The Lean Approach to Supply Chain Management

Lean is an approach to supply chain management that originated with Toyota, which is why you may hear it referred to as the Toyota Production System (TPS). The idea behind Lean is that you use the least amount of time, effort, and resources by maintaining smooth and balanced flow in a supply chain. The best way to accomplish this is by having logical, disciplined processes and excellent communications.

Because Lean originated in a Japanese company, many of the principles of Lean manufacturing are described using Japanese names.

Many people make the mistake of thinking about Lean as a training program or a set of tools that a company can buy. However, Lean is really a philosophy — a different way of looking at how businesses create value. In order for Lean to work properly, everyone in the company needs to be working together to eliminate three things that cause inefficiency:

• Muda: Waste
• Mura: Unevenness in operations
• Muri: Overburdening of people and equipment

When someone identifies a need to innovate or improve a process, the key stakeholders are brought together for a kaizen event. (Kaizen is pronounced to rhyme with "Hi Ben.") During a kaizen, the stakeholders form a team and look at how the process is working, come up with ideas for how to make it better, and then implement changes. That sounds simple, and it should be. Because business cultures often make it hard for people to speak up or be heard, a formal approach like Lean helps to get everyone involved.

A core value of TPS is that people must be treated with respect because all of the workers have ideas to contribute that could benefit the company.

In the Lean approach there are eight kinds of Muda, or waste, that companies should be constantly driving out of their processes and their supply chains:

• Transportation: Any time that you ship something from one place to another, you are consuming time and money. The less you need to ship a product, the better.
• Inventory: Any time that you have products sitting around in inventory, you are wasting money by tying up space and working capital.
• Motion: Any time that you move something when it isn't necessary, or when it isn't somehow making your product more valuable to a customer, you are wasting time and money.
• Waiting: Any time that you have to wait for one thing to happen before you can do something else, you are wasting time and money.
• Overproduction: Any time that you make too much of a product, or make a product before you can sell it or use it, you've wasted time and money.
• Overprocessing: Any time that you do something that doesn't add value — that a customer won't pay for — you are wasting time and money.
• Defects: Any time that you make a product that you can't use or sell, you've wasted time and money. This also includes wastes such as scrap and rework.
• Untapped skills and employee creativity: Any time that you fail to engage and inspire your employees to offer ideas, implement improvements, or identify waste, you are wasting an asset that you are already paying for — their brains.

An easy way to remember the eight wastes is with the acronym "TIM WOODS." (The S at the end comes from skills in the last item.)

Toyota originally identified seven kinds of waste, but as Lean has been adopted in other companies, most of the experts have come to agree that untapped human creativity is so important that it needs to be included as an eighth form of waste.

TPS originated in the manufacturing world, so it is often called Lean manufacturing, but the principles have gradually been adopted in retail, distribution, and even service-based organizations. These days, you can find Lean initiatives in virtually every industry.