Lean is all about increasing value and cutting waste.
Doing Lean will lead to more loyal customers, more engaged employees which together drive more successful companies and stakeholders. Sounds like a Disney story, doesn’t it? While there is no guarantee of survival in this ever-changing business climate, Lean brings a higher probability of success than doing it the way we’ve always done it.
The Lean focus is to understand the difference between value and waste. To increase the value to the customer and eliminate waste. I have heard some people talk of Lean as just waste elimination. One plumbing contractor said his whole business was about dealing with waste elimination. To only attack waste is like training for the Olympics by cutting out sugar and fats. It helps, but other training will also be needed.
Waste is anything that uses resources but does not produce value.
There are seven basic types of waste. (See LCPG Part 3 for more details) They are:
Value is created by transforming the product or service to what the CUSTOMER is actually willing to PAY for. Value is defined as the ratio of USEFULNESS to COST. Usefulness is in the eyes of the user, aka customer. From a construction standpoint, when I use the term customer my primary meaning is the end user or owner of the facility. For subcontractors their immediate customer is often the general contractor, but the end user is the person who really pays the bills. Lean actually applies to both the next in-line customer and to the final or end user.
The paradox of lean is that one will not have sustained lower costs by focusing on cost cutting, but will lower costs by focusing on delivering greater value.
The way to increase value is to increase usefulness, decrease costs, or a combination of both.