Why lean manufacturing wins over efficiency improvement movements?

In almost every organization, sometimes so called lean organizations there is a movement to improve the efficiency of a particular process of an activity. They measure efficiency figures in %, like 80% or 90%, and generally aim for an improvement of less than 10%. For an example if they are at 80% they would want to be in 90% range within a year or a month or whatever the timeline is set to. While this looks fine and absolutely required, does this provide the ultimate outcome organizations are looking for? Do these drives contribute to a better user experience? Do they lower the costs of the products to the customer? Do they help delivering the goods when the customer wants them? In most of the cases they don’t. This is because most of these improvements happen in isolation with minimal understanding of the bigger picture. Yes, they may put hours into work and get the efficiency of the work floor by 10%, reducing the cycle time by 1 day. But ultimately they will deliver their goods to the warehouse a day earlier and the goods will stay in the warehouse a day longer. That is all they have achieved. From the customer’s point of view, there is no change, hence no value is added, instead resources are wasted in the name of improvement.

In addition, it is much better to understand what are the wastes available in the process and attack them instead of trying to squeeze an improvement in an already value adding process, thereby putting more stress on already value adding operations. As a lean thinker, you must know what is value in relation to the lean definition. Value is defined from the customer’s point of view, not from your point of view. For an example, if you think you delivered great value by increasing the production efficiency by 10%, think again, and think how your improvement is translated to the customer value. If you fail to translate your savings to the customer value, you have failed.

Let’s us have a look at the below figures on how easy or difficult it is to add value to the customer using “Improve efficiency” and with “Lean Thinking”. Before that, we all lean thinkers understand, more than 90% of the resources can be categorized as “Muda” or waste in lean terms. That is more than 90% of the resources goes without adding any value to the customer. Below figures are based on that assumptions. 

While, “Lets improve efficiency” guys work in the Small Blue area (Which is about 10% of the total area), Lean works on the larger (90%) of the green area. Let’s say you managed a 10% improvement on the Value added activities. So you will have a net effect of 1% in the full spectrum. (That is 10% of 10% = 1%).

In contrast, when lean thinker does a 10% improvement in the green area, which is 90% of the spectrum, you will get a net improvement of 9%. This is 9 times the result you achieved by increasing the efficiency. Most probably eliminating the non-value added activities will be easier than squeezing some efficiency from already value adding operation. 

Original status

Normal Process. 90% of Non Value Added Activities + 10% Value Added Activities

1% improvement by increasing the efficiency of value added activity by 10%.

10% Efficiency Improvement on Value Added Activities. Net Improvement of 1%.

9% net improvement by increasing the efficiency of non-value added activity by 10%.

10% Efficiency Improvement on Non Value Added Activities. Net Improvement of 9%.

So what is the moral of the story? 

Try attacking non-value added activities. You can get greater improvement by doing so. Above example shows how 10% improvement in non-value added activities can translate to 9 times higher improvement to the 10% improvement made on non-value added activities. Please click the "Like" button below, if you like this post.