What does "lean" really mean?

"Lean" production perfectly synchronizes demand and replenishment. But it's not just about manufacturing. Here's how lean thinking applies to logistics.

By John Kerr -- Logistics Management, 5/1/2006

Imagine that you are an automaker, and that three American customers have ordered blue cars with black seats and four Canadian customers have ordered white cars with red seats. The orders arrive while the factory is holding just enough red seats and black seats, blue paint and white paint, and car bodies and power trains to assemble the seven cars and ship them out that same day.

As the materials are consumed, they signal supply stations to replenish them at once. The supply stations then alert the suppliers whose trucks are driving several "milk runs" each day to deliver parts moments before they are needed. The whole supply chain runs like clockwork, perfectly synchronized no matter how variable the demand from customers.

In this perfectly demand-driven world, there is no waste. And that, hugely simplified, is what "lean" production is all about. The assembly lines make no more and no less than is needed right then and there. Distribution centers (DCs) are simply cross-docking hubs—if they exist at all. Communications are rich, frequent, and unambiguous between suppliers and producers, between producers and distributors, and between distributors and customers. And inventory? What inventory?

In concept, lean is brilliant. In execution, it is more theory than reality. "We all know what we need to do. It's doing it that's hard," says Dr. Karl Manrodt, associate professor in the Department of Management, Marketing, and Logistics at Georgia Southern University. "People know the words but not the tune," adds James Womack, cofounder and principal of the Lean Enterprise Institute (LEI), a leading education and research firm.

Despite the difficulty of implementing a lean system, companies have begun to consider it as a process-improvement tool, not just for manufacturing but also for everything from transportation management to accounting. The beauty of the lean philosophy is that it focuses everyone on what matters—on exactly what the customer needs. This means that everything else is seen as non-essential and therefore as a cost that can be taken out, whether it is buffer stock or a business process that requires multiple manual sign-offs.