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INTRODUCTION TO LEA N TRA NSFORMA TION

INTRODUCTION TO LEAN TRANSFORMATION

PRODUCTION SYSTEMS............................................................................................2The features of Mass Production System – small variety, large lot........................2The Features of Conventional Production System – large variety, small lot...........3The Features of Lean Production System - TPS.....................................................4

The Pull System.................................................................................................4Leveled Production............................................................................................5Continuous Flow Processing...............................................................................6Sequential Information Flow Using Kanban........................................................7Prevention of Quality Defects and Equipment Breakdown..................................8

BASIC CONCEPTS OF LEAN TRANSFORMATION.......................................................10The Goals of Lean Transformation......................................................................10

Cost Reduction by Elimination of Waste...........................................................10Creating Conditions to Guarantee Product Quality...........................................10Creating a Work Site with Operators in Mind....................................................13Creating a Flexible Work Site...........................................................................14

Awareness of Waste...........................................................................................15Cost Reduction versus Cost Plus......................................................................15Cost and the Method of Production..................................................................15Work and Waste..............................................................................................16Overload and Unevenness...............................................................................17Kinds of Waste.................................................................................................17Understanding Efficiency.................................................................................18Individual and Total Efficiency.........................................................................18Operator Work and Machine Work...................................................................19The Importance of Problem Awareness............................................................20

Final thoughts on Lean Transformation...............................................................20

PRODUCTION SYSTEMSLean Transformation is based on the Toyota Production System (TPS). TPS is a method Toyota uses to make their products. Every manufacturer has

Marek Piatkowski - F.S.P. Consulting Inc.1


its own way of making things, thus there are as many manufacturing methods as there are manufacturers.A company’s method of production reveals the philosophy of its founders, managers and administrators. And strictly speaking, even in the same company there are variations of method between plants.

The features of Mass Production System – small variety, large lotThe basic manufacturing method in mass production is the assembly line conveyor system, also called the Ford Production System. Mass production systems seek to achieve the following goals:

Increase in productivity Uniformity of product Reduction in costs Consistency of quality Shortening of production lead-time.

This means, in effect, that the production process is divided into simple work units, in which it is easy to learn the work and develop skills. This lessens disparities in skill between employees, promotes product uniformity, and makes mass production possible.The work done by each work unit should require about the same amount of time to make overall work flow smoothly. This technique permits the workload to be evenly distributed among all the employees and improves the operational usage of equipment usage of equipment, enabling both men and machines to achieve 100% performance without stopping the lines. It also results in a certain measure of cost reduction. In general, however, mass production systems must avoid design changes or model diversity as much as possible if they are to avoid changing the work content of each process, increasing the number of parts for every model and adjusting - as a result - the equipment for all necessary modifications. If adjustment of work is required, there will always be an accompanying loss of time and quality. To avoid this loss, therefore, production is always done in large lots. For example, parts for the same types and models are made together. It is obviously a good idea to produce them in large lots with the fewest possible changes of press dies. The manufacture of common parts thus facilitates the whole mass production system. This is short is the practical concept behind the mass production work site.It has generally been held that mass production, while possessing various market characteristics, makes the maximum effect on cost reduction by systematic production in large lots. The American automobile companies have indeed proven this in the past.Mass production, as summarized by the phrase “conveyor system,” certainly involves work that “flows” along assembly lines, but if one moves back up the production “stream” along the preceding processes, one will note that the flow is not everywhere constant.



An automobile plant uses an assembly line with a conveyor system, but those of its departments engaged in the rough processing of materials, such as stamping or casting and forging, cannot easily employ the conveyor system. Here large lot production - demanded by equipment limitations - becomes central.We can see, in reviewing the characteristics of the mass production system, while the ability to obtain good results through large lot production is indeed an important factor, the current shift to large-variety, small-lot production presents serious problems for the older small-variety, large lot production technique.

The Features of Conventional Production System – large variety, small lotThe market is always changing through gradual expansion or contraction, and never remains static. As a market matures, the demands of its customers diversify and stimulate the development of large variety, small lot production. This variety includes types, models and options.The ideal situation is to have the production department make products in accordance with sales. At the actual work site, however, there are many different restrictions on this ideal, so the production plan is often formulated with emphasis on the manufacturing side.The sales and production planning departments can, in their interaction with the production department, cause problems at the plant, including poor forecast, uncertain production schedules and numerous design changes in the manufacture of products.Given these conditions, the production department will try to produce goods strictly by the production schedule table in large lots, and without line stoppages, in order to increase production efficiency and prevent any decrease in the operational usage of the equipment. It will also increase stock as a hedge against breakdowns, defective products and absenteeism. This type of factory employs many devices in each process, thus increasing extra work and making it difficult to properly assess production capacity. The various problems connected with employees and equipment all tend to blend into a murky fog. Under these circumstances, the plant will start to manufacture products independently of market needs and without the capacity to respond immediately to customer needs. The result of all this is that the amplitude of the increase and decrease in production quantities will be much larger than actual conditions warrant.To counteract this at the actual work site, our hypothetical factory will increase equipment so it can accommodate maximum production increases and will star to automate its lines, both wasteful capital investments. Additionally, the work will become unbalanced and the working methods irregular, leading to problems in quality and labor relations.



