Lean Management

Class 52/16/11

LEARNING OBJECTIVES

After completing the chapter you will: Understand the concepts of the Toyota

Production System and lean management Learn how a production pull system works Understand how to eliminate waste in

processes Understand the “rules” of lean management Understand how to accomplish lean

production See examples of lean concepts applied to

manufacturing and service systems

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LEAN PRODUCTION

Lean Production can be defined as an integrated set of activities designed to achieve high-volume production using minimal inventories (raw materials, work in process, and finished goods)

Lean Production also involves the elimination of waste in production effort

Lean Production also involves the timing of production resources (i.e., parts arrive at the next workstation “just in time”)

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LEAN THINKING Womack and Jones (1996) defined the

principles of lean thinking:Define value precisely from the perspective of

the end customer in terms of a specific product with specific capabilities offered at a specific price and time Differentiate value from muda, or waste Can be difficult due to the many steps across

departments and companies Identify the entire value stream for each

product or product family and eliminate waste Apply to three critical activities: product definition,

information management, and physical transformation

LEAN THINKING

Make the remaining value-creating steps flowNo waiting, downtime, or scrap within or between steps

Suggest application of kaikuku, or radical improvement, as opposed to kaizen, or continuous improvement

Design and provide what the customer wants only when the customer wants itLet the customer pull the product from the value stream

LEAN THINKING

Pursue perfectionThere is no end to the process of

reducing effortThe four initial steps interact with one

another in a virtuous circle More precisely defined value challenges steps in value stream to reduce waste

getting value to flow faster exposes muda

harder customers pull, the more impediments to flow revealed

LEAN THINKING: LANTECH

Developed a device that would stretch-wrap pallets with plastic film

Built its four types of machines in batches, called a batch and queue system Also used this system for processing orders and

developing new products Great complexity with its processes, long

time to complete processes, and much of the process time was queue time

Moved to total quality management after it lost a patent infringement suit Empowered workers but didn’t address

processes

LEAN THINKING: LANTECH

New VP of Operations hired an established a dedicated process flow for each of the four product families Equipment grouped together in four cells No batches – one unit at a time: continuous flow All jobs directly linked – no buffers of inventory Set takt time: available time in a period /

customer orders in that period Changeovers done quickly to accommodate

product options Applied same techniques to office and

product development

FEATURES OF LEAN PRODUCTION

• Management philosophy• “Pull” system though the plant

WHAT IT IS

• Employee participation• Industrial engineering/basics• Continuing improvement• Total quality control• Small lot sizes

WHAT IT REQUIRES

• Attacks waste• Exposes problems and bottlenecks• Achieves streamlined production

WHAT IT DOES

• Stable environment

WHAT IT ASSUMES

PULL SYSTEM

Customers

Sub

Sub

Fab

Fab

Fab

Fab

Vendor

Vendor

Vendor

Vendor

Final Assembly

Here the customer starts the process, pulling an inventory item from Final Assembly…

Here the customer starts the process, pulling an inventory item from Final Assembly…

Then sub-assembly work is pulled forward by that demand…

Then sub-assembly work is pulled forward by that demand…

The process continues throughout the entire production process and supply chain

The process continues throughout the entire production process and supply chain

THE TOYOTA PRODUCTION SYSTEM

Based on two philosophies: 1. Elimination of waste

2. Respect for people

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ELIMINATION OF WASTE

1. Focused factory networks

2. Group technology

3. Quality at the source

4. JIT production

5. Uniform plant loading

6. Kanban production control system

7. Minimized setup times

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MINIMIZING WASTE: FOCUSED FACTORY NETWORKS

CoordinationSystem Integration

These are small specialized plants that limit the range of products produced (sometimes only one type of product for an entire facility)

These are small specialized plants that limit the range of products produced (sometimes only one type of product for an entire facility)

Some plants in Japan have as few as 30 and as many as 1000 employees

Some plants in Japan have as few as 30 and as many as 1000 employees

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MINIMIZING WASTE: GROUP TECHNOLOGY (PART 1)

Using Departmental Specialization for plant layout can cause a lot of unnecessary material movement

Using Departmental Specialization for plant layout can cause a lot of unnecessary material movement

