There are two types of cost associated with production – • costs that deliver value to customers. These costs are good costs and help deliver profits so are to be
encouraged. These costs deliver the value that people pay for the product or service that the company makes.

The other sort of cost is associated with those that are incurred but do not deliver any discernable value to the end customer. These costs are termed waste. Lean is all about eliminating waste while improving organization efficiency and flow.

Simple cost cutting exercises do not discriminate between cost and therefore as a result can do more harm i.e. decreasing effectiveness or capability.

A key aspect to remember in regard to lean is that it discriminates between waste and value

Lean is also not a productivity initiative – productivity usually refers to getting more from an existing asset by working them harder – again this does not discriminate between working on the right or wrong things and therefore may result in greater waste – lean refers to aligning production so that the product flows through the entire process with minimal waiting time (leadtime) and with inventory, machinery and other resources aligned at the right time in the right quantity exactly meeting demand.

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