Lean Management

Dr. Gene Fliedner

Decision and Information Sciences

School of Business Administration

Oakland University

04/18/23 1

Lean Management Defined

• The basic tenet of lean is the enhancement of productivity through waste elimination.

• Toyota Production Systems: An operating philosophy in which the best quality, cost and delivery of a product or service is achieved through shortening the production flow by eliminating waste.

• Elimination of 3 M’s: Muda (waste), Mura (inconsistency), Muri (unreasonableness)

• Womack, Jones, Roos, The Machine that Changed the World Half the hours of human effort in the factory Half the defects in the finished product One-third the hours of engineering effort Half the factory space for the same output A tenth or less of in-process inventories

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Lean History• Dunham (1956) notes the Egyptians used an assembly line (flow) practice and divided labor to

enhance productivity and speed in the building of the pyramids.• The foundation of ergonomics appears to have emerged in ancient Greece. It focuses on

employee safety and eliminating waste in tasks such as repetitive movements, work design, and improving quality It has been divided into three domains:

1. Physical ergonomics: concerned with human anatomy and delves into relevant topics such as working postures, materials handling, repetitive movements, lifting, workplace layout, as well as safety and health

2. Cognitive ergonomics: concerned with mental processes and mental workload among other relevant topics, and

3. Organizational ergonomics: concerned with relevant topics that include work design, design of working times, teamwork, and quality management among other relevant topics.

• In as early as 1104, the Arsenal of Venice utilized a vertically integrated flow process consisting of dedicated work stations to assemble standardized parts into galley ships which enhanced productivity.

• Eli Whitney’s introduction of interchangeable parts in 1798 as a major breakthrough • During the scientific management era of the late 1890’s and early 1900’s, several industrial

engineers such as Frederick Taylor and the Gilbreths contributed practices such as standardized work, time and motion studies, and process charting

• Starting in about 1910 through the 1920’s Henry Ford extended these practices by marrying interchangeable parts with standard work and moving conveyance as well as incorporating behavioral concepts such as worker motivation in order to design a more comprehensive lean system

• Mid and later 1900’s came the contributions of Toyoda, Ohno, Shingo, Imai, and others and their identification of the 7 wastes

• The ideas spawned from Toyota were largely generated by financial necessity.04/18/23 3

$Profit

“fixed” price K

a i z e n

time

Total Cost = VA + NVA

• Classic business model: Cost + Profit = Price

• New business model: Price – Cost = Profit

Current Competitive Environment: Value Add versus Non Value Add

04/18/23 4

Lean Waste: Seven Plus Two

1. Over production: prior to demand2. Waiting: for information, materials, people, equipment,

etc.3. Transportation: more conveyance than is necessary4. Over-processing: e.g., any form of inspection5. Inventories: having more than absolute minimum6. Motion: more than necessary to complete the task7. Defects or Rework• Note the internal nature!8. Knowledge Disconnection: inhibition of knowledge,

ideas and creativity flows9. Sustainability

04/18/23 5

4 Elements of Lean Systems

1. Leadership: Styles, Skills, Abilities, Behaviors, and Practices

2. Culture and Principles: Atmosphere, Beliefs, Practices, Behaviors, Norms

3. Team (stakeholders: employees, management, supply chain)

4. Tools

04/18/23 6

Lean Leadership• Leadership refers to the collection of managerial styles, skills, abilities, behaviors, and practices.• Leadership within an organization includes setting the direction the organization through a thorough, long-

term vision of the organization’s value-producing processes.• Leadership theories have been discussed in the literature for decades but can largely be classified into one

of eight primary groups:1. Participative Theory (Lewin, et al, 1939; Likert, 1967)2. Great Man Theory (Redl, 1942)3. Behavioral Theory (Merten, 1957; Blake and Mouton, 1961; Pfeffer and Salancik, 1975)4. Contingency Theory (Fielder, 1964; Fielder, 1967; Fielder, 1987; Hickson, 1971)5. Trait Theory (Mischel, 1968; Peterson, 1968)6. Situational Theory (House, 1971; Vroom and Yetton, 1973; Hersey, et al, 2007)7. Management or Transactional Theory (Dansereau, et al, 1975; Graen and Cashman, 1975)8. Relationship or Transformational Theory (Burns, 1978; Bass, 1985; Kouzes and Posner, 2007)• Flinchbaugh et. al. (2008) argue that lean leadership builds upon traditional leadership theories and

includes additional skills of:1. Teaching2. Creating a source of energy that encourages employees to pursue stretch objectives3. Eliminating fear that discourages the risk taking associated with experimentation, action, and new thinking4. Leading through participation, and5. Imbedding lean within one’s own personal practices. • Mann (2009) suggests that cultures develop from reinforced behaviors and the most important source of

reinforcement is leadership. He notes that sometimes culture contradicts stated rules and practices which is detrimental to lean initiatives. The failure of most lean initiatives can be pinned on the failure to change leadership practices (Mann, 2005).