Saw Saw

Lathe PressPress

Grinder

LatheLathe

Saw

Press

Heat Treat

Grinder

Note how the flow lines are going back and forthNote how the flow lines are going back and forth

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MINIMIZING WASTE: GROUP TECHNOLOGY (PART 2)

Revising by using Group Technology Cells can reduce movement and improve product flow

Revising by using Group Technology Cells can reduce movement and improve product flow

Press

Lathe

Grinder

Grinder

A

2

BSaw

Heat Treat

LatheSaw Lathe

PressLathe

1

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MINIMIZING WASTE: UNIFORM PLANT LOADING (HEIJUNKA)

Not uniform Jan. Units Feb. Units Mar. Units Total

1,200 3,500 4,300 9,000

Uniform Jan. Units Feb. Units Mar. Units Total

3,000 3,000 3,000 9,000

Suppose we operate a production plant that produces a single product. The schedule of production for this product could be accomplished using either of the two plant loading schedules below.

Suppose we operate a production plant that produces a single product. The schedule of production for this product could be accomplished using either of the two plant loading schedules below.

How does the uniform loading help save labor costs?How does the uniform loading help save labor costs?

or

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MINIMIZING WASTE: INVENTORY HIDES PROBLEMS

Work in

process

queues

(banks)

Change

orders

Engineering design

redundancies

Vendor

delinquencies

Scrap

Design

backlogs

Machine

downtime

Decision

backlogsInspection

backlogs

Paperwork

backlog

Example: By identifying defective items from a vendor early in the production process the downstream work is saved

Example: By identifying defective work by employees upstream, the downstream work is saved

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MINIMIZING WASTE: KANBAN PRODUCTION CONTROL SYSTEMS

Storage Part A

Storage Part AMachine

Center Assembly Line

Material Flow

Card (signal) Flow

Withdrawal kanban

Once the Production kanban is received, the Machine Center produces a unit to replace the one taken by the Assembly Line people in the first place

This puts the system back were it was before the item was pulled

The process begins by the Assembly Line people pulling Part A from Storage

Production kanban

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RESPECT FOR PEOPLE

Level payrolls

Cooperative employee unions

Subcontractor networks

Bottom-round management style

Quality circles (Small Group Involvement Activities or SGIA’s)

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TOYOTA PRODUCTION SYSTEM’S FOUR RULES: SPEAR AND BOVER (1999)

1. All work shall be highly specified as to content, sequence, timing, and outcome

2. Every customer-supplier connection must be direct, and there must be an unambiguous yes-or-no way to send requests and receive responses

3. The pathway for every product and service must be simple and direct

4. Any improvement must be made in accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization

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RULE 1: HOW PEOPLE WORK

Focus on the details 1st unstated rule: every activity must be

specified for success May seem obvious, but the majority of managers

outside Toyota do not take this approach)

RULE 1: CAR SEAT EXAMPLE

“ When a car’s seat is installed, the bolts are always tightened in the same order, the time it takes to turn each bolt is specified, and so is the torque to which the bolt should be tightened. Such exactness is applied not only to the repetitive motions of production workers but also to the activities of all people regardless of functional role.”

RULE 1: TOYOTA’S METHOD

Seven-step process with specific steps and lengths of time

There is a well developed sequence of events for each particular job

When employees deviate from these details it is obvious

RULE 1: TOYOTA’S HYPOTHESES

Performing the activity tests two hypotheses:1) The person doing the activity is capable of

performing it correctly2) Performing the activity creates the expected

outcome

Example:“If they can’t insert the seat in the specified way

within the specified amount of time, then they are clearly refuting at least one of the hypotheses, indicating that the activity needs to be redesigned or the worker must be trained again.”

RULE 2: HOW PEOPLE CONNECT

Every connection must be standardized & direct, specifying: people involved form & quantity of goods and services way requests are made by each customer expected time that requests will be met

Rule creates supplier-customer relationship Result: “…no gray zones in deciding who

provides what to whom and when.”

