Glossary
(Of terms not discussed in detail within the book)
Andon This is a visual control device frequently combined with an audible alarm that employees on the frontlines can activate to signal the occurrence of an issue or problem. Its purpose is to expose and communicate problems as soon as they occur and to kick start improvement work to solve the issues when they are still minor.
Bottleneck The slowest operation in any process. Improving this should be the basis for prioritising improvement work. Time lost at the bottleneck is time lost for that entire value stream.
Continuous improvement This is an attitude where people recognise that there is always room for improvement in the current state of any system. Implementing incremental improvement ideas on an everyday basis is the manifestation of this way of life.
Customer experience Customer experience is the sum perception of all occasions a customer interacts with a provider of products or services, over the period of their relationship, be that a one-off or reoccurring association.
Failure demand Failure demand describes the demand on the resources of an organisation caused by the errors created by the organisation in the first instance. This historically is a large segment of the demand that enters organisations and is a high leverage point for the focus of improvement work. The opposite of this is value demand, which is concerned with providing customers with the right service they want first time around.
Gemba This is a Japanese term that refers to where the actual work is performed. Lean refers to gemba as being the place where value is added to a product or service. You are encouraged to conduct gemba or waste walks between management and the frontlines. This fosters relationship building and hence awareness of waste (also commonly called muda) and improvement countermeasures. Waste walks should always be performed in a collaborative manner and not be used to point the finger or play the blame game.
Inventory The hard cash and materials invested in by an organisation in order to fulfil customer requirements. This is almost always an excellent initial cost saving opportunity. Inventory should be viewed as money on a pallet! This includes all forms of inventory, be that raw materials, work-in-progress, supplies or consumables and finished goods.
Lean accounting This practice consists of two streams. One stream is application of Lean methods to your organisation’s accounting and measurement processes. This eliminates waste, frees up capacity, and reduces mistakes similar to when Lean is applied to your other mainstay processes.
The second stream is to adapt the accounting processes so they reflect improvement and provide simple and timely information that is suitable for decision making in congruence with Lean transformation. Accounting for Lean does not require traditional accounting practices to run the frontline processes. (However, you are still required to comply with GAAP and tax reporting requirements.)
Traditional management accounting uses methods like standard costing, activity based costing, variance reporting, cost-plus pricing and complex financial reports. For example, traditional labour efficiency and overhead absorption metrics motivate batching of work and high inventory levels. Keeping people busy building inventory (even if there are no sales) makes traditional accounting measures look good. If we reduce inventory through Lean and synchronise the rate of employees’ work in certain departments (i.e. sometimes slow down the pace of operations) to produce to the rate of customer demand, some traditional accounting metrics get worse.
Hence Lean organisations need to have a clearer understanding of the real costs associated with their value streams for decision making purposes. Standard costing is flawed in some aspects as it misses important factors such as the profit contribution of certain product/services and their impact on bottleneck resources (even worse for shared resources). An hour lost at a bottleneck is an hour lost for that entire business line. Lean accounting tracks value stream cost and the benefits of improvement by supplementing traditional accounting with real time (not monthly like customary accounting practices) process metrics of performance. These are primarily maintained at the gemba by the frontline workers.
Lean development The objective of Lean development is to deeply understand customer needs (both spoken and unspoken) and the problems that your product or service is solving. Unspoken needs are teased out through Lean organisations’ innovation processes to deliver differentiated products and services. Lean development delivers new products/services/software fast (generally twice as fast as traditional development processes) via removal of development waste, and high levels of transparency through visual management and built-in quality practices. Lean development vigorously challenges (through the use of value engineering, quality functional deployment, 3P and other Lean methods)1 existing designs where generally 70% of costs are locked in at this design stage. It provides alternatives that improve cost, maximise value, ease fulfilment of the product/service, and support the ‘green’ economy from ‘cradle to landfill’. In essence, Lean development merges two streams of best practice, design excellence and delivery excellence of the design.
Lean supply chain This practice is concerned with streamlining the supply chain, delivering product/services faster to the end customer, with minimum waste. A Lean supply chain is a great enabler for any organisation that strives for excellence because often the greatest proportion of cost for business is on purchased supplies. The Lean supply chain seeks to maximise end-to-end flow from raw material to customer receipt. It requires cooperation among many businesses and systems thinking is required to maximise the end-to-end delivery of the product or service.