A trend of this kind causes much waste and raises costs, and clearly influences business results negatively.Conventional production systems all follow this pattern to a certain extent. Attempts to make improvements or introduce new equipment to develop the work site will, under such circumstances, have a negligible effect.

The Features of Lean Production System - TPSThe Toyota Production System (TPS) symbolizes a management philosophy for addressing issues related to: quality, cost, productivity, and respect for people -- in conventional production systems.To achieve this objective, Toyota aims at a synchronized, sequential production system that can deliver just enough stock, at just the right time (just-in time), to each line along the whole length of the production process.In contrast to the conventional production system, in which systematic mass production with large lots is believed to have a maximum effect on cost reduction, the Toyota philosophy is the “Make the smallest lot possible, and do so by setting up work stations in the shortest time possible.”If each process in a large-variety, small-lot production system were to produce large rather than small lots, the stock needed would be enormous due to the large variety of parts and would lead to great waste. This in turn would invite an increase in cost and a decrease in quality.At Toyota, measures have been taken to reduce almost to zero the various types of waste resulting from overproduction and overstocking. The key mechanism for this is the application of the “Pull System” rule, by which the parts needed for a succeeding process are picked up at the preceding process with Kanban as the prime means for conveying information.

The Pull System

In conventional production systems, parts produced at one process, as determined by the production schedule, are delivered to succeeding processes even if they are not yet needed there. This method may be good when parts can be produced on schedule throughout the whole process.But if just one process has trouble and the line stops, the processes directly related to the troubled one will suffer from either a shortage or a backup of parts.The pull system is designed to allow production of parts in response to sales: unless an employee from the following process goes to the preceding process to pick up the parts, the preceding process must not produce any more parts than required -- that is to say, the quantity



indicated by the Kanban. The Kanban gives the preceding process information about production quantities and timing and thereby prevent production overruns.For the preceding process to produce the necessary quantity of parts that the following process will pick up, all production processes must have personnel, equipment and materials that can manufacture the parts “just in time.” If the succeeding process in irregular in its own quantity and time, the preceding process must proportionately increase (or decrease) it’s output to compensate for the irregularity. Costs, therefore, will rise.Such irregularities must be minimized in large-variety, small-lot production. This is done, by keeping the lots small to hold down the flow of identical parts. The mechanism for this is “leveled production.”Since the concept of leveling is important in Lean Transformation, it will be discussed in detail in the following section.

Leveled Production

In the production work site generally, the bigger the fluctuations either in part flow or production quantity the greater the waste. A fluctuating production quantity or irregular manufacturing pace in any process will cause the production process as a whole to change in a disorderly fashion, resulting in confusion, work errors, line stoppages, quality defects and lowered efficiency. In this way, it has a serious effect on the preceding and succeeding processes.To cope with production fluctuations, the company must always have in readiness the equipment, employees and other ancillary production items to meet the maximum possible workload. The more the workload falls below the maximum, the greater the delay among employees and equipment. And this has a serious effect on efficiency and cost.For example, let us consider what effect the final assembly line will have on the preceding process if the former considers only its own process efficiency when planning to produce sedans today, hardtops tomorrow an vans the day-after-tomorrow.The preceding process line, that manufactures parts for Model A, has work today, but the lines that manufacture parts for Models B & C did not. Even if the latter two lines shift their schedules so they can work every day with the requisite stock, they will require three to four times more stock than they would normally use with an equilibrated, or leveled, daily production schedule.Also, if the pull quantity of the following process fluctuates, the preceding process must reserve enough stock to meet the maximum possible part withdrawal to avoid part shortages. This situation worsens the farther back one goes along the preceding processes.To avoid such situations, the final process assembly line must produce all the different models in a continuous sequence. So done, a great deal of the waste in the preceding processes can be eliminated. We call this



