Lean Management and Six-Sigma: An Introduction The lean management philosophy Types of waste; reducing waste Push vs. pull processes Reducing waste through Value Stream Mapping Reducing waste through “5S” tools Reducing waste through cellular layouts What is six-sigma? Lean vs. six-sigma 1

Introduction to Lean: Relationship Between Setup Cost and Batch Size Consider Black & Decker’s Hampstead plant. It produces powdered metal parts. The first step is to compress the powdered metal to the part format (say a gear). Then, there is heat treatment. Consider the first step of the process to produce gear XY. Press setup cost is $100 (about 3 hours of labor). Usage rate (demand) for gear XY is 10,000 / year. Assume holding cost of $2/unit per year. What is the optimal batch size? Note: average inventory = batch size / 2 Batch Size (Q) Annual Holding Cost Annual Setup Cost Total Cost 10,000 1,000 500 (10000/2)*2 = 10000 (10000/10000)*100 = 100 $10,100 (1000/2)*2 = 1000 (10000/1000)*100 = 1000 $2,000 (500/2)*2 = 500 (10000/500)*100 = 2000 $2,500 Given setup cost = $100/setup, then the optimal batch size is 1,000 units (avg inventory = 500 units) 2

How To Reduce Batch Sizes? By Decreasing Setup Cost (or Time) Batch size (and consequently average inventory) increases with setup cost (or setup time) To reduce batch size, you need to reduce setup time SMED – Single Minute Exchange of Dies This is a group of techniques applied to reduce setup (or changeover) times in manufacturing Starts with documenting (e.g., filming) the changeover process Then, one designs fixtures, trays, change layout, and other actions to avoid time wasted during setup May include activities as simple as positioning necessary tools for changeover closer to setup operation Illustration of SMED in action at Formula 1 / Indy 500: https://www.youtube.com/watch?v=UlIGI3laGAo 3

What is the Lean Management Philosophy ? Speed is essential. Level the load (heijunka). Waste (muda) is undesirable. High quality is essential (jidoka, kaizen). Jidoka: workers stop process immediately if defect is found Kaizen: relentless continuous improvement Any difficulty in achieving the above three goals provides an opportunity to improve the process. GOAL: Low inventories GOAL: Zero waste GOAL: Zero defects Jidoka: stop production process immediately if there are abnormalities or quality issues. Kaizen: relentless continuous improvement of processes “Rocks in the river” analogy 4

Uncovering Process Problems: “Rocks in the River” Analogy Water level must be lowered! Quality Problems Material Shortages Machine Breakdowns Workload Imbalances Worker Absenteeism Out-of-Spec Materials In-Process Inventory Process 5

Lean Management, Just-in-Time (JIT), Toyota Production System Lean Management (“Big JIT”, Toyota Production System) is a philosophy of operations management that seeks to eliminate waste in all aspects of a firm’s production activities: human relations, vendor relations, technology, and the management of materials and inventory 6 3

Waste in Operations I: Things Waste from overproduction Producing in large batches 25% of surgical supplies picked and returned to shelf Transportation waste WIP inventory moving from dept to another dept for process Trucking from one site to another Inventory waste Parts waiting to be processed Finished products waiting to be consumed 7 6

Waste in Operations II: People Waste of waiting time Operators waiting for parts to arrive Patients / doctors waiting on lab results Motion waste Staff walking large distances to get things done Patients walking from one department to another Processing waste Unnecessary process steps Too much paperwork Patient going through unnecessary tests 8 6

Waste in Operations III: Quality Waste from defects Rework (defects caught before customer) Warranty claims, recalls Hospital infections 9

Summarizing: The 7 Forms of Waste PEOPLE TYPES OF WASTE Processing Motion Waiting Fixing Defects Making Too Much Moving Things Inventory 10

Lean Component 1: Heijunka (Pull) The Planning Process – Push System Aggregate Production Planning Resource Planning Demand Forecasting Master Production Scheduling Production plan for product families Rough-Cut Capacity Planning MPS Material Requirements Planning Production plan for individual products Detailed Capacity Planning MRP Purchasing Shop Floor Control Production plan for individual components 11

“Push” vs. “Pull” Pull Is a Key Component of Heijunka Using some mechanism, work is scheduled and pushed through each stage in the process in order to meet specified delivery dates for finished products/services. Push Work at each stage in the production process is pulled through the system by actual demand for final products / services. Pull 12

Pull Systems? Kanban? Constant WIP Inventory?… How does it all relate? Means “card” in Japanese It is a “pull” (production) system Typical production control in lean / JIT It is a visual system of cards (a card signifies a quantity of WIP). “Empty” cards authorizes station upstream to work This maintains WIP in control and at a maximum level From Little’s Law, there are only two ways to cut lead time in a process: Increase processing rate (capacity of bottleneck) Decrease work-in-process inventory 13

