I’m Joe Rizzo, I’m the president of a single person consulting company. I do training and consulting in Lean and Six Sigma. I also am the executive director of the New England Lean consortium. So the question is, what is Lean and why should it be important to you?

What Is Lean?

Lean applies to many different companies and organizations because Lean is really all about identifying waste and eliminating waste.

Every business is a process; every process has waste. Several years ago, Japanese automobile makers made an entrée into the United States to manufacture and sell their automobiles. So a lot of people went over to study the Japanese system, and they found out that Japanese automobile makers had a very efficient, low-cost way of making automobiles, and they could sell their product to the United States at a price much lower than United States automakers.

So people rushed over to Japan and studied the Japanese system, which they called the Toyota production system. The father of the Toyota production system was a man called Taiichi Ohno, and people asked Taiichi Ohno, “how did you come up with the ideas for Lean?” and Taiichi responded, “I read Henry Ford’s book.” And Henry Ford, as we all know, invented the assembly line. The idea behind the assembly line was to break the steps into small increments and have one person do every small increment. That way is called division of labor, and the automobiles could be produced at a constant speed. So with that, Henry Ford was able to be the low-cost producer for automobiles, and as a result, he put almost 400 other automobile manufacturers out of business.

Takt Time = Work Time Available / Demand

The faster a product goes through manufacturing, the lower its cost. So we get into a discussion of Takt time, or assembly-line speed. Takt time is the Work Time Available divided by the Demand. The demand is what the customer orders and the rate at which he orders. And the work time available is, let’s say an eight-hour shift, you take out two 15 minute breaks and it boils down to a 7 1/2 hour shift, divide by the number of units you want to make, and you get this units-per-time increment.

So in the automobile industry, the current unit per time increment is roughly two minutes. So every two minutes, a finished automobile comes off the assembly line, and that automobile starts up right away and you can drive it for 100,000 miles, 10 or 20 years, and has very little maintenance. That’s the type of thinking that we would want all the people that implement Lean to consider.

Here are the five Lean principles.

1. Value

The first one is value, and that’s the value that’s perceived by the customer. Based on the perception of the value, that’s the price the customer will pay.
For instance, let’s take US mail. With the US mail, you can send a letter anywhere in the country for $.49 and it will take 2 to 5 days to get there. If you absolutely have to have it there the next day, you will pay $25-$50 with UPS or Federal Express to get it there the next day. So the customer is willing to pay for value, and based on that value, they are willing to pay a lot more money.

Perception is really important in pricing a product or service, and so that’s the first principle: what the customer perceives as value, that’s the price they are willing to pay.

2. Value Stream

The next principle is value stream. What are the steps required to make the product? What are the steps required to deliver the service? That’s the value stream.

3. Flow

The most efficient way of delivering the value is through flow, or straight-line flow. Everything should go in a straight line, no backing up. The shortest distance between two points is a straight line; the most efficient way to make a product or deliver a service is a straight line.

4. Pull

The fourth principle is pull. Pull means, we make things or deliver things to the request of the customer or the demand of the customer. The demand of the customer is usually some of the units per week, some units per month. This is the opposite of the old way of doing things which was to build a large inventory, ship out that inventory, and push the product forward.

5. Perfection

The fifth principle is perfection. We strive for perfection in everything we do, which means we do it in the least wasteful way. On-time delivery is 100%; on-time quality is 100%. Everything’s 100%; there’s no waste in the system.

But perfection has evolved to become: “deliver what the customer wants, when they want it, in the quantities that they want it.”