Lean Manufacturing Cost Cutting Methods

CNIPMMR

Pilot project no. RO/03/B/F/PP-175017 Lean Manufacturing -cost cutting methods-

"This project has been funded with support from the European Commission. This publication [communication] reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein."

TRAINING MODULE

LEAN MANUFACTURING - COST CUTTING METHODS -

MODULE DEVELOPED BY: The National Council of Small and Medium Sized Private Enterprises of

Romania (CNIPMMR) Contents: • INTRODUCTION a) Introduction into the topic b) Terms used c) Scope d) Categories of users e) Details on the organisation who created this module

• MODULE CONTENT CHAPTER 1: METHODS FOR GATHERING AND ANALYZING THE DATA NECESSARY TO CUT COSTS

1.1. WASTE

1.2. LEAN ASSESSMENT 1.3. LEAN INDICATORS Example of OEE calculation 1.4. VSM - VALUE STREAM MAP

CHAPTER 2: METHODS OF CUTTING COSTS BY REORGANIZING PRODUCTION PROCESSES

2.1. JUST IN TIME (JIT) PRODUCTION. 2.2. KANBAN SYSTEMS. Example of Kanban calculation model Example of setting the minimum batch level 2.3. JIDOKA

Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017

2/44

2.4. POKA YOKE 2.5. SINGLE MINUTE EXCHANGE OF DIE (SMED). 2.6. STANDARDIZED WORK 2.7. TOTAL PRODUCTIVE MAINTENANCE (TPM) 2.8. 5 S AND VISUAL MANAGEMENT

CHAPTER 3. IMPLEMENTATION OF IMPROVEMENTS 3.1. FUTURE VALUE STREAM MAPPING Example of calculation 3.2. SYSTEM OF LEAN INDICATORS 3.3. TRANSITION TO A LEAN ENTERPRISE

• CASE STUDIES, EXAMPLES Example of Work Sampling application Example of visual management

• BIBLIOGRAPHY

INTRODUCTION

a) Introduction into the topic As early as the late 1800s, when the manufacturing production of automobiles began

developing, characterized by high quality manual production, which was, nonetheless, very expensive and of poor productivity, and which was intended for a small share of consumers, it was felt the need to pass onto mass production. Thus, in the 1920’s, Henry Ford launched mass production of automobiles. Mass production was characterized by assembly lines where low-skilled workers made hundreds of identical, low quality products and with prices affordable for an average family.

As you know, mass production in all fields evolved so much, that early as the 1980s the consumer’s perception of product value was given by low cost, availability of high quality products and manufacturers’ flexibility to produce according to the market demands. After the year 2000, the consumer’s perception of product value has been given by the flexibility of production, high quality associated with low costs and availability. To put it otherwise, in order to survive in a global market, companies must obtain profit, renew contracts and grow. For all these to happen, companies must be the best at ensuring delivery of fine products, at competitive prices and earlier than the competition.

Lean Manufacturing is currently the most important management method for manufacturing companies. The method is used together with the quality tool referred to as “6 sigma”, it is based on Toyota Production System, it was adjusted by Womack and Jones, in 1995, to Western companies, and it refers to real basic capabilities. Applying Lean Manufacturing leads to exceptional results, with no complex systems required, therefore, it is also an adequate method for SMEs with limited resources.

Lean Manufacturing means flexible assembly lines or cells, more complex tasks, highly-skilled workers, better-made products, wider variety of interchangeable parts, mandatory excellent quality, low costs due to the improvement of the manufacturing process, international markets and world-wide competition. Lean Manufacturing, or production at minimum costs, is a production philosophy that determines a reduction of the duration from customer’s order to delivery of the product by eliminating waste.

The implementation of LEAN concepts has become a survival strategy in a production environment in which COST cutting is a market reality.

If current results of your company do not satisfy you, you can find out answers to many


3/44

of your problems by coming into the Lean world. If you want to introduce improved long-term production management methods, which will help you identify waste in you organization and increase productive capacity and simultaneously cutting production costs, by going over this module you can familiarize with several Lean Manufacturing concepts which, after implementation, shall lead to:

Cutting to half the time of the human effort in workshops

Cutting to half finished product defects

Cutting to one third the production preparation time

Cutting to half the production area, obtaining the same results

Cutting to one tenth or less the unfinished production.

Here are several goals that can be accomplished by applying the Lean Manufacturing method:

Organizing the production flow and setting the work pace in accordance with the Lean Manufacturing method

Establishing a production plan by forecasting market demands

Continuously improving the production flow as often as possible

Verifying market demands to control production (it should not be produced more than what the market demands)

Transmitting customer orders to a single production process.

Distributing production (of distinctive products), by the end of each production process

Creating an "initial pull" for delivery of a small production, compatible with the development of the production process, instead of releasing larger batches of products

Reducing the time necessary for preparing production, simultaneously increasing flexibility, quality and efficiency and cutting costs.

Quantifying waste, analyzing it and the actions to be taken to implement methods to raise the efficiency of the production process

Methods to cut waste, establishing the types of waste and measuring it

Necessity for an actual performance measurement system

Establishing a methodology for planning and implementing the performance measurement system

Determining system characteristics by actually measuring performances

Action to be taken to develop de process

Implementing the "5 S" method

Training and involving the entire personnel

Standardizing (making uniform) the work procedures.

b) Terms used Lean Approach: A 5 step thinking process proposed by James Womack and Dean Jones,

authors of the “Lean Thinking” manual, to guide managers in their attempts to introduce the Lean principles into production. The 5 principles are:

1. Setting the value of each product family from final customer’s point of view.

2. Identifying all activities on the value stream of each product family,


4/44

eliminating as much as possible those waste-generating activities.

3. Ranking value-adding activities in a sequence (flow) of clearly identified steps, so that the product should reach the final customer through a process which should be as continuous as possible.

4. After the value stream is established and introduced, each internal or external customer/beneficiary can apply the “pull” system to “pull” the product from the production line.

5. After the value is set, the value-adding activities identified and those generating waste eliminated, and the value stream set and introduced, the process can be operationalized and repeated until it reaches the optimal level, of maximum value and no waste.

ABC Analysis: Is a tool for dividing items necessary in a production process into groups, according to the demand for those items. Lean specialists use these analyses to select the items for which to create inventories and their sizes. “A” type items are very often necessary in the production process, “B” type items are of medium level necessity and “C” type are less necessary.

Andon: In Japan, in the past, Andon worked as a flashlight, a remote signalling sign or even a business sign. Nowadays, in production, the Andon is an audio and visual control device. For example, if an Andon device has three colour areas (red, green and orange), and the orange area sends visual and audio signals, it means that there is a problem requiring special attention or that an operator must replenish a material which was exhausted. Therefore, the Andon is a visual management-specific tool, consisting of placing lights on machineries or on production lines, in order to indicate the process operation status. The most common visual signal codes are: Green: normal operation, Yellow: changeover or scheduled maintenance; Red: abnormal, machine down. These visual signalling codes are usually combined with audible signal codes.

Waiting: Waste occurring when people and machineries do not work / add value, waiting for a previous process to be completed or for a material to arrive.

Kaizen workshops: Represents the activity of a Kaizen group (which usually lasts 5 days), in which a team identifies and implements an improvement to a process. A classical example is creating continuous flow cells within a week. In order to achieve an improvement, the Kaizen team (including experts, consultants, but also operators and line managers) analyze, implement, test and standardize cell workstations. First, the group members study the continuous flow principles, and then they assess the existing conditions and plan the workstations necessary. Then, they pass onto moving machineries and tools to the new workstations and to testing the newly created flow. After improvement, the process is standardized and the Kaizen team reports the outcomes to the top management.

Takt time (time necessary to process a container of items): The time necessary to complete a container of items in a production area. The calculus formula is: takt time = available operating time x quantity of products planned to be processed. For example, if the available operating time (daily working hours divided by the daily customer demand is of 1 minute, and the quantity planned to be processed is of 20 pieces, then the takt time = 1 minute * 20 items = 20 minutes.

4Ms: The factors that a production system uses to add value for customers. The first three factors are resources, and the last one represents the value for the customer. In the Lean system the 4 factors refer to:

1. Materials – without defects or shortcomings


5/44

2. Machineries – without malfunctions, operation deficiencies or unscheduled stops

3. Manpower – adequate work skills, necessary competencies, punctuality and low absenteeism

4. Methods – standardized processes, maintenance and management.

5 S: The 5 S process or simply the 5 S is a program structured to obtain systematically: organization, cleanness and standardization at the workplace. The content of the 5 S is the following:

1. Seiri (Sorting) – The first step of the process refers to the action of removing unwanted and unneeded materials from the workplace. The main idea is to make sure that every material left at the workplace is indispensable for that respective work.

2. Seiton (Straighten) – The second step of the process refers to efficiency. This step consists of storing each element in a preestablished location, in order to be easily accessible and brought back to the same location as quickly as possible. If everyone has quick access to all elements and materials, the workflow shall become more efficient, and therefore the personnel shall become more productive.

3. Seiso (Shine) – is the third step of the process, consisting of cleaning the workplace, making it “shine”. Cleaning should be carried out by all employees, from managers to operators. All areas forming the workplace must be cleaned, without exception.

4. Seiketsu (Standardization) – The forth step of the process consists of defining the standards to which the personnel should relate when measuring and maintaining cleanness. An important ingredient of seiketsu is visual management. A uniform and standardized colour coding of the various elements can be an efficient way to identify abnormalities in a workplace.

5. Shitsuke (Sustain change) – The last step of the process is discipline. It supposes the common will to maintain order and to follow the other 4S as a lifestyle. The Shitsuke foundation is elimination of bad habits and generalization of positive habits.

7 wastes: The 7 wastes of production are, according to Taichi Ohno’s classification:

1. Overproduction: producing more than necessary for the downstream / client process. It is the worst kind of waste, as it directly causes the other 6 types of wastes.

2. Waiting: operators interrupt work due to malfunctions of machineries or equipment, delays in delivery of materials / layouts / parts necessary for processing.

3. Transportation: unnecessary conveyance of parts and products, such as from the processing line to the warehouse and from there again to the workshop – to the next processing process, when it is more rational to place the next process in immediate vicinity of the first processing workstation.

4. Processing: carrying out unnecessary or incorrect operations due to poor quality equipment or carelessness.

5. Inventories: storing more than the minimum necessary for the operation of a pull production system .

6. Movement: operators make unnecessary movements – such as looking for parts, equipment, documents, repeated movement of tools, etc.

7. Defects: inspection, reprocessing, scraps.


6/44

Cell: A layout of workstations that process a product in a tight sequence, so that parts and/or documents should be processed in an almost continuous flow, unit by unit or in small batches, which should be maintained during the entire sequence of processing operations. The U-shaped cell is widely used because it reduces distance between operations and allows operators to carry out various combinations of labour tasks. In Lean production, the ability to reassign tasks is very important, because it can change the number of workers necessary for one cell, function of the demand of products.

Deming Cycle (PDCA – Plan, Do, Check and Act): The PDCA cycle can be used to coordinate the efforts for continuous improvement. The cycle proves and underlines the fact that improvement programs should start with a careful planning, they should focus on actual activities, and they should end with the control of the results obtained, so that the entire cycle should begin all over again. The content of the 4 phases of the cycle are:

1. Plan – aims at improving the operations performed; before starting the planning action, the causes that generate problems should be identified and solutions to eliminate such problems should be set.

2. Do whatever necessary to solve the problems, first at a small, experimental scale. Thus, interruptions in current activity are minimum while testing the functionality of the changes made.

3. Check the results obtained upon implementing those respective experimental changes: whether the expected results are obtained or not. Also, a continuous control defines key activities (regardless whether they are experiments of the solutions proposed), thus facilitating awareness of the quality of the results obtained and identifying new problems that could occur.

