Value
The Lean approach begins with a detailed understanding of what value the customer assigns to product and services. This is what determines what the customer will pay. Establishing value allows organizations to create a top-down target price. The cost to produce the products and services is then determined. The organization focuses on eliminating waste so that they can deliver the value the customer expects at the highest level of profitability.
“Value is created by the producer. From a customer’s standpoint, this is why producers exist…. 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 product (a good or service, often both at once) which meets the customer’s needs at a specific point in time.” – Lean Thinking
The Value Stream
The value stream is the totality of the product’s entire life-cycle from the raw materials through to the customer’s use of, and eventual disposal of, the product. In order to eliminate waste, the ultimate goal of Lean, there must be an accurate and complete understanding of the value stream. Processes are examined to determine what value is added. Steps, materials, features, and movement that do not add value are eliminated. According to Womack and Jones, value stream mapping will almost always reveal three types of muda. (Muda is Japanese for waste).
- Many steps will be found to unambiguously create value.
- Many other steps will be found to create no value but to be unavoidable with current technologies and production assets.
- Many additional steps will be found to create o value and be immediately avoidable.
Flow
Understanding flow is essential to the elimination of waste. If the value stream stops moving forward at any point, waste is the inevitable by-product. The lean manufacturing principle of flow is about creating a value chain with no interruption in the production process and a state where each activity is fully in step with every other.
“The first visible effect of converting from departments and batches to product teams and flow is that the time required to go from concept to launch, sale to delivery, and raw material to the customer falls dramatically.” – Lean Thinking
Pull
The lean principle of pull helps ensure flow by making sure that nothing is made ahead of time, building up work-in-process inventory and stopping the synchronized flow. Rather than using the traditional American manufacturing approach of pushing work through based on a forecast and schedule, the pull approach dictates that nothing is made until the customer orders it. This requires a great deal of flexibility and short design to delivery cycle times. It also requires an efficient way of communicating what is needed to each step in the value chain.
Perfection
Lean practitioners strive to achieve nothing short of perfection. The march toward perfect process happens step by step as continuous improvements address root causes of quality problems and production waste. The relentless pursuit of perfection is what drives users of the approach to dig deeper, measure more, and change more often than their competitors.
“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. It dawns on those involved that there is no end in the process of reducing effort, time, space, cost and mistakes while offering a product which is ever more nearly what the customer actually wants. Suddenly perfection, the fifth and final principle of lean thinking, doesn’t seem like a crazy idea.” – Lean Thinking
We highly recommend that you pick up a copy of Lean Thinking, which goes into far greater depth about each of these principles of Lean manufacturing. It also offers insightful and unexpected examples across almost every industry. These ideas form the foundation of the Lean approach that has transformed countless corporations, giving them a leg up on the competition and a clear path to both profitability and delighted customers.