Lean Concept Definition: Toyota Company’ Case

Literature review

A Definition of Lean Concept

The lean concept is an idea that aims at maximizing the customer value while at the same time minimizing waste. In other words, lean entails the creation of more value for the customer while using as few resources as possible. Therefore, an organization that utilizes the lean concept would be referred to as a lean organization. These organizations focus most of their energies trying to increase the value it offers to the customers. The major objective of such organizations or this concept is to provide perfect value to its customers through a production process that has minimum (zero) waste (Ballard, 2000).

The Lean Concept Paradigm

The lean concept has been applied in various areas including production and service. It should not be mistaken for being a strategy or a cost-reduction program. However, it is simply a way of thinking and performing for the whole organization. Several ideas and principles are underlying the lean concept (lean concept paradigm).

To understand lean sufficiently, one must understand the systems. This is what has been referred to as ‘systems thinking’. A system is a series of steps through which work is done. This concept helps to bring an understanding that when one aspect of the system changes, it may affect another. An example may be when procurement in a company changes. This would also mean that delivery would change. Lean aids in adding details to a system’s view of the world. It does this by enlightening management on the way information and workflow through the system. This is mostly applicable where the work and information flow freely and where there could be bottlenecks. This allows the organization to focus on improving those areas that would improve the whole system rather than improve certain areas only (sub-optimal changes).

One of the challenges that face organizations is its ability to focus on the most effective means of production value for the customers. A lean organization would approach this challenge by employing certain strategies (Holweg, 2007). One of them is through applying the five basic principles of lean. The other is to focus on understanding waste and value in the way it works and to train its staff for them to act as improvement teams to ensure that there is a change in the way they do and manage work. Womack and Jones (1990) introduced the five principles of lean. The five principles of lean are as follows:

1. Specifying what the customer’s value – value is the only thing the customers want. This calls for the organizations to have a precise understanding of what the specific needs of the customers are. Most processes undertaken by organizations are non-value adding and should, therefore, be avoided or done away with.
2. Understand the value stream – value streams are the activities that should be done in the right way and the right order to experience success in the production of goods and services that are of value to the customers. An organization being governed by lean principles should trace and manage all processes in the organization that produce value. This would include all processes in all the departments and sections in the organization. Other activities may be partly or entirely wasteful or unnecessary. Such activities should be eliminated. Those activities that support value-adding activities should be reduced as much as possible. However, those activities that add value to the customer should be continuously improved.
3. Improving the flow – organizations observing the lean concept should work to ensure that the work within those organizations flows steadily. This means that they should not be interrupted until the work is completed. This calls for the steady flow of one value-adding activity (supportive activity) to the other. Examples of interruptions include batching of work. For example, this may be the case when a manager is expected to authorize all the expense claims made in the previous week at once. Improving the flow would ensure that the processing speed is increased and every effort would work to eliminate barriers and bottlenecks that hinder the flow.
4. Allow customers to pull value from the next upstream activity – this calls for the system to react positively to the demands of the customers. This ensures that the customers can pull the work through the system itself. An organization that does not apply the lean concept normally ends up pushing work through the system such that it is at the convenience of the management. This almost certainly leads to the production of outputs that are not desirable to the consumers. Lean organizations should consider the customers’ demands and consequently pull work through the system. This would ensure that the outputs produced are required and desirable.
5. Perfection – when the value is specified, value streams are defined and the wasteful steps are eliminated. The process of flow and pull are then incorporated. This process starts and repeats several until a steady state is attained. At this point, a perfect value is created. This is whereby there is no waste. As an organization implements the first four principles of lean, it would have a better understanding of the system and this would cause it to generate ideas that would ensure greater improvement. A system under the lean concept would be faster and the forms of waste in the system would be easier to spot and eliminate. What results is a perfect process. Such a process delivers the exact amount of value that is desirable to the customers. This means that every process would be that which adds value to the system. It would also be known to be capable in that it would be able to produce good results every time it is used. It would also be available in that it would be able to produce the desired quality of output all the time. It would be adequate in that it would not cause any delays in the process and flexible. When one of these factors in the process fails, some form of waste usually results.

