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RSM McGladrey, Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.
"Make Green, Go Green, by Going Lean
Presented By Paul V. Burnett
October 2007
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Paul V. Burnett, BSME, MBA
IBM
John Deere
Ford Motor Company
Detroit Diesel Corporation
Applied Materials
Sanmina-SCI
RSM McGladrey
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How to Go Green?How to Go Lean?
Why?
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Doing nothing is not an option!
Governor Arnold Schwarzenegger signed into law emissionreduction targets for California:
By 2010, reduce GHG emissions to 2000 levels,
By 2020, reduce the GHG emissions to 1990 levels,
By 2050, reduce GHG emissions to 80 percent below 1990
levels
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Green and Lean
15-30% of a manufacturing companys monthly energy bill createsgreenhouse gases.
The energy management within a facility - benchmark competitors. Lean methodologies can be used to reduce waste in the
consumption of energy within a manufacturing facility.
The ultimate goal - eliminate equipment not needed in the process.
If elimination is not possible, minimize the use plot energy consumption to predict maintenance schedules and replacement
cycles.
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Analysis of Electric Industry CO2 Impacts
The electric industry cannot provide substantial reductionsin CO2emissions in the near future to meet goals
Limited potential to switch to greener energy near-term CO2 reduction must come from reducing demand
supported by new energy efficient technologies
conservation programs
A market-based collaborative systematic approach todemand reduction is a critical success factor (profitpotential)
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The Economic Case For Change
Asset performance management can reduce energyconsumption by 6% to 11%.
DOE has established a minimum 10% energy reductionguideline as attainable through the application of propermaintenance and technology solutions.
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G.A.S. Index: Global Asset Sustainability Index
G.A.S. Index = Availability * Performance * Quality *Energy Efficiency
Availability = All downtime / Scheduled time Performance = Actual output for scheduled time / Design
output for scheduled time
Quality = Total production minus defects or rework / Total
production Energy Efficiency = Design energy consumption/Actual
energy consumption
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Example: Motor Efficiency
90,000 Watts 100 HP 76,000 Watts
1HP = .746 kWatts
15,400 Watts (17.4%)
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Motor Efficiency Savings
Energy Savings = 90kW x 8,000 hrs./year x (1-(.828/.94)) =
87,336 kWh/yr.
At an average cost of 11 cents per kWh, the estimatedsavings would be $9,607 per year.
Motor operating cost: (100 HP x .746 kW/HP x 8,000 hrs. x $.11/KWh ) / .94 efficiency
= $69,838 per yr.
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Repair v. Buy
Break even analyses must be based on the increasedcost of purchasing a new, more energy efficient
equipment versus the energy consumption reduction. The cost energy today ranges from 10-13 cents per
kilowatt-hour.
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Lean Definition
A philosophy of production that emphasizes the
minimization of the amount of all the resources
(including time) used in the various activities ofthe enterprise.
- APICS Dictionary, 10th ed.
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Lean Enterprise
An enterprise with a focus on waste eliminationand the customers needs in all parts of its
operations, manufacturing and administration.Emphasis is given to lean structures andprocesses, flexibility of response and methodsand techniques to continually seize newopportunities as they arise.
- APICS Lean SIG
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Early Lean Processes
Mass Production
Early 1900s
Ford Motor Company was a pioneer
Assembly line production
High volume production
Limited number of products
Significant cost reductions
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Today
More than 96% of all U.S. companies have less than 250 employees Global competition / low cost labor Demands by customers:
Higher quality Innovation Mass customization Flexibility Lower Costs
Limited resources
Source: U.S. Bureau of Census, 2004
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What is Lean?
It is NOT: Collection of techniques or a methodology
Reduced staffing or low inventories
It IS: A philosophy of manufacturing
Totally different way of thinking
A different value system
Seeks to eliminate waste (non-value added activities to the customer) Emphasis on flow manufacturing
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What is Lean?
Lean Production
Total Quality Management (TQM)Six Sigma
Cellular ManufacturingBusiness Process Improvement (BPI)
Just in TimeTheory of Constraints
Zero DefectsSPCTQC
Kanban
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Lean Characteristics
Focus is on the improvement of resource utilization:
Equipment setup time reduced
Scheduled machine maintenance Orderly, clean workplace
Pull production being used
JIT inventory control
Factory layout in work cell arrangement by products
Active error elimination
Improved quality, etc.