04/18/23 7

Lean Culture

• Lean culture refers to workplace beliefs, practices, behaviors, and norms. It is the principled atmosphere of the system.

• Mann (2009) notes that culture is simply the way things are done in an organization.• Dennis (2002) suggests lean culture is comprised of day-to-day practices and

behaviors. • Collins (2001) describes great companies as those that blend an entrepreneurial spirit

with discipline. He notes that the creation of culture it is an inherently iterative process, not an event. Namely, it is a aspect of continuous improvement where lean culture:

1. Avoids bureaucracy and hierarchy,2. Creates a culture of discipline, and3. Does not focus on what you accomplished, only what you’ve accomplished relative to

exactly what you said you were going to accomplish• In a lean system, these practices and behaviors need to include reliance upon:1. Shewhart’s Plan-Do-Check-Act (PDCA) cycle to grasp the current reality,2. A team work approach,3. Standardization of methods,4. Visual management techniques, and 5. Discipline (the recognition that lean is a lifelong path of continuous improvement which

if pursued honestly and diligently creates energy, focus, and longevity)• Lean culture promotes involvement, experimentation, and new thinking which in turn

leads to improved productivity, quality, lowered cost, shortened delivery time, enhanced safety and environment, and improved morale.

04/18/23 8

Lean Team

• Team member involvement is the heart of lean production; it’s an understanding of Aristotle’s idea that “the whole is greater than the sum of the parts” (Metaphysica); it is Toyota’s respect for people

• Collins’ Good To Great… “Executives who ignited transformations did not first figure out where to drive the bus and then get people to take it. They first got the right people on the bus (and the wrong people off).” Lessons:

1. Think about the effort involved with the “wrong” people2. If you begin with “who” rather than “what”, you can more easily adapt to a

changing world3. If you have the right people on the bus, the problem of how to motivate and

manage people largely goes way4. If you have the wrong people, it doesn’t matter whether you discover the

right direction; you still won’t have a great company5. What if the “great” leader leaves?• Collins’ idea: Great Vision Without Great People Is Irrelevant. What’s needed

is a great team (a system), not the vision of a single person.

04/18/23 9

Lean Team (continued)

• Place greater weight on ingrained character attributes than on specific educational background, practical skills, specialized knowledge, or work experience

• Understand value of people: Training, Education, Empowerment• Leverage knowledge of those closest to problems• Participative management• Nothing is sacred (ask 5W2H often)• Fear-free environment • Standardized thinking • 100% participation• External view (supply chain)

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Lean Tools

• Many of the breakthroughs in tools and production system practices came to light with MIT’s International Motor Vehicle Program study of comparative automotive assembly plant performance differences.

• These investigations led to the seminal publication of Womack et al. (1990)• 14 Lean Tools1. Quick Changeover (SMED) of Machines and Cross Trained Workers2. TQM3. Continuous Improvement: kaizen and kaikaku events4. Value Stream Mapping5. Workplace Organization: 5 S’s (sift, sort, sweep, sanitize, sustain)6. Leveled and Balanced Production (uniform plant loading)7. Pull Approach and Produce/Withdrawal Signal (kanban)8. One Piece Flow9. Visual Management Techniques (i.e., Simple Audio/Visual Status Signals)10.Error Proofing: Poka-yoke, Andon, Jidoka (quality at source)11.Total Preventive Maintenance and Wellness Programs12.Cellular Configuration (plant within a plant)13.Standard Work Instructions (SWI’s)14.External: greater supplier participation/collaboration

04/18/23 11

Lean Goals and Strategies

• Goals: Cost, Quality, Speed, Flexibility, Longevity, Personnel Development, Sustainability

• Cost Strategy: waste elimination• Quality Strategies1. Operator empowerment2. Perfect parts every time3. A new customer definition4. “Quality at the Source” tool kit5. Operator responsibility6. Visibility management• Productivity (Speed) Strategies1. Produce to exact customer demand2. Single piece flow (produce one unit at a time versus batch)3. Eliminate waste4. Commit to continuous improvement5. Understand the value of people6. Allow for no contingencies7. Promote long-term perspective.

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Lean Goals and Strategies (continued)

• Flexibility Strategies1. Increase operator skills2. Multifunction equipment3. Plant within a plant (various layout types)4. Resources always ready• Longevity: Decision-making with long-term time horizon• Personnel Development: Training, education, skills (leadership,

decision-making, interpersonal communications, etc.)• Sustainability Strategies1. Product and process life cycle considerations2. Environmental stewardship3. Facilities design, construction, environmental control and

maintenance.