More recently, Womack and Jones (2003) provided six more principles of what they referred to lean consumption. These principles corresponded closely with those of lean production, which were introduced earlier. The additional principles of consumption are as follows:

1. Solve the problems of the customers completely – this required the organizations to ensure that all the products and services from that organization work. They should all work together.
2. The companies should not waste the customer’s time – the time is a valuable factor for the customer and therefore the organizations should avoid wasting their time.
3. Provision of exactly what the customer wants – the priorities of the customers should be taken into considerations and the production of what they want should be put as the priority. The management should not provide what they think is required but what the customers demand.
4. Organizations should provide the required services or goods at the exact location where the customer wants – this also calls for the organizations to respect the choice of the customers concerning the location for the production of what they want.
5. Provide the desired goods at the desired place and at the exact time – this issue calls for the punctuality of the organizations in delivering the desired goods or services.
6. Continually look for solutions to reduce the resources and time of the customer – the organization should aggregate the solutions provided for previous problems to have a range of solutions for a range of problems to be fast at providing solutions to similar problems in the future.

These additional principles by Womack and Jones recast the lean thinking principles to allow the producers to view things from the customer’s perspective. This enables them to view and judge their goods and services as the customers would. This is similar to the attempt by marketers to shift from the four Ps to the four Cs. The four Ps were product, place, price, and promotion. The shift was made to include concept, communication, cost, and channel accessibility.

To be able to integrate the lean concept, an organization must use lean thinking in its approach. This would spell a change in many aspects of management. These include the use of different innovations, divisions into departments and use of company assets. This means that there would be efficiency in the flow of goods and services within the organizations. The flow would be made through all sectors, innovations, and assets of the organizations. Finally, it would go to the consumers who would receive high-value goods and services.

Lean is a way of thinking about work to avoid waste. Waste may be broken down into seven specific types. One of the types of waste is over-delivering. This happens when the volume (quantity) produced exceeds the amount consumed by the customer. Another form of waste is whereby a particular process needs to be completed to go to the next process.

This act of waiting is a form of waste in itself. Another type of waste may be observed in the transportation process or conveyance. Over-processing is another form of waste. This occurs when a poor design is used. This usually leads to the production of goods and services other than only those that are desired by the customer (what the customer values). Very high inventory levels are also wasteful. The human motion has also been categorized as a type of waste according to lean. The time and resources used during the correction of a defect when it occurs in the production process is also a form of waste.

Elimination of waste has been a major challenge for management for many years. Lean provides an alternative way of thinking about waste. In some cases, this has led many to become obsessed about reducing waste. This has been referred to as industrial housekeeping in other instances. Some common types of poor lean improvement initiatives include those that begin by eliminating the different types of wastes in isolation. This is not desirable since it may lead to an imbalance and worsen the situation. This is because it is likely to disrupt the flow.

Avoiding waste is advantageous in many ways. This ensures that there is the production of higher quality products and services with the use of fewer finances and workforce. However, the elimination of waste should be done in all areas and not in specific areas only. This would be much effective when compared with traditional business systems. This way, the organizations would be able to respond to the ever-changing desires of the customers. The organizations would be able to provide high-quality goods and services and of high variety. The goods and services would also be less costly and have faster throughput times. Information management would also be made more effective and productive.

The concept of lean thinking incorporates various tools in its operation. One of them includes the ‘5s’ system. This describes the visual nature of lean. This is because lean thinking is visual and does not require any mathematical calculations. The idea behind this system is to make the workplace less messy (more organized) so that activities move smoothly. For example, it would ensure that things are found much easier, that there are fewer distractions and mistakes and accidents would be avoided.

The first ‘S’ stands for Sort. This requires the sorting of the needed and unneeded items. The other requires items to be ‘Set in order’. This includes arranging things in proper places. The third ‘S’ stands for Shine. This means that the workplace should be cleaned up. The four ‘S’ stands for Standardize. This calls for the first three S’s to be standardized. The last one stands for ‘Sustain’. This calls for the continual use of the ‘5S’ and makes it part of the activities at the workplace.