“leveling” -- that is, to even out the many different factors controlling types and quantities.The leveling of the production quantity means that a single part (or any one item) should be manufactured in a given number of minutes and seconds. This time is called the “Takt” time. Every process observes this Takt time in production. It is then easy to organize the equipment, man-hours and other factors necessary for effective production. If only one type of item is manufactured, smooth production is possible by leveling only the quantity. If multiple types are manufactured, however, the leveling of the types is necessary to avoid the waste that lead to lowered efficiency.The leveling of the types means that the required production quantity ratio for all types is manufactured in a series. For example, if the production quantity ratio for Model types A, B and C is 2:1:1, respectively, the different types will be produced consecutively in the sequence A, B, A, C, A, B, A, C... and so on.Production carried out in this fashion makes it possible to pull parts from a preceding process without causing any fluctuation in quantity and types. The preceding process also need not have additional stock, man-hours and equipment.The ultimate purpose behind this leveling of production in all processes is to manufacture just in time vehicle types in quantities determined by sales, and to make an effective and flexible organization which, by knitting the whole production process together as much as possible, eliminates time and money waste and places no excessive burden on employees.Extending leveled production all the way to the last line also facilitates standardized work.

Continuous Flow Processing

In the marketplace, each Customer purchases a different model of our product, so the production site should manufacture these parts individually and in succession. Furthermore, the same approach applies to those stages of manufacture where individual parts are produced. The ideal, ultimately, is to achieve leveled, sequential production without accumulation of part within a process or between processes.Manufacturing comprises many processes, from the raw material processes of forging, casting, forming and pressing, to the intermediate processes of welding and on to the final processes of painting and assembly. The degree of leveling that can be achieved by integrating all these processes so they flow together equals the degree of improvement in overall plant efficiency.Those places in the production process where a flow has not been established produce considerable amount of waste. And particularly in the case of parts that require many interim processes for completion, a failure to achieve flow before the end of the sub-production cycle will be critical.



The reason for this is that the intermediate set-up parts will accumulate before and after the various equipment and machines, and the order in which the parts enter the first process and the order in which they exit the last will bear no relationship to each other. Each time a part is completed, it will have to be loaded on a pallet or a tray and carried to the next process. This situation will require a kind of parts “traffic cop” every time a part must move to another process, and the total plant efficiency will suffer as a consequence.The pressing or molding or forging processes, which must use lot production, should try to achieve production flow by keeping the lot size as small as possible. For this, it is important to set up dies in a short time.To eliminate the congestion of parts within a process or between processes and to achieve sequential flow production is called “continuous flow processing”. The following measures are necessary for continuous flow processing:

Products Successive production. Manufacture and assemble each single piece or unit in the process order so the product will flow one after the other between workstations or processes. Small lots. Shorten the die-change time or changeover process in lot production processes and keep the lots small.

Employees Multiple process responsibility (“multi process handling”). Arrange a system so employees perform several tasks that match the Takt time according to the work sequence. Multiple skill employees (“multi skilled employees”). Always provide several levels of training to the employees so they can operate various types of equipment, do various kinds of work and perform other work besides that for which they are directly responsible.

Equipment Process sequence layout. Lay out the equipment in the order of processes so sequential production and multi-process handling can be done. Equipment with simple set-up. Make a system to eliminate adjusting work or changing of associated equipment in order to shorten the set-up time.

It requires great effort, in the lot production processes, to keep the lots small and to create a production flow in the plant.



Sequential Information Flow Using Kanban

In a true Lean Operation it is necessary to link all processes into a single line to produce its goods in a smooth flow. However, when each process is physically separate from the others, transportation is required. An operator of the following process goes to the preceding process to pull parts as needed (Pull system). The preceding process produces only the parts to be pulled by the succeeding process (fill-up production). The method used to exchange information between the pull and fill-up production sites is a Kanban.It is important for every employee at the production site to know what, how much and when parts are produced. This information interchange is the autonomic brain system of a very large production process and it keeps all processes operating without interruption.Kanban plays a major role in leveling production or shortening production lead-time by maintaining a sequential flow of timely information to all processes. The number of Kanbans issued will increase or decrease depending on the current parts usage quantity. Raw materials and set-up part stock can, therefore, be held to the minimum.One role of the Kanban is to serve as “a tool for improvement.” Since employees are permitted to determine for themselves the minimum stock necessary by evaluating stock conditions, they are able to use the Kanban information to make improvements (Kaizen) to reduce stock.This also has the advantage of raising individual employees’ awareness concerning cost and personal participation.