4. Act – generalization / large scale implementation of changes, if the experiment was successful.

Efficiency: Satisfying all customer necessities with minimum of resources. Apparent efficiency vs. Real efficiency: Taichi Ohno distinguishes between apparent and real efficiency by giving the example of some workers who produce 100 products a day. If after improving the process, they produce 120 products a day, then it results an increase in efficiency with 20%. This thing is real if, and only if the demand increases with 20%. If the demand remains stable at 100 products, the only manner to increase the efficiency of the process is to determine a way in which the same number of products can be obtained with less effort and capital.

Product family: A set of products and variants of the same product, which can be obtained through a sequence of similar processing processes, on similar machineries. The significance of product families for Lean specialists is the fact that they represent the starting point for value stream mapping. It must be noted that product families can be defined from every customer’s perspective (next customer or external customer) within an enlarged value stream, departing from the final customer to intermediary customer, along the production process.

Each Part, Every Interval (EPEI): The rate at which various (batches of) parts are manufactured in a production system or process. If a machine passes to another type of production according to a previously established sequence so that the planned number of parts of a certain type should be produced every 3 days than the EPEI is of three days. As a general rule, it is advisable for EPEI to be as short as possible, in order to produce items in smaller batches and to minimize inventories of unfinished products. The EPEI of a machine depends on the production changeover time and of the number of items scheduled to be processed by that respective machine. A machine that requires longer


7/44

production changeover time and which produces products in large batches shall automatically have longer EPEI.

Continuous flow production: It can defined as production and transfer of one item (or of a small and uniform batch of items) at a time, from one process to the next, along the entire production line, as continuously as possible, each supplying operation producing just as much as required for the following operation (client operation). The continuous flow can be achieved in several ways – from the automatic assembly line to the manual workstations placed in cells.

Materials flow: Movement of the physical elements through the entire value stream.

Value stream: Includes the activities that makeup a process, necessary to bring up a product, from concept to launch and from order to delivery. The stream value comprises activities that process product manufacturing information, as well as the actual activities in which materials are processed until they reach the physical form of that product.

Value Stream Map (VSM): A chart which includes all steps necessary for a continuous flow of information and materials, from reception of an order to the delivery of the product. Value Stream Mapping can be a repetitive process, as a requirement for improving the production process. The value stream map of the current state includes the steps that a product currently takes from order to delivery, in order to determine the existing conditions for obtaining that respective product. The future value stream map can capitalize the improvement opportunities identified in the current map, in order to achieve a superior performance level. In some cases, it is advisable to make an ideal map, which should highlight the improvement opportunities generated by the introduction of all Lean-specific methods.

Heijunka: Levelling the type and production quantity for a certain period of time. Through this action, the production obtained shall satisfy efficiently customer demands, simultaneously determining results such as minimization of inventories, of the cost of capital, labour and lead time throughout the entire value stream. As far as the levelling of the production quantity is concerned, let’s assume that a manufacturer receives orders for 500 products a week, but broken-down distinctively on days, as it follows: an order for 200 products on Monday, 100 on Tuesday, 50 on Wednesday, 100 on Thursday and 50 on Friday. In order to level production, the manufacturer can create a buffer stock ready for delivery, so that to meet the demand for products on Monday, and then level the manufactured volume at 100 pieces a day, throughout the entire week.

Jidoka: Entails stopping a production line automatically when an error (incompliance) is detected. It consists of providing machineries and operators with the ability to detect abnormalities occurred in the system, so that the process could be immediately discontinued. This method requires that all processes carried out have an adequate quality and it also makes possible to organize labour (manpower and machineries) more efficiently. Jidoka is one of the two fundamental concepts of the Toyota Production System, next to JIT. Jidoka is focused on the causes that determine the problems affecting the system. This leads to an improvement of processes, respectively assuring product quality by eliminating problem-generating causes.

Just In Time (JIT): A production system that produces and delivers only as much as it is needed, only when it is needed and only in the quantity requested by the customer. JIT and Jidoka are the two fundamental concepts of the Toyota Production System. JIT is based on the Heijunka concept (production levelling) and includes the following three elements: the pull production system, total available operating time and continuous flow. The purpose of JIT is to eliminate wastes entirely, to achieve the best quality possible, the lowest costs


8/44

possible and the shortest production and delivery terms possible. Although a simple principle, the JIT system requires a sustained discipline and endeavours to analyze and synthesize production process-related data, for an efficient implementation. The idea for the JIT system belongs to Kiichiro Toyota, the founder of Toyota Motor Corporation, in the 1930s.

Kanban: A method to control the quantity of products on the line (by organizing a system of cards, signals, buffer stocks, …). Kanban is the Japanese word for a label-like document, attached to a product on the production line. Nowadays, Kanban means any signalling device that gives authorization and instructions for production and/or conveyance of items in a pull system. Kanban cards are the best known and the most popular examples for transmitting signals throughout the production flow. Kanban cards have usually the form of a cardboard note, possibly with a plastic cover (for protection), containing data such as: item name / code, number of product items, the internal or external supplier process, quantity scheduled to be obtained, “address” of the storage area / location, “address” of the client process. Kanban cards have two major functions in the production process: the first consists of signalling from the downstream workstation to the upstream workstation to start producing the items necessary and the second consists of warning workers to move items to the following processing workstation, so that they should reach destination just before the moment they can be processed. The first function is called Production Kanban, and the second is called Conveyance Kanban).

Lean Manufacturing: Production philosophy that determines a reduction of the duration from customer’s order to delivery of the product by eliminating waste.

Large batches and Production line: An approach specific to the “push” mass production, in which a large batch of items is entirely processed and then moved to the following process, regardless whether items are necessary at that time, where they usually wait in line until they can be processed.

Product Family Matrix: A chart built to identify product families and similar processes / machinery necessary.

Total Productive Maintenance (TPM): A series of methods, originally designed to ensure a continuous operation of machineries involved in production processes, so that production should never be interrupted. TPC includes the following maintenance policies:

1. Corrective – when a machine breaks down, the situation is remedied as quickly as possible.

2. Preventive – regular maintenance, which prevents occurrence of possible malfunctions.

3. Predictive – instead of periodical inspections carried out at regular intervals, the “vital signs” of equipment are examined, and the evolution and best moments for preventive interventions are determined accordingly.

4. Detective – applies to all types of devices that work only in certain situations and do no include the devices that signal the interruption of operation (such as: fire alarms or smoke detectors). Such devices require periodical inspection, in order to see whether they are still operational.

Muda: Waste (in Japanese). Any activity that consumes resources without adding value for the customer; within this general category, it is useful to distinguish between two types of muda, respectively:

type 1, consists of activities that cannot eliminated immediately

type 2, respectively activities that can be quickly eliminated through Kaizen actions.


9/44

Standardized work: Establishing precise procedures for each individual operator who is involved in a production flow, based on the following three elements:

1. Available operating time – is the rate at which products must be made in a process so that to satisfy customer demands.

2. Precise sequence of processes that the operator carries out during the available operating time

3. Standard stock necessary for the production process to be carried out adequately and without interruption.

Production levelling: Refers to levelling the type and quantity of production over a certain period of time. This allows obtaining a production volume that satisfies customer demands more efficiently, simultaneously minimizing inventories, cost of capital, labour and total lead time throughout the entire value stream.

Multi-machine handling: A work practice in which a worker operates several machines in a production process carried out in a unitary space (production cell). Requires the separation of the human labour from machine work and it is facilitated by the application of the Jidoka method.

Automation: Ensures the interruption of the production process when a problem or a malfunction occurs. In case of an automatic line, the automatic shut-down supposes installation of sensors and switches to stop the production line when an abnormality is detected. In case of a manual line, a shut-down system is usually installed in a fixed position.

Waste: Any activity that consumes resources / increases product cost, without adding value for the customer. Most activities can be considered waste from customer’s perception and they are divided into two categories:

1. The first type of wastes does not add value, but cannot be avoided, due to current technology and production assets (such as invoicing, inter-operational packaging, certain inter-operational conveyance operations, etc.)

2. The second type of wastes does not add value and must be eliminated quickly.

Single Piece Production Planning: A detailed plan for each batch / item used in the production process, containing all elements relevant to an error and waste-free process management. This is a basic tool of the Toyota Production System.

Poka Yoke: A mistake proofing method - includes possibilities of visual or other type of signalling which indicate the specific status of a process, power / movement limitation devices, assembly devices, marking of the best position for conveyance, colour code used for assembly cables, etc. Thus, Poka Yoke is the first step in detecting and preventing errors that could affect the system. Poka – yoke is a product / production process designing technique, which prevents the occurrence of errors by designing processes, equipment and tools so that no operation could be possibly made incorrectly. In short, Poka Yoke entails: prevention of errors; detection in real time of abnormalities the moment they appear; immediate interruption of processes to prevent further malfunctions, removal of the original, malfunction –generating cause, before resuming the production process.

First In, First Out (FIFO): The principle and practice of maintaining production in a precise order, in an adequate sequence, by making sure that the first item entering a processing operation or a storage area is also the first one leaving (this principle ensures that stored items do not loose their properties and that quality problems are not evaded by selecting only good items for delivery). Compliance with the FIFO rules is an essential requisite for implementation of the “pull” production system.


10/44

Production preparation: A strict method of designing production processes for a new product or completely re-designing the production processes for an existing product, for which customer requirements had been modified substantially. An inter-departmental team examines the entire production process, develops a series of alternatives for each production process and evaluates them from the perspective of the Lean criteria.

Leading process: Is defined as that process of the value stream that sets the production pace for the entire flow (the leading process should not be mistaken for the process that determines a narrow space – the one “restricting” downstream processes due to capacity shortages upstream). The leading process is often located in the value stream in the closest point to the final customer, which is often the final assembly cell, where specific customization of the product for a certain customer begins. Nevertheless, if the product is continuously moving throughout the value stream according to the FIFO rule, then the leading process can be represented by the upstream process.

Mass production: A production system developed in the 1920s, in order to organize and manage the production system, processing operations, relations with suppliers, customers, respectively. The particulars of this production system are:

1. Processes are designed sequentially rather than simultaneously.

2. Production processes are strictly ranked, with separate jobs for production planning and execution.

3. Finished products as well as raw materials are delivered in large batches, at various time intervals, function of the durations, often uncontrolled, of processing / replenishment.

4. Information is managed in systems with several hierarchical levels, setting the production level for each operation downstream the production process.

Lean Production: Is a production management and organization system oriented towards developing products, production processes and relations with customers and suppliers so that it should require less human effort, less floor space, less capital, less lead time. Upon an adequate application of the Lean system, the products resulted have less flaws and better meet customer requirements, in comparison with the traditional production system. This production system is based on the methods developed by Toyota company after the Second World War. Once accomplished, the lean production system requires half of the human efforts, half of the production space or half of the investment capital traditionally required to obtain products of certain quality, in the conditions in which a wider variety of products can be made in smaller quantities and with lesser flaws than in the mass production system.

Reprocessing: Remaking a faulty product.

Shojinka: Flexible production cells (mix & volume).

Toyota Production System (TPS): Production system developed by Toyota to obtain best quality, lowest cost and shortest production time, simultaneously eliminating wastes for the products made. TPS is based on two fundamental concepts, namely: JIT and Jidoka. Moreover, it uses other methods such as: standard work, Kaizen, PDCA cycle.

“PULL” Production System: The Pull production system tends to eliminate overproduction and is one of the three major components of the JIT system, next to available operating time and continuous flow. In the “Pull” system, a downstream operation provides information to the upstream operation (often by means of the Kanban card) regarding what item or materials are necessary for processing, in what quantity, when and where they are necessary. The


11/44

upstream supplier process starts processing items only when the downstream client process signals the “need” for items (for example, by means of a Kanban card). The “Pull” production system is the opposite of the “Push” system. “Pull” system entails “pulling” the product from the production line, at the pace set by customer demand. In order to reduce the risk of interruption of production as a consequence of an incorrect sizing of batches, occurrence of malfunctions, etc., certain tactical buffer stocks are provided, allowing the control of the stocks of unfinished products.

