by Jeff Thill and Mark Stover

As a term, lean has taken on a variety of meanings by different people at different times. To many manufacturers, “going lean” simply means cutting costs, but this is far from a complete or accurate definition. Eliminating waste, for instance, is an overriding lean objective that doesn’t necessarily equate to cost cutting.

The best lean thinkers use the word to encompass the entirety of what lean represents: a modern business management system focused on the relentless pursuit of reducing and eliminating waste in business processes to create strong business results.

Despite this thorough definition, it contains seven key statements still open for interpretation. Test your lean understanding with the following explanation of these basic statements.

Seven basic statements

Modern. Today’s customers demand more deliveries of smaller lot sizes, in wider varieties, more frequently, at increasingly lower costs, with perfect quality on every order. Mass production cannot perform to such modern requirements. Likewise, manufacturers unable to meet up-to-the-minute expectations will soon find that their customers have promptly switched to other suppliers.

Business management. Most of lean implementation has focused on manufacturers’ shop floors, but the concepts should be applied across an entire enterprise—indeed, across an entire value chain—from suppliers’ suppliers to customers’ customers.

System. Business is more of an organic system than a machine. And naturally so, since the fundamental building block of every business is people. Therefore, as processes are improved, the entire system (people, process, information, technology) must also be considered to avoid eliminating waste in one area only to create it elsewhere.

Focus on the relentless pursuit. Lean is not easy; it’s for adults only. Successful conversions require process discipline and a focus on required business outcomes. Mind games, an unwillingness to be engaged in work, and suboptimal strategies often driven by poorly designed and misaligned performance measurement systems are all barriers to successful conversions.

Distractions will certainly occur in business, sometimes daily. But distractions should not interrupt the prevailing focus. Instead, they can provide insights into problems and present new improvement opportunities. Lean manufacturers refuse to let their focus on the relentless pursuit of perfection be derailed.

Reducing and eliminating waste. Waste is any used-up resources that do not create value as defined by the customer. This includes money, time, people, ideas, capital equipment, physical space, trust, and knowledge. In contrast, value-added activities are those actions that directly result in the conversion of raw materials into finished goods, ready for use by the customer. Everything else is non-value added.

The classic wastes found in any organization include defects, overproduction, delays, non-value-added processing, idle inventory, nonessential movement of people and transportation of things, and underutilized employees.

Business processes. Every business has unique processes, but most have processes that are common to all businesses. For example, most companies take orders, make products to fill those orders, ship products, invoice for product prices and shipping, and collect payments. There are also supporting processes like recruiting and deploying human and capital resources, designing and engineering parts, accounting for the cost of work, purchasing, selling, and customer service. All of these processes can be filled with waste, preventing companies from flowing value to their customers.

Create strong business results. Creating more value for more customers creates stronger business results. Results are measured in market share, ROIC, profitability, inventory turnover, cash flow, ROA, and other “hard” business measures. Because lean can impact outcomes so dramatically, the business results make the difficult job of implementation worth the challenge.

Jeff Thill is a Wipfli partner serving manufacturing and wholesale entities ranging in size from large, widely owned companies to smaller, family-owned businesses.

Mark Stover is a senior consultant whose focus is continuous process improvement.

To learn more about Lean, please contact Jeff at our St. Paul office at 651.766.2862, or e-mail him at jthill@wipfli.com.