Volvo Production System, Anne-May Engdahl

Volvo Production System

GTC

13 November, 2008

2Volvo Production System

VPS AcademyAnne-May Engdahl Nov 2008

VPS – Overview

Background to VPS

VPS structure

VPS Content

Going forward



Corporate Values

Quality

Environment

Safety



Corporate Culture

The Volvo Way is a guide for our behavior

as leaders and team members.

It shows what we stand for and want to

achieve.

We shall work towards profitable growth

with energy, passion and respect for the

individual.



One of Volvo Group Top Priorities

Volvo Production System• Method & discipline across also non-manufacturing areas

• Systematically use professional benchmark and best

practice

3.1 Operational Excellence

Increase productivity and cost efficiency:• develop and implement Volvo Production System

• Increase productivity by 5% p.a.

• Reduce cost of poor quality by 25% by end of 2009

Create a competitive customer oriented culture:• Common language with shared terminology

• Avoidance of duplication of efforts

• Common solutions

• Ability to find and share benchmarks and best practices

VPS is a key strategy achieve our strategic

objectives…



”All we are doing is to shorten the time line from the point where we receive the customer order to the point we get paid.

We shorten this time line by reducing waste in form of activities that does not add value to our customers products.”

Taiichi Ohno

The key to Toyotas successes



Inventory Overproduction Transport

Defects and

Rework

Unnecessary

Processes

Movements Wait

The Seven Wastes + 1



Why VPS? - Achieve World Class performance

Create value for

our customers

Create value for

our employees

Create value for

our owners

• Secure quality

• Secure delivery times

• Lower costs

• Secure safe and environmentally-sound workplaces

• Realize full potential of employees by focusing on

continuous improvement and value-added activities

• Reduce waste

• Reduce cost of poor quality

• Drive and support commonality

• Favor reuse of best practices across BA/BU



VPS – Overview

Background to VPS

VPS structure

VPS Content

Going forward



VPS background

Design of

VPS modelVPS Launch

AssessmentsPre-study

2005 2006 2007 2008 –

Content updates

VPS in the BA/BU



The Volvo Production System covers three

important dimensions

Vision 5 PrinciplesModules with tools

and techniques

A holistic view of what it will look

like when all the principles and

tools come together as an

implemented and operational

system, aligning along the firm

values

Key elements of the vision that

will help and support the

implementation and daily

maintenance of the production

system – forcing consistency of

system thinking and decision

making

Practical tools and techniques

that when applied focus and

drive the material and

information flow – driving

continuous-improvement

activities and behaviors



Volvo Production System - Vision

An organization

where we continuously

improve quality, delivery and

productivity, in everything we do



The Volvo Production System – Customer

We aim to continuously create value

for our customers and to be valued

as the world‟s leading provider of

commercial transport solutions...



The Volvo Production System – Volvo Way

…to do this, we base our guiding

principles on The Volvo Way –

including our Values, our Culture, our

Leadership, as well as how we go

from Word to Action



The Volvo Production System – 5 principles

Our Five Principles guide us to reach

our vision of continuously improved

quality, delivery, and productivity –

all five are necessary together, in

order to reach the vision



VPS Module Reference material…

…building the knowledge how to use

a tool and what should be the ideal

state



VPS Academy and group networks

Plant level

BA/BU level

Central Academy

Plant specialists

VCE

Mack

RTC

VAC

VPT

VPC

Volvo

partsVTC

• Eskilstuna

• Wroclaw

• Belley

• Etc.

VBC

Central Academy

BA/BU VPS responsible

Nissan

Diesel

Plant level

BA/BU level

Central Academy

Plant specialists

VCE

Mack

RTC

VAC

VPT

VPC

Volvo

partsVTC

• Eskilstuna

• Wroclaw

• Belley

• Etc.