“PUSH” Production System: The product is “pushed” along the production process, in batches that are large enough to:

A. Satisfy current and future demands

B. Compensate for problems that might occur during the course of the process.

SMED: SMED - Single Minute Exchange of Die, is a quick and efficient method to make changeovers in production. SMED method is used to set a process and to tune it until it is brought to normal operation, with minimum waste, with a view to manufacture a certain product. In specialized literature, this method is also known as “Quick Changeover”. SMED is a concept according to which any changeover in production can and must last less than 10 minutes. Recently, they speak of a more advanced concept: OTED – One Touch Exchange of Die, which entails that production changeovers should last less than 100 seconds.

The process of reducing the time necessary to prepare production changeover, from the processing of the last item of the previous product until the processing of the first good item of the next product. The basic steps in reducing this preparation time are:

1. Measuring the total time for setting and adjustment to the current state

2. Identifying internal and external operations, calculating individual times

3. Converting, to the extent to which it is possible, as many internal operations as possible into external operations

4. Reducing the time for the internal operations left

5. Reducing the time for the external operations

6. Standardizing the new procedure.

Standard inventory: Quantity of products necessary before each operation, so that the production process should be carried out adequately. The size of the standard inventory depends on the extent of the variations in the downstream client process (creating the need for a buffer stock) and the capacity of the upstream supplier process (creating the need for a safety stock). An adequate Lean practice is to determine the size of the standard inventory for a process and afterwards to diminish continuously that dimension, but not before reducing the variability of the downstream client process and increasing the production capacity of the upstream supplier process.

Inventory: Products and excess materials (and information) that cannot be consumed immediately, present along the stream value in various processing operations. Physical inventories are often characterized by the position they have along the value stream. Thus, there can be identified inventories of raw materials / materials / information, inventories of unfinished / in-process inventories, inventories of finished products that appear in various stages along the value stream.

Supermarket: Term taken over from business practices, to define the location and organization for storing a buffer intended to satisfy the requirements of the downstream processes. Supermarkets are usually placed next to the upstream


12/44

suppler processes, so that to be able to see and fill the requirements for items of the downstream client processes. Each item or material has a well established place, so that the number of items necessary for processing the downstream client process should be easily added. The moment an item or a material is depleted, the worker shall inform the upstream supplier process of this by means of a specific signal (Kanban card or empty container / space)

Overproduction: To produce more, faster or sooner than it is necessary for the following operation. Ohno considers overproduction the worst king of waste, as it generates and hides consecutive wastes such as unnecessary stocks, flaws, waiting and conveyance in excess.

Production Cycle Time: The actual time necessary to complete an operation within a process. The total production cycle time includes all operations necessary, which must be correlated with the available operating time (which contains, in addition to the total production cycle time, also indirect productive times), so that waste caused by overproduction should be eliminated.

Available Operating Time: The available operating time can be defined as the maximum time available to complete a product, so that customer demand should be met on time. It can be considered the beat of the Lean system (the takt / rhythm of processes)

Total Production Time (Takt Time): Time necessary from reception of orders until their delivery. The following example is useful for explaining better the use of this category of time:

Available Operating Time = Takt Time = Average Daily Demand for a Product = Daily Available Production Time / Daily Requirements If a production line must make 5000 items during an 8 hour shift, then the Available operating time (production takt time) = 8 hours / 5000 items = 0,0016 hours / item = 5,76 seconds per item.

Therefore, the 5,76 seconds per item is the maximum time available to manufacture the necessary 5000 items during an 8 hour shift, so that to deliver the product on time, in compliance with client requirements.

It should be differentiated between the available operating time (the time given by the customer to deliver a product), the production cycle time (technological time directly necessary to process the product) and total production time (duration that includes direct and indirect production times and which can be superior or inferior to the available operating time).

Cost target: Represents the maximum cost for developing and producing a product, within a sub-supplier chain, so that final customer’s quality requirements should be met and manufacturers obtain an acceptable yield for the investment made. Toyota developed this cost targeting strategy for a small group of suppliers with which it had long-term relations. Thus, Toyota, together with these suppliers, assessed a fair / equitable price for a material supplied, upon estimating customers’ opinion on the value of the finished product and then, starting from the price considered the customer to be acceptable, it assessed iteratively, in reverse direction, the costs of all partners along the value stream, so that their necessities for marginal productivity be also satisfied.

Conveyance: Moving the product from the place where it was manufactured to the place where it is needed. The distance covered can induce waste, as well as unnecessary conveyance.

Visual factory – Andon: The capacity to understand the status of a production area within 5 minutes or less, through a simple observation, without using computers and without talking with anybody.


13/44

Value: The value of the products, as perceived by customers and reflected in the sale price and market demand.

Value-adding activities: are those activities considered by the customer to add value to that respective product.

Non-value-adding activities: any other activity which generates costs, but does not add value to the product, from customer’s perception.

c) Scope The business environment of Romania, in continuous development, requires from

SMEs an ongoing adjustment to market demands, especially in the conditions of Romania’s accession to the European Union. Market globalization leads to an increase in competition. There is no divine right to stay in business; therefore, small and medium-sized enterprises of Romania should become aware that the key to survival is competitiveness.

Enhancing the productivity of the SMEs that operate in the manufacturing field, as well as cutting production costs is possible by applying the Lean Manufacturing method. These arguments are the reason for which companies, firms, organizations in industrial manufacturing and logistic planning, but also of the economic and social fields should become familiar and should apply Lean concepts, which lay at the basis of production managements and which means survival in a global market.

d) Categories of users The top and medium level managers – general manager, deputy manager, sales

manager, human resources, marketing consultants, area managers in SME with businesses in production, services, retail and distribution, consultants, entrepreneurs, specialized personnel in the financial field, employees.

e) Details on the organisation who created the module The National Council of Small and Medium Sized Private Enterprises of Romania

(CNIPMMR) with headquarters in Bucharest, 1-3 Valter Mărăcineanu St., 1st Entrance, 1st floor, sector 1, Postal code 010155, is a confederation of associations of SMEs (employers’ association representative at national level - www.cnipmmr.ro). One of the missions of our organization is to provide professional services, which should lead to an improvement in the activity of small and medium sized enterprises of Romania.

Taking into consideration the extensive experience of cooperation with entrepreneurs and based on the knowledge of the business environment of Romania, CNIPMMR, through the Project Department, makes available to SMEs and SME associations, in addition to support services, such as facilitation of information and assistance regarding irredeemable financing sources, other financing access services and training and vocational services.

As lifelong learning represents a prerequisite tool without which one cannot keep up with the new challenges and requirements of the environment in which every organization carries out its business, the objective of these vocational and training services is the lifelong learning and improvement of the employees:

Development of business skills of the SME personnel with a view to the adjustment to the global market and to Romania’s accession to EU;

Improvement of the economic and technical performances of SMEs by increasing the vocational training of the personnel;

Increase of the number of successful entrepreneurs.

The vocational training services consist of a series of training modules authorized by the National Council for Adult Vocational Training (CNFPA), which enables us to issue diplomas/certificates recognized by the Ministry of Labour, Social Solidarity and Family and by the Ministry of Education and Research. The course offer consists of: Project Management, SME Management (course consisting of 7 modules specialized in:

http://www.cnipmmr.ro/


14/44

PRODUCTIVITY AND INVESTMENT MANAGEMENT, PROCUREMENT MANAGER, FINANCIAL MANAGEMENT FOR MANAGERS IN NON-FINANCIAL SECTORS, MANAGEMENT OF THE PRODUCTION PROCESS, CHANGE MANAGEMENT, RISK MANAGEMENT, ENTERPRISE RESOURCES MANAGEMENT), NEGOTIATIONS – TECHNIQUES AND PROCEDURES OF MANAGERIAL AND ORGANIZATIONAL COMMUNICATION, PROBLEM SOLVING WITH TRIZ METHODOLOGY.

Other courses offered by CNIPMMR refer to: Techniques for Finding and Keeping a Job, Launching Income Generating Businesses, Development of the Entrepreneurship, Business Plan and Company Activity Strategy, Social Responsibility of SMEs

MODULE CONTENT CHAPTER 1: METHODS FOR GATHERING AND ANALYZING THE DATA NECESSARY TO CUT COSTS

Lean Manufacturing is a systematic approach to identifying and eliminating waste (non value-added-activities) through continuous improvement of the production flux of the product based on client’s demand, pursuing perfection. (The MEP Lean Network).

Lean production is a time-based philosophy. By reducing production time new products can be introduced faster on the market, as well as shorter time between the expenditure and collection of money (collection of the cash flow).

Learning objectives: Identifying waste / waste causes

Lean evaluation / Lean measurements

Becoming aware of the current situation of the value stream and of the analysis methods for cutting costs

1.1. WASTE Waste means any element that raises the product cost, without adding value for the

customer. Waste can be caused by many factors, such as: machinery location, excessive setup time, uncompetitive production process, poor preventive maintenance, uncontrolled work methods, lack of personnel training, boredom, production planning, lack of organization at the workplace, lack of quality and trust in suppliers, lack of concern (responsibility), transmitting faulty items to the production flow, lack of communication of improvements, overproduction, large stocks, conveyance/transportation, non-value added processes, waiting time, counting, etc..

Lean Manufacturing is a system that imposes 7 types of waste:

1. Overproduction: producing more, sooner, faster than required by the next process.

2. Transportation: moving the product from where it was produced to where it is necessary. The distance represents a waste.

3. Reprocessing: remaking a faulty product. Materials, manpower, machinery used to remove flaws raise the total cost of the product.

4. Movement: every movement of individuals or machineries that do not add value to the product.

5. Waiting: when individuals and machineries are inactive, waiting for the previous process to be completed.

6. Inventories: products that cannot be consumed immediately. The inventory is a necessary evil. Inventories should be in small quantities; therefore an alternative method should be selected to minimize inventories. Inventories conceal the reality and determine managers to make wrong decisions.

7. Processing works which is not necessary.


15/44

In any enterprise, three types of activities can be identified:

Value-adding activities (VA) – are those activities which, in the eye of the final consumer, make a product or a service more valuable;

Non-value adding activities (NVA) – are those activities which, in final consumer’s perspective, don’t make a product or a service more valuable. Nonetheless, not all non-value adding activities can be eliminated; they can be divided into:

o non-value adding activities, some of which are indispensable and others necessary to certain extent – are those activities which, from final consumer’s perspective, don’t add value to product or service, but which are necessary (invoicing, inspection, work safety actions, etc.).

o non-value adding activities that are not necessary in the current conditions.

In the case of a physical product (production or logistic flow), the ration between the rates corresponding to the three types of activities and the duration of overall production cycle, within a regular company (but not an international one), is of approximately: 5% value-adding activity, 60% non-value adding activity and 35% necessary but non-value adding activity.

In the case of an informational environment (e.g.. administrative office, distribution process, data processing), the ratio between the rates corresponding to the three types of activities and the duration of the overall production cycles, within a regular company (but not an international one), is of approximately: 1% value-adding activity, 49% non-value adding activity and 50% necessary, but non-value adding activity.

1.2. LEAN ASSESSMENT In order to find out whether your company is Lean or if you want to find out how “Lean”

you are, you must find answers to the questions “Where are you now”” and “Where do you want to go?”. In other works, you should visualize the current situation, with its strengths and the weaknesses that must be mended. Then decide whether to adopt an improvement cycle, a quick and accurate action plan, flexible in time, to accomplish the objectives set.

As a Lean assessment tool, you can use an assessment questionnaire, then trace the “radar chart”, highlighting the current situation and the desired situation.

The assessment questionnaire includes a list of aspects, for the description of which questions on categories of interests are asked, then a score is granted for each answer that is adequate to the situation and a total is identified, representing a certain ranking, on a scale from 0 to 100%. Assessed areas refer to:

Inventories – e.g.: size of the inventory of finished product, for unfinished production, materials, speed of turnover, etc.

