The Five Principles of Lean

The Five Principles of Lean
Section 1: Module Introduction

Section 2: Lean Principle #1: Value
Section 3: Lean Principle #2: The Value Stream
Section 4: Lean Principle #3: Flow
` Section 5: Lean Principle #4: Pull
Section 6: Lean Principle #5: Strive for Perfection
Section 7: Conclusion
© Lean Methods Group. All rights reserved. No portion may be copied, rewritten, reproduced, or published.
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Section 1: Module Introduction

Module Objectives
Welcome to our module on the five principles of Lean. Lean is much more than just a set of problem-solving tools.
It was based on a foundation of principles designed to not only quantify and eliminate waste, but to help
companies change the way they do business for the better. Understanding the five principles and how they work
together will help practitioners apply them in the most effective way.
In this module, we will discuss the tenets that Lean was founded on, which are: Value, Value Stream, Flow, Pull,
and, Strive for Perfection. Throughout the course, we will discuss these principles as they relate to a business
scenario many of us are familiar with.
Your challenge is to determine how you can apply these principles to your business.
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Introduction to Boingo
In order to better describe the 5 principles of Lean, we will present them in a scenario you’ve probably have
experienced. Boingo has just purchased a new PC, and he is going to follow his computer through the company’s
assembly, configuration and delivery process.
You will watch Boingo’s journey to see the five principles in action. As you move through the process, keep in
mind that this is not unlike the journey that your customers and clients may go through, even though your
business may vary greatly from the computer industry.
See if you can relate to the frustration he experiences, and think about how you can apply these principles to your
business. Let’s begin!
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The Computer Manufacturing Process - According to the Business
Boingo has purchased his PC from a company called the Vertical PC Company.
Boingo starts his journey in the hardware area. Boingo has requested a PC with new technology requirements
and unfortunately, this new hardware is not in stock yet. Boingo has to wait until his components finally arrive.
After a long delay, the right components are finally selected for his PC.
Boingo proceeds to the Testing department, where they have just implemented new regional reporting
requirements. The new VP needs more data on why tasks are taking so long, so a new reporting system is rolled
out, causing even more delays.
Boingo finally gets through the testing area and proceeds to assembly. In the assembly area, Boingo sees that
the department’s personnel is working on a large order placed by one of Vertical’s biggest clients. To avoid
delays, the manager has redirected his team’s priorities to fill this order before completing any others. As a result,
Boingo faces more delays. When the PC’s are finally shipped, Boingo’s order moves to the head of the queue
and his PC is assembled.
He proceeds to the software department, and you guessed it, more delays. Boingo learns that software
expenditures have soared, and the regional manager has put in some control plans to cut this spending. There
are 12 signatures that need to be processed prior to the software being installed on his PC. Keep in mind, the
manager of this area has promised customers better pricing due to this new control policy.
Boingo finally gets his 12 signatures and proceeds to the final step - configuration. But in configuration, Boingo
experiences more waiting. To take advantage of the newest technology, his PC is on a new platform, but Boingo
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finds that there are only a few test sets to perform this new configuration. Most of the configuration machines are
geared to the old platform, and there are very few trained technicians who can do this new configuration testing.
Finally, Boingo proceeds to product pick-up to receive his new computer, and to his dismay, Vertical has added
some “accessories” to his machine. He’s glad to get his PC, but it isn’t at all what he ordered.
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Section 2: Lean Principle #1: Value