Prevention of Quality Defects and Equipment Breakdown

If every process can obtain the necessary parts at the required time – Just-in-Time -- and in the proper quantities, there will be no need to maintain stocks of extra materials or parts. However, what are the appropriate countermeasures if equipment breaks down and the operational rate is lowered, with an accompanying decline in production, or if defects in quality occur frequently or parts cannot be obtained in a timely fashion?There is a tendency, generally, to react by accumulating a reserve of stock based on an estimate of quality defects, equipment breakdown and employee absenteeism. Toyota, however, is opposed to using stock build-up to counter these problems. Keeping excess stock means that the various production problems are merely hidden or glossed over, and this makes is impossible to establish a work site with a strong constitution.Recourse to stock build-up means that, even if production halts due to defects or machine and equipment breakdowns, stock is used to compensate. Thus the company does not perceive any strong need to prevent problems, to prevent their recurrence, or to improve the operational rate when defects or breakdowns occur.Without an attempt to create a strong efficient work site, the period from receipt of an order to production and delivery of the product will lengthen



and stock will increase. Therefore, it is crucial to prevent defects in quality and to “build quality into the process.”On the other had, maintenance is also important for deterring machine and equipment breakdown and for preventing their recurrence. The Toyota Production System also places importance on “kaizen of maintenance” and stresses training for such improvement.



The Toyota Production System can be summarized very briefly: Produce only the necessary parts When is necessary In the required quantity

To this end, Toyota strives to completely eliminate from its production activity all factors that only serve to raise costs. By long trial-and error, at the manufacturing work site, Toyota developed and implemented the best possible production method that we could devise -- not from theory but from hard experience. Since this is the technology of the actual work site, it is not permanently frozen, but will be improved and developed in the future.The basic concepts, goals and procedural techniques of the Toyota Production System / Lean Transformation will be discussed next.



BASIC CONCEPTS OF LEAN TRANSFORMATIONThe fundamental philosophy behind Lean Transformation is to provide superior quality products for more Customers at a significantly lower price and to contribute to a more prosperous society.It is important to build a Company production system based on this philosophy. Lean Transformation has endeavored to rationalize production by:

Completely eliminating waste in the production process To build quality into the process To reduce costs - productivity improvements To develop its own unique approach toward corporate management To create and develop integrated techniques that will contribute to corporate operation.

This is Lean Transformation.

The Goals of Lean Transformation

Cost Reduction by Elimination of Waste

It requires constant effort at cost reduction to maintain continuous profits in manufacturing. The prime way to reduce costs is to produce only those products determined by sales in a timely fashion, to restrain excessive manufacturing and to eliminate all waste in manufacturing methods. There are various ways to analyze and implement cost reduction, from the start of designing all the way through to manufacturing and sales. One of the goals of Lean Transformation is to locate waste pragmatically in each process and then eliminate it.It is possible to uncover a very large amount of waste by observing employees, equipment, materials and organization in the actual production line from the perspectives of the process itself and the actual work involved. Some types of waste are obvious, but others are hidden. Waste never improves value; it only increases cost.The thorough elimination of waste leads to greater employee self-respect and to major cost reductions by preventing unneeded losses.

Creating Conditions to Guarantee Product Quality

To produce a high-quality product is the first commandment of any manufacturing company. The high quality of any product in which many component and parts do not fail and are trouble-free, must be built into it at every process.



Lean Transformation has developed various ways to support the commitment to “build the quality into the process.” This principle gives each operator the responsibility to check quality thoroughly at every stage of work within the process, and brings product inspection directly into the process so that good products flow to the following process and defects are extracted at that point.Each operator must be aware that “the following process is a customer” and must never send a defective product to downstream processes.If equipment is defective or operates abnormally, either the machine itself or some system must be able to detect the problem and stop operation. Foolproof devices are often used as simple means for this purpose. This also makes it easier to maintain quality.Lean Transformation has taken many measures and expended much effort to see that, if a defect in quality should occur, we can uncover the true cause and apply countermeasures to prevent its recurrence.

Quality FirstProducing high-quality products is paramount for, and therefore must be given priority by, any manufacturing industry. Customers will never continue purchasing a product if its quality is poor, and no matter how cheaply it is produced, the producer will only incur losses.In the case of any product, safety is considered especially important. Taking shortcuts or doing shoddy work, in the extreme case, putting a faulty product on the market, amounts to a harmful act and can have devastating consequences for a company.Therefore, it should be Company’s mission to supply our customers with trouble-free product. To do this, we must produce products that conform exactly to design quality specifications. Attaining high quality must also be given foremost consideration in our work, and neglecting quality can never be excused, hence the necessity of checks to verify quality.All parts produced in a process must be inspected there to make sure defects are not occurring, and ensure that defective parts do not reach downstream processes. Ways must thus be devised to perform such inspections economically.

