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There we also dream a bit about the next "leap. Perhaps some reader will be the first. After four years of exhaustive study of organizations around the world who are actually doing it, we now know how to succeed at leanness. As the examples will show, we know how to apply lean thinking, techniques, and organization to practically any activity, whether a good or a service. What's more, we now have a glimmering of the next leap beyond today's best practice. In the pages ahead we'll explain in detail what to do and why.

Your job, therefore, is simple: Just do it! It's the one word of Japanese you really must know. It sounds awful as it rolls off your tongue and it should, because muda means "waste," specifically any human activity which absorbs resources but creates no value: mistakes which require rectification, production of items no one wants so that inventories and remaindered goods pile up, processing steps which aren't actually needed, movement of employees and transport of goods from one place to another without any purpose, groups of people in a downstream activity standing airound waiting because an upstream activity has not deliv- ered on time, and goods and services which don't meet the needs of the customer.

Taiichi Ohno , the Toyota executive who was the most fero- cious foe of waste human history has produced, identified the first seven types of muda described above and we've added the final one. But however many varieties of muda there may be, it's hard to dispute—from even the most casual observation of what gets done in an average day in the average organization—that muda is everywhere.

What's more, as you learn to see muda in the pages ahead, you will discover that there is even more around than you ever dreamed. Fortunately, there is a powerful antidote to muda: lean thinking. It provides a- way to specify value, line up value-creating actions in the best sequence, conduct these activities without interruption whenever someone requests them, and perform them more and more effectively.

In short, lean thinking is lean because it provides a way to do more and more with less and less— less human effort, less equipment, less time, and less space—while coming closer and closer to providing customers with exactly what they want. Lean thinking also provides a way to make work more satisfying by pro- viding immediate feedback on efforts to convert muda into value. And, in striking contrast with the recent craze for process reengineering, it provides a way to create new work rather than simply destroying jobs in the name of efficiency.

Value can only be defined by the ultimate customer. And it's only meaningful when expressed in terms of a specific product a good or a service, and often both at once which meets the customer's needs at a specific price at a specific time. Value is created by the producer. From the customer's standpoint, this is why producers exist.

Yet for a host of reasons value is very hard for producers to accurately define. Business school-trained senior executives of American firms routinely greet us when we visit with a slick presentation about their organization, their technology, their core competencies, and their strategic intentions. Then, over lunch, they tell us about their short-term competitive problems specifically their need to gamer adequate profits in the next quarter and the consequent cost-cutting initiatives.

These often involve clever ways to eliminate jobs, divert revenues from their downstream cus- tomers, and extract profits from their upstream suppliers. Because we are associated with the concept of lean production, they are usually eager to label these programs "lean," although often they are only "mean.

Usually there is an awkward silence, and then, if we aren't persistent, these issues quickly slip out of sight to be replaced once more by aggregated financial considerations.

In short, the immediate needs of the shareholder and the financial mind-set of the senior managers have taken precedence over the day-to-day realities of specifying and creating value for the customer. When we've gone to Germany, until very recently, we've found a reverse distortion of value specification.

For much of the post-World War II era, executives of private or bank-controlled companies could ignore the need for short-term financial performance and were eager to tell us all about their products and process technologies. The engineers running the companies! Designs with more complexity produced with ever more complex machinery were asserted to be just what the customer wanted and just what the produc- tion process needed. But where was the evidence? In pressing this point, it often became apparent that the strong technical functions and highly trained technical experts leading German firms ob- tained their sense of worth—their conviction that they were doing a first- rate job—by pushing ahead with refinements and complexities that were of little interest to anyone but the experts themselves.

Our doubts about pro- posed products were often countered with claims that "the customer will want it once we explain it," while recent product failures were often ex- plained away as instances where "the customers weren't sophisticated enough to grasp the merits of the product.

When we have traveled to Japan, also until very recently, we have encoun- tered yet a third distortion. What's been really important for Japanese firms as they have defined value is where value is created. Most executives, even at firms like Toyota which pioneered lean thinking, have begun their value definition process by asking how they can design and make their product at home—to satisfy societal expectations about long-term employment and stable supplier relations. Yet most customers across the world like products designed with an eye to local needs, which is hard to do from a distant home office.