Principle #1 - Value
Now that Boingo has received his PC, let’s review his experience according to the five principles of Lean.
The first principle is value. Value is defined by the customer, and Boingo begins his journey with a simple new
PC in mind. To his dismay, the business has redefined what they think is important to the customer by adding
quite a number of new accessories to his PC.
Let’s take a look at the differences in how value is defined.
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CPU Accessories: Value or Not?
Boingo unwraps his new PC, the first item that he notices is a strobe light that flashes when Boingo is online.
While reading the instruction book, he finds that the Vertical PC company has proudly announced this new
innovation as a safety feature so parents can easily determine if their children are online and require adult
supervision. Boingo wonders if this feature can be dismantled. He doesn’t have any children and can’t imagine
having to see the strobe light every time he's online.
His next new surprise is a horn. Vertical wants to enhance the “customer experience” by building more interaction
into the eBay experience. Any time Boingo places a winning bid on eBay, he can honk the CPU horn to applaud
his success. Boingo gives the horn a try only to find that the screen on the PC dims as the power is diverted to
the horn function.
One last item is packed down in the PC box, and Boingo begins to unwrap the item. The instruction book
identifies this as an “impromptu laser show.” A little dismayed, he reluctantly plugs in the strobe. A message on
his desktop prompts him with the question, “Laser show?” Clicking “yes,” he watches a stream of green laser
lights come out of the attachment. It's a neat show, but Boingo resents having to pay for this feature.
He quickly unplugs the accessories and tosses all of them back into the packing box!
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Voice of the Customer
Boingo thinks back to what he really wanted in a new PC. His list of features included a fast graphics card, a
super-fast processor, lots of memory, and a good long battery life. This is his definition of what a good-value PC
would offer, and it is why he bought the PC.
Boingo is confused about all of the accessories and wonders why Vertical didn’t ask him what he wanted in the
new PC before they added all of this so-called value.
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Defining Value for the Customer
If Vertical had asked 3 simple questions when adding new process steps or features, they would have found that
their definition of value was starkly different than Boingo’s.
The first question they should have asked is, “Is the customer willing to pay for the product or service?” Vertical
would have quickly realized that the accessories they added were “great ideas” as an attempt to increase top line
sales. If they had asked the first question to a good group of future customers, they would have found that
Boingo and others would not have agreed to pay for these accessories.
The second question is, “Does the activity transform the good or service?” Remember all the new reporting
requirements in the testing department? The manager wanted more control over the delays, so a lot of time and
energy goes into filling out these new reports. Those reports do not transform Boingo’s new CPU and can be
categorized as non-value add.
And finally, they should have asked, “Is the activity done for the first time?” Remember the 12 signatures that
needed to be processed in the software department? A lot of business red-tape caused significant delay to
Boingo’s PC, and could have been avoided if only Vertical had determined what the appropriate number of
signatures should be, and then removed the needless redundancy of additional ones.
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Section 3: Lean Principle #2: The Value Stream

