Lean Management

1. Lean Management Class 52/16/11

2. 12-2 Learning Objectives After completing the chapter you will: • Understand the concepts of the Toyota Production System and lean management • Learn how a production pull system works • Understand how to eliminate waste in processes • Understand the “rules” of lean management • Understand how to accomplish lean production • See examples of lean concepts applied to manufacturing and service systems

3. 12-3 Lean Production • Lean Productioncan be defined as an integrated set of activities designed to achieve high-volume production using minimal inventories (raw materials, work in process, and finished goods) • Lean Production also involves the elimination of waste in production effort • Lean Production also involves the timing of production resources (i.e., parts arrive at the next workstation “just in time”)

4. Lean thinking • Womack and Jones (1996) defined the principles of lean thinking: • Define value precisely from the perspective of the end customer in terms of a specific product with specific capabilities offered at a specific price and time • Differentiate value from muda, or waste • Can be difficult due to the many steps across departments and companies • Identify the entire value stream for each product or product family and eliminate waste • Apply to three critical activities: product definition, information management, and physical transformation

5. Lean thinking • Make the remaining value-creating steps flow • No waiting, downtime, or scrap within or between steps • Suggest application of kaikuku, or radical improvement, as opposed to kaizen, or continuous improvement • Design and provide what the customer wants only when the customer wants it • Let the customer pull the product from the value stream

6. Lean Thinking • Pursue perfection • There is no end to the process of reducing effort • The four initial steps interact with one another in a virtuous circle • More precisely defined value challenges steps in value stream to reduce waste • getting value to flow faster exposes muda • harder customers pull, the more impediments to flow revealed

7. Lean Thinking: Lantech • Developed a device that would stretch-wrap pallets with plastic film • Built its four types of machines in batches, called a batch and queue system • Also used this system for processing orders and developing new products • Great complexity with its processes, long time to complete processes, and much of the process time was queue time • Moved to total quality management after it lost a patent infringement suit • Empowered workers but didn’t address processes

8. Lean Thinking: Lantech • New VP of Operations hired an established a dedicated process flow for each of the four product families • Equipment grouped together in four cells • No batches – one unit at a time: continuous flow • All jobs directly linked – no buffers of inventory • Set takt time: available time in a period / customer orders in that period • Changeovers done quickly to accommodate product options • Applied same techniques to office and product development

9. Management philosophy • “Pull” system though the plant WHAT IT IS • Attacks waste • Exposes problems and bottlenecks • Achieves streamlined production WHAT IT DOES • Employee participation • Industrial engineering/basics • Continuing improvement • Total quality control • Small lot sizes WHAT IT REQUIRES • Stable environment WHAT IT ASSUMES Features of Lean Production

10. Vendor Fab Sub Vendor Fab Final Assembly Customers Sub Fab Vendor Fab Vendor Pull System Here the customer starts the process, pulling an inventory item from Final Assembly… Then sub-assembly work is pulled forward by that demand… The process continues throughout the entire production process and supply chain

11. 12-11 The Toyota Production System • Based on two philosophies: • 1. Elimination of waste • 2. Respect for people

12. 12-12 Elimination of Waste • Focused factory networks • Group technology • Quality at the source • JIT production • Uniform plant loading • Kanban production control system • Minimized setup times

13. 12-13 Minimizing Waste: Focused Factory Networks These are small specialized plants that limit the range of products produced (sometimes only one type of product for an entire facility) Some plants in Japan have as few as 30 and as many as 1000 employees Coordination System Integration

14. 12-14 Minimizing Waste: Group Technology (Part 1) Note how the flow lines are going back and forth • Using Departmental Specialization for plant layout can cause a lot of unnecessary material movement Saw Saw Saw Grinder Grinder Heat Treat Lathe Lathe Lathe Press Press Press

15. 12-15 Minimizing Waste: Group Technology (Part 2) • Revising by using Group Technology Cells can reduce movement and improve product flow Grinder 1 2 Lathe Press Saw Lathe Heat Treat Grinder Press Lathe A B Saw Lathe

16. 12-16 Minimizing Waste: Uniform Plant Loading (heijunka) Suppose we operate a production plant that produces a single product. The schedule of production for this product could be accomplished using either of the two plant loading schedules below. Not uniform Jan. Units Feb. Units Mar. Units Total 1,200 3,500 4,300 9,000 or Uniform Jan. Units Feb. Units Mar. Units Total 3,000 3,000 3,000 9,000 How does the uniform loading help save labor costs?

