Lean management and digitization (the big overview)

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Lean management – lean corporate management combined with digitalization? You probably know the basics of lean management – as part of a continuous improvement process by optimizing resources without creating value. But how does digitalization come into play? Follow me on a small excursion into the past to better understand the future.

Lean Management – History, Fundamentals and Success Factor for Digitization

I would be happy to take you back on a little journey through time. I admit that even at that time I had not yet seen the light of day. Nevertheless, the idea and implementation of lean corporate management – especially from today’s point of view of digitalization – is an exciting story.

Lean Management – The birth of a success story

The terms lean production and lean management, lean production and lean management are closely linked. The roots of lean production lie in Japan. In the 1980s, the Toyota production system (TPS) took a pioneering role and conquered the globe in the 1990s at the latest.
The reasons for the development of the TPS were not a theoretical challenge, but the US’s post-World War II isolationist policy toward Japan and the suppression of Japanese competition in automobile manufacturing.
The raw materials were scarce, Japan did not receive any economic aid from the states, so it was forced to use its own modest resources sparingly. This meant avoiding any waste and using organizational means to try to optimize processes and processes while increasing quality.
Engineer and production manager Taiichi Ohno was Toyota’s chief executive. He traveled to Detroit in 1956 and inspected the Ford and General Motors plants. He realized that mass production with Taylorism could not be transferred to the production of small quantities with high variance. While in the USA the workers no longer had to think along, but only had to work, Ohno allowed his workers to stop the bond in case of problems.
He published his principles in a book that was published in Japan in 1978 and was published in English ten years later.
The Lean Production Method gained international attention with the publication of the MIT study by James P. Womack and Daniel T. Jones. The Massachusetts Institute of Technology (MIT) conducted a large-scale study of manufacturing processes in the automotive industry from 1985 to 1991. This was the worldwide birth of the idea of lean production.
The goal was to realize a production without waste. Production should be precisely adapted to actual requirements, preferably without warehousing, running efficiently and error-free off the production line.
A desirable ideal idea that is difficult to achieve in reality. This was also obvious to the Japanese. For this reason, an ongoing improvement was and is still being sought in the process process process, in the certainty that there is still potential for optimization.
This holistic approach to lean production formed the basis for lean management and could also be transferred to other areas in the company, such as maintenance, logistics, administration or project management. Lean production is now part of lean corporate management, and lean management means in plain language: increase productivity while avoiding waste. Companies achieve this by optimizing their processes and making their value chain more efficient. The customer is always the focus. That sounds good, doesn’t it?

Lean Management – Principles and Goals

The Lean idea is based on the following five principles:

  • Customer orientation The customer’s wishes are at the heart of the customer’s wishes. It should receive the desired product in the right place, at the right time, in the best quality and at an acceptable price.
  • Recognize the value stream The value stream includes all the necessary steps to complete a product. In lean management, it is broken down into its individual components, analyzed and the production system geared towards it.
  • The principle of the river This means looking at the production process from the product. This must flow continuously without interruptions. This applies to all departments involved, i.e. each production step must be done in the correct order. It must be documented how the individual steps relate to each other, to what extent they are interdependent and how they can be synchronized.
  • The pull principle The starting point is the customer’s order. Ideally, if the value stream works according to the flow principle, there is no storage and no waiting times. Every part is already in the right place.
  • Continuous Improvement Process (CIP) There is no perfect condition, so there is still potential for optimization. In the continuous improvement process, employees continuously question the processes, activities and processes and bring in ideas. In Japanese, this philosophy is called Kaizen, which means “change for the better”. Kaizen is not only a method of management, but it reflects the way of thinking and mindset behind it.

Various methods and tools help to implement these five principles, which we would like to take a closer look at in more detail below.

Lean Management Methods and Tools

Well-known tools for the implementation of the goals are the PDCA cycle,the 5s/5a method, Kanban and in the extended sense Lean Six Sigma. In combination, the methods are particularly effective.
Plan, Do, Check, and Act determine the PDCA cycle. If problems arise, a plan of action is first drawn up, which contains the objective, possible obstacles and the desired results (plan). Subsequently, the implementation (do) and the check for the success of the measure (check) takes place. This is recorded in writing, clearly defining the processes and responsibilities. The final step is to address the standardization of the solution or, if necessary, a new PDCA cycle (act).

