Operations Management Lean Production Operations Management Ron Lembke

Waste Waste is ‘anything other than the minimum amount of equipment, materials, parts, space, and workers’ time which are absolutely essential to add value to the product. --Shoichiro Toyoda, Chairman, Toyota Motor Co., 1992-99 If you put your mind to it, you can squeeze water from a dry towel. -- Eiji Toyoda, President 1967-1982

Toyota Motor Corp. Kiichiro Toyoda, founder Toyoda Auto Only 1936 known Toyoda AA

Lexus -- the early years First two Toyotas imported to U.S. 1957 Toyopet Crowns

Eiji Toyoda’s Ambitious Plans Post-WWII Japanese industry in ruins Early 1950s – toured Rouge plant 2,500 cars in 13 years. Ford: 8,000 per day “Catch up to Americans in 4 years!” Toyoda made delivery trucks and motorcycles, and not many of either

Elimination of Waste Knew they wouldn’t beat U.S. with product innovation, concentrated on licensing patents, and producing more efficiently Costs prevented mass-production, volume strategy of American firms. Find ways to reduce waste, cost Shigeo Shingo (at right) & Taiichi Ohno, pioneers

Couldn’t Emulate GM GM huge batches in huge factories Japan’s area is 10% less than California and 70% agricultural. Put entire population of CA into 30% of state, then add 6 times as many people. (and you thought LA was crowded). Land extremely expensive Sprawling factories not an option

Just-in-Time Downstream processes take parts from upstream as they need. Like an American Supermarket: Get what you want when you want it in the quantity you want. Taaichi Ohno, 1956 US visit

7 Types of Waste (Ohno 1988) Overproduction Time on Hand (waiting time) Transportation Stock on Hand - Inventory Waste of Processing itself Movement Making Defective Products

Seven Elements to Eliminate Waste Focused Factories Group Technology Quality at the Source JIT production Uniform Plant Loading Kanban production control system Minimized setup times

1. Focused Factories Small, specialized plants No huge, vertically integrated plants Small plants easier, cheaper to build Tom Peters, “The Pursuit of Wow.” Group size of 150 Know everyone else in the group

2. Group Technology – Work Cell Products grouped into families Work cell can produce whole family Cellular layout, not functional, U-shaped, flows through the work cell Benefits Much less inventory sitting around Less material movement, fewer workers Quality – facilitated by lower inv levels, cross-training Cross-training Keep skills sharp Managers, too – respect them, not just “because they’re your boss,” but they do know what they’re talking about Reduce boredom & fatigue Understand overall picture, more new ideas

3. Quality at the Source Do it right the first time Stop process, correct errors immediately Not a lot of parts to sift through to find a good one Can’t afford high defect rates Since low WIP, get quick feedback on errors

Lowering Inventory Reduces Waste WIP hides problems

Lowering Inventory Reduces Waste WIP hides problems

Lowering Inventory Reduces Waste Reducing WIP makes problem very visible STOP

Lowering Inventory Reduces Waste Remove problem, run With less WIP

Lowering Inventory Reduces Waste Reduce WIP again to find new problems

Performance and WIP Level Less WIP means products go through system faster reducing the WIP makes you more sensitive to problems, helps you find problems faster Stream and Rocks analogy: Inventory (WIP) is like water in a stream It hides the rocks Rocks force you to keep a lot of water (WIP) in the stream

4. Just In Time-- What is It? Just-in-Time: produce the right parts, at the right time, in the right quantity Requires repetitive, not big volume Batch size of one Short transit times, keep 0.1 days of supply

5. Uniform Plant Loading (heijunka) Any changes to final assembly are magnified throughout production process Sequencing: If mix is 50% A, 25% B, 25% C, produce A-B-A-C-A-B-A-C…

Takt Time Takt time: Beat or cycle Master production schedule: 10,000 /mo. 500 day, 250 a shift 480 minutes means 1 every 1.92 minutes

6. Kanban Japanese for ‘signboard’ Method for implementing JIT In order to produce, you need both: material to work on, and an available kanban. Each work station has a fixed # kanbans.

