Lean Manufacturing

1. Lean Manufacturing Portland State University School of Business Administration ISQA 552: Managing Operations and the Value Chain Wednesday, March 8, 2006

2. Discussion Topics • Why the Need for Lean • Key Lean Concepts • Long-term View (Lean Enterprise) • Lean Application • Learnings, Issues and Challenges • Suggested Resources

3. Why The Need For Lean in the Footwear Industry • Historically, the footwear industry has operated as a push system focused on economies of scale, with large batches and long assembly lines. • Labor-intensive manufacturing processes require manufacturing in low-cost countries. • Focus on departmental efficiencies. • Customers’ increasing demands for a greater variety, more frequent deliveries, and smaller order quantities; all at a lower cost. • Ongoing need to demonstrate leadership in corporate responsibility: • Respect for workers • Safety and ergonomics • Sustainability (elimination of waste) • Industry and shareholder pressure to improve margins and reduce cycle time. So what to do? Benchmark the best.

4. The Approach to Lean Start with a simple definition of Lean Thinking Deliver the most value From your customer’s perspective While consuming the fewest resources Key Insights • Focus on each product and its value stream rather than organizations, functions, assets, and technologies. • Ask which activities are waste and which create value. • Enhance the value and eliminate the waste to optimize the whole.

5. Ohno Manufacturing Model Method Lead Time Non Value Added Value Added Non Value Added Value Added Inputs Outputs Targets • As per customer demand • In spec. • Lowest total cost • Zero injury (With Profit) • Manpower • Machines • Materials • Quantity • Quality • Cost • Safety “All we are doing is looking at the time line from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes.” Taiichi Ohno,1988

6. Value Stream Concept VALUE STREAM PROCESS PROCESS PROCESS PROCESS Create Job Posting & Advertise Screen Resumes & Schedule Interviews Conduct Interviews Make Offer & Negotiate Package Product or Service Complete Intent or Need Value Stream: All process steps, both VA & NVA, required to deliver a product or service to the customer from the point that the intent or need is identified.

7. Key Lean Concepts (to apply to Value Streams) A house is a structural system that is strong only if the roof, pillars, and foundation are strong. A weak link weakens the whole system. Toyota Production System TPS Best Quality Lowest Cost Best Safety High Morale Shortest Lead Time 4 Just - in - Time 1 3 (Right product, Highly Right Jidoka (Built - in Motivated Amount, Quality) People Right Time) • Andon • Takt Time • Error proofing • Safety • Teamwork • Flexible Workforce • Continuous • In - station Flow quality • Pull System • 5 Why’s • Quick Changeover 2 Operational Stability • Leveled Production • Standardized Work • 5S and Visual Management • Total Productive Maintenance

8. Key Lean Concepts (continued) “Brilliant process management is our strategy. We get brilliant results from average people managing brilliant processes. We observe that our competitors often get average results from brilliant people managing broken processes.” Mr. Cho, President Toyota 1 Highly Motivated People • Safety – concern for the worker has to be foremost to make the factory an environment where workers can contribute ideas. • Teamwork – a team environment in the plant enables the team to manage itself, including solving most problems on their own. Management needs to see itself as there to support the teams. • Flexible Workforce – workers need to be multi-skilled to be redeployed when improvement occur. • Questions to consider: • How do your incentive systems need to change? • What are effective ways to involve all employees in the business of improvement? It’s the people who bring the system to life: working, communicating, and resolving issues together. TPS encourages, supports, and in fact demands employee involvement.

9. Key Lean Concepts (continued) 2 “Losers have tons of variety. Champions take pride in just learning to hit the same old boring winners." -Vic Braden Operational Stability • Level production (heijunka) – an advanced topic, but the simple explanation is to do a little bit of everything, every day, throughout the day. Make all varieties – all models and all sizes – so that we are very very good at changing sizes and models. • Standard Work – we need to identify and document the Best Way to safely make a quality part, every time within Takt Time. Then use that standard method by every operator, every time. • 5S and Visual Management – A stable factory is well organized, clean, and disciplined. It is clear and obvious what is supposed to happen, and what is happening. • Total Productive Maintenance (TPM) – is basically about maintenance of machines – and moving away from being reactionary, to become preventative. The idea is to move away from “just in case” behavior, and create a boring factory, where the same thing happens every day – no surprises, no accidents, no crisis.

10. Key Lean Concepts (continued) 3 Built-in Quality (Jidoka) • Andon Systems – basically a way for the operator to call for help. If something is preventing them from making a quality part, they should activate the andon – which lights up a board showing which operator needs help. The team lead is then alerted to come and provide support. The key idea is to empower the operator to stop the line and call for help. • Error Proofing -- putting in processes that eliminates the possibility of mistakes – a good example of error proofing is on computers – the jacks for plugging in various cables are all different sizes and shapes – and they make them so that it is impossible to plug in to the wrong place, or to put in upside down. • 5 Why – getting to root cause analysis when a problem arises, not just addressing symptoms. The focus is quality at the source. The earlier an issue is found, the less expensive it is to fix. If you have to throw something away, better to do so before you add a bunch of stuff (value) to it.

11. Key Lean Concepts (continued) 4 Just-in-Time (Right product, right amount, right time) • Takt Time – the speed at which material needs to move through that value stream. The concept represents a shift from departmental silos in the plant, to thinking about Value Streams – the process to make a product from start to finish. • Continuous Flow – inventory and information move through the value stream at takt time. Continuous flow makes problems visible because when a problem arises. • Pull System – the customer ultimately creates a pull. So when the customer wants a finished pair, we make one. But customer is also thought of as “the next process.” So when final assembly needs a part, the upstream process produces one. • Quick Changeover -- If you want flexibility, we have to come up with ways to reduce the changeover time, so that it’s possible to change the line quickly and easily. JIT, one of the pillars of TPS, is a set of principles, tools, and techniques that allows production and delivery of products in small quantities with short lead times.