The 5s method is about order in the workplace. A tidy workplace is the best prerequisite for quality work and means less delays, waste or accidents at work.

The 5s stand for:

  • Sort (“Seiri”)
  • Systematizing (“Seiton”)
  • Cleaning (“Seiso”)
  • Standardize (“Seiketsu”)
  • Self-discipline (“Shitsuke”)

In German, the 5a mean:

  • Sorting
  • Cleaning up (arrange work equipment ergonomically)
  • Workplace cleanliness
  • Making arrangement the rule
  • Comply and improve all points

Kanban as a tool for lean production is part of the just-in-time concept. The Japanese word kanban means shield or card. Production depends on customer demand. This triggers a material supply according to the pull principle. The quantity is usually predefined. The purpose is low inventories, with short turnaround times and deadlines being overarching objectives. Today, e-kanbans are mostly used on monitors.

Another tool is Six Sigma, extended by the Lean Principles. Six Sigma is a method of quality management with the core elements of describing, measuring, analyzing, improving and monitoring business transactions using statistical means. Both methods are quite different, but lead to the hoped-for synergies, as there are hardly any redundancies.

Lean Management – Digitization in Review

Let me also take a quick look back at digitalisation. With the introduction of lean production, which began in the 1980s, digitalization took place in parallel. Microprocessors found their way into industry to control and control processes and machines. The Personal Computer (PC) suddenly enabled small and medium-sized enterprises to carry out administrative tasks. Another milestone was the Apple mouse as an input medium from 1984 onwards, as a result of which Microsoft also replaced with its Windows operating system MS-DOS, which brought a considerable simplification for the users. The development of the World Wide Web (WWW) by Tim Berners-Lee at CERN near Geneva brought the breakthrough of the Internet in 1989. At the same time, the communication of companies shifted from fax machine to e-mail, at least in non-sensitive areas.
The students and young engineers of the new courses in computer science, industrial engineering and business informatics stood right by foot and rallied with their hooves. They wanted to bring the new technologies into the companies. Digitisation made its way into manufacturing operations, but also did not stop at the service sector. Many island solutions were created. The realization that lean management is a major success factor for digitalization has only become apparent in recent years.

Lean management – a key success factor for digital transformation

How can lean management and advancing digitalization be brought together? One catchphrase is Industry 4.0. The project for the future, which is to herald the 4th Industrial Revolution in Germany. The terms digitization 4.0, Internet 4.0, but also Lean 4.0 derive from this, which also do not stop at Swiss media.
And in fact, we should not be talking about digitalisation, but about digital transformation. Digitizing originally describes the conversion of an existing analog medium into bits and bytes. A piece of music can be digitized, a photo or a video. It is then the same thing, only in a different technological form.

Digital transformation is about much more. It is a question of solving problems using the latest technologies. These include terms such as agility,“design thinking”,“brainstorming” and other ways of working.

It is not technology that triggers digital transformation, but the key point is the solution of a customer problem. A customer-oriented solution is the starting point of digital transformation – not technology.
In the meantime, however, the concept has changed and digitizing means that
transfer of working methods to a digital level.

Digital progress makes an important contribution to the implementation of lean management. The digital innovations do not evenly penetrate the different functional areas of a company, but have a different potential for success. Therefore, it is crucial to examine your own operation and to identify the areas of further streamlining possibilities.
A lean start-up is an option, especially for business start-ups. With little capital and reduced processes, startups can quickly establish themselves on the market with lean corporate management. Which philosophy is pursued, whether design thinking, agility or lean startup is irrelevant, since the methods in the basic settings are very similar.

Digitalization can sustainably streamline business processes: Business agility

What is behind the term business agility? It refers to a company’s ability to adapt quickly, efficiently and cost-effectively to market changes and customer needs.
This is achieved with agile methods, whose roots are usually in lean management. In lean production, Kanban is used to optimize the value chain, and the implementation at Scrum is similar. It is very reminiscent of the PDCA cycle (Plan, Do, Check, Act) used in the Continuous Improvement Process (CIP).
New technologies such as cloud computing, big data evaluations, internet of the things (IoT), artificial intelligence (AI),social media communication and mobility solutions play an essential role in digital transformation. These techniques also serve corporate management and improve and streamline business processes sustainably. This ultimately forms the basis for a profitable growth of the company.