And they like products made to their precise order to be delivered immediately, which ocean shipping from a Japanese production base makes impossible. They certainly do not define the value of a product primarily in terms of where it was designed or made.

What's more, the stay-at-home-at-all-costs thinking of Japanese senior managers, even as the yen steadily strengthened, depleted the financial re- sources these firms needed to do new things in the future. The immediate needs of employees and suppliers took precedence over the needs of the customer, which must sustain any firm in the long term. Moving beyond these national distortions in the world's three most im- portant industrial systems and every country probably has its own unique set ,2 we are repeatedly struck how the definition of value is skewed every- where by the power of preexisting organizations, technologies, and undepre- ciated assets, along with outdated thinking about economies of scale.

One of the best and most exasperating illustrations of this backwards thought-process is the current-day airline industry. As frequent users of this service we have long been keeping detailed notes on our experiences and contrasting our own definition of value with that proposed by most compa- nies in this industry. Our value equation is very simple: to get from where we are to where we want to be safely with the least hassle at a reasonable price.

By contrast, the airline's definition seems to involve using their ex- isting assets in the most "efficient" manner, even if we have to visit Tim- buktu to get anywhere. They then throw in added features—like executive lounges in their hubs and elaborate entertainment systems in every seat—in hopes the inconvenience will be tolerable. Just today, as this is written, one of us has traveled the 3 50 miles from his summer home in Jamestown in western New York State, across Lake Erie, to Holland, Michigan, in order to make a presentation on lean thinking to an industrial audience.

What was needed was a way to fly from Jamestown direcdy to Holland both of which have small airports at an affordable cost. What was available was either an absurdly priced charter service from Jamestown to Holland total door-to-door travel time of about two hours or an eighty-mile drive to the Buffalo, New York, airport, a flight on a large jet to the Detroit sortation center of Northwest Airlines where the self-sorting human cargo finds its way through a massive terminal from one plane to the next , another flight on a large jet to Grand Rapids, Michigan, and a forty-mile drive to the ultimate destination.

The lower-cost option required a total travel time of seven hours. Why aren't airlines like Northwest and its global partner KLM and airframe builders like Boeing and Airbus working on low-cost, point-to- point services using smaller jets instead of developing ever-larger aircraft? And why aren't they developing quick turnaround systems for small jets at small airports instead of constructing Taj Mahal terminals at the absurd "hubs" created in America after airline deregulation—and long present in Europe and East Asia due to the politically motivated practice of routing most flights of state-controlled airlines through national capitals?

One hour of the seven hours spent on the trip just cited was taxiing time in the Detroit hub and a second was occupied with self-sortation inside the terminal. Few firms are aggressively promoting this definition of value because the airlines and airframe builders start their thinking with extraordinarily costly assets in the form of large aircraft; the engineering knowledge, tooling, and production facilities to make more large aircraft; and massive airport complexes.

This type of efficiency calculation, focused on the airplane and the hub—only two of the many elements in the total trip—loses sight of the whole.

Much worse from the standpoint of value for the passenger, it simply misses the point. The end result of fifteen years of this type of thinking in the United States is that passengers are miserable this is not what they meant by value!

Europe and parts of East Asia are-not far behind. Lean thinking therefore must start with a conscious attempt to precisely define value in terms of specific products with specific capabilities offered at specific prices through a dialogue with specific customers. The way to do this is to ignore existing assets and technologies and to rethink firms on a product-line basis with strong, dedicated product teams.

This also requires redefining the role for a firm's technical experts like the inward-looking German engineers we just cited and rethinking just where in the world to create value. Realistically, no manager can actually implement all of these changes instantly, but it's essential to form a clear view of what's really needed.

Otherwise the definition of value is almost certain to be skewed. In summary, specifying value accurately is the critical first step in lean thinking- Providing the wrong good or service the right way is muda.

Identify the Value Stream The value stream is the set of all the specific actions required to bring a specific product whether a good, a service, or, increasingly, a combination of the two through the three critical management tasks of any business: the problem-solving task running from concept through detailed design and engineering to production launch, the information management task running from order-taking through detailed scheduling to delivery, and the physical transformation task proceeding from raw materials to a finished product in the hands of the customer.