Team – e.g.: type of organization, waging system, work safety system, turnover of labour, etc.

Processes – e.g.: how many large machineries or single-process areas are there (through which more than 50% of the product must pass); types of processes, batch sizes, production changeover time, product variety, etc.

Maintenance – e.g.: registration / availability of data on equipment (operating, repairs history and spare parts, manuals and spare parts), types of maintenance used, frequency of malfunctions, existence of a preventive intervention plan, etc.

Layout and material handling – e.g..: the amount of the total floor space used to place and handle materials, the amount of floor space of an enterprise, organized according to functional criteria or cells / process types, degree of efficiency in general


16/44

administration, appearance of the enterprise, cleanness, etc.

Suppliers – e.g.: average number of suppliers for each raw material or purchased material, replenishment rate, specific procurement clauses; percentage of the raw material and products purchased from skilled suppliers, and which do not require qualitative acceptance, etc.

Setup– e.g..: the general average setup time (in minutes) for the most importance piece of equipment, the percentage of operators trained to apply quick setup techniques, existence of a work procedure, etc.

Quality – e.g..: percentage of the total employees who were trained to apply statistical control techniques, percentage of statistically controlled operations, general rate of non-compliances, etc.

Scheduling / control – e.g..: percentage of the production run that “flows” directly from one operation to the next (with no intermediate warehousing), degree of compliance with delivery terms, etc.

Visual management – e.g.: notice boards in the enterprise, available posted data, rate of information update, etc.

An example of Index table for scores obtained in such an assessment:

SECTION POINTS No. of

questions / section

AVERAGE % STRATEGIC

IMPACT FACTOR

SECTION TARGET

1.0 Inventory/stocks 0 3 0.00 0% 11.0% 99.0%

2.0 Team 0 6 0.00 0% 9.5% 85.5%

3.0 Processes 0 6 0.00 0% 11.0% 99.0%

4.0 Maintenance 0 5 0.00 0% 8.0% 72.0%

5.0 Layout and material handling 0 5 0.00 0% 11.1% 100.0%

6.0 Suppliers 0 5 0.00 0% 9.0% 81.0%

7.0 Setup 0 3 0.00 0% 11.1% 100.0%

8.0 Quality 0 4 0.00 0% 10.0% 90.0%

9.0 Scheduling / control 0 3 0.00 0% 9.0% 81.0%

10.0 Visual mgmt 0 3 0.00 0% 10.0% 90.0%

Company: xxx SUM: 100%

Date: 01/01/2005 MAX: 11.1%

The strategic impact factor allows each enterprise to set the priority areas, with weights by which the scores obtained are multiplied, so that results could be compared in the Radar chart, which illustrates the situation and objectives and shows the priority action fields.

Here is an example of radar chart, according to the score obtained after analyzing the categories illustrated above:


17/44

Lean Profile

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1.0 Inventory

2.0 Team

3.0 Process

4.0 Maintenance

5.0 Layout

6.0 Suppliers

7.0 Setup

8.0 Quality

9.0 Scheduling

10.0 Visual mgmt

TARGET ACTUAL The assessment questionnaire should be adapted to the type of company / branch, as

the “Lean” level starts with general questions, adjusted to the needs of the company, branch, the important factors of the score list being adaptable to needs.

Lean assessment is carried out taking into account also the socio-technical system, that is elements correlated internally (internal system) with the environment. Lean assessment is carried out in order to accomplish a common objective. For the purpose of the Lean assessment, input into the internal system, the environment and expected output are taken into consideration. Input into the internal system is defined as work, materials, capital, energy, information, which are the correlations, influences and continuous interactions of the internal system with the continuously changing environment. The environment is represented by the society, the natural environment, market, technology, government, etc. Expected outputs can be products / services, but also undesirable outputs such as pollution, loss, waste.

Lean assessment can be carried out by means of other measurements and analyses, upon which data are gathered and analyzed, feedback for control of problems is immediately obtained, and actions are taken based on data on improvement of performances. The biggest problem in many organizations is the lack of action based on the data gathered, although they are gathered and reported.

1.3. LEAN INDICATORS There are four key elements in the production environment: productivity, quality,

safety and costs. The typical indicators for Lean production refer to these four elements and consist of determining the time from reception of an order until its delivery, speed of turnover, duration until the first product of a certain kind is obtained, the rate of on-time deliveries, overall equipment efficiency (OEE).

Productivity

Overall productivity is the ratio between the quantity of products (output) made in a system during a certain period and with a quantity of resources (input) used within the same period of time. Total productivity is the quantitative measure for the results obtained pursuant to the use of those respective resources. Total output / Total input.

Partial productivity is the ratio between outputs and inputs specific to distinctive factors. Thus, it can be determined:

Labour productivity: total output / man-hour used

Materials productivity: total output / materials consumed

Capital productivity: total output / cost of capital

Energy productivity: total output / consumption of energy


18/44

The difference between productivity, efficiency and effectiveness is the following:

o Efficiency: How well is the input used?

o Effectiveness: How good are the results?

o Productivity: Out-put-input ratio

Productivity should reflect the capacity to produce what it is necessary, when it is necessary, where it is necessary, in the volume and percentage necessary, in the most financially efficient manner. It is very important that the Input factor, which should eliminate the non-productive time and the Kanban waiting time (a long Kanban waiting time shows an unbalance between processes).

In accordance with the Lean principle, the enhancement of the value created should be made with the same, or even less resources.

Quality Productive performance is determined in many cases by machineries / equipment or

by human intervention: raw materials, inspections, interventions in case of malfunctions, etc.

The REAL performance of piece of equipment can be determined by several method, but a sage and accurate estimation is given by the overall equipment effectiveness (OEE), according to which, specific TPM (Total Productive Maintenance) methods are applied.

When calculating the OEE, it should be taken into consideration the availability (how much per cent of the overall effectiveness is availability), process efficiency (how much per cent of the overall equipment effectiveness is the process efficiency) and percentage of good products (how much per cent of the overall equipment effectiveness is good products).

Availability: is diminished because of the time during which the equipment did not operate, although it could have been available – operating time vs. loading time.

Availability = meLoading titimeOperating

x 100

Useful estimations:

Loading time = (Usual works hours + extra hours) – (scheduled idle time + over-capacity)

Note: It should be performed a critical review of the idle time scheduled!

Operating time = Loading time – idle time

Note: Consideration should be given to malfunctions, lack of power, lack of personnel, lack or raw materials, lack of tools, setups, cleaning, …..

Process efficiency (performance): possible causes for which the equipment does not function, and it is not obtained a sufficient production, can be due to inactivity caused by need for personnel, interference with other machineries, low operating speed, adjustments, tests, small interruptions, training hours, etc.

Efficiency = timeOperating

productsofnoxproducttimecycleTeoretical ./ x 100

Note: You should know how the work hours are used and what is the cycle time for a product or the average cycle time:

Percentage of good products (quality): Net operating time (functioning) = net running time – time lost due to malfunctions

Percentage of good products = productsofNo

scrapsofNoproductsofNo.

.. − x 100


19/44

OEE – overall equipment effectiveness Real performance of a piece of equipment or the synthetic efficiency for a work load

of 8 hours is given by the formula:

AD

= AB

xBC

xCD

, where:

- A is the loading time

- B is the operating time or the gross running time

- C is the net operating time

- D is the useful operating time:

AB

= availability; BC

= efficiency; CD

= quality

The conclusion reached by the Japanese Lean specialists after carrying out these measurements is that "Equipment in our factories is used at half of their capacity. There is no reason that yours should be different". (Yamashina 1989)

Example of OEE calculation

A. Daily production time = 60 min. x 8 hours = 480 min.

B. Daily schedule idle time (starting manufacturing, scheduled maintenances, interruptions for meetings) = 20 min.

C. Daily loading time = A – B = 460 min.

D. Downtime loss (if it lasted 20 min., preparation 20 min., setup 20 min.) = 60 min.

E. Daily operating time = C – D = 400 min.

G. Daily production = 400 items

H. Good pieces factor = 98%

I. Theoretical cycle time = 0,5 min./piece

J. Actual cycle time = 0,8 min./piece

Based on these data, the following results are obtained:

F. Actual run rate = J x G = 0,8 x 400 = 320 min.

T. Availability E / C x 100 = 400/460 x 100 = 87%

M. Speed rate = I / J x 100 = 0,5/0,8 x 100 = 62,5%

N. Net operating rate = F / E x 100 = (0,8 x 400)/400 x 100 = 80%

L. Process efficiency= M x N x 100 = 0,625 x 0,800 x 100 = 50%

OEE = Overall plant productivity = T x L x H x 100 = 0,87 x 0,50 x 0,98 x 100 = 42,6%

On-time delivery measures the capacity of the value stream to ship products to customer at the moment requested by the customer. The indicators that can be used are:

Time between the input of raw materials and output of products: is determined by the quantity of inventory on the value stream, expressed in days or running hours or by the overall inventory quantity referred to product shipment rate, speed of turnover.

Quality indicators: rate of good pieces, time lapsed until the first good piece is obtained.


20/44

Not taken into consideration are the reprocessed products, and the evaluation of these indicators is carried out in various process phases, not just at the end.

1.4. VSM - VALUE STREAM MAP The analysis of the current situation is carried out in order to obtain a clear ad common

image of the “target system” of the unit under analysis, referred to its “current state” and to provide input for planning change required to accomplish the objectives planned.

The purpose of the analysis is to define the existence of the business in which we are involved, why do we exist, what do we do, how do we act, the way in which we add value to business and customers, while accomplishing our objective. In order to become familiar with the current situation, a set of tools is used.

Examples of methods of analysis of the current situation:

Assessments at organizational level: tools used, Baldrige or EFQM criteria for excellence in performances, SWOT analysis, internal strengths and weaknesses, opportunities and external threats.

Assessment of the production system: focus on the use of team practices by the employees in the production / service field.

Assessment of the management: 360 degree assessment of management practices.

Input/output analysis refers to:

▫ Suppliers: entities (groups, functions or organizations) which provide input to the team.

▫ Input: materials, equipment, information, individuals, financial resources, etc. needed by the team to carry out processes.

▫ Value added processes: processes that the team carries out in order to transform input into output – a process adding value to input by transforming it or by using it to produce something new.

Examples: repairing of a product, delivery of products, processing a customer’s order, preparing an annual statement, making a product, preparing and organizing a training course, identifying training necessities, establishing design quotas, mail delivery etc.

▫ Output: products or services created by the team; what is handed over to the customer.

▫ Customers: individual or group who receives and uses the output made by the team. Regardless whether it is an internal or external customer, it uses the output provided by the team Internal customer – product or services user (s) within the organization. External customer – user of a global product or service of the organization, from outside that organization (usually referred to as “final user” or “consumer”).

Value analysis: quantifies various types of waste. It is used to quantify types of waste such as those caused by overproduction, waiting, transport, processes that add additional costs, inventories, various unnecessary conveyances (movements), scraps.

The method can be applied successfully to productive (manufacturing) environment, to analyze production process performances, as well as to non-productive environments, to analyze overheads (OVA - Overhead Value Analysis), or time management.

Work Sampling (the snapshot observation method): it is applied in order to obtain a snapshot of the current situation, but also because “You cannot manage what you do not measure”, in accordance with the theory formulated by Prof. Em. Carl R.


21/44

Lindenmeyer.

Here are several principles on which this method is based:

▫ The method entails a non-continuous observation, that is sampling of observation situations. Random, short observations are made within a precise period of time, on previously established routs, which should not be unique.

▫ For the measurements to be as precise as possible (with an error rate as low as possible), the personnel should be informed, not only the person directly involved in making observations. .

The method can be applied by carrying out the following steps:

1. STEP 1: it is made a preliminary investigation, to determine the values to be analyzed.

For example, in the case of a warehouse, it should be taken into consideration the handling of goods, the time necessary to enter data into computers, absence of various members of the personnel during the work day, for various reasons, the time during which nothing is made, various other elements, function of what we want to measure.