Ensuring Quality of all ProductsIn generally practiced conventional methods, finished parts and products are inspected by an inspector then sent on to downstream processes. But good quality cannot be assured if finished goods are to be judged good or bad. An inspector can randomly sample goods and judge their quality good, but excuses won’t mean much to the customer who gets the one bad unit from among 1,000 good ones. Defective goods reaching the customer damages consumers’ trust in the cooperation and the product, and must be avoided



at all costs because it can lead to manufacturing products that are no longer salable.Generally, defective products are discovered by an inspector and repaired before they make it to the customer. The stronger the determination not to let defective products out of the plant the more stringent inspections become and the more often corrective adjustments and repairs are made.But inspection work carried out by inspectors working off the line yields no added value, so research to find ways to manufacture quality products with fewer inspectors is necessary. In other words, “building quality into the product” is essential.

Building In Quality at Each ProcessThe concept of “building in quality at each process” is the basis for preventing the flow of defective parts to downstream processes. It therefore requires that operators are aware that “downstream processes are my Customers.”In practice, “building in quality at each process” brings the inspector’s function into each process so defects can be uncovered immediately when they occur. Only in this way can it be ensured that all parts are defect-free, and that no faulty parts reach downstream processes.If defects are discovered at a downstream process, it would do no good were they merely corrected and their cause not investigated, as the defect would continue to recur. Therefore in such cases, the previous process must be promptly notified of the problem, and the process or department where the defect originated must immediately investigate the cause and institute measures to prevent recurrences.Under the generally accepted notion of quality control, inspectors are stationed at the end of processes or lines. There the inspector judges the products coming off the line, calculates the results, and passes the results on to the processes concerned. Usually, this is all that happens; the results are known, but it is difficult to affect countermeasures to prevent recurrences.This brings us to the conclusion that it is important for operators to inspect the quality of the goods they themselves have produced, and naturally every article produced must be inspected. There are many means to achieve this; the way to assure quality achievement is strict observance of the Standardized Work established under the prevailing working conditions at each process.Standardized work is devised so that required quality levels can be achieved and maintained. Standardized work weaves inspection work, both visual and inspection work using measuring instruments, into the production work performed in each process. If such inspection work is not interwoven into the process work, the concept of “building in quality at each process” will not function properly.



Inspection WorkInspection work is not merely the action of judging whether parts or finished products are good or bad. It also entails -- and this we want to emphasize -- pursuing the cause of defects, gaining a comprehensive understanding of the circumstances to pinpoint the real cause, and instituting measures to effectively prevent their recurrence. Emphasis on pursuit of real causes is necessary because cursory observation of a defect phenomenon can lead to trying to cure symptoms instead of the disease. For example, a defect resulting from installation of a wrong part might be discovered, but installation of the wrong part may be only a symptom of a more deeply rooted problem rather than the real cause. Careful investigation might reveal that the wrong part was installed because a symbol in the work instruction sheets is illegible and prone to misinterpretation, or that parts are not arranged in the order of their installation sequence, or even that an employee was just inattentive. Defects are reduced by effectively grasping all these factors, than introducing countermeasures based on a comprehensive understanding.Thus the purpose of inspection work is not to pick out the defective products, but to eradicate the occurrence of defects. In a nutshell, inspection work goes beyond mere diagnosis to encompass full treatment and rehabilitation. It is essential that inspection work be understood in this way.

The Added Value of RepairsEven when everyone in each process is observing standardized work, a few products that require repairs are bound to turn up. Although, ideally, the need for repair work should not occur, it does. It seems to be generally accepted that when repair work is required it will be enough just to make the repairs on a repair line and let everyone else get on with their normal work. So in some companies the necessity for repair is taken as a matter of course.But repair work requires wasteful manpower increases, lowers rates of added value, and raises production costs. If defective products and products requiring repairs are taken as a matter of course where defect-free products should be produced, the necessity arises for extra manpower and additional facilities, tools, and conveyance measures.The prevention of defects and the necessity for repairs can be achieved by aggressively promoting Kaizen (improvements) in conjunction with quality. By producing high-quality products and eliminating the need for repairs, not only can man-hours for repairs be reduced, but also we can reduce the man-hours required for inspection work.