VBC

Central Academy

BA/BU VPS responsible

Nissan

Diesel

VPS-A VPS BA/BU Networks

VPS-A is the central function that

develops and communicates the VPS

model and ensures best practice sharing

across the group

• VPS Steering Committee - all BA/BU

• VPS Working group - active BA/BU‟s

• Subject and extended networks,

4. Offer support

1. Assess level

2. Define what

to do

3. Suggest

how to do it

4. Offer support

1. Assess level

2. Define whatto do

3. Suggest how to do it

0. Own and develop VPS

knowledge and documentation

5. Offer support 2. Assess level

4. Suggest

how to do it

1. Own and

develop VPS

model

3. Recommend

improvement

opportunities

4. Offer support

1. Assess level

2. Define what

to do

3. Suggest

how to do it

4. Offer support

1. Assess level

2. Define whatto do





4. Suggest

how to do it

1. Own and

develop VPS

model

4. Offer support

1. Assess level

2. Define what

to do

3. Suggest

how to do it

4. Offer support

1. Assess level

2. Define whatto do





4. Suggest

how to do it

1. Own and

develop VPS

model

3. Recommend

improvement

opportunities



First points of contact – VPS Homepage



VPS Database for common reference material



VPS – Overview

Background to VPS

VPS structure

VPS Content VPS Assessment

Good Examples

VPS Reference Material

Transformation Guidance

Performance Measurement

Going forward



VPS assessment gives guidance…

VPS

SQDCEP

Assessment &

Gap Analysis

Tools &

Techniques

VPS

SQDCEP

Assessment Tools &

Techniques

Improvement Benchmarking

Gap analysis



VPS Assessment scoring model version 2.0

Metrics defined

Giving positive effect

where implemented

Positive trends

Metrics on World

class level

World leading

performance.

Pilot

Areas of importance

(value flow)

All applicable areas

Extended deployment

Full extended

deployment

Innovation of approach

Some of the key

elements are applied

Most of the key


All key elements are

applied

Continuous

improvements and

sharing

1 Basic initiatives

2 Structured Approach

3 Established

4 Outstanding

(World class)

5 Perfection

Metrics defined


where implemented

Positive trends

Metrics on World

class level

World leading

performance.

Pilot

Areas of importance

(value flow)


Extended deployment

Full extended

deployment


Some of the key


Most of the key



applied

Continuous

improvements and

sharing

1 Basic initiatives


3 Established

4 Outstanding

(World class)

5 Perfection

EffectDeployment Approach EffectDeployment Approach

Metrics defined


where implemented

Positive trends

Metrics on World

class level

World leading

performance.

Pilot

Areas of importance

(value flow)


Extended deployment

Full extended

deployment


Some of the key


Most of the key



applied

Continuous

improvements and

sharing

1 Basic initiatives


3 Established

4 Outstanding

(World class)

5 Perfection

Metrics defined


where implemented

Positive trends

Metrics on World

class level

World leading

performance.

Pilot

Areas of importance

(value flow)


Extended deployment

Full extended

deployment


Some of the key


Most of the key



applied

Continuous

improvements and

sharing

1 Basic initiatives


3 Established

4 Outstanding

(World class)