Over the years, more and more lists of lean management developed in the literature, and the original five principles found new nourishment with new insights. The ten design approaches according to Friedrich Graf-Götz and Hans Glatz (Organisation Gestalten, Beltz-Verlag, 2001) are significant, which I would like to discuss in more detail below:

Focus of all activities on the customer (customer orientation)

First of all, we need to find out what is really important for the customer. Lean corporate governance means recognizing which investments are profitable and which are just waste. These must be eliminated.
The interaction with the end customer in order to get to know their wishes, needs and behaviors sounds obvious. Unfortunately, this is always forgotten, especially in expert groups from the departments and IT. This requires a new way of thinking.

Concentration on one’s own strengths

What is behind this statement? It should go well, but how? Here it is important to take a closer look at the already existing strengths and to put them in the foreground. Improve or eliminate existing small weaknesses, be it your own or that of the team.
Not always an easy undertaking. As a managing director or company owner, you are constantly challenged. You have to make decisions for your business on a daily basis. I know that, I am in a similar situation.
Every now and then I have to jump over my own shadow to recognize my own weaknesses, explore my strengths and use them accordingly. Whether for myself or for the team.

Optimization of business processes

Where to start? The introduction of the sustainable improvement process (CIP) helps with the implementation. Often, business processes are only managed, but not optimized. This requires methodical structuring of certain business processes. The use of proven lean management methods helps.

Continuous improvement of quality (continuous improvement process, CIP)

CIP is a philosophy of life and not a unique project. This is based on a continuous product improvement carried by employees and with it a progress in the service.
The Japanese term Kaizen means “a change for the better”. In order to detect a waste of resources in ongoing processes, all employees involved are involved. The customer is again clearly the focus. The quality management tool “Six Sigma”, based on statistical data, helps to improve business processes.

Internal customer orientation as a corporate mission statement

Internal customer orientation, how can this be implemented in a company, even defined as a mission statement? First of all, it is said to radically eliminate the idea that the customer is only a disruptive factor in the operation – a well-known feeling that customers often sneak into restaurants or at checkouts of supermarkets. It is important to receive customers warmly. This is best achieved with good employee management. Those who give their staff pleasure at work can rely on having a dedicated team that offers competent service to customers. A good atmosphere in the house makes the employees think positively, which ultimately benefits the customer. This is reflected in a loyal customer satisfaction.

Personal responsibility, empowerment and teamwork

Empowerment refers to strategies and measures that determine the degree of autonomy and self-determination in the lives of people or communities. Leave your employees with responsibility and personal responsibility. This inspires fruitful teamwork, which ultimately leads to a growing of the employee’s zeal for work. Loyalty to the company is increasing, which again benefits the consumer.

Decentralized, customer-oriented structures

Different locations bring your company closer to buyers. However, the basis should be a uniform, customer-oriented approach. The customer is served as desired in each branch. The individual branches of the company are based on the structures of the parent company, which apply equally to all.

Leading is service to the employee

Good leadership is an art. These must be constantly checked. Employees need an energetic hand that guides and guides them properly. Consideration, respect and a good empathy are just a few points of good employee management. This leads to better performance, which means service to the employee. And satisfied employees mean a plus for the buyer.

Open information and feedback processes

Information and feedback are the be-all and end-all within the company and on the part of the buyers. This makes it possible to detect and quickly eliminate product errors and dissatisfaction among end customers.

Change in attitudes and culture in the company (Kaikaku)

Kaikaku means “reform” or “radical change”. In contrast to kaizen in small steps, Kaikaku means the big litter. If a process is exhausted in terms of improvement, Kaikaku is the next logical step according to the lean scales, at all imaginable company levels.

Conclusion

The Lean approach with its lean and waste-free processes forms the basis and prerequisite for a goal-oriented digitalization. Especially on the way to the digital transformation with the Internet of Things (IoT), with artificial intelligence and learning algorithms, it is said to throw Plunder overboard, so as not to lose sight of the essentials.