2. STEP 2: it is conceived a data gathering and reporting form, which should include observation lines and columns for the elements observed.

Here is an example of observation sheet referred to as "snapshot observation sheet":

Object: _____________________ Date: ______________

Moment A B C D E F G

T1

T2

T3

T4

Total

%

3. STEP 3: it is determined the number of observations, function of the degree of precision accepted.

The number of observations function of the degree of precision expected is determined with the formula:

2

)100.(.4a

ppn −=

Where:

n = number of necessary observations

p = the highest rate of testing observation

a = the precision expected (error)

The factor “4” corresponds to a degree of trust of 0,95.

If we want another limit of the degree of trust, we should use the formula:

)1(

2

qqNv

Z −= ⎟⎠⎞

⎜⎝⎛ α

Where: α is the degree of precision, v is the admissible error margin, q is the estimated


22/44

value.

4. STEP 4: the duration of snapshot observations is determined.

If the duration is too short, it is not representative and therefore, it must be extended. The pace at which observations are made (how many observations are made in a day and at what interval) is established according to the daily number of possible observations and the total number of necessary observations. For example, for a number of 20 observations that can be made within a day (function of the area to be covered, the duration of the route, the distance between the locations included in the route) and a number of 400 observations necessary to reach an acceptable precision, 20 days are required to provide them.

5. STEP 5: determination of the moments of random observations (which should lead to results free from systematic deviation). It can be used any software that generates random numbers or tables of random numbers.

For example, for a 10 min. tour (route), respectively 6 tours that can be made in one hour, it means that 48 tours can be made in an 8 hour shift (08.00-16.00). Therefore, the work day is divided into 48 intervals, numbered from 1 to 48, it is drawn a table with 50 random numbers and these numbers are transformed into hours/min. In order to establish the moments (time) at which the observation tour can begin, the moments thus identified are entered chronologically in the reporting form and then the tours that should be made during the planned breaks are eliminated.

6. STEP 6: the actual observations are made.

Observations are made in “snapshot” manner, at pre-determined moments, varying the routes (preestablished variants) as much as possible, in order to eliminate to the maximum extent the risk of entering into certain easily noticeable behavioural patters. After each observation, a line of the “snapshot observation sheet” is filled in. At the end of the observations period, the rate for the element traced is calculated with the formula:

100xBAC i

i =

where,

Ci = rate of the activity i, i = 1 ... n, n – number of observations

Ai = number of observations (appearances) for activity i

B = total number of observations (for all activities)

7. STEP 7: it is calculated the precision (error) with which observations were made.

If there were not sufficient observations, and a low accuracy is not admissible, additional observations should be made.

nppa )100.(.2 −

=

where: a = current precision

p = current rate (of the activities studied)

n = number of observations

8. STEP 8: results analysis

)1(2

ppezn −⎟⎠⎞

⎜⎝⎛=


23/44

where:

n = number of observations

z = coefficient of plausible probability (degree of trust) that the result estimated (p = weight of the element studied) should be within the limits of an admissible error; to be taken from special tables.

e = relative admissible error Z =

2,58 for a precision of 99%


2,00 for a precision of 95,5%

Z =




Z =



Value stream mapping is carried out with the help of the results obtained by applying one or all the analysis tools previously mentioned (or other specific tools). The value stream map includes all actions (both value added, as well as non-value added) currently performed to make the product run through the main specific technological processes.

In order to map the value stream, you should take into consideration the material flow (external procurement sources, inventories, production plan made according to the estimated market demand, production process, means of transportation, working personnel) and the information flow (manual and electronic information flows) that include all elements concurring at the accomplishment of a production processes in a company.

The stream value map is a visual representation of the value stream, with all aspects clearly illustrated.

In the following, it is presented a sample:

Then, all elements represented in the value stream map are associated with durations

– production cycle time, inventory consumption time, setup time, etc., so that by the end we should be able to determine the overall time necessary for a product to run through the flow


24/44

described.

When mapping the value stream, a series of symbols are used, such as: C/T=1sec

Tuesday C/O=1hour I Uptime=85% + Thursday Michigan 200 T 4600L 27,600 sec. av. Steel Co. 2400R EPE=2weeks

Delivery by truck Inventory Process External sources Data box Change

dFinished goods to customers

Kaizen “Lightening”

Pull arrow Operator Supermarket

S OXOXWeek. S

Safety inventory

Electronic information

flow

Plan BoxHaijunka Manual information

flow

CHAPTER 2: METHODS OF CUTTING COSTS BY REORGANIZING PRODUCTION PROCESSES 2.1. JUST IN TIME (JIT) PRODUCTION.

JIT is production compliant with customer’s request: what it is necessary, when it is necessary and in what quantity is necessary. JIT is a manufacturing philosophy of great significance for industrial companies, due to the short response time (“flexibility”), proliferation on new market shares and products, creation of short product lifecycles.

JIT = Philosophy + method + workers “who think”

Philosophy Methodology

Zero defects Overall concern for quality

Zero malfunctions Total Preventive Maintenance

Zero inventories KANBAN

Zero setup time SMED – Single Minute Exchange of Die

Zero material handling Compact layout

Zero production time Competitive engineering

The JIT strategy consists of constantly reducing the time necessary to transform customer order into actual deliveries, and it is concept developed within the Toyota Production System.

JIT consequences in a workshop consist of visual control of the line, reduced consumption of materials, production planning according to a mix series of products, cell layout, item standardization.

B B

Production Kanban

Feeding Kanban

Signalling Kanban

Kanban Workstation Buffer


25/44

Just In Time production has two basic principles: continuous production flow and the “Pull” system.

Continuous production flow is necessary because batch production is too slow to answer the takt time requested by the customer, and lead to excessive inventories, which prevent the detection in due time of the non-compliances occurred during the production process .

JIT or processing in continuous unitary flow (item by item), is made in accordance with the following principles:

Production is structured as a synchronized chain in which each individual has a balanced work volume, as referred to his/her supplier and customer in this chain.

All individuals finish work at the same time. The product is moved downstream, in a synchronized manner.

Each individual has the power to stop the production process, whenever he/she notices a defect.

The takt time sets the production pace so that it matches the sales pace.

The total operating time (takt time) is the work time (total of seconds available in a working day) referred to the volume of necessary products (daily production demand). The production pace is given by the Cycle time, which is the actual time necessary for a worker to complete a cycle within his/her process.

In order to balance the cycle times of various processes, it is used a method called Heijunka, which focuses on levelling production. Production cells can be created to fit a very irregular demand. In this case, a buffer of finished products is used to level the production plan running.

Manufacturing cells usually entail workstations placed close to each other, arranged in U-shapes, serviced by multiple-skilled workers, with flexible processes – a product or a sub-assembly can be produced, multiple ranges of products. Cells can have workstations inter-related with other work cells or sub-cells, which means that cells become flexible (Shojinka – flexible production cells), thus, a wide variety of products can be made with basic technology and unspecialized machineries.

In cells, the load per worker is flexible, and the number of workers can be modified in order to adapt the capacity to the necessary of products. Equipment should be flexible (multifunctional machineries).

Amongst the benefits of using production cells, we can mention:

It is allowed the flow of a single item, due to the improvement of the first run of the product (enhanced quality due to a quick feedback)

It helps obtaining a better Kanban

It reduces the need to move items due to an improvement of the cycle time

It increases productivity due to unit cost savings

It signals problems, so that the causes should be quickly and completely removed

It allows a better use of the floor space.

Within work cells, teams have increased powers and are self-managed. Supervisors do not manage the team, but they rather coach, train and motivate it. Teams meet on daily for 10 – 15 minutes and review the production objectives for that respective day, review works tasks and assign to team members, special instructions, quality and production problems, what are the emergency plans in case of non-attendance, reasons for early leaving of personnel., schedules of extra hours and partial substitutions, daily update of the weekly situation, major events, such as customer visits. In other words, advanced teams are involved in member selection criteria, in implementation of the production process, in


26/44

evaluating the employees and performance-related problems.

“Push” production system is a traditional production system, in which the product is “pushed” through the production process, in batches large enough to satisfy current and future demands and to compensate for problems that might occur during the process. The Push System starts with the kick-off of the production based on a plant which is prepared based on existing orders, but also on forecasted ones (from customers). The specific way of thinking in this situation is “We make it, they (the management) will sell it eventually!”.

The market demands determined for some time now, the emergence of a “Pull” production system, in which downstream processes pull from upstream what they need and when they need it. Upstream processes then make up the materials consumed. The product can be pulled through the production system at the takt time, which is at the downstream limit of the entire process. Finished products are made by levelling production with the help of tactical buffer inventories collected in a Kanban system of starting processing processes, a system that offers control over the entire unfinished production inventory existing on the flow.

The “Pull system” starts when the customer purchases products, in case of repeated orders or when the customer places an order for a new product. This system focuses on the idea “If they demand it, we shall produce it”.

The “pull” system allows small batch production. Thus, inventories are reduced by minimizing the number of Kanban card on the flow and the production enters a continuous flow, with continuous movement of small batches of material or of the production obtained.

Small batch production has many advantages, because it reduces inventories, requires less floor space, hence smaller capital investments, brings processes closer to each other, it makes easier to detect quality problems, and it creates interdependency between processes.

Other advantages are given by the reduction of the setup time. Small batches require shorter setup, thus the setup times can be reduced from hours to minutes. For this purpose, Shingo developed the SMED (Single Minute Exchange of Dies) system, in which tool changeovers are made in less than 10 minutes.

According to the SMED principles, in order to cut setup time it is required:

To separate the internal setup from the external one.

To transform the internal setup into external (off line).

To rationalize all setup aspects.

To carry out setup activities simultaneously, until they are completely removed.

Here are several setup reduction techniques: presetting the setups required, use of quick fastening devices, use of locks, prevent non-alignments, eliminate certain tools, interchangeable sets, easier movements, etc.

Small batch production requires mix series of products. JIT allows simultaneous production or assembly or a series of distinctive product using the same production equipment. This is known as production in mixed series of products such as: A A B A A C A A B A A B A A C A A B A A C A B, or other similar.

The result is the repetitive flow production, against the traditional, large batch production. The production in mixed series requires smaller batches and shorter setups.

Launch of production plans the manufacture of the same mixed series of products, every day, during a certain period of time, or different sequences of mixed series. Machine load can be changed from one month to another, but it shall remain the same each day of a certain period of time, which allows simultaneously meeting several orders and reducing the inventories of finished products.

Here are several application principles for the production in mixed series:


27/44

Redundancy of orders should present certain amount of regularity. This type of production is specific only to repetitive orders.

The method called „generic Kanban” controls variations in order volume for the mixed-mode production. The generic Kanban represents a fixed amount of work (e.g.. 8 hours) which is used to achieve the daily plan of mixed series that must be produced.

The system must be dimensioned so that to respond automatically to volume variations, by adjusting the number and rate of Kanban cards.

2.2. KANBAN SYSTEMS. Kanban is the generic name that refers to a signalling system that uses cards through

which it transmits information regarding the necessity to replenish a workstation. The Kanban system correlates all operations on the production flow by means of cards, signals, buffers. For a good functioning of the Kanban system, the card signalling system is used simultaneously with a Kanban area or other methods of the same category.

There are two main functional systems for Kanban:

1. The system with a single card: Production Card

2. The system with two cards: Transportation Card and Production Card.

The alternative forms of the Kanban functional system, which can be used according to the particulars of the production process are:

Two-bin: is the method of using a bin as a buffer in the production process and a bin for transportation, While the buffer is being consumed, the empty bin is transported to/from the upstream workstation, for replenishment with items for the next consumption. In case of larger productions or unitary flows, this method offers the “Kanban area” alternative, which means visual delimitation of the floor space in which the product can be placed. As a convention, if the Kanban area is not empty, the upstream workstation cannot be replenished.