5 Perfection

EffectDeployment Approach EffectDeployment Approach

Action list

for main

improveme

nt areas

Dimensions Sub areas Score Assessment summary

1. The Volvo Way 0,6

Knowledge and use of vision 1,0

Performance management 1,0

Leadership 1,0

Safety and Health 0,0

Environmental care 0,0

2. Team work 0,3

Goal oriented teams 1,0

Cross functional work 0,0

Organizational design 0,0

3. Process stability 0,8

Standardized work 2,0

5S (Workplace organization) 1,0

Maintenance systems 1,0

Performance Measurements 0,0

Value stream mapping 0,0

4. Just-in-time 1,0

Logistics Delivery 1,0

Continuous flow processing 2,0

TAKT time 1,0

Pull systems 1,0

Flexible manpower system 0,0

5. Built-in quality 0,8

Quality control 1,0

Quality assurance 2,0

Quality design 0,0

Quality culture 0,0

6. Continuous improvement 1,3

Problem solving methodology 2,0

Operational development 1,0

Design of improvement organization 1,0

0,0

1,0

2,0

3,0

4,0

5,01. The Volvo Way

2. Team work

3. Process stability

4. Just-in-time

5. Built-in quality

6. Continuous improvement

1. Overview

3. Final report

2. Road MapBuild up small scale

organization

Finalize, extend

and scale up

support

2007

2008 –

Academy

focus

• Make best-practice

knowledge available to

organization

• Recruit small dedicated

teams with experienced

practitioners

• Start conducting

assessments

• Continue to conduct

assessments

• Complete library of best-

practice knowledge

• Regularly update with

feedback from organization

• Expanded scope

Build up small scale

organization

Finalize, extend

and scale up

support

2007

2008 –

Academy

focus

• Make best-practice

knowledge available to

organization

• Recruit small dedicated

teams with experienced

practitioners

• Start conducting

assessments

• Continue to conduct

assessments

• Complete library of best-

practice knowledge

• Regularly update with

feedback from organization

• Expanded scope



Good examples across the group

Volvo Group

VPS Academy 1

Poka Yoke device from VPT Global (Autumn 2007)

Poka Yoke is a technique of preventing errors by designing the product, process and/or

equipment so that an operation literally can not be performed incorrectly or at least not

without being notified about the problem

Poka Yoke is primarily used to eliminate quality problems and can be preventive or

detective

Thoroughly understanding the ways

the process can fail is critical. It is

therefore useful to start by listing the

different types of possible errors that

can occur, e.g.

-Processing error

-Setup error

-Missing part

-Incorrect part

-Defective part

-Measurement error

Start out broadly and generate

different types of mistake proofing

solutions for evaluation

Example, detective Poka Yoke

Example, preventive Poka Yoke

Before After

Lamp lights up and helps

the operator select the

proper component to install

Volvo Group

VPS Academy

Safety bulletin from VCE Graders in Goderich, Canada (Nov 6th 2007)

The safety bulletins are used as a

complement to the ordinary safety

procedures

They can be used in a reactive way – to

highlight what incidents/accidents

have already taken place, but also in a

preventive way – to highlight an area

or activity that possibly could be

unsafe

The safety bulletins are spread where

appropriate throughout the

organization

If used for preventive purposes, the

bulletins could have a certain focus

area, e.g. “Know your surroundings”,

not only to make the personnel aware

of a specific problem area but also to

encourage the personnel to think in a

new way

Volvo Group

VPS Academy 3

TAKT-board from VCE Excavators in Shanghai, China (Oct 15th 2007)

This TAKT-board highlights current status of production and remaining TAKT-

time of the current cycle. This is placed in the ceiling over the line and thereby

very visual for all employees to see

Specifies the defined TAKT-time

Specifies the remaining time of

the current cycle

Daily production target expressed

in numbers

Target numbers that should have

been produced at the specific

moment in time

Actual numbers of products

produced at the specific moment

in time corresponding to “Target”

Total time of line stops during the

shift

Volvo Group

VPS Academy 6

Autonomous Maintenance example from VCE Arvika, Sweden

This check sheet describes the nine

steps of the Autonomous

Maintenance that the operator

should check when starting each

shift. Different colored areas show

different areas of responsibilities.

On the floor it is marked where the

operator should stand when each

check is made. The numbers are

linked to the check sheet.

Photos from: 2007-10-26



VPS module reference material

8 (78)Volvo Production System AcademyValue stream mapping

VPS-1017, Issue 3, 2008-07-02

VSM is a method of viewing the combination of flows,

and this is the way it looks likeEXAMPLE

Company

Supplier

Production planning

Company

90/60/30 days

forecastDaily delivery

schedulesDaily

faxes

Daily delivery

schedule

Weekly production schedule

1 x day

Tuesday,

Thursday

6 weeks

forecast

MPS

1700 m/roll

Raw Material

►I ►I

Cutting

1

C/O = 1 hour

Uptime = 85%

C/T = 1 Sec

►IL: 4600 pcs

R: 2400 pcs

Welding No 1

1

C/O = 10 mjn

Uptime = 100%

C/T = 39 sec

L: 1100 pcs

R: 600 pcs

L: 1600 pcs

R: 850 pcs

►IL: 1200 pcs

R: 640 pcs

C/O = 10 min

Uptime = 80%

C/T = 46 sec

Welding No 2

1

C/O = 0 sec

Uptime = 100%

C/T = 40 sec

Assembly No 2

1

Despatch dep.