17. 12-17 Example: By identifying defective items from a vendor early in the production process the downstream work is saved Machine downtime Scrap Vendor Change delinquencies Work in orders process queues Engineering design Design (banks) redundancies backlogs Example: By identifying defective work by employees upstream, the downstream work is saved Decision Paperwork Inspection backlogs backlog backlogs Minimizing Waste: Inventory Hides Problems

18. 12-18 Minimizing Waste: Kanban Production Control Systems This puts the system back were it was before the item was pulled Once the Production kanban is received, the Machine Center produces a unit to replace the one taken by the Assembly Line people in the first place Withdrawal kanban Storage Part A Storage Part A Machine Center Assembly Line Production kanban Material Flow Card (signal) Flow The process begins by the Assembly Line people pulling Part A from Storage

19. 12-19 Respect for People • Level payrolls • Cooperative employee unions • Subcontractor networks • Bottom-round management style • Quality circles (Small Group Involvement Activities or SGIA’s)

20. 12-20 Toyota Production System’s Four Rules: Spear and Bover (1999) • All work shall be highly specified as to content, sequence, timing, and outcome • Every customer-supplier connection must be direct, and there must be an unambiguous yes-or-no way to send requests and receive responses • The pathway for every product and service must be simple and direct • Any improvement must be made in accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization

21. Rule 1: How People Work • Focus on the details • 1st unstated rule: every activity must be specified for success • May seem obvious, but the majority of managers outside Toyota do not take this approach)

22. Rule 1: Car Seat Example “ When a car’s seat is installed, the bolts are always tightened in the same order, the time it takes to turn each bolt is specified, and so is the torque to which the bolt should be tightened. Such exactness is applied not only to the repetitive motions of production workers but also to the activities of all people regardless of functional role.”

23. Rule 1: Toyota’s Method • Seven-step process with specific steps and lengths of time • There is a well developed sequence of events for each particular job • When employees deviate from these details it is obvious

24. Rule 1: Toyota’s Hypotheses • Performing the activity tests two hypotheses: 1) The person doing the activity is capable of performing it correctly 2) Performing the activity creates the expected outcome Example: “If they can’t insert the seat in the specified way within the specified amount of time, then they are clearly refuting at least one of the hypotheses, indicating that the activity needs to be redesigned or the worker must be trained again.”

25. Rule 2: How People Connect • Every connection must be standardized & direct, specifying: • people involved • form & quantity of goods and services • way requests are made by each customer • expected time that requests will be met • Rule creates supplier-customer relationship • Result: “…no gray zones in deciding who provides what to whom and when.”

26. Rule 2: Application • Toyota uses kanban cards to set up direct links between suppliers and customers • Other companies use supervisors to answer calls for help; no specific person assigned • “…when something is everyone’s problem it becomes no one’s problem.” • Toyota’s workers expected to ask for help • Testing hypothesis keeps system flexible, allowing for constructive adjustment

27. Rule 3: How the Production Line is Constructed • All products and services flow along a simple specified path • no forks or loops to convolute the flow; all direct to specific persons or machines • change only when production line is expressly redesigned • Toyota production lines accommodate many types of products • All of the rules allow Toyota to conduct experiments and remain flexible and responsive

28. Rule 4: How to Improve • What can be improved: • Production activities • Connections between workers or machines • Manufacturing pathways • Improvements must be made: • Using the scientific method • Under the guidance of a teacher • At the lowest possible organizational level

29. Rule 4: How to Improve • How do you use the scientific method? • Frame problems using first three rules • Formulate and test hypotheses • Question assumptions • Don’t confuse goals with predictions based on hypotheses e.g. Reducing changeover time by two-thirds

30. Rule 4: How to Improve • Who does the improvement? • Frontline workers, with assistance from supervisors • Problem scale determines how many organizational levels are included in the solution • Toyota’s commitment to learning • Operations Management Consulting Division (OMCD) • Toyota Supplier Support Center (TSSC)

31. Notion of the Ideal • People motivated by a common goal • Sense of what the ideal production system would be • Make improvements beyond what is “necessary” • Very pervasive • Essential to the Toyota Production System

32. Notion of the Ideal • Concrete Definition: • The output of an ideal person, group of people, or machine: • Is defect free; • Can be delivered one request at a time; • Can be supplied on demand in the version requested; • Can be delivered immediately; • Can be produced without waste; • Can be produced in a safe work environment.

