The following is a partial transcript of a guest lecture given at Carnegie Mellon University Australia on the 18th of July 2014. The lecture was delivered by Paul Smith as an Introduction to Lean Manufacturing for students undertaking the Master of Science in Information Technology course. The talk focuses on removing waste from business processes to improve productivity, quality and safety, and includes insights from the kaizen training and lean tours that Shinka Management runs in Japan.

As part of the lecture a discussion was held on the relevance of lean to the role of the CIO. As the most senior executive in an enterprise responsible for the information technology and systems, the CIO often plays a central role in business transformation projects. An understanding of the fundamentals of lean is relevant in this role, as more and more we are seeing business transformation projects being labeled as lean or agile. These projects often miss the point that lean is a culture that is developed over years, not a one-off undertaking.

Lean Manufacturing

Lean is a continuous improvement philosophy which is Synonymous with Kaizen or the Toyota Production System. The history of lean management or lean manufacturing is traced back to the early years of Toyota and the development of the Toyota Production System after Japan’s defeat in WWII when the company was looking for a means to compete with the US car industry through developing and implementing a range of low-cost improvements within their business.

In brief, lean management seeks to implement business processes that achieve high quality, safety and worker morale, whilst reducing cost and shortening lead times. This in itself is not unique to Japan. What sets lean management apart, and makes it particularly effective, is that it has at its core a laser-sharp focus on the elimination of all waste from all processes.

The Seven Wastes

So what do we mean by waste? Here we are referring to any expenditure of resources that doesn’t add value for the customer. In lean manufacturing there are generally considered to be seven types of waste.

  1. Over-production against plan
  2. Waiting time of operators and machines
  3. Unnecessary transportation
  4. Waste in the process itself
  5. Excess stock of material and components
  6. Non value-adding motion
  7. Defects in quality

Whilst we discuss these in terms of their origins in the automotive manufacturing industry, this same thinking can apply to almost all industries. These wastes can all be applied, for example, to the preparation and serving of a hamburger, logistics operations or a call center – this thinking is not limited to manufacturing.

Labour and Equipment Effectiveness

We can typically look at the waste within a business process by considering the labour and equipment effectiveness. For example for labour, there’s usually a stark difference between the paid time for a resource and the time that the resource is actually adding value for the customer. We can define this difference through a series of losses.

Labour and Equipment Effectiveness

Social Loss, for example losses due to meetings, is typically the responsibility of management

Utilisation Loss is generally the supervisor’s responsibility, and may occur if parts are not available or the operation is not setup such that the operator can perform at their best.

Performance Loss is the operator’s responsibility. This includes not meeting standard times and not following standard operating procedures.

Method Loss is the responsibility of engineering and management across the organisation. For example, if a product was not designed to be easily manufactured then this would be the R&D team’s responsibility.

We’re often also interested in the availability and effectiveness of equipment being used.

Plan Loss results from scheduling equipment not to run

Stop Loss results from a changeover or breakdown

Speed Loss results from running equipment below the design speed of the machine

Quality Loss results from producing defective parts and materials

Analysis of equipment effectiveness is especially important to focus on when dealing with high-cost equipment, such as in drilling, mining or the airline industry. In these cases a business is only making money or providing value when its equipment is operating.

Field Inspections

Rather than talk about theory, let’s look at a couple of examples from industry. I’ve chosen this first example as an introduction to two fundamental approaches used in lean management, time studies and work sampling. This example is for an Australian power utility and focuses on the field asset inspection process. Utility companies, whether they be power, water, gas, or telecommunications have a responsibility to continually assess the condition of their assets, and this is especially true for utilities operating in a regulated environment. A power utility typically has dozens of asset inspectors operating in the field.

The task of the asset inspector, in simple terms, is to carry out a series of visual inspections for a pole and its associated infrastructure (wires, insulators, transformers, etc.) and report on the current condition and any abnormalities. This task involves differing levels of complexity depending on terrain, configuration at the top of the pole, and reporting requirements and can take anywhere from 5 to 40 minutes for a single pole.

Time studies

Time studies and work sampling can be used to analyse asset inspection process. Time studies involve analysing individual cycles of a process, in this case the inspection of a single pole. The motion of the inspector and movement of tools is recorded and each individual element (step) in the process is listed along with the time required to complete it.

…a technique of establishing an allowed time standard for performing a given task, based on measurement of the work content of the prescribed (standard) method, with due allowance for fatigue and for personal or unavoidable delays.

Definition of time study, from: Salvendy, G. Handbook of Industrial Engineering, Second Edition, John Wiley & Sons, New York, 1992.

Time studies can be carried out manually or with video-based time and motion study software to help us understand:

- What elements (steps) exist within the process?
- What order are they performed?
- Does a standard operating procedure exist, and is it being adhered to?
- Is there variability in the way the process is run from cycle to cycle, or between inspectors?

