is a central part of lean production. We suggest that a focus on improvements raises the importance of visual management and performance measurement.

The five lean principles give a good conceptual overview of lean production. When put into the perspective of ERP systems, we can immediately see how important it is to have accurate and timely data if ERP is to operate alongside, or even integrate with, a flow-orientated pull system. For example, excessive lot sizing and the addition of “just- in-case” buffers in lead time and safety stock parameters will lead to disrupted flow and overproduction, as well as excessive inventory.