The Lean Thinking Origin

The origin of lean thinking can be traced back to many decades ago. One aspect of lean thinking is the avoidance of waste. Several instances in the past show how people managed to avoid and then laterally eliminated waste. The concepts incorporated in lean thinking have a long history. Several people had discovered the main concepts in the past. This was done in an attempt to eliminate waste in the production process (Krafcik, 1988). Therefore, the concepts were already in place. However, the name was coined a little later.

Some of the documented evidence on the existence of lean concepts can be traced before the 20^th century where these concepts were considered common sense. Some examples include those of Benjamin Franklin. Some of his sayings criticized the various forms of waste including waste of time. He also talked about the importance of avoiding unnecessary costs.

He says that this could be even more profitable than increasing sales. Some of the documented information by Franklin covers issues to do with unnecessary inventory. He said that some of the goods people buy are not always ‘goods’ but instead, may prove to be evil. He also adds that people may expect goods to be sold cheaply and may be sold at a price lower than they cost. In some other instances, he has been recorded to state that many have been destroyed because of buying goods worth pennies. Henry Ford also cited Franklin for being a great influence on his business practices (Ford and Crowther, 1922). This included just-in-time manufacturing.

Frank Gilbreth, a motion efficiency expert, also noticed some form of waste. He noticed that the concept of waste had been introduced into the workplace but was greatly ignored. He saw the way masons wasted time and energy bending over to the ground to pick up bricks. The bending of the body to pick the heavy bricks was a form of waste since it required a lot of time and took up most of the valuable time required for construction.

According to him, this was a form of inefficiency. Unfortunately, it had been a common practice at the workplace and people were ignorant about it. Gilbreth’s observation was very practical since interventions to reduce this kind of waste yielded great results. This happened when the non-stooping scaffold was introduced. This ensured that the bricks were delivered at the waist level. This allowed the bricklayers to work three times as fast as before. This was also done with less effort and therefore, more efficient.

The 20^th century also came with its fair share of inventions concerning the lean concept and lean thinking. Fredrick Taylor is one of the great contributors to the concepts used in lean. He introduced what is now called standardization. He also introduced the concept of best practice deployment. He has been called the father of scientific management. Taylor stated that if an individual in the workplace proposed an innovation, it should be mandatory that management take good consideration of it.

He proposed that management should conduct proper research on the new improvement proposed and perform several experiments, if required, to test the validity of the proposed method. They should then compare the suggested method with the one that is in place (old standard). If the proposed method is found to be much better than the one in place, then the new one should be adopted as the new standard procedure for the entire organization.

Taylor also warned against the firing of employees or the cutting of their wages if efficiency improvements decrease the need for workers. He argues that such efficiency improvements that decrease the need for the workforce are because of the employees’ hard work and increased output. This, he argues, would cause the employees to lose morale for working efficiently.

Industrialists in America also realized that there was a threat while using cheap labor. This threatened the American workers during the early 1900s. The goals they suggested for this as a countermeasure are what are now referred to as ‘lean manufacturing’. Henry Towne also contributed to the lean concept. He was one of the presidents of a certain association. It was called the American Society of Mechanical Engineers. He acknowledged the way high wages were paid to the workers throughout the country. However, he was greatly troubled by the practices of other countries.

He argued that some practices by other countries interfere with this success. He argued that the production of cheap labor by other countries affected this venture. However, he recommended that they should maintain that condition and strengthen their control of the local markets. He also encouraged broader opportunities in foreign markets to be made possible for them to compete with the productions of other industrial countries. To do this successfully, he suggested that they should welcome and encouraged every intervention that would tend to increase the efficiency of their production processes.