We can then use the results of the time study, either manually or using time study software, to understand where improvements can be made to reduce the time required for the task and improve consistency. Improvements are found through analysing each element and then working through a process of eliminate, combine, rearrange and simplify.

Eliminate – Question whether or not the work or operation can be omitted, and eliminate those which are unnecessary. It is necessary to consider elimination before any other improvements.

Combine and Separate – For those operations which cannot be eliminated, study the manner in which they should be performed. The study should be done without bias from accepted ideas or prejudice. Attempt to reorganize work in as simple a way as possible. This is combination and separation.

Rearrange and Substitute – Consider questions such as when to do, in what order, how can work be done easily, etc.

Simplify – Consider improvements to make each operation simple and easy, to shorten distances, to lessen weight etc.

An example of each in the context of the asset inspection example is given here:

Eliminate – Remove the need for the inspector to walk around the car to fetch tools, by storing tools on the same side of the car as the inspector.

Combine and Separate – Merge the tasks of wire inspection by binoculars and photographing top of pole by providing inspector with binoculars that include a camera function.

Rearrange and Substitute – This can refer to changing the order of the elements or changing the layout of the work area. An example of the later would be to attach lighter tools required for the inspection to the inspector and attach other tools to a board which can be easily attached and detached to the pole (e.g. by use of magnets).

Simplify – Reduce the time required to upload photos during each inspection by using wireless upload to laptop rather than wired upload.

Through some simple changes and low-cost improvements, its possible to develop a standard layout and procedure that allows the inspector to complete 58% more inspections in the same amount of time.

Standard Work

Time studies play a role in the development of standard work, often defined as standard operating procedures (SOPs). Standard work plays a critical role in achieving the following:

- Determine the capacity of equipment and facilities
- Enable effective work scheduling, maximizing output and utilization
- Give management data to trace the difference between standard and actual times
- Compare the time needed for different work methods
- Evaluate the productivity of equipment to be purchased
- Facilitate efficient layout of the production floor
- Balance work force with the available work
- Facilitate accurate cost determination in advance of actual production
- Identify and resolve safety and quality issues

Work Sampling

Work sampling is often used together with time studies. The purpose of work sampling is to understand how an operator uses his or her time during the course of a day’s work. A record of activities is taken at a set interval, for example every minute, and a day is summarised according to time spent performing main tasks, performing auxiliary tasks and idle.

The purpose of work sampling is to help identify how more time can be allowed for performing main (value-adding) tasks as opposed to auxiliary tasks such as setup and shutdown, and tasks that are not work-related.

Although not the main role of work sampling, the mere act of carrying out a work sampling activity can help in identifying a wide range of improvement topics relevant to the task be studied.

Dealership Process Improvement

The second example I’d like to show is for an Automotive Dealership. This example is based on the Dealership Process Improvement offering that has been implemented in quite a number of countries with the purpose of improving customer experience and dealership productivity.

The typical customer experience in taking one’s car for a service involves dropping the car off at a dealership or mechanic in the morning and picking it up in the evening. As part of the Dealership Process Improvement program, a One Hour Express Service offering can be provided.

During the lecture we looked at an analysis that focuses on movement and tasks performed as part of a standard service. The changes include the move to using two mechanics working in unison, and other improvements that are simple and not capital intensive. The ordering and assignment of tasks allows each mechanic to reduce the amount of walking they do, and the design of the express service trolleys allows for more convenience and less movement away from the work area. The result is that the service can be carried out with two mechanics in under a third of the time it originally took with one mechanic.

Benefits associated with these improvements include
- Customer convenience associated with maximum one hour wait time
- Standardised process has positive impacts on quality
- Better utilisation of space – a greater number of cars can be serviced without having to increase the number of service bays
- The planned approach has many benefits that extend beyond just the service itself

The example relates only to the service component, but there are many other aspects to the Dealer Process Improvement offering. These include:

- Pro-active customer contact
- Customer appointment
- Personalised customer reception
- Confirming price and delivery time
- Customer care (Coffee, showroom tour, etc.)
- Workshop scheduling
- Parts stocking & Picking
- Repair order and processing of quality work
- Repair order completion and invoicing
- Customer Information and car return
- Customer after-service contact
- Concern prevention and resolution

Dealership Process Improvement

The Dealership Process Improvement offering has been customised and implemented for a large number of automotive companies.

Lean Concepts and Tools

So these were just a couple of examples, with a focus on wasted movement (6th in the list of wastes above) because it is easy to visualise. Lean management and lean manufacturing encompasses so much more. Some of the concepts and tools that are commonly encountered in lean are shown here.

- Process Levelling and Flow
- Performance Management
- Push vs Pull Production
- Visual Management
- Standardisation
- Target Setting

- 5S
- Kanban
- Pokayoke
- Just-In-Time

Kaizen Terms

However, lean is not so much about using a set of tools to implement spot changes, but more about how to foster continuous and sustained improvement across companies – and this is an area that Japanese companies are particularly strong in and an area where much of the English literature available on lean is lacking.