►IL: 2700 pcs

R: 1440 pcs

C/O = 0 sec

Uptime = 100%

C/T = 62 sec

Assembly No 1

1

Despatch dep.

I5 days of

production

demand

5 days 7.6 days 1.8 days 2.7 days 2 days 4.5 days

1 sec 39 sec 46 sec 62 sec 40 sec

L/T: 23.6 days

V/A: 188 sec

12000 Left

6400 Right

18400 pcs/month

Box: 20pcs

2 shifts

Source for this example, as for many figures and examples in this training material: Rother M., Shook J. (1998) Learning to see, The Lean Enterprise Institute

8 (38)Volvo Production System Academy5S

VPS-1018, Issue 1.1, 2008-09-19

What is 5S?

Sort

(Seiri)

Set in order

(Seiton)

Shine

(Seisou)

Standardize

(Seiketsu)

Sustain

(Shitsuke)

• 5S originates from the 5 Japanese workplace

organization activities that begin with “S”

• 5S is an approach to create neat, organized

and efficient workplaces, its waste-reduction

strategy will when fully implemented and

maintained help in reducing costs

• 5S includes all objects and documents

47 (58)Volvo Production System AcademyQuality Assurance

Process Capability studies, CP and CPk

LCLUCL

LSLUSL

Tolerance Natural

Tolerance gEngineerinCP

LSL USLTarget

LCL UCLX

Engineering

toleranceNatural

tolerance

LSL USLTarget

LCL UCLX

Engineering

toleranceNatural tolerance

Cp compares natural tolerance of process with

engineering tolerance of the customer

• The Cp value only takes into account the spread of the process, and does not consider, whether the process is on target. This is

only done by the cpk value which is therefore more powerfull to measure quality.

• A process is considered as capable with a cpk >1

• Common expected cpk values in industry are 1.33 (automotive industry) or even 1.66 for critical processes

Definition

Differences

LSL USLTarget

LCL UCLX

X- USL

X- UCLLCL - X

LSL - X

LSL USLTarget

LCL UCLX

X- USL

X- UCL

LSL - X

LCL - X

X-UCL

X - USL

LCLX

LSLXCpk ;ofLower

Cpk also takes into account, how well the process is centered



VPS transformation approach

3. Visible leadership & basic shop floor

support structure

1. Organizational alignment with

VPS strategy and self-funding

transformations

$ Wave n

Sustainable

improvements

4. Performance management

2. Investment in capability-

building and resources

$ Wave 1



Guidance on how to structure the

transformation

Prepare

Establish the

team and

ensure the

necessary

preparation

steps are

complete

Stabilize

Install the

base

elements for

stability and

quality

Flow

Introduce the

visual tools,

triggers and

inventory to

flow the

material

Takt

Pace the

flow to match

that of

customer

demand

Pull

Link

individual

processes

together to

create one

single flow

Maintain

Review and

improve the

change and

coach line

managers

Design

Design

future state

system,

validate

targets

Diagnose

Diagnose

current

operating

and

management

systems

Plan

Develop a

tactical

implemen-

tation plan

by work

streams

Timing may vary

depending on the size of

the transformation



VPS guidance how to start…

VPS Academy 8


Picture

Stabilize Flow Takt Pull Maintain

Gather data

Picture

- Team selection

- Team kick-off

- Team training / lean

games

- Set up practical

aspects and logistics

- Team building

- Define the problem

- Establish

communication

channels

- Communicate to

people affected by

the transformation

- Collect relevant data

- Audit pre-requistes (ieQSM)