Creating a Work Site with Operators in Mind

If labor is expended on a product but does not contribute any additional value to it, that labor is of no value. On the other hand, if the labor expended on a product enhances the product’s value, then that labor is of great value because it is effective. This type of effective labor use translates into showing respect for human dignity, the dignity of the employee.In the Lean Transformation measures have been taken so that the labor or every employee will enhance the value of our products. One of these measures is Standardized Work. This is a way to perform the most effective sequential production without waste by rationally concentrating the work around the Operators’ movement. Some companies use a system that stresses the performance of equipment and machines. In this case, the equipment is considered to be of prime importance and the employee mere expansion of the machine.Mutual support is indispensable if each employee, who plays the leading role for his particular task, is to perform the work and improve the efficiency of the whole production process. In Lean Transformation the implementation of mutual support between the preceding and succeeding processes has affected highly efficient work.If the Operator discovers some problem in the work for which he is responsible, he or she is permitted to stop the line depending on the gravity of the problem. This is only possible against a backdrop of respect for the judgment and intelligence of the employees. A work site, where every employee can fully display his own ability, can be created with a system in which the work accomplishments of each individual are a matter of public knowledge, and anyone can propose kaizen for work problems.

Creating a Flexible Work Site

As the Global Economy has matured and become internationalized, users’ tastes have expanded to encompass a wider range of product types, models and status value, with an enormous increase in the amount of production time – Lead Time.At the same time, the user wants a short delivery time. And a short delivery period is now one of the key points in sales. Furthermore, the sales quantity is always indefinite and difficult to predict. Under these conditions, the fixed production of product types or quantities may lead to shortages or surpluses and cause considerable waste. Therefore, it is important for the production department to shorten the Lead-time between the receipt of an order for a product and its delivery as much as possible.One of the goals of Lean Transformation is to set up a process so the production department can manufacture a product in sufficient time for a market that is always changing and diversifying. The basic concept behind the shortening of lead-time is to:



Take orders Produce immediately And deliver on time.

A strong and vigorous production system can produce the required items in the necessary time without waste, cope with minor changes in production quantity, and meet schedules satisfactorily with a good line operation rate because problems can be easily discovered and rectified. As a result, it can satisfy the customer’s desires.



Awareness of Waste

Cost Reduction versus Cost Plus

Lean Transformation improves productivity through the principle of Cost Reduction.With the principle of cost reduction, the sales price of a product is determined by actual market conditions. A profit cannot be secured, thus, without first reducing cost regardless of increases or decreases in the production quantity. This type of cost philosophy requires an overall company effort. Cost reduction is:

Profit = Sales price – Cost

In contrast to cost reduction, there is the cost-plus principle, in which product price is determined by combining all the costs -- such as those of raw materials, labor and other expenses needed for production -- with whatever company policy decides is needed as profit. Cost policy:

Sales price = Cost + Profit

The two formulas above are the same mathematically, but there is a great difference in the emphasis each one places on the variables. In other words, cost-plus considers that the cost is fixed. While cost reduction considers, that the cost can be effectively changed by manufacturing methods.

Cost and the Method of Production

A detailed analysis of any given production process will show that some portions are crucial and others not crucial for enhancing the value of the material. The ratio between these two has a major impact on cost.For example, there is no difference between manufacturers in the price for 1 kilowatt of electricity, the price for 1 ton of sheet metal and the price for the same machine tools. But there is a difference in profits, even though they all use the same energy, materials and equipment to produce the same kind of product. This difference stems principally from the different manufacturing methods.We shall now show how costs can be changed, by examining “the stock quantity of raw material.”If one hundred parts are manufactured today, we only need to have material on hand for 100 pieces. And if we consider that, at any given time, we only need to have material on had to cover the daily stock for the few days it takes to secure replacements, then we clearly do not have to maintain a large stock backlog.



The accumulation of stock for long periods of up to three or six months -- despite the fact that it might be easily acquired in just a few days -- will lead to wasteful interest and inventory storage costs and even to the possibility that it may not be used because of design changes.To illustrate, let us look at the example of a stamping machine. Even if two companies buy the same press, there will be a difference in cost between the passive company that uses the machine according to the manufacturer’s specifications, carefully calculates an economical lot size based on the prevailing set-up time, increases the number of pallets, expands the warehouse and stores a large quantity of press parts, and the active company that shortens the set-up time and produces parts efficiently using the practical know-how and effort of employees at the work site.The costs can change significantly according to how the product is produced and how effectively the current equipment, material and labor are utilized in production. The reduction of costs by the method of manufacture plays an important role in the company’s profits and that, in its turn, will maintain the company’s stability and job security for its employees.The actual production site must continue, in the future, to review our own production system guided by the cost reduction policy.

Work and Waste

In promoting Lean Transformation it is necessary to properly understand the meaning of “complete elimination of waste.” Waste encompasses various phenomena, none of which enhance the value of the product. This includes all factors that do not add any value to the product, whether in parts, labor or production process. In short, this means “the various production elements that only increase cost.”If we focus on the employees’ work movements in the workplace, their production activity may be divided into three classes:1. Value Added Work

Value Added Work is work that actually adds value to the product. This includes processing, such as shaping, forming, treating, assembling, and so on. Other examples include assembly or installation or parts, welding, hardening of gears, and spray-painting bodies, etc. The higher the proportion of work that ads value, the greater the efficiency of production.