6. Kanban Worker 2 finishes a part, outbound moves over Flow of work 1 2 3 Worker 2 finishes a part, outbound moves over 2 has a brown triangle tag available, so 2 gets another part to work on: 2 takes off 1’s blue circle tag giving it back to 1, and puts on her brown triangle tag and moves it into position.

6. Kanban When 3 finishes a part, Finished parts move over one spot Flow of work 1 2 3 When 3 finishes a part, Finished parts move over one spot He has to have a yellow square tag to put on, He gets a part from 2’s outbound pile, And gives the brown triangle back to 2

6. Kanban – “Pull” Production Flow of work 1 2 3 When 3 finishes a part, Finished parts move over one spot He has to have a yellow square tag available to put on, He gets a part from 2’s outbound pile, And gives the brown triangle back to 2 3’s production will be taken by 4, offstage right. Tag goes back into 3’s bin End customers pull products through the factory

6. Kanban – “Blocking” 2 3 Worker #3 finishes his part next. 2 3 But customers haven’t freed up any of the yellow square kanbans, so there is nothing for 3 to work on now. 3 could maintain his machine, or see anyone needs help 2 3

How is this Different? Processes can become idled (blocked) or starved Starved: authorization (kanban card) but no material to work on Blocked: material to work on, but no authorization Painfully aware of problems in your system. Orange County Toyota– cleanest DC I’ve ever seen Material moves through the system so quickly no in- process recordkeeping is needed. 3M consultant: if we thought computers would be better than paper, we would have used them. But we didn’t.

Importance of Flow Ohno was very clear about this: “Kanban is a tool for realizing just-in-time. For this tool to work fairly well, the process must be managed to flow as much as possible. This is really the basic condition. Other important conditions are leveling the product as much as possible, and always working in accordance with standard work methods. -- Ohno, 1988, p. 3

7. Setup Reduction Can’t afford to do huge runs Have to produce in small batches Toyota Die Change: 3 hours down to 3 SMED: Single Minute Exchange of Dies under ten minutes Make Internal setups into External Internal – process has to be stopped, External External – process can still be running Eliminate Adjustments, Eliminate the Setup? Some setups bigger than others – printing dye colors Continuous Process Improvement, anyone?

A contrasting opinion “Inventory is not the root of all evil, inventory is the flower of all evil. - Robert Inman, General Motors

Ask ‘Why’ 5 Times 5W = 1H 1. Why did the machine stop? Overload and fuse blew 2. Why the overload? Not lubricated 3. Why not lubricated? Oil pump not pumping? 4. Why not pumping? Pump shaft worn out. 5. Why worn out? No screen, scrap got in

5 Whys

All the Animals Guster Bagel Wade Holly

Preventative Maintenance Unexpected loss of production is fatal to system and must be prevented Additional maintenance can prevent downtime, or minimize length of interruptions, when they do occur

Capacity Buffers System is inflexible, no inventory buffers, so to respond, need excess capacity Schedule less than 24 hours per day ‘Two-Shifting’ 4-8-4-8 Cross Training

Characteristics of JIT Partnershps Few, nearby suppliers Supplier just like in-house upstream process Long-term contract agreements Steady supply rate Frequent deliveries in small lots Buyer helps suppliers meet quality Suppliers use process control charts Buyer schedules inbound freight

Supplier Relationships American model: keep your nose out of my plant. Gain info to force price cuts Lack of trust between suppliers Firm encourages suppliers to share knowledge, because they don’t worry about competing Firm helps supplier increase quality, reduce costs

Summary The environment can be a control - don’t take setups for granted Operational details are very important (Ford, Carnegie) Controlling WIP is important Flexibility is an asset Quality can come first Continual improvement is necessary for survival