OPSM 501: Operations Management

1. Koç University Graduate School of Business MBA Program OPSM 501: Operations Management Week 9: Littlefield reflections Lean Thinking Zeynep Aksin zaksin@ku.edu.tr

2. Toyota Production System:Why did TPS develop? • Economic conditions in Japan after WWII: - low income - low labour productivity - low economies of scale compared to US • But car buyers wanted to be offered variety,quality, timeliness and a reasonable price. Toyota was challenged to cut cost dramatically TPS - aimed at cost reduction by thoroughly eliminating waste.

3. Reduce inventory to expose defects Zero non-value added activities (muda) . Zero defects, zero breakdowns, zero inventory, zero set-up Production flow synchronized with demand (JIT) One-unit-at-a-time flow Mixed model production (heijunka) Piece-by-piece transfer (ikko-nagashi) Match production demand based on Takt time Pull instead of push Supermarket / Kanban Make-to-order Quality methods to reduce defects Fool-proofing (poka-yoke) and visual feed-back Detect-stop-alert (Jidoka) Defects at machines (original Jidoka) Defects in assembly (Andon cord) Build-in-quality (tsukurikomi) . Adjustment of capacity to meet takt-time Multi-task assignment (takotei-mochi) Flexibility Reduction of Variability Quartile Analysis Standard operating procedures Standardization of work Quality circles (Kaizen) Fishbone diagrams (Ishikawa) Skill development / X-training Worker involvement

4. The Shingo System: Fail-Safe Design • Shingo’s argument: • Defects arise when people make errors • Defects can be prevented by providing employees with feedback on errors and putting controls in the process • Poka-Yoke includes: • Checklists • Special tooling that prevents employees from making errors • (Poka-Yoke: Japanese slang for “avoiding inadvertent errors” )

5. Which dial turns on the burner? Stove A Stove B

6. Pareto Analysis Percentage Frequency -100% -50% -0% A B C D E F Pareto Law (80/20 Rule): “80 percent of the problems are due to 20 percent of the causes”

7. Fish-Bone Diagram • Also known as cause-and-effect diagram, or Ishikawa diagram • Pareto analysis is used to identify key problems or symptoms, • Fish-Bone diagram is used to sort causes of the problems • Brain storming sessions of groups of workers needed • It is a very valuable educational tool

8. Fish-Bone Diagram • Used to find problem sources/solutions • Other names • Fish-bone diagram, Ishikawa diagram • Steps • Identify problem to correct • Draw main causes for problem as ‘bones’ • Ask ‘What could have caused problems in these areas?’ Repeat for each sub-area.

9. Cause-and-Effect Diagram(Fishbone Diagram)

10. The System of Lean Production (Toyota, Citroen, …) Principles Organization Methods • Just-in-time Production • Kanban • Classical Push • “Real” Just-in-time • Mixed Production • Set-up reduction Zero Inventories Zero Defects Flexibility / Zero set-ups Zero breakdowns Zero handling / non value added Autonomation Competence and Training Continuous Improvement Quality at the source

11. Principles of Lean Production: Zero Inventory and Zero Defects Buffer argument:“Increase inventory” Inventory in process Toyota argument:“Decrease inventory” • Avoid unnecessary inventory • To be seen more as an ideal • Two types of (bad) inventory: a. resulting from defects / rework b. absence of a smooth process flow • Remember the other costs of inventory (capital, flow time) Pictures: Citroen

12. Principles of Lean Production: Zero Set-ups, Zero NVA and Zero Breakdowns Avoid Non-value-added activities, specifically rework and set-ups • Maximize uptime • Without inventory, any breakdown will put production to an end • preventive maintenance • Flexible machines with short set-ups • Allows production in small lots • Real time with demand • Large variety

13. Methods of Lean Production: Just-in-time Push: make to forecast Pull: Synchronized production • Part produced for specific order (at supplier) • shipped right to assembly • real-time synchronization • for large parts (seat) • inspected at source • Classical MRP way • Based on forecasts • Push, not pull • Still applicable for low cost parts Pull: Kanban • Visual way to implement a pull system • Amount of WIP is determined by number of cards • Kanban = Sign board • Work needs to be authorized by demand

14. Methods of Lean Production: Mixed Production and Set-up reduction Produce Sedan Produce Station wagon Production with small batches Production with large batches Production with large batches Production with large batches Production with large batches Cycle Cycle Cycle Cycle Cycle Cycle Cycle Inventory Inventory Inventory Inventory Inventory Inventory Inventory Inventory Beginning of Beginning of Beginning of Beginning of End of End of End of End of Month Month Month Month Month Month Month Month Produce Sedan Produce Sedan Produce Sedan Produce Station wagon Produce Station wagon Produce Station wagon Beginning of Beginning of Beginning of Beginning of End of End of End of End of Month Month Month Month Month Month Month Month

15. Organization of Lean Production: Autonomation and Training • Automation with a human touch • Create local decision making rather than pure focus on execution • Use machines / tools, but avoid the lights-off factory • Cross training of workers • Develop problem solving skills 10-15

16. Organization of Lean Production: Continuous Improvement and Quality-at-the-source • Solve the problems where they occur - this is where the knowledge is - this is the cheapest place • Traditional: inspect and rework at the end of the process • Once problem is detected, send alarm and potentially stop the production Defect found End User Own Process Next Process End of Line Final Inspection $ $ $ $ $ • very minor • minor delay • Rework • Reschedule • Significant Rework • Delayed delivery • Overhead • Warranty cost • recalls • reputation • overhead Defect fixed 10-16

17. Continuous Improvement • Represents continual improvement of process & customer satisfaction • Involves all operations & work units • Other names • Kaizen (Japanese) • Zero-defects • Six sigma

18. P D C A P D C A Process Improvement • Measurement • External and Internal • Analysis • Analyze Variation • Control • Adjust Process • Improvement • Reduce Variation • Innovation • Redesign Product/Process Improve Innovate Improve Control

19. The River Analogy Defects Defective Materials Machine Breakdowns Long Set ups Long Lead times Unsuitable Equipment Uneven Schedules Unreliable Suppliers Inefficient Layouts Absenteeism Rigid Work Rules

20. Ongoing objectives • Improve process flows • Efficient plant layout • Fast and accurate flow of material and information • Increase process flexibility • Reduce changeover times • Cross-training • Decrease process variability • Flow rates • Processing times • Quality • Minimize processing costs • Eliminate transportation, inspection, rework

21. How? • Improve process flows • Cellular layouts • Demand pull mechanisms • Increase process flexibility • Fast changeovers • Smaller lotsizes, level production • Decrease process variability • Standardize • Improve supplier reliability and capacity • Safety capacity, preventive maintenance • Fast feedback and correction • Minimize processing costs • Improve quality, eliminate non-value-adding activities

22. Beyond production: Shouldice as a lean enterprise Womack and Jones (2000) From Lean Production to Lean Enterprise, HBR March-April 1994

23. Beyond production: Zara as a lean enterprise

24. Some Japanese • Poka-Yoke • Kaizen • Muda • Jidoka • Heijunka • Kanban

25. Class next week • Topic (newsvendor) not included in midterm • However there is an in-class activity • Please bring your laptop to class, will use some Excel files to do an in-class exercise • Will do it in pairs; one laptop per two is enough but make sure you coordinate with each other

26. Midterm exam next week • Study from the notes and book • Solve some problems from the book: practicing by solving problems is essential for success • Go over cases and in-class exercises, games, etc.