5S is a set of practices that is the foundation of a lean company. A simple definition of the five practices follows:

Seiri (Sort) – Identify and separate the necessary, occasionally used and unnecessary items.

Seiton (Set in Order) – Arrange necessary and occasionally used items into clear designated storage positions.

Seiso (Shine) – Thoroughly clean the workplace and equipment. Cleaning is an inspection.

Seiketsu (Standardise) – Visual aids, 5S manuals, 5S audits. Standardise 1-3S.

Shitsuke (Sustain) – Practice 5S to the point where it is a natural part of your work.

In Japan there are entire books devoted to the practice of 5S, and different companies have different interpretations and implementations of these practices to suit their own requirements and philosophy. A few visual examples follow:

Seiri Seiton Tools

Above: The process of simply carrying out 2S, that is Sort and Set in Place, makes it easier to find tools when needed, and with less chance of injury.


When there is a defined place for everything, such as in the example above, or when using shadow boards, it is very easy to understand if something is missing with one glance. This helps avoid stoppages to search for tools in a manufacturing environment, and in some environments such as hospitals, can mean the difference between life and death in an emergency situation.

Lean Hospital Nurse Station

Simply setting and maintaining a defined order for manuals in this nurse’s station in Japan reduced the amount of document-related work time by more than half. Note the use of the yellow and pink tape, which allows us to tell if anything is missing or in the wrong place with one glance.

5S Visual Management

The above photo is from a foundry in Japan, the use of standard layouts here helps shop floor managers determine with one glance if production is ahead or behind. If there are no completed products at the position where the flags are, this represents a situation whereby production is behind.

5S Lean Factory Example

This steel coil handling facility near Nagoya represents a fine example of 5S achievement. The productivity, quality and safety outcomes of such a work environment are significant. This provides a foundation allowing for standard work, visual management, and other elements of lean management to be applied effectively.


Toyota is one of the largest companies in the world, ranking at about 14th in terms of revenue and with 300,000 employees globally. The company manufactures approximately 10 million cars per year. If we were to assume 30,000 parts to each car on average, that’s 300 billion parts handled annually as part of Toyota’s global operations.

It may be surprising to learn that the scheduling and inventory management system at the heart of these operations is not a complex enterprise resource planning system, but a remarkably simple concept – that of the kanban card. There’s a lesson here for the future CIO or CTO that the best solution for handling complexity isn’t always going to be a high-cost cutting edge information system. By considering process first and then system, Toyota could identify this tool as being an appropriate solution to help manage their supply chain.

Kanban Example

The use of kanban is governed by a simple set of rules. The kanban rules are as follows:

  1. Take kanban off container when you use the first part
  2. Next process gets kanban from previous process
  3. Only produce the product and volume specified on the triggered kanban
  4. Don’t produce anything without a kanban
  5. Always transport product with a kanban
  6. Don’t use anything without a kanban attached

Whilst the concept is simple, use of kanban is not recommended for most companies. Proper implementation of kanban requires strict discipline to be effective, and without a good foundation of 5S and other lean fundamentals, implementation of kanban is destined for failure. Some of the best lean companies in Japan, such as Rinnai, waited 10 years after commencing their lean journey before considering the use of kanban – without the lean fundamentals and culture properly established, a kanban system can be damaging.

Successful Lean Companies

Here we have a summary of the hallmarks of companies that are succeeding with lean. These point to the role of the person at the top of the company as being of utmost importance in terms of developing and fostering a lean culture.

Successful Lean Companies

As our own benchmark for a successful lean company, we keep turning back to Rinnai under the leadership of Chairman Susumu Naito. The company’s motto is “Quality is our Destiny” and the 87-year-young Chairman continues to spend time on the shop floor every day together with his employees in a never-ending push towards perfection.

Agile Management

Related topics worth being aware of are that of agile management and agile software development. Richard Durnall, Chief Technology Officer for REA Group, credits lean thinking and agile management for much of REA Group’s success over recent years.

Richard Durnall CTO REA Group

Amongst other benefits, lean and agile help REA Group’s staff to collaborate more effectively and shorten their lead times for releasing new services and features for their customers.

Agile Management REA Group

Key Takeaways

In summary, some of the key takeaways from this session, especially for the aspiring CIO or CTO, are the following points.

- Lean management is not a project, it’s a culture
- The philosophy of lean is that of continuous improvement through eliminating waste
- Standards enable the improvement process
- Lean moves us away from putting out fires to a discipline of working on the business
- Remember: process before system

Paul Smith, PhD, is a Director and lean consultant with Shinka Management Pty Ltd, specialising in the transfer of of Japanese lean management know-how to Australian industry. Shinka Management provides lean training services focusing on practical, implementable solutions for improving business processes and increasing productivity and competitiveness. With the support of the Australian Industry Group, Shinka Management runs lean study tours to Japan to promote consciousness of Japanese management practices amongst Australian and New Zealand industries.

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