RULE 2: APPLICATION

Toyota uses kanban cards to set up direct links between suppliers and customers

Other companies use supervisors to answer calls for help; no specific person assigned “…when something is everyone’s problem it

becomes no one’s problem.” Toyota’s workers expected to ask for help Testing hypothesis keeps system flexible,

allowing for constructive adjustment

RULE 3: HOW THE PRODUCTION LINE IS CONSTRUCTED

All products and services flow along a simple specified path no forks or loops to convolute the flow; all direct

to specific persons or machines change only when production line is expressly

redesigned Toyota production lines accommodate many

types of products All of the rules allow Toyota to conduct

experiments and remain flexible and responsive

RULE 4: HOW TO IMPROVE

What can be improved: Production activities Connections between workers or machines Manufacturing pathways

Improvements must be made: Using the scientific method Under the guidance of a teacher At the lowest possible organizational level

RULE 4: HOW TO IMPROVE

How do you use the scientific method? Frame problems using first three rules Formulate and test hypotheses Question assumptions Don’t confuse goals with predictions based on

hypothesese.g. Reducing changeover time by two-thirds

RULE 4: HOW TO IMPROVE

Who does the improvement? Frontline workers, with assistance from supervisors Problem scale determines how many organizational

levels are included in the solution Toyota’s commitment to learning

Operations Management Consulting Division (OMCD) Toyota Supplier Support Center (TSSC)

NOTION OF THE IDEAL

People motivated by a common goal Sense of what the ideal production system would

be Make improvements beyond what is “necessary”

Very pervasive Essential to the Toyota Production System

NOTION OF THE IDEAL

Concrete Definition: The output of an ideal person, group of people,

or machine: Is defect free; Can be delivered one request at a time; Can be supplied on demand in the version requested; Can be delivered immediately; Can be produced without waste; Can be produced in a safe work environment.

ORGANIZATIONAL IMPACT OF THE RULES

The rules create an organization with a nested modular structure by: Making people capable and responsible for their

own work Standardizing connections between individual

customers and suppliers Pushing the resolution of connection and flow

problems to the lowest possible level

ORGANIZATIONAL IMPACT OF THE RULES

Benefit: People can implement design changes in one part without unduly affecting other parts Toyota can delegate a lot of responsibility

without creating chaos

COUNTERMEASURES

Kanbans or andon cords Temporary

responses to specific problems

Serve until a better approach is found or conditions change

NOT solutions

Building up inventory of materials Ideal system would

have no need for inventory

Required in certain circumstances: Unpredictable

downtime or yields Time consuming setups Volatility in the mix

and volume of consumer demands

LEAN IMPLEMENTATION REQUIREMENTS: DESIGN FLOW PROCESS

Link operations

Balance workstation capacities

Redesign layout for flow

Emphasize preventive maintenance

Reduce lot sizes

Reduce setup/changeover time

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LEAN IMPLEMENTATION REQUIREMENTS: TOTAL QUALITY CONTROL

Worker responsibility

Measure SQC

Enforce compliance

Fail-safe methods

Automatic inspection

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LEAN IMPLEMENTATION REQUIREMENTS: STABILIZE SCHEDULE

Level schedule

Underutilize capacity

Establish freeze windows

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LEAN IMPLEMENTATION REQUIREMENTS: WORK WITH VENDORS

Reduce lead times

Frequent deliveries

Project usage requirements

Quality expectations

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LEAN IMPLEMENTATION REQUIREMENTS: REDUCE INVENTORY MORE

Look for other areas

Stores

Transit

Carousels

Conveyors

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LEAN IMPLEMENTATION REQUIREMENTS: IMPROVE PRODUCT DESIGN

Standard product configuration

Standardize and reduce number of parts

Process design with product design

Quality expectations

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LEAN IMPLEMENTATION REQUIREMENTS: CONCURRENTLY SOLVE PROBLEMS

Root cause Solve permanently

Team approach

Line and specialist responsibility

Continual education

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LEAN IMPLEMENTATION REQUIREMENTS: MEASURE PERFORMANCE

Emphasize

improvement

Track trends

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LEAN IN SERVICES (EXAMPLES)

Organize Problem-Solving Groups

Upgrade Housekeeping

Upgrade Quality

Clarify Process Flows

Revise Equipment and Process Technologies

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LEAN SERVICES: JEFFERSON PILOT FINANCIAL

Jefferson Pilot Financial is an insurance company searching for new ways to grow Had rising customer expectations New products with increased complexity

Had to deal with specialized companies with lower prices

Needed a way to improve service and reduce costs

STEPS TOWARD IMPROVEMENT

Wanted key differentiator to be superior service

Needed to analyze operations of business units

With analysis, JPF realized they could increase revenue through improved operations