Ford also continued with the same kind of reasoning (lean thinking). His focus was also on the reduction of waste. He made these considerations while he was developing his mass production manufacturing company. Charles Buxton acknowledged Ford’s success. He said that it astounded the country and almost the entire world. This was because of its financial, industrial and mechanical success.

He also added that the characteristics of his company contradicted the requirements of what was referred to as true efficiency. This is because there was a constant increase in quality while at the same time, the wages of the workers was increasing greatly. There was also a continuous reduction in costs incurred by the consumer. With these strategies put in place, the output increased continuously and the owner was able to enjoy enormous profits.

In his book, My Life and Work, Ford also wrote a paragraph describing some concept of waste. He described a farmer who puts to good use only 5% of his entire energy during the production process. Firstly, he describes how the farmer only uses his hands to do all the work, not introducing the use of machines to make work easier. He describes how the farmer would walk up and down and carry water for great lengths instead of simply using a pipe. When there is a lot of work to be done, his solution is to hire more men (ineffective labor). To the farmer, using the money for innovation is a waste of money. Ford explains that it is due to the waste of time and energy on the farm that makes the prices high and maintains the profits at the low.

The forms of waste at the workplace include poor arrangement and doing work in an inefficient way that has become a norm. Another concept by Ford is the Design for Manufacture concept. Ford provided in his book a way of cutting the costs of production. He stated that this could be done through the elimination of useless parts of a particular product. These include areas that are not necessary.

Lean thinking is a concept that is being embraced by leaders across the world. It has been applied in various areas of production and management. This can be seen in the production of services, in retail, healthcare, maintenance, manufacturing, construction and even in government. Lean consciousness has also begun to take root in management as senior managers and leaders in many sectors of the economy are embracing the lean concept.

The Toyota Way

The lean concept is based on the preservation of value with the use of less work. Another philosophy known as lean manufacturing is a management value that was mainly derived from the Toyota Production System. However, the name ‘Toyotism’ was used then. It was identified as lean some period in the 1990s (Liker and Meier, 2005). Toyota Production System (TPS) is well known because of its focus. It focuses on eliminating or reducing all forms of waste. These wastes were originally referred to as the ‘seven wastes’ of Toyota. This was done to ensure that the overall consumer value was improved. The steady growth of the Toyota Company made it to progress and attain its current position. It flaunts as the largest vehicle manufacturer in the world.

The Toyota Way is a set of principles. They govern the activities of the Toyota Company. These principles underlie the company’s production systems and managerial approach. The Toyota Way 2001 was compiled in 2001. It was the first set of philosophies, values, and ideals of manufacturing. It based on principles that touched on two main areas. They included respect for people and continuous improvement.

The two key issues (respect for people and continuous improvement) became the focal points of the principles. Those principles that were meant to ensure continuous improvement included the establishment of a long-term, rather than a short-term vision. They also emphasized ensuring that there is a continuation of innovation. They also touch on issues to do with working on challenges. This involves going to the source of the problem at hand. Continual innovation is also one of the philosophies. The other set of principles touch on personal relations. They encourage the building of respect for the fellow workmates. They also show the importance of teamwork in the organization.

Liker (2004) published ‘The Toyota Way’. He was a professor of industrial engineering at the University of Michigan. In his book, he described this as a system made to provide instruments for people to continue to improve their work. This system consists of fourteen principles and Liker categorized them into four sections. The principles are as follows:

Long-term Philosophy

The first principle touches on issues to do with the management. It dictates the way management should be designed. This includes the way it should aim for long-term gains rather than short-term ones. This principle also motivates individuals in an organizational setting to establish attainable goals.

The Right Process Will Produce the Right Results

This category comprises of the next seven principles. They focus on processes that are meant to deliver quality output. These principles support processes that are meant to eliminate waste as much as possible. This is achieved through the process of continual improvement. The seven types of wastes are waiting, unnecessary conveyance or transport, overproduction, over-processing, too much inventory, defects, and motion. These wastes were referred to as ‘Muda’.

