The origins of lean production and logistics can be traced back in particular to the car company Toyota and its ingenious Toyota Production System, pioneered by people such as Kiichiro Toyoda (son of the company's founder), Taiichi Ohno and others during the 1930s and especially after World War II. In developing the Toyota Production System they drew heavily on the work of Ford and identified areas in the Ford model that could be improved. They also drew on the work of the American quality guru, W. Edwards Deming. In fact much of Deming's early work received a richer response in Japan than it did in the USA, and the Japanese were to enjoy significant competitive advantage as a result of their embracing of what came to be called total quality management (TQM).

Toyota sought to develop a production system where the emphasis was not on the efficiency of individual machines, but on total flows through a system. Significant emphasis was placed on quick machine turnovers, elimination of waste (known in Japanese as muda), even production flows, low levels of inventory, faster total process time and achieving total quality. Where many production systems are ‘push’ based, Toyota sought to develop a system where inventory is ‘pulled’ downstream through the system. This prevents stockpiling and inefficiency and is known as just-in-time (JIT) inventory replenishment (discussed further in Chapter 9), where inventory is kept to a minimum and replenished only as it is used. The Toyota Production System (TPS) was born and in particular it sought to eliminate waste (in the form of unnecessary inventory and inefficient processes) in seven key areas (discussing these areas gives us insights into much of the thinking behind lean production):

Overproduction – basically producing too much. In this instance some inventory ends up being held in a warehouse or other holding area. This is referred to as make-to-stock (MTS), as opposed to the more efficient make-to-order (MTO).
Waiting – poor process design and/or poor planning may result in work-in-progress inventory waiting until a machine or operator becomes available so that it can go through the next stage of production. Many aspects of the TPS philosophy also find application outside of manufacturing contexts. In the case of ‘waiting’ think, for example, of the inefficiencies that arise in some healthcare systems where patients have to wait in hospital, sometimes for days, for the appropriate doctor to examine them or read their test results.
Transportation – except in the case of products such as software, invariably most products have to be physically transported to the marketplace. In a sense this is non-value adding time with the freight just sitting on the truck. Again, adopting the TPS philosophy, one might try to think of ways in which value could be added to the product during this idle time. Just think, for example, of bananas ripening in transit. Another example concerns certain medical devices which have to be sterilised after production but before use. Some manufacturers have developed special packaging which allows chemicals to dissipate from the post-production sterilised product within the package over a fixed period of time. During this fixed period the devices can of course still be transported to the market, the only caveat is that the product is not opened until the due date.
Inappropriate processing – in some production systems sometimes all products may enjoy the same level of processing, even though this might only be required for some of the products. An example might be using a certain advanced type of packaging on all products, even though this might only be required in certain markets.
Unnecessary inventory – inventory has various costs associated with it which we will study in detail in Chapter 9. Suffice to note for now that holding unnecessary inventory just-in-case it may be required is costly and may also actually hide problems.
Unnecessary motion – in a poorly designed production system it may be the case that work-in-progress inventory moves in an erratic route between stages around the factory. In a retail distribution example in Chapter 5 a similar scenario (albeit on a larger scale) is illustrated whereby a supplier delivers product from region X to a consolidation centre in region Y, only for the product to then be moved back to a regional distribution centre operated by the retailer near region X.
Defects – product that is defective invariably can cause production delays as it may be necessary to see what caused the defect. Furthermore, if the defect is only observed at the end stage of production, it may take time to discover where exactly the problem arose. This is all wasteful downtime which total quality systems, by their emphasis on zero defects, seek to minimise.
A key aspect of lean is ensuring that value is added at each stage of the process (‘the value stream’) and steps in the process that do not add value are eliminated.

Traditionally, many production systems worked on a push mentality, that is materials are produced according to a planned forecast (which may or may not be accurate) and moved to the next stage of the supply chain; in pull-based systems inventory is only produced and moved when it is required, and thus is more closely aligned with actual demand. (In essence, push systems relate to MTS, while pull systems relate to MTO – see point 1 in the TPS.)

In recent years an eighth area, underutilisation of resources, has been added to the list. Toyota became one of the world's most successful manufacturers and while companies in the West were initially sceptical of Toyota's ideas, they quickly began to embrace them. A key study of the worldwide auto industry, the International Motor Vehicle Programme, by Womack, Roos and Jones in 1990 brought the world of lean to a wide audience. The study was published in a highly influential book called The Machine that Changed the World6 and resulted from a five-year, $5 million,14-country study conducted by MIT, apparently the largest and most thorough study ever undertaken in any industry.

Such has been the success of lean production and logistics that in recent years many of their ideas have been translated to the services sector. Two of the authors of the book, The Machine that Changed the World, Womack and Jones, wrote that ‘lean production transformed manufacturing. Now it's time to apply lean thinking to the processes of consumption. By minimising customers' time and effort and delivering exactly what they want when and where they want it, companies can reap huge benefits’.7 Womack and Jones developed their own principles of lean consumption:8

Solve the customer's problem completely.
Don't waste the customer's time.
Provide exactly what the customer wants.
Provide what's wanted exactly where it's wanted.
Provide what's wanted where it's wanted exactly when it's wanted.
Continually aggregate solutions to reduce the customer's time and hassle.
Lean production and logistics is concerned with eliminating waste in a pull-based value stream of activities with level production (i.e. even production runs with neither idle time nor surges in demand) and just-in-time inventory management.