Lean Thinking

Type

Method of organizing production

Origin

Japan, Taiichi Ohno of Toyota

Objective

Profit improvement by:

• maximizing customer value
• minimizing waste

Focus

Cost reduction

Profit = Selling Price - Cost

a) Selling price is dictated by the market: cannot be increased.

b) Cost is dictated by the production activities: should be decreased over time.

Strategy

• Build a system view of an organization that is centered on the notion of customer-defined value
• Eliminate Waste: all the steps in the production of a good or service that do not add value to the final customer. "Are my customers willing to pay for this?"
Add Value considering the entire system

Steps

1. Specify value from the perspective of customer
   The starting point is to recognize that only a small fraction of the total time and effort in any organisation actually adds value for the end customer. By clearly defining Value for a specific product or service from the end customer’s perspective, all the non value activities - or waste - can be targeted for removal.
2. Identify the Value Streams
   The Value Stream is the entire set of activities across all parts of the organisation involved in jointly delivering the product or service. This represents the end-to-end process that delivers the value to the customer. Once you understand what your customer wants the next step is to identify how you are delivering (or not) that to them.
3. Create Flow
   Typically when you first map the Value Stream you will find that only 5% of activities add value, this can rise to 45% in a service environment. Eliminating this waste ensures that your product or service “flows” to the customer without any interruption, detour or waiting.
4. Pull
   This is about understanding the customer demand on your service and then creating your process to respond to this. Such that you produce only what the customer wants when the customer wants it.
5. Pursue PerfectionCreating flow and pull starts with radically reorganizing individual process steps, but the gains become truly significant as all the steps link together. As this happens more and more layers of waste become visible and the process continues towards the theoretical end point of perfection, where every asset and every action adds value for the end customer.

How to?

Changes the focus from vertical to horizontal flow:

From optimizing separate technologies, assets, and vertical departments To optimizing the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers.

Use a change agent or "Sensei". A good sensei will catalyze and guide the change effort and keep the momentum building.

Metrics

• Cost
• Lead Time
• Value-Added Percentage

Expected Results

• Respond to changing customer desires with high variety, high quality, low cost, and with very fast throughput times
• Fewer defects
• Information management becomes much simpler and more accurate

Lean Software Development

End-to-end integration of the value stream, from user research and strategic planning to data center operations and product support. "from concept to cash"

1. Divide the work into small value-adding increments that can be independently scheduled
2. Develop any value-adding increment in a continuous flow from requirement to deployment

Tools