What is 'Lean Enterprise'

Lean enterprise is the production and management philosophy that considers any part of the enterprise which does not directly add value to the final product to be superfluous. Lean enterprise focuses on value creation and the elimination of waste and non-essential processes. Foremost, it considers the product or service from the consumer's perspective to determine what is of value (i.e. what the consumer is willing to pay for), then examines at the process with the aim of reducing all of its aspects except for the value-adding ones.

Breaking Down 'Lean Enterprise'

Lean enterprise is sometimes simply referred to as "lean." Both of these terms came into use in the 1990s, but the approach itself originates in Toyota Production System — a management philosophy developed by Eiji Toyota and Taiichi Ohno between 1948 and 1975. Those principles gave birth to lean manufacturing and Six Sigma, and their melding in Lean Six Sigma manufacturing principles.

Lean enterprise put another way is the maximization of customer value while also minimizing waste in the production process. At its essence, lean enterprise is the creation of maximum value for the consumer while using fewer resources. Its goal is to perfect the delivery of value to the consumer by way of perfecting the production and delivery process as exemplified by creating no waste.

Lean Enterprise Principles

According to Lean Thinking: Banish Waste and Create Wealth in Your Corporation by James Womack and Daniel T. Jones, lean enterprise is characterized by five main principles as per the lean manufacturing ethos:

  • Value: This pertains to how end customers value a certain product or service as it relates to their wants or needs.
  • Value stream: An understanding of the full arc of the life cycle of a product or service (from the acquisition of raw materials, production of a good, sale and delivery to the customer, use by the customer, and the end of the product's life cycle).
  • Flow: If any part of the value stream is stagnant it is considered wasteful for not providing customer value.
  • Pull: This is the directive that nothing should be produced until it is demanded or ordered by the customer.
  • Perfection: This is the ethos that all causes of sub-par quality should be eliminated from the manufacturing process.

Lean Enterprise and Lean Six Sigma

Lean enterprise also borrows eight directives based on lean six sigma principles. These address the elimination of waste from the production, transportation and delivery process, known as "muda," which form the acronym "DOWNTIME."

  • Defects
  • Overproduction
  • Waiting
  • Non-utilized talent
  • Transportation
  • Inventory
  • Motion
  • Extra processing
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