Process A process is a sequence of tasks that cooperatively brings about a distinct purpose. Most pre-Lean processes are ripe for improvement work. All value is created as the result of a process.
Process capability Cpk is the measure of process capability; it tracks how close a process is running to target with minimum variation. The industry standard to satisfy customers is that your Cpk index should be running above 1.33. A process can be running with low variation and still be off the target or conversely a process may be running at the target but the variation in performance can be high. Cpk tracks the performance in terms of meeting the target with low variation.
Process mapping A process map lists every step that is involved in the fulfilment of a product or service. There are special symbols to indicate ‘operation’, ‘delay’, ‘move’, ‘storage’ and ‘inspect’. It helps to identify waste. Process mapping is also powerful for standardising processes after improvement. The mapping should be done at the gemba, not in an office (if you are not mapping an office process). Once the map is complete the individual steps can be brainstormed into those that add value, those that are pure waste and should be eliminated as soon as possible, and those which are value-added enabling (needed to support the process in the short term). It is a great tool for generating ideas about alternative solutions to achieve the purpose of the process. An enhancement to the basic map is a person–equipment map which highlights what the person is doing during the equipment cycle time and helps to uncover wasteful time gaps. A good analogy to obtain input for this type of chart is to ask if you would sit and watch your washing machine clean your clothes for the full cycle!
Spaghetti diagram A spaghetti diagram is a waste diagnostic tool to trace the motion of people carrying out their jobs or the route that a product or service takes during fulfilment. A person’s movement is tracked on a layout drawing of the area. In pre-Lean workplaces the movement generally reflects a bowl of spaghetti – the lines tracking the motion are normally tangled and crossed over each other. The diagram is used to examine current layouts and the waste of motion that poor layouts induce forever. Improved layouts and location of machines and equipment can be accomplished through the application of this simple tool. Often merged with the use of pedometers (the participant’s consent should be sought beforehand) to track the movement of an employee over a shift. Management often underestimate the cost of people motion. Historical studies from the author’s experience reveal, for example, that a nurse walks 4–5 miles per shift due to poor ward layouts and searching for equipment and supplies. This is the equivalent of about 90 minutes’ walking per shift away from the patient’s bedside. Consider the cost of this per hospital in terms of wasted hours and inferior patient outcomes. (There is a direct correlation between the percentage of nurse time at the bedside and improved outcomes.)
Stakeholder A stakeholder is a person or group of people who are affected by a process or project improvement, either directly or indirectly.
System A system is a collection of interdependent components that works interactively to deliver customer value. None of the elements, acting alone, can do what the system does. There are three types of systems, namely mechanical, organic and socio-technical. The parts of a mechanical system, like a car, can be designed to work together to further the system’s purpose: transportation. The organs of organic systems, like the human body, are genetically designed to further the purpose of living. A business organisation is a socio-technical system with some parts that can be designed, such as technology, roles and processes, and other elements that must be led, namely people.
True North The organisation’s ultimate aim, there are four True North goals:
- Employee growth – Frank Devine of Accelerated Improvement Ltd. defines True North as ‘100% discretionary effort by 100% of your employees, 100% of the time’.
- Quality – the concept of striving for zero defects.
- Delivery – fastest lead time through the quest for one-piece flow processing.
- Cost – the journey towards 100% core value-adding steps.
Variation This is the great enemy of Lean. Variation in time and demand is found in every process from supply chain demand amplification to dimensional variation. Learn to distinguish between common and special cause variation and treat them appropriately.
Work-in-progress This is the amount of unfinished work that is awaiting completion. Lean aims to reduce work-in-progress (WIP) so as to reduce costs, increase quality (through faster feedback) and, more significantly, reduce lead time. (WIP inflates lead time proportionally, i.e. reducing WIP by 50% provides a corresponding improvement in lead time.) In manufacturing, WIP is product parts or sub-assemblies, in service industries it is primarily time or open projects.
Yokoten The concept of yokoten is concerned with sharing improvements and learning. It is practised when teams and departments share how they overcame problems with solutions, with the aim of motivating other teams to learn from these solutions and adapt them for use in their own areas.