Principle #2 - The Value Stream
The second principle of Lean is the value stream. A value stream is all the steps in a process that the customer is
willing to pay for in order to bring a product or service to delivery. The value stream is inherently tied to the first
Lean principle of value, because you cannot create a Lean value stream without understanding the customer’s
definition of value.
Boingo faced a tremendous number of delays and obstructions during the production of his new PC, and
experienced many barriers between the departments at Vertical. To build his PC, Vertical had to: gather the
hardware, test the hardware, assemble the computer, install the software, and finally, configure the software to
the PC. This sequence of steps comprises Vertical’s value stream, but the process included many activities that
did not add value to Boingo’s PC.
Let’s look at what Vertical could have done differently to remove the obstacles Boingo encountered.
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Value Stream Overview
Management has decided that the best way to organize the business is by department, so that all of the hardware
equipment and employees are together, all of the test equipment and employees are together, and so on. In this
way, Vertical is organized vertically. Vertical thinks this structure best utilizes its employees and equipment.
But the company doesn’t seem to recognize the tremendous barriers that are created by this organizational
structure. In most businesses, significant delays and errors occur in the handoff between departments or process
functions. The more segmented a business, the more handoffs, and the more time required by the process, the
less efficient the business will be at meeting the requirements of the most valuable person: the customer.
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Eliminating Handoffs
If Vertical wanted to greatly improve Boingo’s experience in building his PC, they would eliminate the
departmental barriers and handoffs, and create a department that is managed horizontally. That is, they would
form a new department that includes hardware, testing, assembly, software, and configuration, all under the same
umbrella.
The manager of this area, typically called a value stream manager, would have complete control over Boingo’s
PC construction and most of the delay and error would be easier to remove. Boingo would then experience a
much more pleasant journey, one akin to flowing down a stream.
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Value Stream Principles
Here are some of the principles behind value streams.
 First, value streams prompt companies like Vertical to think horizontally rather than vertically.
 Second, they force the business to see from the perspective of the customer. If Boingo were an internal
consultant, how would he organize the required departments that produce his PC?
 Third, rearrangement occurs based on the sequence of activities necessary to deliver a good or service.
What is the optimal process required to offer goods and services to our customers?
 Fourth, Silos are reduced or eliminated, causing dramatic improvements in lead time and error reduction.
Studying the value stream creates a significant and radically different approach to business improvements.
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The Value Stream Map
A value stream map is the visual representation of the value stream, and can be used to show a number of flows
in the process. One might be the actual “part flow” of the computer being built, and another is the “information
flow,” like production schedules.
This is an extremely powerful map, as you’ll soon see, and provides the answers to the question “Where do we
make improvements?”
There are four key elements of a value stream map.
 First, we start with the customer, which is placed at the top of the map. With the customer, we note the
customer demand, which defines how many products or services the customer requires in a given time
period.
 The next element is the process, which is noted below the customer. At Vertical, the configuration
process takes five steps, and those would be listed on the map. Within the process, we identify where
products are being pushed or pulled from one step to another.
 The third element in a value stream map is the delays we encounter between process steps. Creating
visual representations of these delays help us identify areas for improvement.
 The fourth and final element of a value stream map is the timeline at the bottom.
This timeline allows us to determine the ratio of value-added time to non-value added time and helps us further
understand where we have opportunities to eliminate waste and create a smoother process.
The value stream map is a critical tool in evaluating the value stream, and is especially powerful when combined
with the other Lean principles.
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Section 4: Lean Principle #3: Flow

Principle #3 - Flow
The Value Stream Map often tells us where waste occurs, but to answer the “how,” we go to the third and fourth
principles of Lean; namely, flow and pull. Remember that Boingo experienced a tremendous amount of delay in
his journey to build his new PC— which is exactly the opposite of flow.
To understand flow, it’s easiest to think of it as “balancing internal resources to meet external demand.” When
flow isn’t established, delays occur and the process comes to a halt. Boingo hits all kinds of delays and
roadblocks along his way. When flow is accomplished, Boingo can move smoothly through the 5 processing
steps to get his PC. Generally speaking, it’s in the areas of flow and pull that many of the Lean tools come into
play.
At the beginning of the module we mentioned that Lean is much more than just a set of tools. It’s a mindset, a
way of life. We are going to introduce a few of these now to whet your understanding of Lean.
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Achieving Flow through Standard Work
Establishing flow can be accomplished through a concept called “standard work.”
Standard work involves three different components:
 Understanding the customer demand or ‘TAKT’ time.

