Agenda

1. Lean Methods Benefits of L6S Description of Lean Strategic Viewpoint Operational Level Six Sigma Description of 6s methodology 6s tools and techniques Implementation of L6S Agenda

2. Lean Enterprise Key Drivers • Total Organizational Buy-in • Lean Manufacturing Techniques • Manufacturing flexibility • Process velocity • Total Quality Management • Products • Processes • Sales, Operations, and Inventory planning • Forecasting • Production Smoothing • Capacity Planning • Lean replenishment • New Product Introduction • Delivery Performance

3. Lean Six Sigma • Lean/Kaizen • Focus on eliminating waste • Cycle time and inventory focus • Redesign processes/Standardize • Broad involvement • Common sense approach based on observation • Six Sigma • Variation Focus • Rigorous problem solving and control (DMAIC) • Process and product design (DFSS) • Data driven: Y=f(X) • Process Control

4. Six Sigma Lean/Flow Lean 6 Sigma Synergy Reduced Cycle Time Reduced Defects Improved Capability Improved On-Time Delivery Reduced New Product Lead Time Improved Customer Satisfaction Improved Employee Flexibility Improved Capital Utilization/Capacity Improved Yields Improved Quality Improved Customer Responsiveness Lean 6 Sigma Synergy Reduced Cycle Time Improved On-Time Delivery Reduced New Product Lead Time Improved Customer Satisfaction Improved Employee Flexibility Improved Capital Utilization/Capacity Improved Customer Responsiveness Reduced Defects Improved Capability Improved Yields Improved Quality

5. Balanced L6S tool use LEAN 6 • Improve Response Time • Reduce Cycle Time • Reduce WIP • Reduce Quality Defects • Improve Supplier Quality • Improve Material Availability • Establish Standardized Work • Improve Admin. & Mfg. Process

6. Financial Implications Income Statement Balance Sheet Financial Implications

7. UTP LEAD TIME REDUCTION MFG. SPACE REDUCTION INCREASING PRODUCTIVITY • Data from 1,500 nation wide manufacturing events: • Avg lead time reduction: 52% • Avg productivity increase: 24% • Avg WIP decrease: 43% • Avg reject rate decrease: 38% • Avg floor space decrease: 32% • Source: Quality in Manufacturing, Mike Peterman, Jan 2001, V12, p24 REDUCE INVENTORY EQUIPMENT SIZE,& REQUIREMENTS & NUMBERS REDUCED 20% - 30%

8. Balance Sheet Mfg Costs Product Costs Raw Material Inventory Raw Material Current Assets Direct Labor Work In Process Inventory Manufacturing Overhead Income Statement Selling and administrative Finished Goods Inventory Cost of Goods Sold Selling and Administrative expenses Financial Implications Sales

9. Financial Implications 7 Days 8 Days 53% 12 Days 13 Days 52% $ 6,000 $ 6,000 50% $ 5,700 $ 4,300 43% $ 8,550 $ 6,450 43% $20,250 $16,750 45% $ 5,088 $ 4,162 45% 7.9

10. Financial Implications $ 7,500 $ 2,500 25% $ 465 $ 285 38% $ 248 $ 152 38% $ 620 $ 380 38% $ 1,333 $ 817 38% 306,000 144,000 32% $ 0 $ 250 100% $ 7,729

11. Prevention Costs Quality Engineering Quality training Quality Circles SPC Activities Appraisal Costs Incoming test & inspection Supplies for inspection Maintenance of test equipment Cost of Quality Internal Failure Costs Net cost of Scrap Rework labor & Overhead Downtime Analysis of cause of defect External Failure Costs Field servicing Warranty Product recalls Returns and allowances

12. Lean Methods • Strategic Level • Philosophy • Operational Level • Tools • Traditional vs. Flow concepts

13. Improvements • HBR; “Decoding the DNA of the Toyota Production System”; Sep-Oct. 1999 • HBR; “Learning to Lead at Toyota”; May 2004 • Companies often implement tools of TPS without the underlying principles. • Tools aid in the implementation of a temporary “best practice” until a new problem is discovered.

14. Toyota Production System • Rule 1- How people work is highly specified • Content • Sequence • Timing • Outcome • Standard Operating Worksheet • Takt time

15. Toyota Production System • Rule 2- Every customer-supplier connection must be direct • No question on • Supplier (internal or external) • Number of units required • Timing of delivery • Kanban • Service Requests

16. Toyota Production System • Rule 3- Pathway for every product and service must be simple and direct • Flow along a simple specified path • Does not mean each path is dedicated to only one product • Product Process Matrix • Rule 4- Improvement must be made in accordance with the scientific method at the lowest possible level

17. Improvements • People at all levels • Assembly line operators • Supervisors • Management • Executives • Structure work and improvements as experiments

18. Improvements • Active experimentation for improvement • Standard work • Gaps between what is expected through improvements and what is actually obtained become immediately evident. • Operators are responsible for operational improvements • Management helps them understand that responsibility and facilitate improvements.