And 3 many additional steps will be found to create no value and to be immediately avoidable Type Two muda. At the same time, the initial ingot of material—for example, titanium or nickel—was ten times the weight of the machined parts eventually fashioned from it. Ninety percent of the very expensive metals were being scrapped because the initial ingot was poured in a massive size—the melters were certain that this was efficient—without much attention to the shape of the finished parts.

And finally, the melters were preparing several different ingots—at great cost—in order to meet Pratt's precise technical requirements for each engine, which varied only marginally from those of other engine families and from the needs of com- petitors. Many of these activities could be eliminated almost immediately with dramatic cost savings.

How could so much waste go unnoticed for decades in the supposedly sophisticated aerospace industry? Very simply: None of the four firms in- volved in this tributary value stream for a jet engine—the melter, the forger, the machiner, and the final assembler—had ever fully explained its activities to the other three.

Partly, this was a matter of confidentiality—each firm feared that those upstream and downstream would use any information revealed to drive a harder bargain. And partly, it was a matter of oblivi- ousness. The four firms were accustomed to looking carefully at their own affairs but had simply never taken the time to look at the whole value stream, including the consequences of their internal activities for other firms along the stream.

When they did, within the past year, they discovered massive waste. So lean thinking must go beyond the firm, the standard unit of score- keeping in businesses across the world, to look at the whole: the entire set of activities entailed in creating and producing a specific product, from conceDt through detailed design to actual availahilitv. The organizational mechanism for doing this is what we call the lean enterprise, a continuing conference of all the concerned parties to create a channel for the entire value stream, dredging away all the muda.

Whenever we present this idea for the first time, audiences tend to assume that a new legal entity is needed, some formalized successor to the "virtual corporation" which in reality becomes a new form of vertical integration. In fact, what is needed is the exact opposite. In an age when individual firms are outsourcing more and themselves doing less, the actual need is for a voluntary alliance of all the interested parties to oversee the disintegrated value stream, an alliance which examines every value-creating step and lasts as long as the product lasts.

For products like automobiles in a specific size class, which go through successive generations of development, this might be decades; for short-lived products like software for a specific application, it might be less than a year. Creating lean enterprises does require a new way to think about firm-to- firm relations, some simple principles for regulating behavior between firms, and transparency regarding all the steps taken along the value stream so each participant can verify that the other firms are behaving in accord with the agreed principles.

These issues are the subject of Part III of this book. Flow Once value has been precisely specified, the value stream for a specific product fully mapped by the lean enterprise, and obviously wasteful steps eliminated, it's time for the next step in lean thinking—a truly breathtaking one: Make the remaining, value-creating steps flow. However, please be warned that this step requires a complete rearrangement of your mental furniture. We are all born into a mental world of "functions" and "departments," a commonsense conviction that activities ought to be grouped by type so they can be performed more efficiently and managed more easily.

In addition, to get tasks done efficiently within departments, it seems like further common sense to perform like activities in batches: "In the Claims Department, process all of the Claim As, then the Claim Bs, and then the Claim Cs. In the Paint Department, paint all of the green parts, then shift over and paint all the red parts, then do the purple ones.

But this approach Irppnc the members of the denartment busv. So, it must be "efficient," right? Actually, it's dead wrong, but hard or impossible for most of us to see. Recendy, one of us performed a simple experiment with his daughters, ages six and nine: They were asked the best way to fold, address, seal, stamp, and mail the monthly issue of their mother's newsletter.

After a bit of thought their answer was emphatic: "Daddy, first, you should fold all of the newsletters. Then you should put on all the address labels. Then you should attach the seal to stick the upper and lower parts together [to secure the newsletter for mailing]. Then you should put on the stamps. Wouldn't that avoid the wasted effort of picking up and putting down every newsletter four times?

Why don't we look at the prob- lem from the standpoint of the newsletter which wants to get mailed in the quickest way with the least effort? What's equally striking when looked at this way is that most of the world conducts its affairs in accord with the thought processes of six- and nine-year-olds! Taiichi Ohno blamed this batch-and-queue mode of thinking on civiliza- tion's first farmers, who he claimed lost the one-thing-at-a-time wisdom of the hunter as they became obsessed with batches the once-a-year harvest and inventories the grain depository.