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The Importance of Waste Elimination
Lean deals with the elimination or reduction ofmany types of non-value-added activities, often
referred to as waste
The driving force for waste elimination is improvedvalue in the products and services customers buy
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Seven Popular Wastes
Overproduction
Waiting
Excessive transportation
Inappropriate processing (the hidden factory)
Unnecessary inventories
Unnecessary motion
Defects- Taiichi OhnoToyota Production System
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The Nature of Wastes
1. Overproduction Target and achievement unclear
Processes not statistically capable
2. Waiting Operators waiting
Operators slower than production line
3. Excessive Transportation Widely spaced equipment waiting
Forklifts not available when needed
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The Nature of Wastes (continued)
4. Inappropriate Processing Variability in operators performance
Processes not statistically capable
5. Inventory Large safety stocks
Variable procurement lead times
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The Nature of Wastes (continued)
6. Motion Double handling
Non-standard layouts Equipment widely spaced from each other
7. Defects Low material yields
Excessive process variability
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Correcting Wastes
1. Overproduction Eliminate by reducing setup times.
Synchronizing quantities and timing between processes. Make only what is needed now.
2. Waiting Eliminate through synchronizing work flow.
Balancing uneven loads with flexible workers and equipment.
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Correcting Wastes (continued)
3. Excessive Transportation Establish layouts and locations to make transport and handling
unnecessary, if possible.
4. Inappropriate Processing Why should this item be made?
Why is each process necessary?
Are any processes being performed that are not part of the workflow?
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Correcting Wastes (continued)
5. Inventory Reduce by shortening setup times. Improving work skills.
Smoothing fluctuations in demand for the product. Reducing all the other wastes reduces the waste in stocks.
6. Motion Study motion for economy and consistency. Economy improves productivity, and consistency improves
quality. Improve the motions, then mechanize or automate. Otherwise,
there is a danger of automating waste.
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Correcting Wastes (continued)
7. Defects Develop the production process to prevent defects.
Eliminate the need for inspection. At each process, produce nodefects.
Design processes to be failsafe (Poka yoke).
Quality processes yields quality products automatically.
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Can you think of other actions to eliminatewaste in your company?
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Leadership Function
Initiate needed change by identifying a vision
Aligning employees to that vision
Motivating to achieve that vision
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Leadership
Lean Change InfrastructureProject &
Training Plans___________________
___________________
___________________
___________________
___________________
______________________________________
___________________
___________________
Vision &
Lean Strategy
ValueNo Waste
Flow
PullStandard Work
JIT
Champion
CEO
Plant Management/President
Vice President
Sponsors:
Manufacturing
Engineering
Quality
Lean Office
FacilitatorFacilitator Facilitator
Team Team Team Team Team Team
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Transparent Workplace
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Transparent Workplace
Define Processes
Value-Added Activities
A Value-Added Step Value versus Non-Value-Added
Value-Stream Mapping
Typical Process Flow Analysis Visual OrderThe Five Ss
Visual Control
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A particular method of doing something which involves anumber of steps, activities, or operations
Processes are found in manufacturing & service industries Example:
Transparent Workplace
Processes Definition
Grind
Type
Contract
Turn Mill Drill
Obtain
Signature
Type
Envelope Mail
Manufacturing
Office
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Process Map
Supplier Customer
Stamping Weld Assembly Paint Shipping
Staging
Weekly
Orders
Weekly
Orders
Weekly Schedule
1
2
3
4
5
Production
Control
I I II
Daily Daily
Total Time: 10 Days
Value-Added Time: 6 minutes
1 Day 1 Day 2 Days 3 Days 1 Day2 Days
50 sec 40 sec 90 sec 120 sec 60 sec
Process Time Line
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Map customer requirements (orders)
Map order information flows
Map physical product/material flows Map plant/office information flows
Add a process time line
Summarize current state
Ask questions at each step to determine waste or
non-value-added areas
Transparent Workplace
Value-Stream Mapping Process
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The % of value-creating time
The number of units of inventory required to support a
production unit Total travel distance versus value-creating distance
Transparent Workplace
Summarize Current State
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Add value to products & services that customers arewilling to pay for Improvements that change a products or services form, fit or
function
Other activities use resources but add no value Some non-value-added activities may be necessary
Based on current knowledge or technology
Long term goal - Eliminate
Remaining non-value-added activities should be eliminatednow!
Transparent Workplace
What Are Value-Added Activities?