19. Example of Formal CI (Kaizen) Group 1 Group 3 Group 2 Engines Eng:Trans Assy Transmissions Group 4 Group 5 Group CI (Weekly) Operational Committee (Monthly) Steering Committee (Quarterly)

20. Batch (Traditional) This was a push system driven by forecast with each process responding at its own pace An order for 900 units over a month gets produced at the end of the month when all parts are received Characteristics: Work orders, weekly or monthly production buckets, hot lists Results: Large WIP, Hidden bottlenecks, High defect rates, Long lead times Lean Nothing is moved or produced until the previous process is completed. Scheduled delivery of parts spread out over a month. Say 45/day. Results: Only necessary amount is produced, waste is visible, customer first mentality Batch vs. Lean

21. Hidden Waste FINISHED PRODUCT TO CONSUMER RAW MATERIAL SEA OF INVENTORY LINE IMBALANCE LACK OF HOUSE KEEPING QUALITY PROBLEMS LONG SET-UP TIME POOR SCHEDULING MACHINE BREAKDOWN LONG TRANSPORTATION ABSENTEEISM COMMUNICATION PROBLEMS SUPPLIER DELIVERY

22. Exposed Waste FINISHED PRODUCT TO CONSUMER RAW MATERIAL SEA OF INVENTORY LINE IMBALANCE LACK OF HOUSE KEEPING LONG SET-UP TIME QUALITY PROBLEMS POOR SCHEDULING MACHINE BREAKDOWN SUPPLIER DELIVERY COMMUNICATION PROBLEMS ABSENTEEISM LONG TRANSPORTATION

23. Process Efficiency • Reducing unnecessary wait-time between value added steps • Process cycle efficiency= Value Added Time/Total Lead Time

24. Lean Six Sigma Journey Lean Methods Implementation Six Sigma Projects: Implementation Status Quo

25. Lean Six Sigma strategy • 6 Sigma • Data driven methodology to magnify impact of process improvements attained through lean efforts • Control techniques applied to sustain improvements and minimize their erosion • Standardize improvements to maintain gains on Key Process Indicators Process Improvement Project Implemented Company Performance Maintenance of Process Performance Time 6s Project Company Performance Time 6s • Continuous Improvements (Kaizen) • Use small teams to optimize process performance through rapid incremental improvements • Apply intellectual capital of team members intimate with process CI Company Performance Time

26. Measurements • Customer Order Cycle Time • Completed vs. Daily Production Schedule • Yield • Linearity • Workforce Skill • Speed to Market: Product Development Process • Continuous Improvement: Savings

27. Lean Methods • Strategic Level • Philosophy • Implementation • Operational Level • Tools • Traditional vs. Flow concepts

28. Minimize Waste • Overproduction • Excess Inventory • Waiting • Motion (Worker movement) • Transportation • Defective parts • Unnecessary Processing

29. Takt One Piece Flow Pull Kaizen Cellular Quick Changeover Kanban Seven Wastes Quality at the Source Teams TPM 5s/Workplace Organization Standardized Work Visual Organization Value Stream Mapping Tools Lean Manufacturing Company

30. Visual Control and the Workstation To Set in Order Ensure space for each thing, and a thing for each space. No more searching. To Sort Eliminate what’s not absolutely necessary The 5 S To Sustain Maintain continuous effort. This is a way of life. To Shine Maintain a clean and orderly space to make problems easily identifiable. Eliminate rejects and scrap. To Standardize Improvement of the workstation. Be organized to reduce clutter.

31. Lean Methods: 5S • Sort • Shine • Set in Order • Standardize • Sustain

32. Lean Methods: 5S • Clear, shiny aisle ways • Color coded areas • No work-in-process ( WIP ) • One-Piece Flow • Operator Methods Sheets

33. Lean Methods: Visual Workplace Traditional Toolbox and workbench set up. Access to control panel difficult. Tools now on tool board. Tool outline makes it easy to tell when a tool is out of place or missing. Better access to control panel.

34. Lean Methods: Poke-Yoke Poka-yoke systems consist of three primary methods: 1. Contact 2. Counting 3. Motion-Sequence Each method can be used in a control system or a warning system. Each method uses a different process prevention approach for dealing with irregularities. Toggle Switches

35. Lean Methods: Poke-Yoke Poka-yoke systems consist of three primary methods: 1. Contact 2. Counting 3. Motion-Sequence Each method can be used in a control system or a warning system. Each method uses a different process prevention approach for dealing with irregularities. Count the number of parts or components required to complete an operation in advance. If operators finds parts leftover using this method, they will know that something has been omitted from the process.

36. Lean Methods: Poke-Yoke The third poka-yoke method uses sensors to determine if a motion or a step in a process has occurred. If the step has not occurred or has occurred out of sequence, the the sensor signals a timer or other device to stop the machine and signal the operator. Poka-yoke systems consist of three primary methods: 1. Contact 2. Counting 3. Motion-Sequence Each method can be used in a control system or a warning system. Each method uses a different process prevention approach for dealing with irregularities.