Looked to Japanese practices of “lean production”

LEAN PRODUCTION

JPF could benefit because its operations were similar to that of a car company

In 2000, appointed “lean team” Initiative has delivered impressive results

Halved time of receipt to application of policy Reduced labor cost by 26% Reduced rate of errors on policies by 40%

Resulted in 60% increase in new premiums

BUILDING THE MODEL CELL

Company can introduce a lean system without significantly disrupting operations

“Model cell” rollout- company sets up microcosm of its entire process-Allows managers to conduct experiments and smooth out kinks while working towards optimal design

BUILDING THE MODEL CELL

Jefferson Pilot Financial chose section of new business unit devoted to processing policies

Unit had 10 employees and handled policies that did or did not require physician statements

Lean production built around continuous-flow processing Traditional methods have large batches processed

at each step and passed along only after an entire batch has been processed

If not caught quickly, errors can occur on large scale

Applied seven design practices of Lean manufacturing to redesign Cell’s Workflow

REDESIGNING THE CELL’S WORK FLOW

1. Placing Linked Processes near One Another All steps in a process should be located

close to one another JPF- Work groups located by function

ex: Employees who receive applications and employees who sort them on different floors

After teams were placed next to each other process was done faster and employees were more aware of being part of a whole

REDESIGNING THE CELL’S WORK FLOW

Standardizing Procedures JPF employees had freedom in managing

work, which made it difficult for other workers to fill inex: Different systems for storing files

Lean Team insists files be store alphabetically and in same drawer at each workstation; standardized data entry

Made it much easier for others to help when workloads were high or workers were absent

REDESIGNING THE CELL’S WORK FLOW

3. Eliminating Loop-Backs Loop-Back is when work returns to a previous

step for further processing which typically creates delays

Lean Team noticed all sections of each policy form were sent back to employee who received initial application

JPF split receiving team in half-employees to assemble policies-employees to receive applications

Reduced confusion and reduced delays and waste

REDESIGNING THE CELL’S WORK FLOW

4. Setting a Common Tempo Applies the concept of “Takt” (German

for musical meter) A baseline was calculated by timing

new employees and challenging employees to speed the process

Then appropriate number of employees assigned to each task

REDESIGNING THE CELL’S WORK FLOW

5. Balancing Loads Instead of sorting applications by numerical

or alphabetical order, the work is spread loaded among different teams

This keeps an even tempo and leaves no team in the process idling while another team is working

REDESIGNING THE CELL’S WORK FLOW

6. Segregating Complexity While balancing loads of work is important to

keep a smooth flow, it is also important to separate complicated work

Some applications are more complex because they require a physicians statement

Once the tasks requiring a physician’s statement were separated into two different teams, the time to process applications dropped 80%

REDESIGNING THE CELL’S WORK FLOW

7. Posting Performance Results Hourly performance is posted and therefore

subject to review enables the team to review performance and see

where the team is excelling and where it is lagging

Employees at first feared that if they were a laggard they would be criticized as such.

However, the postings encouraged teams to strive to improve, and also served as a way to benchmark positive performance and reward it

SETTING PERFORMANCE GOALS

Always measure performance & productivity from customer’s perspective

JPF changed processing time metric Previously measured time application was

received to when it was bound, and now measure time between when customer sends application to when they receive policy

Shop-floor goals should be connected to CEO’s performance metrics Cell productivity ties to the ratio of total

acquisition expenses to value of new paid premiums

SETTING PERFORMANCE GOALS

Look at suppliers through lean-production lens Established new vendor-selection criteria

Matched metrics with lean-production requirements Measured process and put results on white-

boards for all to see

ROLLING OUT THE NEW SYSTEM

Six-month rollout of lean production to rest of New Business Operations

Divided operations between status of customers and complexity of tasks

Identified other operations that could benefit from new system

Helped increase productivity and make more cost-effective capital investments

CONVINCING SKEPTICS

To ensure effectiveness, needed to communicate “why” and “how” Everyone needed to understand why the process

was necessary Used plane exercise as example

Skeptics of initiative were convinced through exponential performance improvements Staff could perform more cross-functional work

and benefit from having their work visibly represented