"In its most basic form, lean manufacturing is the systematic elimination of waste from all aspects of an organization’s operations, where waste is viewed as any use or loss of resources that does not lead directly to creating the product or service a customer wants when they want it."
That comes from the EPA website that Kevin referenced in his recent blog concerning lean in government. I imagine most folks would read it and generally agree. I don’t.
Taichi Ohno described the Toyota Production System by saying that, "All we are doing is looking at the time line, from the moment the customer gives us an order to the point we collect the cash. And we are reducing the time line by reducing non-value adding wastes."
You see, the problem with the EPA definition is that they forgot the part about the time line. A lot of people forget that part, which leaves lean empty. Delphi forgot that part. Most manufacturers do. The time line is the cycle time of the entire manufacturing process from receipt of customer order to collection of payment. Since inventory is waste – can’t forget that fundamental either – that means that procuring the material it takes to fill the customer order is squarely along the time line. That also means that, if a company meets Ohno’s definition and reduces the time line, inventory must come down. No improvement in inventory turns means no lean manufacturing is happening – at least as Ohno would define it. You might have EPA lean, but without a radical increase in turns, you most certainly do not have Taichi Ohno/Shigeo Shingo lean
Applying lean techniques – stuff like kanbans and value stream mapping – to meet the scrawny definition offered by the EPA mean you are free to use lean to pursue the same old objectives. Becoming lean under those terms is really not too difficult. Managers have been attacking waste since Noah built the ark. It is just that the waste they attacked was based on their definition of cost. Ohno said to attack the waste in the time line. That is a horse of a very different color than the waste identified by a traditional accounting system.
What the EPA calls ‘lean’, I call just doing their job. The same is true with most lean applications in the service economy. But there is a huge difference between a manufacturing company and a service company. I mean a really, really HUGE difference – inventory.
Going into an insurance company with a bag of Toyota tricks and showing them how to shuffle the paperwork along in a less costly manner is a walk in the park compared to going into a manufacturing company to reduce the time line. Going after the manufacturing time line puts you right into the belly of the beast, where a century of American manufacturing calls inventory an asset while you are trying to define it as waste. You don’t have to slay that dragon in a call center, a hospital or a law office. It lives only in manufacturing where it breathes the fire of accounting righteousness on all who dare to reduce inventories and under absorb overhead. The service sector only confronts the lean leader with the snarling stray dog of bureaucracy.
Lean service is a different concept entirely. That EPA definition may be good enough in that arena. I really don’t know because I have been in manufacturing all my life. I suspect that a successful manufacturing lean leader can succeed in the service world. I highly doubt that someone steeped in the world of lean service would stand a chance in the manufacturing world. They would be unequipped to deal with GAAP (Generally Accepted Accounting Principles) that many seem to think were chiseled onto the flip side of the tablets Moses brought down from the Mount. GAAP says a manufacturer can call ‘time out’ along the time line to save labor costs. Ohno does not play by that rule.
All of this gets us closer and closer to the root of the looking lean versus being lean issue that has become quite a focus lately. Take the EPA definition of lean into a manufacturer that still defines inventory as an asset and they can only look lean. Take Ohno’s definition into a company and redefine inventory at all levels of the company, in all applications including the balance sheet, as waste and they can actually be lean.