33. Organizational Impact of the Rules • The rules create an organization with a nested modular structure by: • Making people capable and responsible for their own work • Standardizing connections between individual customers and suppliers • Pushing the resolution of connection and flow problems to the lowest possible level

34. Organizational Impact of the Rules • Benefit: People can implement design changes in one part without unduly affecting other parts • Toyota can delegate a lot of responsibility without creating chaos

35. Countermeasures • Kanbans or andon cords • Temporary responses to specific problems • Serve until a better approach is found or conditions change • NOT solutions • Building up inventory of materials • Ideal system would have no need for inventory • Required in certain circumstances: • Unpredictable downtime or yields • Time consuming setups • Volatility in the mix and volume of consumer demands

36. 12-36 Lean Implementation Requirements: Design Flow Process • Link operations • Balance workstation capacities • Redesign layout for flow • Emphasize preventive maintenance • Reduce lot sizes • Reduce setup/changeover time

37. 12-37 Lean Implementation Requirements: Total Quality Control • Worker responsibility • Measure SQC • Enforce compliance • Fail-safe methods • Automatic inspection

38. 12-38 Lean Implementation Requirements: Stabilize Schedule • Level schedule • Underutilize capacity • Establish freeze windows

39. 12-39 Lean Implementation Requirements: Work with Vendors • Reduce lead times • Frequent deliveries • Project usage requirements • Quality expectations

40. 12-40 Lean Implementation Requirements: Reduce Inventory More • Look for other areas • Stores • Transit • Carousels • Conveyors

41. 12-41 Lean Implementation Requirements: Improve Product Design • Standard product configuration • Standardize and reduce number of parts • Process design with product design • Quality expectations

42. 12-42 Lean Implementation Requirements: Concurrently Solve Problems • Root cause • Solve permanently • Team approach • Line and specialist responsibility • Continual education

43. 12-43 Lean Implementation Requirements: Measure Performance • Emphasize improvement • Track trends

44. 12-44 Lean in Services (Examples) • Organize Problem-Solving Groups • Upgrade Housekeeping • Upgrade Quality • Clarify Process Flows • Revise Equipment and Process Technologies

45. Lean Services: Jefferson Pilot Financial • Jefferson Pilot Financial is an insurance company searching for new ways to grow • Had rising customer expectations • New products with increased complexity • Had to deal with specialized companies with lower prices • Needed a way to improve service and reduce costs

46. Steps Toward Improvement • Wanted key differentiator to be superior service • Needed to analyze operations of business units • With analysis, JPF realized they could increase revenue through improved operations • Looked to Japanese practices of “lean production”

47. Lean Production • JPF could benefit because its operations were similar to that of a car company • In 2000, appointed “lean team” • Initiative has delivered impressive results • Halved time of receipt to application of policy • Reduced labor cost by 26% • Reduced rate of errors on policies by 40% • Resulted in 60% increase in new premiums

48. Building the Model Cell • Company can introduce a lean system without significantly disrupting operations • “Model cell” rollout - company sets up microcosm of its entire process -Allows managers to conduct experiments and smooth out kinks while working towards optimal design

49. Building the Model Cell • Jefferson Pilot Financial chose section of new business unit devoted to processing policies • Unit had 10 employees and handled policies that did or did not require physician statements • Lean production built around continuous-flow processing • Traditional methods have large batches processed at each step and passed along only after an entire batch has been processed If not caught quickly, errors can occur on large scale • Applied seven design practices of Lean manufacturing to redesign Cell’s Workflow

50. Redesigning the Cell’s Work Flow • Placing Linked Processes near One Another • All steps in a process should be located close to one another • JPF- Work groups located by function ex: Employees who receive applications and employees who sort them on different floors • After teams were placed next to each other process was done faster and employees were more aware of being part of a whole