As mentioned in the previous post, Deming influenced a number of 21st century management techniques. Most of them have already ascended to buzzword status like “Six Sigma” and “Total Quality Management (TQM)” and should be familiar to those working in corporations and bibiliophiles browsing books in local specialty bookstores.
Instead of enumerating and discussing all of those approaches to management, I’ll just give an overview on the management technique that encompasses most of them: Lean.
Being an umbrella term for practices following a certain set of principles, I am hesitant in adding a second word to “lean”. Wikipedia lists lean as “lean manufacturing“, other literature use broader terms like “lean thinking” while others use narrower terms like “lean production”. To save me the effort of typing the second word, I’ll just leave the term as just “lean”.
Anyway, here are the principles behind lean:
One of the primary concepts behind lean is “muda” which is “waste” in Japanese. Muda is a major problem in any form of production: anything that eats up resources without giving anything useful in return counts as muda.
Taichi Ohno, the person who devised the most popular implementation of lean Toyota’s “Toyota Production System (TPS)”, identified the seven classic types of muda:
- defects, because they cost more to fix the farther they go down the line
- overproduction of goods not needed
- inventories of goods awaiting further processing, because they eat up storage space
- unnecessary processing
- unnecessary movement of people
- unnecessary transport of goods
- waiting by employees to equipment or upstream work to finish
Simply put, muda is important to lean because the primary goal of the latter is to eliminate the former.
Because muda is defined as any activity that does not provide value, one must first define what that value is before one can attack muda.
The question is, how do we define value?
The knee-jerk reaction of most businesses is that value is defined by profit. Any activity that will likely produce profit should be considered as value.
However, as Drucker noted, the purpose of an organization is not to make a profit. He even goes to say that that purpose is not only irrelevant, it’s also harmful.
The answer lies in Drucker’s answer to the purpose of business: “to create a customer”. Ultimately, value is defined by the customer, not by profit forecasts, not by product designers, and not by geographic location. And, as the book Lean Thinking states:
…[Value] must be expressed in terms of a specific product (a good or a service, and often both at once) which meets the customer’s needs at a specific price at a specific time.
By defining value from this definition, we can see which processes provide value and which are just muda through the next principle.
The value stream is the set of actions needed to produce a good. This starts from designing the product, to taking an order of the product, up to the actual production and delivery.
Once one maps out an entire value stream for a product and takes into account the concept of value, it will be apparent that the actions can be classified to three types:
- steps that obviously provide value e.g. filling the soda can with soda
- steps that create no value but are unavoidable (aka “Type one muda“) e.g. transporting cans from the can factory to the bottling plant
- steps that create no value and are avoidable(aka “Type two muda“)
The third category needs a longer explanation as it usually only shows up when the entire value stream is mapped. Oftentimes, different steps are handled by different departments and as such, they are not aware of the steps that each department performs on the product. Examples of waste here would be an expensive step performed repeatedly (and redundantly) by different departments, or making assumptions on specifications that would eventually be corrected downstream at great cost.
This type of muda is easy to correct, but it highlights a serious flaw in traditional production management, namely, managers are too concerned with optimizing individual processes when in reality the greatest gains in productivity can be found by analyzing and optimizing the entire value stream.
With that revelation, we now proceed to the next principle.
After mapping the value stream and eliminating the type two muda, one can now proceed to the next step: make the remaining process flow in a continuous fashion.
At this point, most of the remaining type one muda can be blamed on a certain processing method: the “batch-and-queue” method.
This method doesn’t really require explanation as it is present in almost all types of production: Group A executes step 1 until it produces a batch. Then the batch is sent to Group B who will perform step 2 on the batch (as soon as Group B is free). Then the batch is sent to Group C, and so on.
As humans, we are wired to believe that batch-and-queue is more efficient than processing the entire product in one continuous flow. However, countless studies have shown that batch-and-queue isn’t that efficient. First off, the process is slow; the next step has to wait until an entire batch is produced and shipped before they can start. This delay leads to the next problem: longer wait times between the customer’s order and the actual delivery allow more unexpected problems to pop up (e.g. the customer might change his order, or the customer might cancel the order outright) converting entire batches to discarded muda.
Lean does away with the batch-and-queue method by letting a processed product move through the next step immediately after processing i.e. letting the product flow.
While this looks easy in theory, this can take a lot of work in practice. One problem is that some machines can only be operated in a batch mode. Not only that, processing different products can be a problem because changing the configuration of the machines to suit the next product can take hours (the machine was designed for a batch and queue mode i.e. one day it processes a certain product, and another product on another day). This problem can be solved by retooling the machine or acquiring new machines in order to allow flow, a solution that might turn off a lot of corporations.
Other potential problems would be initial worker resistance (as they aren’t used to working with different departments in production), and the effort in rearranging machines and departments to form flow “cells”. Once these problems are solved, however, drastic results usually arrive: dramatic reduction in production times, reduced scrap, increased quality (as defects are much less likely to be passed over like in batches), and even reduced production area due to the elimination of storage space.
A direct consequence of shorter production times is that the customer can now pull products they need from the business just as they need it. Compare this to a business building a wide variety of products in large batch and hoping that customers would buy them. The weird part is that while the latter is obviously a lot more wasteful than the former, most industries still stick with it.
This fourth principle does not limit itself to the customer. In fact, the entire value stream’s flow is based on pull. Products are only processed in a step only when the next step “pulls” it. Parts and raw materials are also pulled as needed to avoid waste.
This pull also creates its own consequence: the suppliers of the parts and materials needed by the company will have to adopt lean in order to meet the demands of the latter. This will take a lot of effort, and possibly require that some suppliers must be dropped, but in the end it’s usually a win-win situation for both sides.
So far we’ve covered “kaikaku“, radical improvements in processes to eliminate muda. Lean doesn’t stop there, though.
Lean has the concept of “kaizen“, continuous incremental improvement. After the initial improvements in flow, kaizen continuously eliminates muda, streamlines flow, allows the company to meet the demands of the customer, and in turn, continuously drives the system towards perfection, the fifth principle in lean.
And that’s basically it for lean. Various three letter methodologies like TPS, TPM, TQM, TQC, etc. can claim that they do things differently, but in the end it’s all a matter of different vocabulary. Besides, as long as their specific approaches fall under these five principles, it shouldn’t matter, right?
Now you might ask, “Why is Bry, a software developer who vowed never to take an MBA course, showing so much interest in a management technique?”
The answer should be obvious to competent software engineers. :D
The rest should just wait for the next post.