These seven principles empowered the employees in the Toyota Production System. For example, an individual employee had the right to stop the production process to signal an issue of quality. This simply implies that quality is a priority in the production process. The implementation of the bureaucratic system of Toyota is done to allow for continued improvement. This involves the people directly affected by the system. This means that the employees would participate in the growth and improvement of the Toyota Company.

The Toyota Company values employees and this is also used as a measure of the company’s production rate. A certain level of workload is maintained so as not to overburden the employees and the equipment. This also helps minimize or eliminate any form of waste and avoid unevenness in production levels. These principles are also important in that they help ensure the right amount of materials is used in the production to avoid overproduction, which is a form of waste. The 5S program is also employed in the workplace to maintain efficiency. This is an aspect of lean thinking. This enables people to share workstations and reduce time wastage while one tries to locate the required tools and materials. This also ensures that the technology that is in use is tested to produce good results (efficiency and reliability).

Add Value to the Organization by Developing Your People

The ninth principle touches on leadership teams. It encourages them to embrace the corporate philosophy. Liker argues that the employees must meditate upon the principles for them to remain relevant. The tenth encourages every individual in an organizational setup to embrace the set policies. The success of teams of four to five individuals is measured through the team rather than individual effort.

The eleventh principle provides information concerning business partners. All these three principles focus on human development. The partners of Toyota receive proper treatments since they are equally valued. It does this by challenging them to perform better and it assists them in achieving this. The company also provides cross-functional teams to assist the business partners to identify and fix problems. This is aimed at making them stronger and better business partners. Examples of business partners are the suppliers and they too benefit from this.

Continuously Solving Root Problems Drives Organizational Learning

This category contains principles that are related to problem-solving. They emphasize that this could be achieved by maintaining understanding. They also provide for continual reflection and improvement as problem-solving strategies. Another is the use of solutions based on consensus and that are swiftly implemented. The twelfth principle shows the expectation of managers. The managers are expected to evaluate operations by themselves to have a first-hand understanding of the issues that face the process and the suitable solutions.

The thirteenth principle of ‘The Toyota Way’ emphasizes on the immediate implementation of a decision whenever it is reached. These solutions are to be arrived at through a consensus process. The last principle encourages the Toyota Company to be a learning organization. This means that it would be required to reflect on its practices always and to strive to improve them. Liker (2004) considers the act of critically analyzing everything that an individual does as part of the learning process and a step towards making the company a learning organization.

The Lean Construction

Lean construction is a term that was first coined in 1993. This happened in a meeting by the International Group for Lean Construction (Gleeson and Townend, 2007). Lean constriction combines some of the original work and developments in construction and design and it adopts some of the practices and principles in lean manufacturing. It may also be referred to as the new paradigm for project management. Kuhn (1962) described how science evolved through the introduction of innovations and concepts.

He shows how this led to the change from mass manufacturing to lean manufacturing. Construction differs from manufacturing since this process is project-based. Lean construction is a process that strives to provide improvements continuously. The improvements should be seen in all areas of the natural and man-made environment (Abdelhamid, 2007). These include construction, recycling, maintenance, design, and salvaging.

This process strives to provide improvement in the construction process and try to minimize costs while maximizing value. It does this by considering the needs and wants of the consumers (Koskela et al., 2002). In 1992, Lauri Koskela noted some failures of the time-cost-quality tradeoff paradigm. Therefore, he challenged the Construction Management community to consider revising it and eliminate the failures. Howell (1999) and Ballard (1994) also noticed some anomaly in the paradigm. One of the failures was in the project planning. It was realized that only fifty percent of all the tasks that were on the weekly plan was completed come to the end of the week. The other fifty percent were not tackled.

Constructors could try solving most of the problems by actively managing variability. This was to start with the restructuring of the project. This would then be applied for the rest of the operations for improvement (Ballard and Howell, 1998). Research indicated that the tools and conceptual models used for construction management under the time-cost-quality tradeoff paradigm failed to deliver projects on time. It also failed to provide the desired output under the budget provided. Lastly, it did not provide goods of the desired quality (Abdelhamid, 2004). Several tools were in use. One of them was the earned value management. A work breakdown structure and the critical path method were also incorporated. With the failures experienced with this paradigm, it became obvious that the key principles of construction management needed revising.