CONWIP (Constant Work in Process): represents the constant quantity of products on the line, for a single technological line, regardless the mixes series of products (production is levelled, the quantity of product on the line does not vary).

“Bucket Brigade”: is a self-organized team work method. Tasks are divided (approximately) proportionally along a line that is almost 100% manual, usually (assembly, packaging, delivery of orders), with a number of “stops” (workstations) exceeding that of the team workers. Workers move along the line and carry out a part of the tasks in a single way / forward. When the last worker finishes its task, he/she moves upstream and takes over the tasks of his/her predecessor; in his/her turn, the latter slides upstream and does the same thing, and so on. It is not allowed to skip a workstation and workers are lined up from the slowest (the beginning of the line) to the fastest (the end of the line).

The advantages of using bucket brigades come from the fact that it represents a very simple and self-organized way of dividing work in a team in which members’ performances are relatively distinctive. Lines are automatically balanced without loosing pace and the maximum productivity is obtained, with a minimum unfinished production, with no jams on the line. Thus, it is obtained maximum production, at the level specific to the fastest operator (the last one on the line). By comparison with areas of normal assembly, due to the better production rate, this method determines an increase in productivity by 30%!


28/44

The method is applicable especially to assembly lines and to large volume goods (as

orders are received during the entire process).

The method was created based on the organization model observed at the level of the work behaviour in bees and ants. (Bartholdi, 1995)

Generic Kanban: controls variations in the volume of orders for mixed-mode production. Generic Kanban is the fixed quantity of work (e.g. 8 hours) used to achieve the daily plan of mixed series that must be produced.

Kanban signalling systems are quite complex processes, which require sustained efforts to dimension and verify the solutions selected by testing and repeated improvements. This module is an overview of the main concepts on which Lean Manufacturing, as production cost cutting method, is based; in order to perfect these methods, you should contact the Association of ROMANIAN LEAN EXPERTS, (www.lean.ro).

Example of Kanban calculation model

How many Kanban cards are necessary in one cycle?

Number of Kanban cards=CQ

SSPTWTAD )1)(( ++

Where,

AD = Average daily demand

WT = waiting time by the workstation

PT = processing cycle time

CQ = container quantity

SS = safety stock

Example of calculation

Average demand = 1000 pieces / day

Processing time = waiting time = 1 hour (= 1 hour / 8 hours = 0,125 days)

Container volume = 50 pieces

Safety stock = 0 pieces

Number of cards = [1000 (0.125 + 0.125) (1 + 0)] / 50 = 250 / 50 = 5

Example of setting the minimum batch level

Hypotheses:

A cupping press should process 3 marks in 2 shifts daily. From mark 1, 150 units per day must be produced, mark 2 - 270 units per day, mark 3 - 100 unit per day. The processing cycle time = 1’ per piece. The production changeover time (setup) for each mark is of 45 min. each. Kanban measure = 10 for each type.

http://www.lean.ro/


29/44

Calculation:

Available setup time = working day (16h) – total operating time (520 min.) = 960 – 520 =440 min.

Max. no. of daily setups = available setup (440 min.)/(45 min.) = 9.8 setups/day

If each day 3 types of marks must be produced, then the max. no. of setups available each day = 9.8/3 = 3.26 setups

Batch size for mark1 = B = D/S = 150/3.26 = 46 pieces (=> 5 kanban)

Batch size for mark 2 = B = D/S = 270/3.26 = 83 pieces (=> 9 kanban)

Batch size for mark 3 = B = D/S = 100/3.26 = 31 pieces (=> 3 kanban)

These numbers should be rounded off to a kanban unit, by adding or subtracting, according to experience and level of discipline in the enterprise.

2.3. JIDOKA JIDOKA means quality incorporated. The method consists of automatic stopping a line

when errors are detected.

Here are several grounds taken into consideration when applying this method: machineries are not that intelligent to be able to work and stop by themselves; people are served by machineries, not the other way around; quality is incorporated, not inspected; efficiency – human efforts are separated from machine work, people are free to carry out the value adding work.

2.4. POKA YOKE POKA YOKE is a method used to prevent occurrence of accidental errors in the

manufacturing process. The method is used to detect errors, to prevent errors and it represents a way of obtaining zero defects

2.5. SINGLE MINUTE EXCHANGE OF DIE (SMED). Is an industrial engineering method to reduce setup time. It is based on the SMED

(Single Minute Exchange of Die) method, invented by the Japanese engineer Shigeo Shingo.

SMED is an industrial strategy which is currently applied in many developed companies. Due to SMED, position on the marked is strengthened, by continuously improving quality, efficiency and increasing flexibility. Flexibility, or response time to changes in the market demand, is characterized by flexibility in innovation, flexibility of the product mix, volume flexibility.

The obstacles in the way of production flow, which, in order to be modern and flexible should "flow", can be: batch size, unbalanced processes, uncontrolled processes, errors- defects in products, lack of multifunctional personnel, lack or raw materials.

The basic methodology in cutting the setup time is characterized by 4 basic activities: preparation for setup, change of tools / parts, setup / adjustment, readjustment:

Type of activity Details

Preparation for setup

Bringing and warehousing components and tools, cleaning the machinery, transportation from point A to point B during the setup, administrative aspects (sheets to fill in, authorizations), maintaining tools, etc.

Change of tools / parts

Technical activities, including the removal of a part from a machine and the mounting of new part on the machinery (new parts necessary to manufacture a new products, as well as parts removed in order to carry


30/44

out other activities, and which afterwards are mounted again, such as protection housing).

Setup / adjustment

Changing machine parameters to the specific value, in accordance with the new specifications of the product (temperature, height, width, speed, etc.).

Re-adjustment All activities that must be carried out because the setup / adjustment was not adequate at the first operation (trail operations, fine tuning, control of test products, etc.). The quality of the basic setup / adjustment activity can determine the number of re-adjustment activities necessary.

Perturbations / problems

Represents all activities occurring during setup, but which are not considered “normal” setup activities. They are activities which are not normally included in setup instructions, such as: searching for tools, technical errors, activities that must be repeated because of incorrect sequences of activities (e.g. the operator forgot a part and must dismount and remount a component.

When applying SMED, it should be taken into consideration the mixed (existing) phase, the separation phase (identifies and separates activities that must be carried out when the machine is idle / operates – online / offline), transfer phase (converting activities carried out when the machinery is offline into activities that can be carried out when the machinery is online) and the improved phase (cutting activities that must be carried out when the machinery is offline).

Mix (existent) phase is the phase in which the following situations may occur:

The process is stopped during the entire setup time

There are no setup instructions and various setup methods are used

There is not distinction between online / offline

Tools and accessories are not maintained, inspected, prepared and warehoused adequately

Setup is made by trials, reason for which errors occur

Several readjustments are made for trail products (setup operations).

Phase of separation of online from offline is applied after video / photo records are made, it is analyzed the setup, various activities, movements, parties involved, accessories, etc.; all activities are identified and divided into ONLINE activities (internal – made while the machinery is idle) and OFFLINE activities (external –made while the machinery is operating). Checklists are made for the preparation phase, as well as for all tools, accessories, parts necessary for the machinery during the setup operation. Then, each identified activity is analyzed by asking the question: “Must the machinery be idle for this activity or not?”

Transfer phase (transforms Online activities into Offline) consists of applying the solutions found upon studying the checklists regarding activities, parties, accessories, etc., standardizing and homogenization of activities, assigning personnel when the time comes. Other necessary actions: determining the technical adjustments before starting the setup by mounting accessories, brackets and devices, by assembling and previously adjusting machinery components, using modular machinery components.

Improvement phase (Online / Offline reduction) consists of minimizing the two types of activities (online and offline). These activities can be minimized by

Eliminating activities by modifying the technical blueprints of the machinery / product / dies / devices, standardizing components, etc.

Using a functioning (quick) gripping

Using electrical and pneumatic tools


31/44

Using universal machinery parts

Using hydraulic, pneumatic or electromagnetic gripping

Using adjustment brackets such as guides, templates, stops, digital reading, verniers, step-by-step engines

Improving measurement and calibration methods, by using product control methods

Eliminating trial operations

Using simultaneous work

Using traditional organizational techniques.

Offline activities can be minimized by:

Carrying out setup kits

Improving transportation and storage of machinery sub-assemblies and tools

Using traditional engineering techniques

The phase is considered improved when:

Online / Offline activities are minimized

Hydraulic, pneumatic and magnetic gripping devices had been introduced

Auxiliary adjustment devices are available.

There are setup kits, the standard setup method is established, as well as the setup instructions

Setup is simplified; special skills, such as the requirements that the setup be carried out by operators, are no longer necessary

Activities can be carried out in parallel

Trail and re-adjustment operations are carried out immediately, the standard setup time being short

The effects of SMED improvement are materialized in reduction of the product (series) changeover time, short term productivity, increased machinery capacity, elimination or setup errors, improvement of quality and safety, increased flexibility of material means, but also of operators, simplification of systems, models .

“Make the same setup 3 times; if you obtain 3 times the same results, then there are no more problems; if you obtain only 2 positive results, the change the method.” (Shigeo SHINGO)

Consequences of applying SMED to a production system can be:

Cutting the setup time necessary and, accordingly, cutting the time necessary to pass from one mark to another

Improving the capability of the processing cycle of the first mark made (standardization of the first setup)

Improving repeatability of production changeover and setup operations

Meeting variable market demands, by ensuring several variants of the same product, even when the demand is for small quantities

Short innovation time, quick adaptability to new or modified products

Short and precise delivery time, high quality despite the frequent setups

Small or zero inventories

Lean Production: the customer pulls the products from the flow.


32/44

In order to apply SMED in an organization, it is required a downwards approach and management’s commitment, which should set the project goal: the desired setup time, the average setup performance to be achieved. The project team must be also created, including the production manager, product specialist, mechanical engineer, production supervisor, technical and maintenance personnel, machinery operators, machinery settler-ups.

2.6. STANDARDIZED WORK Standardized work reflects the best practices and represents the basis for continuous

improvement. Here are several thoughts of Henry Ford on work standardization:

“To standardize a method is to chose out of the many methods the best one, and use it. Standardization means nothing unless it means standardizing towards improvement”.

"Today’s standardization, instead of being a barricade against improvement, is the necessary foundation on which tomorrow’s improvement will be based".

"If you think of “standardization”, the best that you know today, but which is to be improved tomorrow – you get somewhere. But if you think of standards as restrictions, then progress stops.” Henry Ford, 1926, Today & Tomorrow

Reference documents necessary to implement the elements that lay at the basis of work standards shall be drafted for each operation / sequence of work operations, shall be posted at the workplace in visible places and shall be debated and developed together with workers.

2.7. TOTAL PRODUCTIVE MAINTENANCE (TPM) TPM (Total Productive Maintenance) is an approach structured for maintaining

manufacturing equipment and ensuring stability of the production process. Equipment maintenance according to a precise schedule shall allow it to function long periods of time without unplanned shut-down, fewer quality problems in the production process. This way, the conditions necessary for full exploitation of the Lean production (optimal rate production) are obtained.

The maintenance of the production process must be ensured in order to cut the costs caused by:

Waste generated by various unexpected breakdowns

Waste generated by setups and adjustments

Waste caused by inactivity and minor shut-downs

Quality flaws and reprocessing

Waste generated by low speed

Waste associated with the start of a new production process.

TPM means first hand maintenance carried out by operators. Cleaning also means inspecting screws, nuts, lubricating, filters, cracks, etc. When preparing the standard maintenance plan, it should be started with the 5 S, a method which is still approached. TPM includes preventive maintenance (scheduled on monthly, annual basis, on analyses of previous breakdowns / history data; in order to ensure it, spare parts should exist in warehouses) and predictive maintenance (which is carried out based on the control of working conditions – vibrations, oil analysis, noise and temperature measurement, maximizing equipment effectiveness - OEE).

