Zero inventory is an ideal that has not been achieved in practice, even at Toyota. A small amount of inventory is still maintained, particularly in the final processes of the production line. This is to avoid failing to meet demand when there is a sudden spike. In spite of this, the principle of just in time leads to a more responsive supply chain focused on meeting the changing demands of customers quickly.
Connection with customers lean means creating more value for customers with fewer resources. A lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste.
The Western car manufacturers tended to sell through dealers, who would be pressured to buy a certain number of cars from the factory with their own finance. Toyota, on the other hand, had sales teams that sold directly to customers. Contact was maintained with customers with the object of ensuring product loyalty when the customer replaced their existing cars. Customer feedback was also fed back into the design process much more thoroughly than the Western manufacturers who typically relied on a small number of focus groups to establish what customers wanted.
Toyota’s flexible approach to manufacturing enabled the company to produce a wider product range, and to design new models much quicker than the western car manufacturers. Womack et al reported that, in 1990, Toyota was producing as many different products as General Motors, even though at the time the company was half the size of GM.
In 2001, Toyota launched ‘The Toyota Way’, which aimed to take lean beyond its manufacturing and product development into all other areas of the business. Even after 60 years, lean is still evolving within Toyota.
Adoption of lean outside of Toyota
The success of Toyota: many organizations in various industries have aimed to copy the lean principles, and a variety of lean methodologies have evolved to help organizations become lean such as The Flow Framework, developed by Kate Mackle, described by Bicheno and Holweg in The Lean Toolbox. The Flow Framework is a methodology that focuses the attention of organizations on the flow of goods or services through the system and aims to eliminate lead time and bottlenecks.
Plenty of lean implementations have not been successful. Bicheno and Holweg believe the reason for this is that many organizations think lean is a one off programme. It is actually a culture of continuous improvement, and its success relies on the continued support of management. Predictably, managers in many businesses lose interest in initiatives that do not produce immediate improvements to the bottom line.
Lean information systems
Lean principles can be applied to information systems. Features of a lean information system are:
1. Reports and other outputs from the system should only be produced if they add value – that is if they are useful to the decision makers
2. Reports should only be sent to those who need them
3. Information should be processed quickly so that users do not have to wait for it. Generally, real-time processing is preferred to batch processing as batch processing introduces delays
4. Waste should be avoided. Duplication of data should be eliminated so data is only entered into the system once. IT to control this.
5. Continuous improvement – the providers and users of information should meet regularly to review the usefulness of existing information and identify improvements
6. Adaptability – information systems should be flexible enough to meet special ad hoc needs or changing needs of managers over time. An information system that can only produce a standard set of reports is not lean. A system that allows managers to create their own customized reports from databases is more likely to be lean.
FINALLY, Five S Model
The Five S model is a popular tool that has been used by many organizations as part of a lean methodology. The Five S model lends itself neatly to information systems. The objectives of the model are to reduce waste, improve productivity and remove variation. Variation means variation in production or output. It is variations that lead to tension at highest times, and that leads to errors.
The Fives Ss as follow:
1. Sort (structures)
2. Simplify (systemize)
3. Scan (sanitize)
4. Standardize
5. Sustain (self-discipline)
Sort: sort out the items in the workplace. Items that are not used should be thrown out as they are just taking up space and getting in the way. Those items that are used less frequently should be kept away from the workplace, in cupboards or in store rooms. Sorting should be repeated regularly – for example, every six months.
Simplify involves putting items in the best place, where they will easily be found when needed e.g. a carpenter might keep the tools that he uses every day on shelves or in cupboards close to his work bench, while those tools that are used less often will be located further from the bench.
Scan refers to continuously scanning the workplace for things that are out of place and need tidying away. It also involves performing routine maintenance tasks, such as lubricating the machines.
Standardize means setting standards or procedures once the sort and simplify processes have been performed to make it easier to keep the workplace sorted and simplified. Color coded stickers could be introduced – for instance, indicating which locations items should be stored in.
Sustain – the use of the Five S Model should not be a one-off exercise, but should continue to be used after its introduction, and become part of the routine in the workplace.
The Five S Model can be applied to information systems as follows:
Sort the information transactions that flow around the organization. Questions should be asked about what is the minimum information that is required for planning, controlling and decision making, and operating the various business processes. The time accuracy trade-off can also be applied here, where 90% accurate in half the time may be preferred.
Simplify: identifying the best methods of communicating the information. At Toyota, key information was communicated to all employees on the factory floor using large TV screens. Simplify also considers the way the information is stored in the system, such as the file structures to avoid duplications.
Scan involves regularly auditing the reports and who is actually using them. It also involves removing obsolete data such as old customers or inventory items that are no longer used.
Stabilize includes coming up with standards such as standards for reports and rules about who should be copied in on emails.
Sustain involves continuously performing the above four steps and therefore continuously improving the information systems.
The lean principles that evolved in the Toyota car factories have led to a new approach to management in many industries. They attempt to focus on satisfying the needs of the customer, and not wasting time and money on activities that do not ultimately add value to the customer. Lean principles can also be applied to information systems to ensure that only useful information is produced on a timely basis.
Procurement quality is a measure of how well the procurement organization performs, as well as, a measure of the quality of the products or services it purchases. In procurement, “quality” is defined as the contractual obligation formed with suppliers to provide products or services that conform to given specifications
How to make a lean organization follows?
1. Conduct an honest assessment of work practices. …
2. Eliminate the fat. Possibly the most difficult part of streamlining a business is cutting workers.
3. Give employees credit for knowing what they’re doing. …
4. Continually revise your method of operation. Becoming a lean organization is a process.
• Dada Suraju Adefolami, FIMC, CMC. Professor of Finance, School of Business Administration, UNEM University Costa Rica, is a Finance / Management Consultant and Certified Forensic Accountant. You can reach him via: [email protected]; 08052043855
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