Lean is About Eliminating Waste Right?

Waste Elimination

Some people think that waste elimination is what Lean is all about. This is music to managers ears. What manager or leader would not jump at the chance of finding waste in their organisation, having it removed, and reducing costs as a result? As a consequence Lean consultants enter an organisation, waste is found; for example staff are found sat around doing nothing or waiting for something or not “behaving” efficiently, and the waste is removed (often as a consequence FTEs are removed) and success is claimed. But does this lead to being more effective?

This has bothered me for sometime. I have met many Lean consultants who talk only of waste elimination, they know nothing about the need for understanding customer demand and have little appreciation of the differences between being effective vs being efficient. Many have only read books written about the TPS, and have little or no knowledge of Taylor, Ford, Sloan, Deming, Taguchi and Ohno.

Here is what I’m often told by Lean consultants

  • Work = Value Adding Work + Non Value Adding Work (waste)
  • Lead time = Value Adding Time + Non Value Adding Time (waste)
  • Reducing non Value Adding time will increase efficiency

Is this correct? Here is an interesting extract from a recent post by Jim Womack (co-authored the book “The Machine that Changed the World”).

“20 years later, it’s striking to me how much effort we’ve expended on eliminating muda (waste) and how little attention we have given to mura (unevenness) and muri (overburden).”

“In short, unevenness and overburden are now the root causes of waste in many organizations. Even worse they put waste back that managers and operations teams have already eliminated once.”

“I have the following advice for managers — especially senior managers — trying to create lean businesses: Take a careful look at your mura and your muri as you start to tackle your muda.”

A powerful post. Jim is articulating what I have felt uneasy about.

Jeffrey Liker has also recently published an article “Why Lean Programs Fail”

A large survey conducted by Industry Week in 2007 found that only 2 percent of companies that have a lean program achieved their anticipated results. More recently, the Shingo Prize committee, which gives awards for excellence in lean manufacturing, went back to past winners and found that many had not sustained their progress after winning the award. The award criteria were subsequently changed.

Effective vs Efficiency

Dr. Keivan Zokaei from the Lean Enterprise Research Centre (founded by Daniel T Jones who co-authored the book The Machine That Changed the World) has much to say on the subject.

Efficiency thinking is setting the quality level as “good enough” we don’t need to strive for perfection. Effectiveness thinking is thinking about the lifetime of a product (and the effects on the whole organisation “system”) which in the long run will cost less. If we do it right first time (which might be more costly at the outset),  it actually saves our organisation money in the long run). Effectiveness is doing the right thing. Efficiency is doing things right.

Many “Lean” organisations could be doing the wrong things righter. Making things efficient that shouldn’t be done in the first place. Doing a lot of efficient things but not effective things. This is what Toyota turned on its head, following the work of Taguchi. Let’s do the right thing first, THEN we will make it efficient.

TPS is about being more effective. Focusing on quality first. This is where Toyota fell down recently. Volume (being number 1 by volume) became the goal. It used to be Safety, Quality, Volume. Toyoda has now returned the priorities back to the original order. [side note: NASA has recently released its highly anticipated report about the Sudden Unintended Acceleration (SUA) charge in Toyota vehicles. The verdict was that Toyota’s electronic throttle control system is fully exonerated. The ten-month study by 30 NASA engineers found “no evidence that a malfunction in electronics caused large unintended accelerations”]

Variation in Demand

With the focus on waste removal we are not looking at variation in demand. There are times in the process when sometimes demand increases capacity and other times it doesn’t. The problem with focusing only on waste removal, and not understanding demand, is that after waste removal, when a high level of demand comes in, the organisation cant cope, we clog up the flow, we introduce waste that we tried to remove in the first place!

Toyota bizarrely built in up to 50% extra capacity into their system. They called it 8-4-8-4 (8 hours of work, 4 hours to do other things). 50% waste built into the system! If a Lean consultant, who didn’t understand variation of demand, went into that organisation they would remove that “waste” and claim it as a success The result? Toyota wouldn’t be anywhere near as successful as they are now.

Rather than utilising capacity it is better to be responsive, to be able to respond when demand arises; keeping spare capacity.

What would your boss say if you asked to have 20% spare capacity for times when demand might exceed your capacity? In the West its all too predictable what the response would be.

But, It’s what Ohno told us to do

Is it? What’s confusing is that Ohno did talk about Muda (waste); idle machines and idle people, which all looks like waste on the surface. But he also talked about having machines (and people) available when demand comes along, he talked about resourcing to the upper level (we are guaranteed to have someone/machine available when the work comes), which means that at times they would have to be idle.

Muri, Mura, Muda

Ohno talked about Muri (overburdening of people and equipment) being a root cause of waste. He talked about Mura (unevenness in operations) and the need for understanding fluctuations in demand, that variation needs to be understood well within the system. Ohno explained this is why Toyota went out to the dealerships to study that demand, with the aim of producing cars at the rate of customer demand.