- Organization chart

- Identify supplier issues

- Identify quality issues

- Collect all micro design data

- Outline high level work

plan

- Scope timeline according

to size of areas to

transform

- Define role of team

members

- Agree on the local

performance

requirements

- Meet line managers to

understand their

concerns

Develop work plan

Picture

Establish team Identify local issues

Picture

CommunicateMetsec Metstrut - Lean Operations

42

OEE Summary

100

11

25

64

24

9

31

2

29

Available

time

Break

down

Change

overMinor stop Speed

Losses

Scrap Value

added Time

Source: Team

% hours

Operating

time

Running

Time

Completed

To start

• Focused equipment

improvements

• Root cause problem

solving

• SMED activities to

support sequence

and reduce lead time

• Problem

identification and

waste removal

• Performance monitoring

• Standardisation of

machine parametersPicture

Prepare

Transformation – Prepare

Design

Diagnose

Plan

VPS Academy 9


Prepare

Finalize cross linked

initiative design

Create tactical

implementation planCheck micro design

Create project

review process

Design visual

triggers and tools

Picture

A

Product 1

Product 2

Product 3

B C

Capability building

Performance mgmt

Organization

- Run through micro

design with all

production

personnel

- Identify

improvements and

further info to

detail

- Run workshop with

operators to add final

level of detail to

production area

- Order necessary

materials

- Check dimensions

against audit elements

- Detail & plan specific actions from the overall cross-linked initiatives for the transformational area

- Communicate with involved personnel

- Book central resources

- Write sub-workstream

implementation plans with

the operators and shop

floor stakeholders

- Ensure signoff by all

production area personnel

- Ensure check points

/quality gates

- Plan daily, weekly and

monthly reviews wit the

key management levels

- Make reporting

templates together with

appropriate KPI’s

(quality, delivery, etc)

Transformation – Diagnose, Design and Plan

Design

Diagnose

Plan

Stabilize Flow Takt Pull Maintain

VPS Academy 10


Stabilize

Transformation – Stabilize

Flow Takt Pull Maintain

Design

Diagnose

Plan

Stabilize quality Stabilize maintenanceStabilize manning Stabilize logistics

Picture

Stabilize process

- Minimize large/short

notice fluctuation in

manning through

communication and

monitoring

- Improve job flexibility

using job rotation and

skill matrix tracking

- Create a discipline for

standards through the

rollout of 5S, followed

by standardized

operating procedures

- Start OEE analysis of

the equipment and

problems solving

- Identify the critical quality points in the process using QFD

- Ensure the tools for both building in and checking quality (SPC, Poke Yoke, andon)

- Problem solve specific large issues (FMEA)

- Identify autonomous

maintenance activity

- Link to maintenance

department schedules

- Train operators as

necessary

- Develop maintenance

KPI’s (MTTR etc)

- Check history of logistics

delivery effectiveness,

problem solving issues

- Build short term

inventories if necessary to

ensure un-interrupted

supply during

transformation

LCL

UCL

1

23

4 6

7

Boar

d

5

8

Prepare

VPS Academy 11


Flow

Transformation – Flow

Takt Pull MaintainStabilize

Design

Diagnose

Plan

Prepare

Set WIP for flow Visualize materialSmooth demand Align logistics deliveryBalance work content

- Install leveling board

to smooth out and

visualize information

- Group products where

necessary with batch

building boards

- Balance the work

content between

equipment and

people using

Yamazumi (work

balance boards)

- Eliminate start/stop

activities & waste

- Follow guidelines from micro designs to setup Standard-in-process stocks (SIPS)

- Dimension inter process stocks with upper and lower limits (WIP)

- Visualize and

standardize the

movement of material

with FIFO lanes and

shop stocks

- Design visual triggers

and responses from the

team for NG situations

- Follow guidelines from

logistics micro designs to

improve delivery and to

remove or minimize

material holding using 2-

bin systems,

synchronized delivery,

small parts boxes, etc

Station 3Station 1 Station 2

VPS Academy 12


Takt

Create loading

process

Link to overall

production planning

Monitor

performance

Identify takt time

requirements

- Track progress of the

production area in real

time using production

boards or monitors

- Develop team leader

responses for NG

performance

- Design differentiated

manning/loading

tables for different takts,

with target cycle times

- Link back to production

boards or monitors

- Prepare standardized preparation schedule , together with the standardized work combination sheets, for the different takttimes