2. Incidental workThis refers to the type of work that does not directly add value to the product, but must -- under current production conditions -- be done for the value added work to enhance value. Examples of incidental work are removal of parts from boxes, delivering parts to the line, setting up a work station, loading and unloading the machine, tool pickup for parts installation and preparation of inspection equipment.



3. WasteWaste is action that is not essential for the work being performed. Waste is not work. Waste is an activity that has no positive influence, even if it is removed from the work movement. This includes: waiting, unnecessary rearranging or restocking of materials, excessive transporting of parts, “watching” equipment, etc. Repair work is also considered to be waste. Such activities add no value to the materials or parts. Waste in a manufacturing site consists of various such factors or actions that serve only to raise costs.

If we observe work at the actual manufacturing site in great detail, we find that the amount of movement that enhances value is unexpectedly low. The activity of replacing movement that does not enhance value with value added work is called Kaizen.

Overload and Unevenness

Both overload and unevenness, like waste, are factors that raise cost and lower quality. Overload is application of a load in excess of ability or capacity: in the case of equipment it can cause breakdowns or defective parts, in the case of an operator it can lead to safety and quality problems.Unevenness is considered to be a combination of waste and overload. This means that waste is either a repetition or a combination of redundant capacity and overload. It is caused by irregular production schedule or changes in the production quantities. And wherever unevenness is found, waste exists.The elimination of waste, overload and unevenness from the production activity will improve productivity and lead to the maintenance and improvement of quality.

Kinds of Waste

A functional classification of the various elements that only raise cost in production activity gives the following seven types of waste:

1. Waste of defect repair2. Waste of overproduction3. Waste of waiting4. Waste in delivery and conveyance5. Waste in processing6. Waste of inventory7. Waste of motion

In Lean Transformation every type of waste must be eliminated. Lean Transformation pays particular attention to the waste of overproduction – Overproduction is considered to be the number one cause of all manufacturing issues and problems. Since the ideal is to



make the necessary goods at the necessary time in the necessary quantities, the manufacture of more goods than is justified by sales is waste. Waste of overproduction induces more waste, thus waste of overproduction must be taken seriously.The following are types of costs that can be increased by waste of overproduction:

Necessity for extra material and parts Increase in containers such as pallets and skids Increase in delivery vehicles The growth of stock and increase in man-hours for stock control Others

The following factors are causes of overproduction: A sense of security against machine breakdowns, defects and absenteeism Mistaken increases of operational rate and apparent efficiency The notion that line stoppages are ‘sinful’ Variations in load Others.

In overproduction, “waste invites waste.” Therefore, work should be done based on standardized work and work rules observed.

Understanding Efficiency

Improvements in efficiency that ignore the production schedule will result in the waste of overproduction and push overall company efficiency in the wrong direction. Improvements in efficiency display their value by lowering costs. When evaluating efficiency, the key factor is the necessary production quantity: you must consider how the necessary items can be manufactured with the fewest man-hours possible in the best time. There are consequently two types of efficiency - True and apparent.

Apparent efficiencyApparent efficiency is a way of raising efficiency by increasing the production quantity within the current man-hours without regard for sales, and it is “efficiency” only in terms of numbers. We call this “Just-in-Case” production.True efficiencyTrue efficiency is an increase in efficiency by producing a salable quantity with the shortest man-hours possible, and is an improvement in efficiency that contributes to substantial reductions in cost. If the production quantity is to be increased, consider how to raise efficiency by performing mass production with the current man-hours to raise efficiency, and if the



production quantity is to be maintained or decreased, consider how to raise efficiency by reducing man-hours.Efficiency is used in various ways as a standard for evaluating productivity in equipment or labor, but we must never forget that its criterion is the necessary quantity warranted by sales.

Individual and Total Efficiency

When considering how to raise company efficiency by elimination of waste, we must look at efficiency in terms of each process, the line embracing those processes, and the whole plant that contains the line, prosecuting improvements in efficiency from lower to higher stages so the improved efficiency encompasses the total system. It is crucial to institute improvements in efficiency with this type of systems approach.

Individual efficiencyIndividual efficiency means that the efficiency of an individual process, line, or machine (equipment) is raised without regard for the preceding or following process, line or machine (equipment).