Capacity

Dr. Keivan Zokaei informs us that this is what Ohno really said, and he states that this isn’t in most Lean books or in Six Sigma training

Capacity – Load = Gap

  • Capacity = work + waste
  • Load = value demand + failure demand
  • Variation is the key, especially as utilisation approaches 80%
  • Work: not faster, but taking time to do good, error free, work that satisfies customers
  • Understand variability (Mura) in capability
  • Is there sufficient system capacity to handle the load?
  • Waste: not all waste elimination adds to capacity
  • Gain intimate knowledge about your demand, smooth and get rid of unevenness (Mura)

This is counter intuitive, most managers want to sweat their assets, they want them to work 100%

They think we have x number of people, and they can do y number of jobs in a day, so that means they can get z amount of work done.

So, if they are thinking 100% what happens if your utilisation of your capacity, or capability, exceeds 80% ? You get a traffic jam effect. You have no buffer for any variation. When something comes through the system, everything just gets clogged up and stuck, and nothing moves effectively. Queues start happening, or you start multitasking without getting anything done. Cycle time goes shooting up. Even 80% is high, If you target anywhere around 80% of your capacity the chances are that things just fall apart. We know this scientifically, mathematically we can prove this, yet mangers ignore it.

If you work faster you are going to reduce quality. Instead we want to produce error free work, doing things right first time. This might prove more costly up front but saves us costs in the long run. This is exactly what Taguchi taught (the nominal value curve), what he won the Deming prize for, and what turned Toyota on its head where they redefined their definition of quality.

We want to avoid what Deming called making toast the American way

You Burn it and I’ll Scrape.

We need to understand variability or Mura. We need to understand the relationship between capacity and demand, by  studying demand being placed upon us and the variation in cycle times. We need to work on unevenness by going into the work (the shop floor) and experimenting.

Ohno taught rather than utilising capacity its better to be responsive, to be able to respond when demand arises; keeping spare capacity. [side note: Interestingly Ohno fought battles in Toyota to adopt this and first had to try it in Brazil to prove it worked, to then return to Japan.]

Ohno vs Efficiency Thinking

Efficiency Thinking: Traditional

  • Input / output. At a given input level (given capacity) maximise utilisation to increase output.

Effectiveness Thinking: TPS

  • Focus on delivering fast, responsive flow of service which will in turn reduce your Work In Progress (WIP) and improve profitability
  • Focus on “right first time”
  • You have to have “spare” capacity

What is the Real TPS (Lean)?

This is how Dr. Keivan Zokaei sums it up

  • Effectiveness thinking as apposed to efficiency thinking
  • Quality and safety first
  • Continuous improvement is a virtue in itself
  • Changing people’s thinking through doing if you want improvement

The Core of Lean is NOT about reducing waste, its about increasing capacity.

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11 thoughts on “Lean is About Eliminating Waste Right?

  1. Interesting blog and succinctly put. The one thing I have learnt is that removing waste is HALF of what lean is about and, as you pointed out, is what gets managers excited. You touched on the other half, which in my experience is much harder to convince managers to work on: Flow. Many of the barriers to good flow of work through an organisation are put in place by managers wanting to control the work. This is particularly true of service based environments where work flows horizontally across departments.

    Thanks for the post.

  2. Hi David,

    A great piece – and a great research effort behind it, too! :)

    To put it into context, I’d say that Analytic organisations seek efficiency, whereas it needs a Synergistic mindset to understand the advantages of pursuing effectiveness. I suggest that THE reason why the Lean adoption “failure rate” (cf the Industry Week survey you quote) is so high is because the vast majority of organisations try to “do Lean” without realising that success *requires* a change in their prevailing mindset – both collectively, and perhaps even more tricky, in the executives and senior management individually.

    – Bob @FlowchainSensei

  3. Great post.

    Take it a step further though. Capacity, in itself, provides no benefit. We can, instead, think in terms of

    “With x% freed-up capacity (or increase in capacity), we can now do a, b, and c”

    Putting capacity in those terms is what will likely speak financially-minded CFO’s and C-level folks.

    Great post.

  4. Hi David,

    well said.

    My observation is that senior managers at large service organisations believe that the answer to every problem is to drive down unit activity costs by:

    * standardising and formalising the business process;
    * centralising it;
    * automating it with IT;
    * reducing staff to the minimum level according to theory and
    * outsourcing to the provider with the lowest daily resource rate.

    Often this is called Lean Six Sigma management.

    And yet everywhere this is done we see:

    * enormous IT expenditure;
    * a large number of skilled permanent staff laid off;
    * a huge increase in errors and rework;
    * a big increase in backlog and wait time;
    * a massive increase in the number of contacts the customer makes;
    * a huge increase in customer dissatisfaction
    * a big increase in costs for other areas dealing with the new “lean” group;
    * an enormous amount of “gaming” of performance measures by staff and outsources;
    * a total refusal by senior executives to listen to complaints;
    * a massive breakdown in trust between senior executives and staff and
    * overall a big increase in costs and a big reduction in quality.

    This applies both to internal and external customers of processes.

    It’s a nightmare and I’m really glad you’re calling it out.

    The big question is how can you persuade senior managers to do something different when theirr first reaction is to smash anyone into the ground who talks about it?

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  7. Iteresting and nice wrap up.

    Seems like this lines up nicely with the Agile principle of “Maximizing the work not done” – do only the most effective thing, doing less to get more.

  8. Very good post, great points made! Why everyone shouldn’t be working at (or over) capacity at all times is one of the hardest things to make upper management understand. Even after years and years of ineffective and delayed projects due to demand being higher than available capacity, they still don’t get it.

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