2.8. 5 S AND VISUAL MANAGEMENT 5 S or visual factory – Andon is “the capacity to understand the status of a production

area within 5 minutes or less, through a simple observation, without using computers and without talking with anybody.”

5 S helps improving productivity, represents the basis for all improvements, supports


33/44

positive motivation of employees, it ensures a pleasant working environment, less quality problems, it improves company image.

5 S represent:

Japanese English Definition Example

Seiri Sorting and Filtering

Sorting and eliminating unnecessary elements

Throwing away scraps, waste

Seiton Systematized Storage

Clear arrangement and identification

Finding an object in maximum 30 seconds

Seiso Shine, cleaning Daily cleaning and inspection Individual cleaning responsibilities

Seiketsu Standardization Rules continuously communicated and observed

Transparent storage

Shitsuke Sustaining change

Motivation to maintain the level reached

5S applied daily

In order to implement the 5 S, it is required the preparation for application, initial audit, education, execution of the 5 S, improvement. 5 S is NOT an activity of several weeks; in order to give results, it is required a continuous implementation, during the entire life of the company, of the 5 principles: sorting, systematizing, shining, standardization and sustaining.

Preparation for application consists of defining the adequate culture for the company, designating the coordination group, raising management’s awareness, setting the goal and the duration of the project, assigning work areas and responsibilities. A pilot project should be developed, containing the implementation plan + available and necessary resources, setting a slogan to catch personnel’s attention, presenting results through notice boards.

Initial audit includes the audit sheet, assignment of the audit team, start-up level, objectives to be accomplished, taking pictures from a fixed spot.

Then, it is required training, education of all individuals involved, by using images of the organization. First improvement proposals should come from the public and should be put into writing, as well as all the questions and existing doubts. The pilot project implementation plan should be discussed with those who should put it into practice.

Execution of the 5 S: sorting, storage, shining, standardizing, sustaining, safety.

Sorting is a method of freeing floor space at the workplace and eliminating all unnecessary objects, such as schedules, test parts, drawings, old or broken tools, accessories, unused materials, etc. The sorting process has impact at the level of the way of thinking of the workplace, eliminating the syndrome “it works this way, too”.

Techniques used: Colour labelling unnecessary objects, according to the operations to be executed. Labelled objects are moved to a storage place, where it shall be assessed their usefulness for other workplaces. Unnecessary objects shall be returned to those who brought them, shall be warehoused, sold, given away or simply thrown away. “Garbage” areas shall be created.

Result obtained: less time necessary to search for parts and tools, increased safety, improvement of productivity and quality.

Storage means establishing locations (boundaries). The second step of the 5S refers to placing in order those objects that are necessary at the workplace, so that they should be easily found / identified, and in a logical order, to facilitate their use. Fixed locations, such as containers, modular shelves, cabinets with transparent doors , boards, painting floors along access paths, trash cans for all kind of materials and tools; they should be stored according to the rate at which they are used. As long as their location is easy to understand by


34/44

everyone, abnormal situations shall be noticed immediately.

Shining means initial cleaning and the cleaning of everything representing the workplace: floor, machineries, cabinets, etc. All sources of dirt should be detected, leakages should be mended, sufficient cleaning materials should be provided at the each workplace. This is the only way to ensure product quality and people’s safety.

Standardization means maintaining the situation reached by establishing rules, habits and standard procedures. Standardized work is obtained by finding the best work methods from various people, for the same machinery or work bench; by using standardized equipments, such as containers, files of different colours, etc.; by posting standard works procedures to notice boards (visual management); by using checklists.

Sustaining seeks to ensure discipline and everyone’s commitment to maintain the results obtained. If change is not sustained, everything can quickly revert to a situation similar to the initial one. For the 5 S method to be successfully implemented, improvements should not be launched all at the same time. It should be developed an environment in which continuous improvement culture represents the standard. Initiatives should be encouraged and rewarded. Time should be allotted to the involvement in improvement, as this is possible only with the cooperation of all employees involved in the implementation of the pilot project. Management’s commitments should also exist, encouraging training actions for participation of employees to 5 S, communication of all actions and results of the audit of the 5 S. In order to carry out the audit, audit teams should be formed of members from various departments, who shall carry out inspections on regular basis (the shift or team leader shall carry out daily inspections, the section head shall carry out weekly or monthly inspections and the top management shall carry out inspections on quarterly basis).

A six S is Security and safety at workplace, which are ensured by using adequate / adequately marked tools, using protection equipment, where necessary (overalls, gloves, goggles, masks, helmets, etc.); by maintaining access halls free; by storing protection equipment in preestablished and easily accessible places. Care should be given to check whether material is spread on the floor, unlevelled floors, sharp corners, unmarked suspended stocks.

Therefore, the 5 S does not mean only cleaning, but also organization and safety at the workplace, marking, labelling, audit to determine progress and maintain the improved results.

5 S benefits are:

Increased productivity due to an increase in product and process quality, elimination of the time spent searching for tools, reduction of idle machinery time, faster identification of problems

Improved safety at workplace

Quick identification of nonconforming products or workplaces

Raising employees’ morale, introducing best practices, promoting better communication at workplace, delegating responsibilities to improve the workplace.

Visual management allows signalling that conditions which can lead to a abnormal situation, so that is should be possible to apply corrective actions.

Examples of abnormal situations: an operator does not apply work instructions, continuous setup of a machinery, job ticket found on the floor, several shelves found empty in the warehouse, products that are not delivered on time to the downstream workstation, container in an unlabelled area, lack of cleaning, too many stocks at a workstation, an operation who sorts items prior to processing or who waits, etc.

Implementation of visual control signals refers to:

Boards recording the production achieved, excluding the production planned


35/44

Clear marking of the places where interoperational stocks can wait

Workstation indicators, product delivery and storage indicators

Pictures / drawings and information to identify finished products

Board recording results, as well as the operator who achieved them

Maintenance schedules

Performance indicators, quality indicators

Work instructions.

Type of signals in the production department: red, orange or green flashing lights, warning sound signals, noise caused by operating machinery, etc.

The visual management is based on the definition of some indicators, which the entire company personnel should know and understand. These indicators can be grouped into five (or six) categories known as 5 M or 6 M: manpower (operators), machinery materials, methods, measurements and medium (organization).

Due to the visual control, clear information can be interchanged immediately between operations and management levels.

CHAPTER 3. IMPLEMENTATION OF IMPROVEMENTS In Chapter 1, in which are presented various methods for collecting and analyzing data

necessary to cut costs, we presented concepts regarding the value stream mapping in its current state and several types of analysis to help us determine the current situation of the company we manage or whose employees we are.

Upon analyzing the current state and determining the analysis results, we can find improvement solutions, by applying the methods presented in Chapter 2. In this chapter, we shall approach the implementation of the changes necessary to obtain the objectives planned.

3.1. FUTURE VALUE STREAM MAPPING The objectives set are defined by mapping the future value stream. The guidelines to

create such a map up to the future state are based on the observation of the following recommendations:

Always producing at the takt time.

Develop a continuous flow, wherever and whenever necessary

Use supermarkets (buffer stock) to control production where a continuous flow cannot be extended upstream.

Try sending customer order only to the leading production process.

Distribute the manufacture of various products uniformly in time, starting with the process that gives the production pace (leading process).

Create an “initial pull” to release and pull small and homogeneous batches of items towards the leading process (instead of releasing large batches of items).

Develop the ability to make “each product in each established period” in the processes upstream the leading process.

In order to develop the future state, information should exist on several key aspects: product manufacturing, materials flow, information flow, improvement support, by finding answers to the following question.

What is the takt time for the product family chosen, according to the size of the demand?

The takt time is given by the ratio between the available production time per shift and


36/44

the rate of consumer demand per shift. For example, if for the manufacture of an automobile, we establish that the takt time is 3600 sec / 45 parts = 80 seconds. This means that a customer shall buy an automobile every 80 seconds. This is the target pace for manufacturing an automobile and its components.

Will you choose a finished product supermarket from which the customer shall receive the products?

Example: Making a Supermarket Demand

Delivery Process

Will products go directly to delivery?

Example: Making direct deliveries

Customer demand

Will the flow be continuous?

Continuous flow means that there are no intermediary stocks.

Where can continuous flow process be used (materials continuous flow?

Where should a “pull” supermarket be used in order to control the production in the upstream processes?

Usually a supermarket is required to control production where the continuous flow cannot be extended upstream.

What single point of the production chain (leading process) should be scheduled? Where is the information flow from the customer first received?

It is advisable to try sending customer orders only to one of the production processes (usually called leading process). This way it is scheduled only one point of the information flow “from order to delivery” – this point is the leading process. Material transfers from the leading process downstream, to the finished production should take place in a continuous flow. The leading process is that process of the product flow which is located closest to the upstream of the “order to delivery” flow. The manufacture of product is then distributed uniformly in time, downstream the leading process, at a preestablished pace. Thus, an initial “pull” is created, by releasing and pulling small and homogeneous batches of items from the

Delivery Process

Assembly Delivery Control

CustoFIFO FIFO

FLOW


37/44

leading process, instead of working with large batches of items.

Example of calculation If the takt time is of 30 seconds, and the size of a container is of 20 pieces, then:

Pitch = 30 sec x 20 pieces = 10 minutes

Thus, every 10 minutes:

a) the leading process receives an order to produce the quantity corresponding to a package / container

b) delivers the quantity of a package, finished.

If the pitch is currently of 20 minutes, then each product is made 3 times an hour.

3.2. SYSTEM OF LEAN INDICATORS In Chapter 1 – METHODS FOR GATHERING AND ANALYZING DATA NECESSARY

TO CUT COSTS, one of the objectives studies was the Lean assessment with the help of certain Leans specific aspects. Another way to answer the question "How Lean we are?", is the Lean assessment with the help of the system of Lean indicators.

For starters, let’s see what possible results can be obtained by applying Lean in the production system. Some results aim at:

Reducing to half the working time, finished products flaws and floor space, obtaining the same results

Reducing 10 times the unfinished productions

Savings made by implementing the suggestions made by the employees

Intangible benefits: raising employees’ morale, increasing work discipline, stronger cohesion between company departments, increasing customers satisfaction and their trust. Source: The Machine that Changed the World, Womack and Jones, 1990

By measuring the indicators, we can determine the degree of improvement of performances. The Lean indicators are total productivity, partial productivity, efficiency and effectiveness, presented in Chapter 1.

The system of Lean indicators can also include:

Value of current inventories on the production flow

Duration of depletion of inventories on the production flow

Total production time (value adding time)

Lead time

Delivery time

Useful operating time

Overall equipment effectiveness (OEE)

Number of defects in a million

Number of good products from the first try

Balanced Score Card

Speed of turnover.

In order to identify the system of indicators necessary to perform a Lean assessment, we must:


38/44

Involve the individuals responsible with change implementation in the production-specific activities

Ensure collection and update of data, whenever necessary

Ensure data collection where it is most useful

Communicate data to those who need them, to the individuals who can make things work

Achieve an easy data collection and trustworthy procedure.

Method to establish the Lean indicators:

From the general list of indicators, it is established a list of indicators that correspond to customer-related objectives or to other improvement objectives to be applied to the current plan

Insuring the launching of the dialogue with the chain of command, up to the highest level and back, in order to know for sure that this list is necessary and accepted by the entire chain of command.

Determination of a precise way of measuring the indicators.

Collect current data at the workplace. Assumptions should not be used.

3.3. TRANSITION TO A LEAN ENTERPRISE In order to transform the traditional enterprise into a Lean enterprise, we should take

into consideration the differences between the “push” production processes, where activities are not correlated, nor directed, and the Lean enterprise processes, where activities are correlated and directed, as well as the cultural differences, in order to meet the standards and discipline specific to the Lean enterprise

The traditional culture is characterized by the fact that instructions come from up downwards in the organization, and the responsibilities are assigned especially to upper levels. Other features: discontinuous improvement of processes, due to the fact that inefficiency rules, limited communication of the financial problems of the company, limited personal and professional satisfaction, existence of boundaries between positions.