But we all need to fight departmental- ized, batch thinking because tasks can almost always be accomplished much more efficiently and accurately when the product is worked on continuously from raw material to finished good. In short, things work better when you focus on the product and its needs, rather than the organization or the equipment, so that all the activities needed to design, order, and provide a product occur in continuous flow.

Henry Ford and his associates were the first people to fully realize the potential of flow. Ford reduced the amount of effort required to assemble a Model T Ford by 90 percent during the fall of by switching to continu- ous flow in final assembly.

Subsequently, he lined up all the machines needed to produce the parts for the Model T in the correct sequence and tried to achieve flow all the way from raw materials to shipment of the finished car, achieving a similar productivity leap.

But he only discovered the special case. In the early s, when Ford towered above the rest of the industrial world, his company was assembling more than two million Model Ts at dozens of assembly plants around the world, every one of them exactly alike.

After World War II, Taiichi Ohno and his technical collaborators, includ- ing Shigeo Shingo,5 concluded that the real challenge was to create continu- ous flow in small-lot production when dozens or hundreds of copies of a product were needed, not millions.. This is the general case because these humble streams, not the few mighty rivers, account for the great bulk of human needs. Ohno and his associates achieved continuous flow in low- volume production, in most cases without assembly lines, by learning to quickly change over tools from one product to the next and hv "right-sizing" miniaturizing machines so that processing steps of different types say, molding, painting, and assembly could be conducted immediately adjacent to each other with the object undergoing manufacture being kept in contin- uous flow.

The benefits of doing things this way are easy to demonstrate. We've recently watched with our own eyes, in plants in North America and Eu- rope, as lean thinkers practiced kaikaku roughly translatable as "radical improvement," in contrast with kaizen, or "continuous incremental im- provement". Production activities for a specific product were rearranged in a day from departments and batches to continuous flow, with a doubling of productivity and a dramatic reduction in errors and scrap.

We'll report later in this book on the revolutionary rearrangement of product development and order-scheduling activities for these same products to produce the same magnitude of effect in only a slightly longer adjustment period. Yet the great bulk of activities across the world are still conducted in departmentalized, batch-and-queue fashion fifty years after a dramatically superior way was discovered.

The most basic problem is that flow thinking is counterintuitive; it seems obvious to most people that work should be organized by departments in batches. Then, once departments and specialized equipment for making batches at high speeds are put in place, both the career aspirations of em- ployees within departments and the calculations of the corporate accountant who wants to keep expensive assets fully utilized work powerfully against switching over to flow.

The reengineering movement has recognized that departmentalized thinking is suboptimal and has tried to shift the focus from organizational categories departments to value-creating "processes"—credit checking or claims adiusting or the handling of accounts receivable.

In addition, they often stop at the boundaries of the firm paying their fees, whereas major breakthroughs come from looking at the whole value stream. What's more, they treat depart- ments and employees as the enemy, using outside SWAT teams to blast both aside. The frequent result is a collapse of morale among those who survive being reengineered and a regression of the organization to the mean as soon as the reengineers are gone. The lean alternative is to redefine the work of functions, departments, and firms so they can make a positive contribution to value creationjjH speak to the real needs of employees at every point along the stream so it is actually in their interest to make valueflow.

This requires not just the creation of a lean enterprise for each product but also the rethinking of conventional firms, functions, and careers, and the development of a lean strategy, as explained in Part III. Pull The first visible effect of converting from departments and batches to prod- uct teams and flow is that the time required to go from concept to launch, sale to delivery, and raw material to the customer falls dramatically. When flow is introduced, products requiring years to design are done in months, orders taking days to process are completed in hours, and the weeks or months of throughput time for conventional physical production are re- duced to minutes or days.

Indeed, if you can't quickly take throughput times down by half in product development, 75 percent in order processing, and 90 percent in physical production, you are doing something wrong. What's more, lean systems can make any product currendy in production in any combination, so that shifting demand can be accommodated immediately.