 Utilizing “standard operating procedures,” or SOPs, to perform the service or activity, and
 A defined standard amount of work that should be completed by each point along the process.
We’ll briefly cover each of these.
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TAKT Time
Takt time is a calculation used to define the customer demand. We use takt time when describing the rate at
which output should be delivered, regardless of what that output is. The customer requirement for Vertical, is to
produce 1280 PCs per month, or one PC every 7.5 minutes.
In this graph, the horizontal line represents the takt time, also called the “line of balance.” This tells us how
quickly we need to produce a PC in order to meet the customer requirements.
The vertical columns represent how long each of our internal processes take, and how they measure up to this
requirement. Our first four process steps don’t present any problem in meeting the customer demand; in fact, all
of them are well below this requirement.
The configuration process is a big concern, however. The configuration time required per PC is 30 minutes. If we
want to balance this process, we’ll need 4 parallel configuration test sets in order to accomplish this customer
requirement. Our other option is to remove some of the tasks in the “configuration” area and move them up-
stream to the software step.
After seeing the line of balance, and how our internal resources don’t meet external customer requirements, it’s
easy to understand where delays are likely to occur. From the bar chart, we see that the delays gradually
increase as we get to the end of the process; that is, configuration delays begin backing up the process and
Boingo feels this imbalance. These delays correspond directly to the imbalances on the TAKT chart.
Have you done a line of balance for your business yet? Would you know how to begin gathering the customer
demand that is required each week, each month, or each year? More in-depth knowledge in these tools should
help you answer “yes” to these two questions.
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Standard Operating Procedures
The 2nd element of standard work is standard routines or procedures. This is often overlooked or undervalued by
those new to Lean.
Imagine the results of using 50 recipes. You could get 50 different results or deviations from any type of standard.
If you have a single documented recipe that everyone agrees to use, you will create the same product every time,
producing quality the first time with no variation.
To some workers, standard procedures don’t seem important, and perhaps more importantly, some workers
quickly dismiss standard procedures because past attempts failed to get others to agree on a standard. In most
companies, people can perform their work any way they want to. There are always limits, but generally, a
standard procedure hasn’t been defined, much less followed.
Vertical would be wise to determine what the best process for each task is, and then document it and deploy it
among their other workers. Remember, if you work with only one recipe, you will get consistent results.
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Standard WIP
The last principle of standard work is standard work in process. Standard work in process ties into a powerful
principle called “Little’s Law” which is used in Lean to determine process lead times.
Little’s Law states that lead time equals work in progress divided by completion rate. This equates to the amount
of inventory, otherwise known as work in process, in a system. According to Little’s Law, to reduce the lead time,
we must either increase the completion rate, or reduce the work in process.
One of the reasons it took so long to get Boingo his PC was the high amount of work in process that had
congested near the assembly process. The standard work in process, sometimes called SWIP, ensures that we
control the amount of inventory or information flowing through a process. Let's take a look at an example.
Here are three employees who pass work to each other sequentially. In this diagram, the bins represent places
where inventory can reside. Each has a maximum of two bins to hold WIP. Work flows smoothly as long as no
more than two bins are full per person. If both bins are occupied, then WIP flowing upstream is not allowed to
progress further. End-to-End flow cannot take place if any one process step exceeds its Standard Work in
Process.
A possible solution is reallocating work to a department that is not backlogged, which would normalize some of
the excess work. This tight control of work-in-process is the third and final concept of standard work, and it allows
us to have a great amount of control over lead-time.
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Section 5: Lean Principle #4: Pull

Principle #4 - Pull
The fourth principle of Lean is called Pull.
Taiichi Ohno, the founder of the Toyota Production System, learned this powerful principle from American
supermarkets. Replenishment of food occurs only after it is consumed. Bananas are a great example. Stores
cannot stock more bananas than are consumed, or they will spoil. If we don’t replenish only the materials and
resources the customer requires, we will likely produce the second element of waste.
Do you recall the acronym for the 8 wastes? It’s WORMPIIT. The second waste, or O, is over-production, and
that’s one of the specific wastes that Pull seeks to eliminate.
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Pushing vs. Pulling
So how does pull apply to Boingo? Let’s think about it this way: Vertical has to have hardware like processors
and memory available when Boingo’s order comes through, right?
Vertical can accomplish this in one of two ways. The first method, called Push, requires Vertical to forecast what
they think the customer demand may be for future months. The orders for the hardware are estimated, the
hardware is ordered, and then they hope that their forecast is accurate.
What if the forecast is wrong? What if the technology in hardware changes overnight? These questions help us
understand the downside of “pushing” hardware in hopes the customer will buy what we order. In Boingo’s
example, the last step closest to the actual customer demand is “configuration.”
Pull happens when we know how many PC’s are being ordered, then we Pull only that many PCs through
configuration. This pull from configuration causes a “cascade effect” and requires the software area to respond to
what configuration needs. Assembly responds to what software needs, and so on. We order and produce only
the components we need in response to the customer demand that is pulled through our process.
Let’s take one more look at Pull, focusing on the ‘hardware’ process.
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Kanban
If we take an in-depth look at the hardware area, we see a small stockpile of inventory. One misconception about
Lean is that zero-inventory is the goal of any process. While reducing the work in process is key to controlling
lead-time, a Lean approach uses buffers of inventory to prevent disruption in flow and minimize delays.
There are two key points illustrated in the following animation. First, we want to control the movement of WIP, so
the signal on the right side is “authorizing” movement of hardware to the customer process that actually
consumes the hardware for Boingo’s PC. Second, and more importantly, we want to control the incoming supply
of new hardware.
This control prevents over-production of hardware, and also Pulls production of new hardware as the customer
consumes it. We use a Kanban to control the movement and production of new inventory. Kanban is a Japanese
word that means “visual signal.”
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Section 6: Lean Principle #5: Strive for Perfection