37. Lean Line Design THREE PRINCIPLE RULES WORK TO TAKT TIME ONE PIECE FLOW PULL SCHEDULING

38. Lean Line Design • Create Process Flow Charts • Develop Standard Operation Worksheets • Define Product/Process Matrices • Create Multi-Product Process Flow Charts • Calculate Takt • Review Actual Requirements vs. Design • Develop Standard Operations • Create the Facility Layout • Define Cells

39. Lean MethodsProcess Flow Charts Understand current state Improve process flow

40. Car Assembly PH1001,2,4 Jorge Monreal Taiichi Ohno 005 X Carry mainframe to assembly fixture 2.5 2.5 Ensure parts to BOM 010 X Place mainframe in assy fixture 4.1 4.1 6.6 Wear safety helmet 015 X Obtain Hood 2.5 4.1 9.1 Do not scratch or damage 020 Bolt hood to Mainframe 6.2 6.2 15.3 Torque to 20 ft-lbs 025 X Obtain safety capsule 2.5 6.2 17.8 Ensure safety decals are on 030 Bolt safety capsule to frame 6.2 2.4 24 Torque to 20 ft-lbs 035 X Obtain rear engine & shield 2.5 2.4 26.5 Check for proper option: turbo/NA 040 Bolt rear engine & shield to frame 4.2 3.2 30.7 Torque in sequence per OMS 045 X Obtain driver cabin 2.5 3.2 33.2 050 Bolt driver cabin to safety capsule 6.2 3.4 39.4 Torque to 80 ft-lbs 060 Bolt underside of engine to frame 20.0 20.0 59.4 27.9 59.4 59.4 Standard Operation Worksheet

41. Product/Process Matrix Product Family SUVs Lemons

42. Multi-Product Process Flow Charts • Define product families based on products with similar process flow charts Yugo Van Pinto Jeep Paint Assy Test Ship SUV Lube Used for Line Design

43. 420 Min/Day 45 Units/Day = Takt Work Time/day (minutes/day) Takt Time = Customer Requirements/day (units/day) One shift: 8 hours x 60 min/hr = 480 mins Lunch = - 30 mins 2x breaks = - 30 mins Total available time per shift = 420 mins CUSTOMER REQUIREMENTS: 45 units/day (Daily Production Schedule) Takt Time 9 min. 33 sec. Takt Time= Every 9 minutes and 33 seconds, each operation must be completed.

44. Demand Time Demand, Capacity, Production Leveling 45 units/day Product Family: SUVs (Products Van, Jeep, SUV) Production Schedule Capacity Yr 1 20% Time

45. Mixed Model Production • Product Family: SUV • Demand per month (20 working days): 900 units (Jan-Feb) • Per shift demand: 45 units  Takt = 9.33 minutes • Possible Model Mix: 50% Vans; 25% SUVs; 25% Jeeps • Vans: 0.50 x 900 = 450 Vans • SUVs: 0.25 x 900 = 225 SUVs • Jeeps: 0.25 x 900 = 225 Jeeps Daily Production sequence: 45 units Van-Van-SUV-Jeep-SUV-Van-SUV-Jeep-Van-Van-SUV……

46. Car Assembly PH1001,2,4 Jorge Monreal Taiichi Ohno 005 X Carry mainframe to assembly fixture 2.5 2.5 Ensure parts to BOM 010 X Place mainframe in assy fixture 4.1 4.1 6.6 Wear safety helmet 015 X Obtain Hood 2.5 4.1 9.1 Do not scratch or damage 020 Bolt hood to Mainframe 6.2 6.2 15.3 Torque to 20 ft-lbs 025 X Obtain safety capsule 2.5 6.2 17.8 Ensure safety decals are on 030 Bolt safety capsule to frame 6.2 2.4 24 Torque to 20 ft-lbs 035 X Obtain rear engine & shield 2.5 2.4 26.5 Check for proper option: turbo/NA 040 Bolt rear engine & shield to frame 4.2 3.2 30.7 Torque in sequence per OMS 045 X Obtain driver cabin 2.5 3.2 33.2 050 Bolt driver cabin to safety capsule 6.2 3.4 39.4 Torque to 80 ft-lbs 060 Bolt underside of engine to frame 20.0 20.0 59.4 27.9 59.4 59.4 Line Splits Standard Operations Wkst 1 30.7 Wkst 2 28.7 Group into equal splits For Two workstations Split = 59.4/2 = 29.7

47. Operator Methods Sheets

48. Operator training Matrix

49. Operator training Matrix • Flexible workforce • People move to where work needs to be performed • Help out in case of slow down: above or below • Reduce repetitive stress • Rotate positions every 4-6 months • Allows for some imbalance in the line

50. Manufacturing Cells: Machine Shop • Tool room support changes tools • Standard work- Operator Sequencing • One operator for eight machines • Standardized Tooling • * Set up reduction • * Point of use MILLING MILLING MILLING BORING HONE DRILL DRILL / TAP FINISH TAKT TIME 9.3 MIN Send to Engine Assy line every 9.3 Minutes