Total efficiencyTotal efficiency means that, at the level of process and line, efficiency is raised with a consequent improvement that is not merely numerical, and that spreads over the entire company.Managers and supervisors tend to think of improvements in efficiency and quality only for their own processes, but they must always consider how local improvements will affect the total operation.Thinking only about individual efficiency can easily lead to improvements in apparent efficiency. Always think about the necessary production quantity first.

Operator Work and Machine Work

There is a key notion for the elimination of waste and the effective combination of work at the work site: the separation of machine work and operator work. If we investigate the work in which employees handle machinery, that work can be classified as employee work and machine work.

The meaning of Operator workOperator work refers to work that cannot be completed without an Operator. Examples of operator work are picking up materials, putting materials in a machine, operating the controls of a machine, and performing manual operation.

The meaning of machine work



Machine work refers to work or incidental work that equipment, which has been started by human hands or other means, automatically performs. Machine work includes automatic machining, inspecting and conveying. Concrete examples are cutting, forming and welding of material, delivering and removing material and inspecting precision automatically by device.Understanding the separation of operator and machine work is basic to multi-process handling work, and is quite effective in creating standardized work to enhance work-efficiency. If operators are merely observing machine operation, then that observation is waste of waiting and should be eliminated. Paying attention to possible problems is important.

The Importance of Problem Awareness

Lean Transformation constantly stresses how important it is to “achieve cost reduction by complete elimination of waste”, as the way we think about waste can have significant consequences. The criterion to determine what is and is not waste varies depending on differences in background and context, and the same thing can be said about the evaluation of efficiency. Thus, the way we think about and judge waste or efficiency is quite important.It has been said that only two things exist when doing work at the work site - things one must do and things one must not do. Whatever our activity, we must never forget to consider the true purpose of the activity and the best means to accomplish that purpose.We always produce “products in response to sales” and carry out the work by aiming at improvement of quality, cost reductions and increased work safety.In so far as we manufacture with the same equipment, materials and methods as other companies, there is no way to gain competitive ascendancy. Keeping one step ahead of the other companies will, however, make the difference between the victory and a failure in the competitive war.

Final thoughts on Lean TransformationLean is not a trend or a movement. Lean is a Management System which includes collection of tools, methodologies, techniques and processes, that when implemented correctly and in the right sequence, will generate measurable results, help companies reduce costs and improve overall operational efficiency. Any company venturing into a Lean Journey must consider not only changes to their manufacturing and material management practices, but also a review and modifications to their organizational structure. Organizational development and training process to achieve the business objectives and benefits that are requisite of the above improvement processes.



Marek PiatkowskiF.S.P. Consulting Inc.

VM: 416-235-2631Cell: [email protected] www.TWI-Network.com


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Marek Piatkowski, P. Eng.Consulting Profile Marek is a President of F.S.P. Consulting Inc. F.S.P. Consulting. F.S.P. Consulting specializes in improving overall operational efficiencies through the effective implementation of Lean Transformation - Toyota Production System. Marek’s initial knowledge and expertise of Lean Transformation tools, methodologies and practices comes from working for Toyota Motor Manufacturing in Cambridge, Ontario. He was hired by Toyota in 1987 as the Education and Training manager. He was one of the first Canadians hired by TMMC. He was a member of the Management Team responsible for recruiting of Team Members, training, development of the Organization and start-up and ongoing operation of production activities. In 1994 Marek entered the field of consulting. Since then he has worked with numerous manufacturing and non-manufacturing operations in North America, Asia and Europe where he has a proven track record of successful implementation of Lean Transformation. His clients include companies specializing in manufacturing of automotive products, appliances, furniture, medical devices, consumer goods, packaging, plastic, glass, rubber, personal computers and electronics.In his work he has proven that Lean is not a trend or a movement. Lean is a Management System which includes collection of tools, methodologies, techniques and processes, that when implemented correctly and in the right sequence, will generate measurable results, help companies reduce costs and improve overall operational efficiency. Any company venturing into a Lean Journey must consider not only changes to their manufacturing and material management practices, but also a review and modifications to their organizational structure. As a part of his experience in implementing Lean Marek also emphasizes the organizational development and training process to achieve the business objectives and benefits that are requisite of the above improvement processes.Marek graduated from Systems Design Engineering from University of Waterloo, Ontario in 1977. Prior to joining Toyota he worked in the electronic industry for Sharp Electronics in Memphis Tennessee and Nortel in Brampton, Ontario. He is a member of John Shook’s TWI Network and a Faculty Associate of Lean Enterprise Institute USA, Lean Enterprise Institute Poland, LEI Mexico and Lean Management Instituut Holland. He resides in Toronto, Canada and can be reached at [email protected] or at 248-207-0416.


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