The culture in a Lean enterprise is different by the fact that decisions are made at all levels (within clearly specified limits), the personnel is involved in continuous quest for perfection, it is dedicated and participative, proud to belong to that respective organization. The financial aspects of the company are known in detail by entire personnel, labour offers professional and personal satisfaction and there are no boundaries between positions.

If we decided to apply change management to switch to a Lean enterprise, then we should begin by executing the improvement plan. Change does not always mean success! At the beginning, more than 50% of the implementation team efforts are condemned to failure. Almost 90% of production process redesign efforts have no results, because there are common errors/problems within various types of change methodologies.

The recipe for a successful change resides in the three key factors that should be present in change as well as in transition: pain (is a mandatory reason for change, dissatisfaction with the current state), vision (a clear vision of the future situation wanted) and step-by-step action (an understanding of the next steps necessary to advance towards that respective vision).

Here are several theories on change and progress assessment, which should be taken into consideration when we decide to apply the transition to Lean production:

Clear definition of the need for change – this should guide and serve as basis / reference for future actions

Defining the mission, vision and other unique and specific performance key areas


39/44

Understanding the equivalent finality: there are many ways to achieve the final result wanted

The will to accept the “project” (the chosen path) and to make all endeavors for an efficient implementation / execution

The process can be as important and the finished product itself – negotiation of the property against product quality

The role of learning by trial and error.

Enterprise Engineering and Research Laboratory of the Industrial Department and Systems Engineering of Virginia Technologies, Blacksburg VA (USA), developed a transformation methodology, as a tool for managing transformation and organizational change efforts.

The transformation methodology is based on the understanding of the need for change, of the analysis of the current state and design of processes, systems and transformation structures. The transformation methodology consists of setting the direction for change, defining development initiatives, in carrying out and implementing initiatives, in reviewing progress and results, and in creating the infrastructure for change.

Need for change: the starter of the need for change is the "burning platform", which defines “what must be changed, improved”.

The need for change can be initially caused by the existence of an opportunity or threat; this can be an important urgent event or a slow decline. The change releasers can be related to internal factors, such as people, processes, technology, etc., or external factors, such as customers, competition, company, regulations, etc.

The organizational change cannot begin until the management acknowledges and creates a common vision of the need for change, which should be more important than costs and uncertainty.

Analysis of the current state aims at creating a clear and common vision of the “target system” in the unit analyzed, of “what we do” and to provide input for change and improvement planning, by creating a clear and common vision of “where we are today”. The tools used to define the target system can be the analysis of inputs/output, analysis of mission – goal + value added.

The goal analysis defines why we exist, what we do, in what business we are involved.

The value added analysis defines the manner in which we add value to the business and customer, while achieving our goal.

Design of processes, system and transformation systems can include structuring of a team to make the change and the appointment of a management team, as agent of change and improvement, setting the project team, executing a performance measurement form, training (education/preparation) actions, assurance of communication tools, etc.

The role of the managerial team consists of defining the “burning platform” (the need for change), defining and communicating the vision and the direction, which is the key performance field of the organization. The managerial team identifies the global strategies to execute the vision and uses performance measurement to evaluate organization’s progress, it makes available the resources necessary and supports the change efforts, setting directions, guidelines, feedback and approvals for the improvement teams created.

A strong management is essential for an efficient change and consists of defining management from a perspective focused on conduct, search for competitive change opportunities, growth, innovation and improvement, experimentation and assumption of risk and learning from inherent risks.

Leadership’s role in change is to offer the other the possibility to act, to encourage cooperation, to trace the path, offer examples, motivate, acknowledge individual


40/44

contributions, celebrate team’s accomplishments.

The change agent’s role consists of making available resources, knowledge, tools and feedback to the groups and individuals involved in change, so that to make change and progress possible.

Definition of vision and values: vision defines the future state wanted, describes something that is not present. Vision can be focused on products / services, customers, technology, etc. and it can describe changes in products/services, customer, technologies, etc. A vision should be unique for the organization, specific, inciting, but also feasible. Values are principles, rules, norms or accepted conducts, according to which we chose to live, to make decisions.

Definition of the key performance areas: the key performance areas are the fields in which we excel, thus offering a “bridge” between mission and vision. Key performance areas have as mission the goal and the values added and the vision. They must be unique for the “target system”, balanced and comprehensive, they must offer a focus tool, which should change with the mission, vision and environment.

Team’s pact defines what makes the team and how. It serves as contract with sponsors/leaders and it must be a live document, updated whenever it is necessary, used to guide the team. A clear and comprehensive pact can help the team pass quickly over the initial phase and to create the conditions for success.

General checklist for the team’s pact:

Mission/goal: defines the reason for which the team exists.

Objectives/results: represents what the team does to accomplish objectives (outcomes, products, plans, etc.).

Sponsor: defines the person who gives the team responsibility, guidance, approval and/or resources.

Limits: define the goal and area, constraints, limits or parameters for making decisions.

Indicators: define success.

Membership: defines who is parts of the team (permanently, by turns, ad-hoc).

Team processes: defines how the team will operate (meetings, decision-making processes, interaction with other groups/teams).

Team’s principles: defines the team rules regarding acceptable behaviour from its members.

Team roles: define the roles within the team.

Team self-evaluation: defines the manner in which the team will evaluate and improve performances.

Progress: in order to know whether we evolve, we should initiate a performance review process, we should improve and update action plans and we should learn from mistakes. Learning by means of performance analysis sessions helps finding the answers we look for:

What is the current performance level of final result indicators and of management indicators?

Is there a disparity between the expected and the real level?

Are the results obtained good, bad, improving, or worsening?

Are the data collection procedures, measurement schedules and analysis procedures satisfying?


41/44

What did we learn about management indicators?

What initiatives do we have to improve performances? Is it necessary to adjust initiatives or action plans?

Were there actually communicated the results, problem causes, plan adjustments, new teachings and needs for resources by using multiple channels?

In order for answers obtained to be clear, and to eliminate the possibility of falsifying / interpreting, it is essential to standardize the tools and reporting forms.

In conclusion, the performance analysis process is made of the analysis of final results indicators, analysis of management indicators, breakdown of indicators according to the points of interest and tracing of the action plan.

Evidence of the evolution towards Lean: we can say that the Lean Manufacturing method was successfully implemented in the production process when the production process is characterized by smaller batches, shorter lead times with whom we obtain increased production capacity with better results, faster speed of turnover and lesser inventories of raw materials, semi-finished and finished products. When larger areas are available to better organize the workplace, increased quality by reducing scraps, reprocessing and higher efficiency. When the value stream is optimized, systematic preventive maintenance assured, so that setup should not constitute a problem. Assurance of visual control efficiency, to obtain a predictable and consistent quality, improved participation of the personnel and its high spirits.

CASE STUDIES, EXAMPLES

Example of Work Sampling application - How much per cent of the time is a warehouse personnel actually involved in

loading/unloading materials?

Exercise: A manager wants to evaluate the time that the individuals in a warehouse use to re-label prices on merchandise. The manager wants an accuracy of 98%, so that the result should comply with the 5% error limit, referred to the real value. What number of observations is necessary?

e = 0,05 z = 2,33 p = ?

It is considered p = 0,5

N = (2,33/0,05) 2 x 0,5 (1-0,5) = 542,89 or 543

From 20 observations, 2 operators were found labelling (p=2/20 = 0,10)

n is recalculated = (2,33/0,05) 2 x 0,1 (1-0,1) = 195,44 or 196

- What is the structure of a team leader’s time?

- How does the staff in office A use time?

Example: an employee solves order entering 8h/day, uses 85% of time, must processes 150 orders at a 100% rate.

In order to assess the efficiency of an employee, it is determined the standard time:

- orderinputordersofnumber

RatetimeTotaltimeNormal /'72,2150

185,0'480%.(%)=

××=

×=

- Personal time 10 %

- Standard time:

orderRewardtimeNormaltimeStd /'02,3

10100100'72,2

%100100. =

−×

=−

×=

Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 - How much per cent of the working time do nurses use to attend patients and how much

for administrative tasks?

- How much per cent of time are the pillars used (with/without load)?

- Who uses transportation equipment?

- What is the average number of individuals who wait at the A window?

- How much per cent of the time is the A machinery shut-down?

Example of visual management Productivity

100%

80%

60%

40%

20%

0%

1 2 3 4 5 6 7 8 9 1 11 1 13 14 15

Number of weeks

Example of visual control – Inventories:

Red zone

The visual level for inventories is chosen in such a manner that if the level never reaches the read area then you have too much inventory (Source: Greif – The Visual Factory) Example of visual control – Deliveries:

Batches are arranged acdetected. (Source: Greif –

y y
Wednesday Monday Tuesda cording to tThe Visual Fa
Thursday

42/44

he input datctory)

Frida
e.
Green zone

Delivery delays can be immediately

Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 Example of visual control – Production cycle

Production starts in week 23 Production starts in week 24 Production starts in week 25

Each week, the identification card is labeled with a different colour. This way, it is obvious when the production is behind. (Source: Greif – The Visual Factory)

Example of visual control – Production Mix Inventory

Part C Part BPart A

Stock for a week

The width of the storage area for each type of product is proportional with the quantity delivered. Thus, the height represents the delivery period for the inventory left. The limit starts the alert. (Source: Greif – The Visual Factory)

Example of visual control – Monitoring

(1) Stan– Th

(2) StanFac

(3) StanindiFac

Phase 1

dard values are entered into distinctive table of indicators . (Source: Greif e Visual Factory)
Phase 2
dard valued are marked on indicators. (Source: Greif – The Visual tory)
Phase 3
43/44

dard values are marked with colours on that respective tool, so that each cator should be monitored separately. (Source: Greif – The Visual tory)


(4) Twcom

(5) Wh(prFa

BIBLIOGRAPAllen, J., RobinsoManufacturing En

Bicheno, J., "The

Ford, H., Today &

Harris, R., Harris,operations, prodEnterprise Institut

Jones, D., WomaEnterprise Institut

Kotter, J.P., Lead

Liker, J.K., "Beco

Marchwinski, C., Edition Version 2.

Rother, M., Harris& production asso

Rother, M., Shookmuda" Version 1.

Smalley, A., "Crproduction-controInstitute, 2004

Womack, J., Jone

Womack, J.P., Jcorporation", Free

http://www.lean.o

http://www.lean.ro
Phase 4
o standard values with less apparent display, event at distance, are pared. (Source: Greif – The Visual Factory)
Phase 5
44/44

en one of the tools deviates from the standard, an alarm system is activated edecessor of the automatic control = JIDOKA) (Source: Greif – The Visual ctory)

HY n, C., Stewart, D., "Lean Manufacturing - a plant floor guide", Society of gineers, 2001

new Lean Toolbox - towards fast, flexible flow", PICSIE Books, 2004

Tomorrow, 1926

C., Wilson E., "Making Materials Flow - a lean material handling guide for uction-control, and engineering professionals" Version 1.0, The Lean e, 2003

ck, J., "Seeing the Whole - mapping the extended value stream", The Lean e, 2002

ing Change, 1996

ming Lean - inside stories of U.S. Manufacturers", Productivity Press, 1998

Shook, J., "Lean Lexicon - a graphical glossary for Lean Thinkers" Second 0, The Lean Enterprise Institute, 2004

, R., "Creating Continuous Flow - an action guide for managers, engineers ciations" Version 1.0, Lean Enterprise Institute, 2001

, J., "Learning to See - value-stream mapping to create value and eliminate 3, Lean Enterprise Institute, 2003

eating Level Pull - A lean production-system improvement guide for l, operations, and engineering professionals" Version 1.0, Lean Enterprise

s, D., The Machine that Changed the World, Roos 1990

ones D.T., "Lean Thinking - Banish waste and create wealth in your Press Business 2003

rg

http://www.lean.org/

http://www.lean.ro/

Documents

Lean Manufacturing Cost Cutting Methods