So what? This produces a onetime cash windfall from inventory reduction and speeds return on investment, but is it really a revolutionary achieve- ment? In fact, it is because the ability to design, schedule, and make exactly what the customer wants just when the customer wants it means you can throw away the sales forecast and simply make what customers actually tell you they need.

That is, you can let the customer pull the product from you as needed rather than pushing products, often unwanted, onto the customer. In fact, your copy is lucky. One half of the books printed in the United States each year are shredded without ever finding a reader! How can this be? Because publishers and the printing and distribution firms they work with along the value stream have never learned about flow, so the customer can't pull.

It takes many weeks to reorder books if the bookseller or warehouse runs out of stock, yet the shelf life of most books is very short. Publishers must either sell the book at the peak of reader interest or forgo many sales. Because the publisher can't accurately predict demand in advance, the only solution is to print thousands of copies to "fill the channel" when the book is launched even though only a few thousand copies of the average book will be sold.

The rest are then returned to the publisher and scrapped when the selling season is over. The solution to this problem will probably emerge in phases. In the next few years, printing firms can learn to quickly print up small lots of books and distribution warehouses can learn to replenish bookstore shelves frequently using a method described in Chapter 4.

Eventually, new "right-sized" book- printing technologies may make it possible to simply print out the books the customer wants at the moment the customer asks for them, either in a bookstore or, even better, in the customer's office or home. And some cus- tomers may not want a physical copy of their "book" at all. Instead, they will request the electronic transfer of the text from the "publisher" to their own computer, printing out an old-fashioned paper version only if they happen to need it.

The appropriate solution will be found once the members of the publishing value stream embrace the fourth principle of lean thinking: pull. Perfection As organizations begin to accurately specify value, identify the entire value stream, make the value-creating steps for specific products flow continuously, and let customers pull value from the enterprise, something very odd begins to happen.

It dawns on those involved that there is no end to the process of reducing effort, time, space, cost, and mistakes while offering a product which is ever more nearly what the customer actually wants. Suddenly perfec- tion, the fifth and final principle of lean thinking, doesn't seem like a crazy idea.

Why should this be? Because the four initial principles interact with each other in a virtuous circle. Getting value to flow faster always exposes hidden muda in the value stream. And the harder you pull, the more the impedi- ments to flow are revealed so they can be removed. The new system cuts production costs by half while reducing throughput times by 99 percent and slashing changeover time from hours to seconds so Pratt can make exacdy what the customer wants upon receiving the order.

The conversion to lean thinking will pay for itself within a year, even if Pratt receives nothing more than scrap value for the automated system being junked. Perhaps the most important spur to perfection is transparency, the fact that in a lean system everyone—subcontractors, first-tier suppliers, system integrators often called assemblers , distributors, customers, employees— can see everything, and so it's easy to discover better ways to create value.

What's more, there is nearly instant and highly positive feedback for em- ployees making improvements, a key feature of lean work and a powerful spur to continuing efforts to improve, as explained in Chapter 3. Readers familiar with the "open-book management" movement in the United States7 will recall that financial transparency and immediate feed- back on results, in the form of monetary bonuses for employees, are its central elements.

Thus, there is a broad consistency between our approach and theirs. However, a major question emerges for open-book managers as finances are made transparent and employees are rewarded for performance. How can performance be improved? Jeremiah was a Quaker and from a mining family. He showed a talent early on for maths and then surveying. He went down to London to be taken on by the Royal Society, just at a time when his social life was getting a bit out of hand.

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At the age of 28 he was taken on by the Royal Observatory in Greenwich as an assistant. Mason and Dixon arrived in Philadelphia on 15 November Although the war in America had concluded some two years earlier, there remained considerable tension between the settlers and their native neighbours. The line was not called the Mason-Dixon Line when it was first drawn. Instead, it got this name during the Missouri Compromise , which was agreed to in It was used to reference the boundary between states where slavery was legal and states where it was not.

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What an idiot!? He was an early advocate of democracy and religious freedom, notable for his good relations and successful treaties with the Lenape Native Americans. Under his direction, the city of Philadelphia was planned and developed.

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