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Sustainability Defined

• Sustainability commonly refers to the characteristic of a process or state which can be maintained at a certain level indefinitely.

• Sustainability addresses how processes and operations can last longer and have less impact on ecological systems.

• Non-value adding activities consume resources and therefore, over the long run are not economically sustainable.

• If an activity does not add value, it should be reduced or eliminated if possible.

1404/18/23

Emergence of Sustainability

1. Regulatory compliance requirements

2. Health and safety

3. Rising ratio of material to labor costs

4. Cost savings or cost avoidance

5. Ethical, legal and societal concerns

6. Opportunity to improve corporate image, community and customer relations

7. Anticipate and pre-empt customer demands.

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Sustainability Strategies or Initiatives

• 3 Broad Categories of Initiatives:

1.Product and process life cycle considerations2.Environmental stewardship3.Facilities design, construction, environmental control and

maintenance

1604/18/23

Product and Process Life Cycle Considerations

• This category of initiatives looks for ways to achieve sustainability objectives over the entire life cycle of a product or service.

• It is common for this category to include look externally, beyond the boundaries of a single transformation process to the entire value chain.

• Sustainability activities in this category span design, development, manufacture, as well as reverse logistical flow of items in a closed-loop value chain.

• The firms implementing initiatives within this category are often more mature in terms of their sustainability programs.

• Activities in this category emphasize the triple-bottom line, which promotes product design that enhances (1) ecology, (2) society while generating (3) economic value.

• Examples: reuse, reclamation, refurbish, remanufacturing, recycling, dematerialization, etc.

1704/18/23

Environmental Stewardship

• This category of initiatives looks for ways to achieve sustainability objectives given societal concerns of: global warming, resource depletion, energy and water shortages, solid waste disposal and other environmental concerns.

• It is common for activities this category to be confined to a single facility (i.e., they are seldom extended to the value chain).

• Initiatives in this category include industry specific voluntary programs: the Environmental Protection Agency’s 33/50 program, International Organization for Standardization (ISO) 14000 environmental management systems standards program.

• Example: reliance upon renewable energy sources (e.g., biomass, solar power, wind power, etc)

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Facilities Design, Construction, Environmental Control and Maintenance

• This category of initiatives also looks for ways to achieve sustainability objectives given societal concerns of: global warming, resource depletion, energy and water shortages, solid waste disposal and other environmental concerns.

• It is common for activities this category to be confined to a single facility (i.e., they are seldom extended to the value chain).

• Initiatives in this category examine material use (e.g., using recycled and recyclable materials), reducing natural resource consumption thereby achieving long-term reductions in operational costs (e.g., capturing greywater), employing automatic environmental monitoring, sensing and control systems (e.g., light dimming), reduced maintenance (e.g., living roofs).

1904/18/23

Development of Sustainability

• Slow adoption rates (low price of resources and disposal costs)

• Step-wise manner: 1.Process-based capabilities are instilled internally in a single

set of transformation activities 2. Integrate and coordinate capabilities across several

activities or systems within the firm3.Embedding these capabilities within the routines and

knowledge of the firm making them multifunctional, organizational-based capabilities

4.Network-based capabilities reaching outside the limits of the transformation process encompassing the value chain network.

2004/18/23

Sustainability History

• Six Historical Eras:1. “Resistant adaptation” years ≈ 1970-1985, least expensive means to minimally comply

with environmental legislation2. “Embracing environmental issues without innovating” years ≈ 1985-19883. “Reactive” organizations ≈ 1988-1992, “end-of-pipe” solutions for treating waste, but

with little effort to prevent waste production4. “Receptive” stage: the early 1990’s, environmental considerations can be a source of

competitive advantage, organizational “policy entrepreneurs” focused company efforts on being more socially responsible

5. “Constructive” stage: mid 1990’s, due to continuing environmental pressures organizations began to adopt a “resource-productivity framework to maximize benefits attained from environmental initiatives,” companies began to look at product and process design to achieve sustainability objectives

6. Value chain partnerships: 2000 and beyond, world-class companies acting in a proactive manner, creating a new vision for the whole system that includes all organizational personnel as well as value chain suppliers and customers

2104/18/23

Future of Sustainability

• Sustainability initiatives must increasingly reflect shared value chain objectives

• Corporations must strive to find opportunities that simultaneously:

1. Lessen environmental impacts, 2. Achieve cost savings,3. Enhance corporate image, AND4. Drive additional revenues

2204/18/23

Lean Management Summary

• What is Lean?1. The basic tenet of lean is the enhancement of productivity through waste

elimination.2. Toyota Production Systems: An operating philosophy in which the best quality, cost

and delivery of a product or service is achieved through shortening the production flow by eliminating waste.

3. Elimination of 3 M’s: Muda (waste), Mura (inconsistency), Muri (unreasonableness)

• 4 Elements of Lean Systems

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