Koskela (2000) saw the difference that existed between the conceptual framework and the actual output and concluded that the current constructs lacked robustness. Therefore, he explained the need for a new theory of production in construction. This led him to use the production system used by the Toyota Company under the Toyota Production System. This way, he was able to develop a more comprehensive paradigm in production management. It was project-based and was governed by three concepts. They included acting as a Transformation, as Value generation, and as a Flow. Koskela and Howell (2002) have also addressed some of the failures of the existing management theory in project-based production. These failures include those in the planning process, the execution of the planned activities and control.

Constructions sites are similar to the complex systems in that both information and materials flow on the site and of the site (Bertelsen, 2003). Bertelsen argued that a construction site could be understood in three concepts. The first is that it should be seen as a project-based production process. It could also be considered an industry with autonomous agents. Lastly, it could be considered a social system.

Application to EPCm Environment

There is a common type of contracting arrangement practiced in the construction industry. It is known as the Engineering, Procurement, and Construction and it is abbreviated as EPC. Under such a contract, the contractor will come up with (engineering) the design, procure the required raw materials and go ahead with the construction. Such contractors may use their labor. However, others subcontract some of the activities involved in the project. In other instances, the contractor may take the project risk for a particular period and with a fixed budget in return for a particular amount of money. This is what is known as a lump sum. It may also be called an LSTK but this depends on the scope of work provided.

The project may only include the engineering and procurement processes. In this case, it is known as an EP contract. This happens when the owner intends to do the construction by himself. It may also be the case if the contractor thinks that the construction risk is too great for him. The reason why an owner goes for an EPC contract is due to the benefits that come about with it. They include the following:

1. The owner only requires putting in the minimum effort in the project hence it is less stressful.
2. The owner is given a one-point contact. This way he or she would be in a position to easily monitor and coordinate the process.
3. This way the owner gets post-commissioning services.
4. EPC contracting also ensures that there is quality and helps reduce practical issues that may occur.
5. The owner would also not be affected when commodities in the market rise.
6. The owner also gets to know the total figure to invest at the beginning of the project.

In recent EPC environments, concepts of Lean Thinking have been integrated for the EPC contractors to deliver greater value to their clients. This has been seen in the way they have continuously improved their processes. This has resulted in a great change in the management of their projects. The techniques and processes of lean construction have now been integrated into project management. This has seen the emphasis on the planning of work sites through systematic approaches. This has been done to maximize the value of customers and at the same time reduced waste during project delivery.

There is also the use of such tools as ‘Last Planner’ in the EPCm environment. The principles of ‘5S’ also apply in such project management applications. This has seen the assurance of quality, order, cleanliness, and safety in the projects and this has increased productivity. The integration of specialized teams in the development of systems, processes, and organizations (SIPO) has been implemented due to the incorporation of the new processes and practices in the daily management of the EPC environment. SIPO caters to all processes of Engineering, Procurement, and Construction.

When these management practices are implemented in EPC, this ensures that the contractors can achieve great improvements in terms of time management since every project requires adequate time allocation. This also results in the reduction of costs as much as possible. Despite the reduction of costs and allocation of a fixed amount of time, these management practices ensure that there is a subsequent increase in quality and services. This provides greater value for the clients and associates of the EPC contractors (Parker, 1972).

It can, therefore, be seen that EPC management requires lean principles to be integrated to ensure that there is the preservation of value with the use of less work. There is also the minimization of waste through proper planning and management. The employment of the principles in 5S also eliminates forms of waste that include the wasting of time looking for equipment and material (Johnson and Broms, 2000). It also ensures that there is continuous improvement through adopting long-term goals rather than short-term ones. Lean thinking has been seen as a way of thinking and practice that aims at eliminating any form of waste (Koskela et al., 2002). It also helps in the use of less effort and time but there is the maximization of value.

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