12. Long-term View (Lean Enterprise) • Most every company implementing lean has the long term goal of establishing a lean enterprise. Why? • Diminishing returns from shop floor benefits. Can you save your way to prosperity? • Manufacturing represents less than one third of the total cycle time for a product. • Harvesting the benefits on the shop floor requires new ways of thinking about logistics, production planning, order management, purchasing, etc. • What is a lean enterprise? • Lean thinking applied throughout the entire organization (not just manufacturing) • Continuous improvement as a way of doing business • Performance measurements drive improvement • Everyone involved in kaizen activities • Extended lean efforts with suppliers, customers, and partners Toyota began it’s innovative journey in 1945…. so clearly there is no finish line.

13. Long-term View (Lean Enterprise) The Business Case for Lean Enterprise Although only a relatively small amount of costs have actually been expended by the time a product has been designed, a relatively large amount of costs (about 80 percent) have been committed. Thus, the greatest potential for cost management occurs during the planning and design. Source: OMR. OPTIMAL TARGET COSTING PRACTICES. June 2002

14. Lean Problem Solving Application Portland State University School Of Business Administration Wednesday, March 8, 2006

15. Standardized problem solving “Not knowing the difference between opinion and fact makes it difficult to make good decisions” Marilyn Vos Savant 5 Whys to determine root cause ? ? ? ? ? • Problems are opportunities to learn • Hiding problems undermines the system

16. Planning and Measurement Plan Identify the problem Analyze for root cause Formulate countermeasures Do Develop implementation plan Communicate plan Execute plan Check Monitor progress of plan Modify plan if necessary Monitor results Act Evaluate results Standardize effective countermeasures Start PDCA again

17. “A3” Proposal/Report Format PLAN PLAN An A3 lays out an entire plan, large or small, on one sheet of paper. It should be visual and extremely concise. It should tell a story, laid out from upper left-hand side to lower right, which anyone can understand. PLAN Implementation Plan Do PLAN PLAN Check

18. Applying PDCA and One Page Report Writing • Exercise instructions: • Break into teams • Each team pick a topic from work or from school • For each topic, work through as much of the A-3 format as you can. Defining the business problem is a good place to start. • Use visuals if possible. Use 5 why analysis to understand root cause. Note where you are making assumptions vs using facts. • Brainstorm recommendations that address root cause. • Summarize your ideas in the A-3 format.

19. Title: ________________ Recommendation What is your proposed countermeasure(s)? Background Where do we stand? Where we need to be? Current Situation Plan What activities will be required for implementation and who will be responsible for what and when? What is the specific change you want to accomplish now? Goals What is the root cause(s) of the problem? What requirements, constraints and alternatives need to be considered? Analysis Follow - up How we will know if the actions have the impact needed? What remaining issues can be anticipated?

20. Learnings, Issues and Challenges Some people imagine that Toyota has put on a new set of clothes, so they go out and purchase the same outfit and try it on. They quickly discover that they are much too fat to wear it. Shigeo Shingo (1989) • Physical changes are relatively easy; behavioral changes are difficult; cultural changes can take decades. • Implementations must have the right expectations and right incentives. • Although trade-off’s still exist between cost, time and quality, TPS is a comprehensive approach to achieving improvements in all three. • Lean is a very people-centered initiative which makes it difficult to predict results. • Applying lean concepts in administrative areas is even more difficult. • Lean must be viewed as a long-term investment by the organization.

21. Five Suggestions for You Today • Learn the System, including the dirty details. • Choose a place to begin your own project. Implement it as an integrated system. • Use the Plan Vs. Actual to lead implementations of your Future States. • Learn Standardized Work (“SWS”). Implement it by focusing on the operator. Eliminate waste in each operator’s job! • Ensure clear ownership at the right level(s).

22. Closing Thoughts “From the end customer’s standpoint none of the information processing steps creates any value. To test this assertion, just ask yourself whether you would be less satisfied with a product if it could be ordered and delivered to you with no management of production and logistics information. Obviously you would not be less satisfied. Indeed you would be more satisfied if the cost savings from eliminating information acquisition and management could be passed along to you. Yet in the modern era of automated information management, most managers have implicitly accepted the notion that information is good, more information is better, and all possible information is best. In fact, information for control of operations is necessary waste. Managers ought to be minimizing the need for it rather than maximizing its availability.” – Dan Jones and James Womack

23. Suggested Readings Other Suggestions Tour a lean facility. See www.lean.org, www.ame.org, www.crms.uky.edu/lean. Lean Thinking : Banish Waste and Create Wealth in Your Corporation by James P. Womack, Daniel T. Jones 1996. Learning to See Version 1.3 by Mike Rother, 1999. The Machine That Changed the World : The Story of Lean Production by James P. Womack 1991. The Toyota Way: 14 Management Principles From The World's Greatest Manufacturer by Jeffrey Liker 2003. The Gold Mine: A Novel of Lean Turnaround by Freddy Balle, Michael Balle. 2005. Toyota Production System: Beyond Large-Scale Production by Taiichi Ohno. 1988 Decoding the DNA of the Toyota Production System by Steven J. Spear, H. Kent Bowen. September 1, 1999 Learning to Lead at Toyota by Steven J. Spear. Harvard Business Review Article, May 2004.