Being efficient is not enough. Although efficiency remains at the center of many companies’ objectives, the ultimate goal is not efficiency itself, but value creation. This is the foundation of lean thinking, which we explore in the third part of our lean series.
Activity is not the same as performance
Those working in manufacturing are well familiar with the feeling when everything is in full swing, machines and people are working continuously, yet by the end of the shift, somehow less output is visible than would have been expected. Apparent activity is not the same as true productivity—and this is precisely one of the most important insights upon which the lean approach is built.
Lean thinking—which is based on the principles of the Toyota Production System (TPS)—is not simply a production methodology. It is much more a framework for thinking: a set of questions we continuously ask about every activity, every step in the production chain. The fundamental question is simple, yet revolutionary: does this activity create value for the customer, or does it merely consume resources?
What is value—and who defines it?
In the lean approach, the concept of value can only be understood from the customer’s perspective. It is not what we ourselves consider important; not what follows from the logic of our internal processes; but rather what the customer is willing to pay for. This may sound trivial at first, yet in practice it requires a significant shift in mindset.
Imagine the processes of an automotive component manufacturing plant. Raw material arriving from the warehouse is machined, then undergoes quality inspection, and finally is placed on the finished goods shelf in packaging. Of this sequence, only the machining is what the customer directly perceives as value—the other steps may be necessary, but in themselves do not bring us closer to what the customer pays for. Lean makes this distinction conscious and operationalizable.
“If we cannot precisely say whether a customer would pay for an activity, then we do not yet understand our own processes well enough.”
The seven—or eight—faces of waste
One of the best-known tools of lean thinking is the identification of muda categories—meaning waste in Japanese. In the systematization of Taiichi Ohno, one of the fathers of TPS, there were originally seven fundamental waste types that Toyota engineers identified in production processes over decades. Later, with the widespread adoption of lean principles, an eighth category was added.
| Code | Name | Description |
| 01 | Overproduction | Producing more products than there is actual demand for. |
| 02 | Waiting | Idleness of machines, people, or materials in the process. |
| 03 | Transportation | Unnecessary material movement that does not create value. |
| 04 | Overprocessing | Unnecessary operations that the customer does not pay for. |
| 05 | Inventory | Unnecessary material that ties up capital and occupies space. |
| 06 | Motion | Unnecessary movement of workers in the workplace. |
| 07 | Defects | Handling scrap, rework, reprocessing, and complaints. |
| 08 | Knowledge | Unutilized employee competence and creativity. |
The eighth waste type—unutilized human knowledge and creativity—is particularly important, as it is the only one that is not material in nature. Lean thinking is therefore not merely a process optimization tool, but also an approach that liberates human capital: the best ideas often come from those who are close to the process day in and day out.
How can waste be made visible?
Knowledge of the principles alone is insufficient—waste must also be recognized. This is provided by the methodological framework of Value Stream Mapping (VSM). This tool visually depicts the complete journey of a product or service from raw material to customer, showing the time requirements of each step, inventories, and information flow.
One of the most striking results of VSM is almost the same across all industries: the so-called lead time—the time it takes for a product to go through the entire process—far exceeds the sum of value-creating time. It is not uncommon for the value-creating ratio in a manufacturing process to be only 5–20 percent of the total lead time. The remaining 80–95 percent is waiting, transportation, storage—in other words, muda.
The impact of value and waste on competitiveness
According to one of the fundamental formulas of lean thinking, the price the customer pays consists of the sum of value and waste. If we reduce waste, we can deliver the same customer value at lower cost—or higher value at the same cost. This is not merely efficiency improvement: it is also strategic positioning.
In the post-COVID period, as a result of supply chain crises, rising energy costs, and labor market challenges, the identification and elimination of waste is a more pressing issue than ever. Companies that view their own processes with a lean mindset are more flexible, adapt faster—and are less vulnerable to the effects of external shocks.
Summary
Lean is not a one-time project, but a continuous journey. The ability to distinguish between value and waste is like a special pair of glasses through which the lean thinker views the world. Once someone puts them on, they are hard to take off.
Frequently Asked Questions (FAQ)
The goal of lean is to increase process efficiency by maximizing value for the customer while systematically identifying and eliminating non-value-adding activities (waste).
Value is any activity or process that the customer is willing to pay for. It directly contributes to improving the form, function, or quality of the product according to customer expectations.
Waste is any resource consumption (time, material, labor) that does not add value to the final product. Lean traditionally distinguishes seven main types of waste.
The seven wastes are: overproduction, waiting, unnecessary transportation, inappropriate technology (overprocessing), unnecessary inventory, unnecessary motion, and defects (faulty products).
Because it generates the other wastes as well: it creates unnecessary inventory, requires storage space, hides quality defects, and ties up capital before the customer pays for the product.
By eliminating waste, lead times and costs are reduced while quality and flexibility improve. This enables the company to respond to market demands faster and more efficiently.
