Lean Transformation in Healthcare

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What is Lean?

Lean Thinking

Lean production, six sigma, and total quality management have a shared history.  While the ideas of Deming, Juran, and Shewhart gained wide acceptance and broad application in post-World War II Japan, the concepts of lean production, through the championing of Taiichi Ohno, also came to fruition.  Lean manufacturing was initiated by Toyota during the 1920s by Sakichi Toyoda.  In the late 1940s, Taaichi Ohno, a Toyota executive, achieved a great deal of success implementing the ideas originally conceived by Toyoda.  During that time, Japanese manufactures were plagued with a variety of problems relating to quality and cost.  Chief among them was the challenge of serving a prospering Japanese market that demanded more product variety.

At the same time, US markets and American manufacturers followed the traditional system of mass production, propagated by the success of Henry Ford.  This system lent itself to large production runs and huge inventories.  Its objective was to manufacture as many units, of a standard part, at a given time, in order to take advantage of economies of scale.  This method of production encouraged employees to work faster, be less concerned with quality, and encouraged companies to hold massive amounts of work in process and finished goods inventories.  As a consequence, companies produced massive amounts of waste.  There was waste in terms of scrap, defects, warranty returns, wasted time, unnecessary movements of goods, unnecessary processing, along with the huge cost of working capital tied up in inventories. In addition, US companies were ill equipped to deal with product variety demanded by a market place growing more sophisticated.  One solution to the problem was the application of total quality management; the other solution was the implementation of lean manufacturing principles.

What is Lean Thinking?

The lean approach refers to a company’s style of inventory management and operational effectiveness. Made popular by the Toyota method of production, also known as Total Productive Maintenance (TPM); lean thinking was given life in North America as a result of the work of MIT researchers lead by James Womack, Daniel Jones and Daniel Roos.  The team of Womack, Jones and Roos introduced the term lean production to North America and the West with its 1990 publication of The Machine that Changed the World.  In 1996 Womack and Roos produced another work that described the principles and applications of converting a mass production operation to a lean operation.

The book, Lean Thinking:  Banish Waste and Create Wealth in Your Corporation, offers 5 guiding principles for practitioners:

  • Determine value by-product/service offering.
  • Identify value streams by each product and service offering.
  • Make value flow.
  • Let the customer pull value from the producer.
  • Pursue perfection.

So, what is lean? 

In our attempt to keep things simple, TPMG describes lean as:

  • A method of management employed to minimize operational waste.
  • A system of operation employed to deliver value added products and services to customers.
  • A practice of producing goods just in time for customer order to keep the cost of holding inventory down.
  • A company’s journey to eliminate the cost of operational waste from selling prices.

Lean production is fundamentally a manufacturing philosophy.  It has been a popular manufacturing approach because it has empowered companies to produce more with less.  Successful lean manufacturers have been able to produce more in less time, with less capital and fewer resources.

With respect to lean thinking, the objective for a company is to respond to customer requirements while establishing an optimum market price for its products and services.  Lean practices become a strategic competence for a company when the elimination of its waste produces a circumstance by which the difference between a company’s average cost to produce a product and the product’s market price is significantly greater than that of its rivals.   This difference provides a company with pricing power that can either drive excess profit margins for share holders or greater market share for the company.

To learn more about how your company can build a lean program, contact TPMG LLC.

To learn more about lean practices, visit: www.helpingmakeithappen.com

Download a Lean Transformation in Healthcare Service Description – Click Here!

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