- Ensure link between takt

time planning and

capacity planning process

- Create a standardized

preparation schedule /

discussion process

(weekly meetings etc)

1

2

2

4

36

4

8

60

7

2

8

4

9

6

1

0

8

12

0

2

5

5

0

7

5

1

0

0

1

2

5

1

5

0

1

7

5

5

5

6

6

7

8

8

9

9

9

1

0

1

0

1

1

854

4

3

DE

M

AN

D

TA

-

un

its

DEMAND G-units

Transformation – Takt

Pull MaintainStabilize

Design

Diagnose

Plan

Prepare Flow

VPS Academy 13


Pull

Build skills/capability

matrix

Create manpower

flexibility triggers

Link processes to

one another

Re-dimension and

reduce WIP

- Physically link upstream

and downstream

process together using

kanbans, conveyors,

trolleys, electronic

signals, queuing rails

- Develop capabilities of

operators and logistics

- Gradually reduce inter-

process inventories as

systems and

capabilities mature

- Create regular

system/kanban

maintenance checks

- Improve skills matrixand operator development plan to add flexibility

- Link to reviews and progression criteria

- Train leaders in „train the trainer‟ skills

- Re-allocate manpower

across areas in real time, to

meet customer demand,

triggered by manpower

allocation tables

- Use andon support teams

and overtime to add

flexibility

Add 1

operator Remove 1

operatorInventory levels

Transformation – Pull

MaintainStabilize

Design

Diagnose

Plan

Prepare Flow Takt

VPS Academy 14


Maintain

Coach managers

Link to plant

control centreUpdate

Standardized work

Build continuous

improvementCreate audits

ActPlan

DoCheck

12345678910111213

- Amend

standardized work

for improvements

to production

process

- Train personnel in

standardized work

kaizen

- Write audit sheets for

key all key elements

of lean design

- Schedule weekly

audits sessions, led

by non-area person

- Report results to

management

- Identify areas requiring additional coaching

- Complete trainings

- Create communication channels for ad-hoc support

- Link to line control

and plant

performance

monitoring system

- Create trigger point

management systems

and escalation

procedures

- Create improvement

infrastructure in the team

- Develop idea

management process

- Train personnel in

problem solving

methodology

Transformation – Maintain

Stabilize

Design

Diagnose

Plan

Prepare Flow Takt Pull

and how to continue



Performance measurement –

a Zero and 100% mindset!

• Zero safety risk

• Zero ergonomic concerns

• Zero defects

• Zero deviations created from

human error

• Zero downtime

• Zero scrap material and rework

• Zero environmental concerns

• Zero Premium Freight

• 100% employee satisfaction index

(VGAS)

• 100% delivery precision

• 100% Build-to-Schedule (BTS)

SAFETYSAFETYSAFETYSAFETY QUALITYQUALITYQUALITYQUALITY DELIVERYDELIVERYDELIVERYDELIVERY COSTCOSTCOSTCOST ENVIRONMENTENVIRONMENTENVIRONMENTENVIRONMENT PEOPLEPEOPLEPEOPLEPEOPLE



VPS Overview

Background to VPS

VPS structure

VPS Content

Going forward



30

VPS Roadmap 2009-2012

2012

100%

Established

and WCP



Examples of common areas of interest

The Material

Flow

Purchasing

IT

Logistics

Organizational

development

HR & OD

Unions

Quality

Environmental

care

Quality CouncilProduct development

Environmental

council

ProductPurchasing

Product

development

Purchasing



The same system from different viewpoints

Manufacturing

perspective

Product development

perspective

Service production

perspective

Administration

perspective



Toyota

Product Value Stream

Detail DesignSet-based Design

Market

analysis

Company

vision

Integration

Events



The strategic objective of operational excellence

will be aligned with the other objectives…

… and we have created a competitive

customer oriented culture!

Profitable GrowthProduct Cycle

Management

OperationalExcellence

Documents

Volvo Production System, Anne-May Engdahl