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A process that physically changes the work passingthrough it that makes it more valuable to the customer
A step requested by the customer - they are willing to payfor it
Transparent Workplace
A Value-Added Step
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Transparent Workplace
Value versus Non-Value-AddedValue-Added Activities
Entering order Ordering materials, supplies Preparing drawings Assembling Shipping to customers Processing customer deposits Examining patients Filing insurance claims Dispensing event tickets
Fueling airplane
Non-Value-Added Activities
Waiting/sorting Moving Kitting/staging Counting Inspecting Checking Recording Obtaining approvals Testing
Reviewing Copying Filing Revising/reworking Tracking work - Charlene B. Adair & Bruce A. Murray,
Breakthrough Process Redesign
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Value Stream Costing
Value Stream
Operational
Support
Facilities &
Maintenance
All other
Value
Stream
Costs
Production
Labor
Production
Materials
Production
Support
Machines &
equipment
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Traditional Accounting and Lean Controls
System/Issue Traditional Accounting Lean
Production Inventory Control Work Order
Production tracking
Inventory Cycle Count
Kanban
Visual signals
Five S
Procurement Purchase order approval
Three way match in AP
Key Suppliers
Master POs
Supplier Certification
Quality of Products Detailed inspection
Rework or scrap
Standardized work
Single-piece flow
Production Cost Control Standard cost
Variance Reports
Analysis of Variance
Cell/VS CSFs and measures
Analysis of Root Cause
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Costs Outside the Value Stream
Identify tasks not related to the Value Stream Exp. - ISO 9000
These costs are not allocated to the Value Stream They are treated as sustaining costs of the business
Budgeted
Controlled
No need for full absorption costing Value Stream costing proves relevant, accurate cost info
about the Value Stream
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Observe & record the flows of orders, materials, goods andinformation for a product family
Product family: A group of product variants passing throughsimilar processing steps that use common equipment
Mapping identifies waste situations for improvements
Transparent Workplace
Value-Stream Mapping (VSM)
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What are some value-added& non-value-added activities
at your company?
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To eliminate waste, you must first find it
Visual order makes waste evident and is a good starting
point for managing resources Toyota Production - Five Ss as the method for exposing
waste & poor utilization of resources
Transparent Workplace
Visual OrderThe Five Ss
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Sort
Set in orderShine
StandardizeSustain
Transparent Workplace
Visual OrderThe Five Ss
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Transparent Workplace
Lockheed & Boeings Six Ss
SORT SUSTAIN
STRAIGHTEN SAFETY
SHINE STANDARDIZE
6S
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Sort: Classify tools, parts, instructions into necessary &unnecessary
Set in Order: Make it visible & easy to use; 3 Es = easy
to see, easy to get & easy to return Shine: Conduct cleanup to identify abnormalities Standardize: Put a system in place to readily identify
abnormal conditions Safety: Identify & eliminate dangerous & hazardous
conditions Sustain: Make a habit of properly maintaining & following
standard practices
Transparent Workplace
The Six Ss
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Awareness of whats happening Manpower: Skill levels, performance, continuous training
Machines: Develop Maintenance schedules and use them
Materials: Demand Signals indicating shortages; shadow boardsfor location of tools
Methods: Standard Worksheets and Operating Procedures
Measurements: Performance trends
Display schedule Quality targets
Reductions in setup & lead times
Transparent Workplace
Visual Control
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Pull versus Push Production Strategy
ValueValueStream
Flow Pull Perfection
Lean Principles
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Pull
No one upstream should produce any good or service
until the customer downstream asks for it Kanban
ValueValueStream
Flow Pull Perfection
Lean Principles
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Push
Build product to forecast
Excess inventory
Poor utilization & distribution of product
Filled distribution channels
50% of all books manufactured are shredded
ValueValueStream
Flow Pull Perfection
Lean Principles
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Pull
Design
Schedule based on actual demand signals Produce exactly what the customer wants
Flow takes place throughout the supply chain, not justinside your production facility
ValueValueStream
Flow Pull Perfection
Lean Principles
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Pull
Benefits
High throughput
Excellent protection against stock-outs Higher flexibility
Less congestion
Shorter lead times
Higher customer service
ValueValueStream
Flow Pull Perfection
Lean Principles
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Perfection
Begins with visualizing the perfect process
Continuous process to remove waste by eliminating effort,
time, space and defects
ValueValueStream
Flow Pull Perfection
Lean Principles
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Final Thoughts Lean and Green
There is a social responsibility component to savingenergy and reducing the amount of CO2 emissions.
Green as a marketing tool. Select an small area with high visibility and a manageable
number of variables for the first G.A.S. Assessment andLean project.
The journey is never-ending and definitely not easy(especially at first) but the results are well worth the effort.
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QUESTIONS?
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Paul V. Burnett, BSME, MBARSM McGladrey, Inc.
Senior Consultant - Operations and Financial
221 3rd Ave SE, Suite 300Cedar Rapids, IA 52401
319.298.5298