Principle #5 - Strive for Perfection
Thus far, we’ve defined value from the customer’s perspective. We created a visual representation of our process
in the value stream. And we created Flow and Pull by listening to customer demand and consuming only the
parts we need.
The fifth and final principle of Lean is “Strive for Perfection.” Striving for perfection in our process means our goal
should be zero defects and 100 percent customer satisfaction. This principle requires a business to continuously
strive for excellence, and not rest when progress is made. To maintain the standard we have set, we should
never stop pursuing excellence, commitment to quality, and total employee involvement.
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Section 7: Conclusion
The Computer Manufacturing Process - According to the Customer
Let's revisit Boingo's visit to the Vertical PC Company, this time with a Lean-optimized process.
Using a Pull system, components are made available when Boingo requests them. He continues without delay to
the Testing area, where technicians test the components right away.
At the assembly area, Boingo watches the efficiency of the Lean team as his computer is promptly assembled.
With a balanced workload, there is no longer a backlog at this process step.
In the software department, managers have re-evaluated their process and have reduced the number of required
signatures from 12 to 1. Boingo’s computer gets the necessary software with no delay, and the computer quickly
proceeds to the Configuration section.
Even though his laptop involves new technology, Vertical can handle his request efficiently. Standard procedures
have been put in place to ensure employees can configure any order, and the PC contains only what Boingo has
ordered.
At last, Boingo's computer is packaged, shipped, and delivered, for a great customer experience with little or no
waste in Vertical's process.
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Module Review
In this module, we have reviewed the 5 principles of Lean. By now, you should be able to describe the 5
principles, which are: Value, Value Stream, Flow, Pull, and Strive for Perfection.
You should also be able to discuss their application in your business environment. We hope you can put this
knowledge to good use in your company.
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The Five Principles of Lean

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The Five Principles of Lean

Section 1: Module Introduction

Section 1: Module Introduction

The Computer Manufacturing Process - According to the Business

Section 2: Lean Principle #1: Value

Let’s take a look at the differences in how value is defined.

CPU Accessories: Value or Not?

Voice of the Customer

Defining Value for the Customer

Section 3: Lean Principle #2: The Value Stream

Value Stream Overview

Value Stream Principles

Here are some of the principles behind value streams.

The Value Stream Map

There are four key elements of a value stream map.

Section 4: Lean Principle #3: Flow

Achieving Flow through Standard Work

Establishing flow can be accomplished through a concept called “standard work.”

Standard work involves three different components:

 Understanding the customer demand or ‘TAKT’ time.

We’ll briefly cover each of these.

Standard Operating Procedures

Section 5: Lean Principle #4: Pull

The fourth principle of Lean is called Pull.

Pushing vs. Pulling

Section 6: Lean Principle #5: Strive for Perfection

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