Source: Michael George, “Lean Six Sigma for Service” Little’s Law Example The independent distributors for a company needs to get proposal information from the marketing dept in order to quote construction jobs. They want a reliable 3-day lead time. Data showed that, because of variation in the process, the marketing dept needs to aim for a 2.4 day average lead time in order to meet the reliable 3-day lead time. Data collected shows that the marketing department can complete 20 quotes per day. How many quotes the marketing department is allowed to keep in process in order to fulfill the 2.4-day average lead time? W = 2.4 days r = 20 quotes /day L = 48 quotes The marketing department cannot allow more than 48 jobs in process if it wants to meet the target 2.4 day average, or 3-day reliable lead time. Source: Michael George, “Lean Six Sigma for Service”

Problem # 2 How many babies are born in the U.S. per year? You have to apply Little’s Law here. W = 75 years (average life expectancy) L = 300 M (U.S. population) r = ? r = L / W = 300 M / 75 years = 4 M babies per year 15

Process Flow Charts and Value Stream Mapping Process flow charts are graphical representations (mapping) of what happens in a process Examples: order fulfillment, product development, addressing a customer service call, implementing a sustainability project A quick introduction to process flow charts and process mapping https://www.youtube.com/watch?v=MrMURochE6Y Now, let’s see how to do that 16

Process Flow Diagram – Main Symbols Beginning or End of Process Storage areas or queues Activity Activities are value-added steps. They have capacity (and they may hold inventory). Storage areas do not add value. Thus, we don’t measure capacity in units/unit of time, although they can constrain the system. Decision Point Direction of Flow

A Process Flow Chart

How to Reduce Waste? 1 - Value Stream Mapping Value Added activities (VA): activities in a process for which a customer is willing to pay for Nursing care, surgery, patient treatment A worker assembling a wheel in a car Non Value Added activities (NVA): activities for which the customer is not willing to pay for, and are not necessary for business A nurse walking 50 ft to another room to search for supplies Retrieving inventory from warehouse Business Non Value Added (BNVA): activities for which the customer is not willing to pay for, but are necessary for accounting, legal, or regulatory purposes Preparing financial statements Disclosing information to regulatory agencies 19

What is Value Stream Mapping? Essentially, a process flow chart, with activities being labeled as VA, BNVA, or NVA More information may be added Changeover time Processing time per unit; cycle time Wait (queue) time Estimated cost Objective: look for waste reduction through removal or reduction of NVA activities 20

Example: Value Stream Mapping Excess Processing / Inspection Defects Excess Transportation Value Added 21 Source: Quest team report, UMD

Process Efficiency Example: previous Value Stream Map Activity Type Time (min) Transport parts to inspection area NVA 5 Inspect parts 3 Move parts to storage shelves 10 Remove parts from shelf and place in assembly kit 15 Transport parts to assembly line technician Assemble parts VA 13 Inspect assembly 22

VSM of Nurses at a Local Hospital How Do Nurses Spend Their Time? MSU = Medical Surgical Unit 23

Nurses: Waste/Documentation Time Breakdown (1 Shift = 480 minutes) BNVA (Nec) NVA 24

2 - Reducing Waste Through 5S 5S is a system of procedures that are used to organize and arrange the workplace, to optimize performance, cleanliness, safety Japanese S Seiri Seiton Seiso Seiketsu Shitsuke English S Sorting Simplifying access (or, Set in order) Sweeping (or Shine) Standardization Self-Discipline (or, Sustain) Self-discipline is the routine practice of all the steps that precede it. 25

Example of 5S Implementation (Black & Decker Plant at Hampstead, MD) BEFORE AFTER “One place for each thing each thing at its place” 26

Another 5S Example: Tech Cell Support Before Another 5S Example: Tech Cell Support After

Some (Short) 5S Videos How to “Set in Order” https://www.youtube.com/watch?v=BqIOnpJ_crI How Kyocera has implemented 5S in its corporate office, in particular the “Sustain” https://www.youtube.com/watch?v=AUaJ9roHj2s 28

Waste From Motion: Functional Layouts Functional layouts can cause a lot of unnecessary material motion Note how the flow lines are going back and forth Saw Saw Saw Grinder Grinder Heat Treat Lathe Lathe Lathe Press Press Press 29 8

3 - Reducing Waste from Motion: Cellular Layout Cellular layouts reduce movement and improve product flow Grinder 1 2 Lathe Press Saw Lathe Heat Treat Grinder A B Lathe Press Saw Lathe 30 9

Lean vs. Six-Sigma Lean: reduce or eliminate waste in process Six-sigma objective: reduce variability in processes DMAIC (Define, Measure, Analyze, Improve, and Control) Implemented through a system of blackbelts, greenbelts Makes extensive use of statistical techniques See next slide They are complementary Reducing variability improves quality (essential to lean due to lean’s low level of inventories) Reducing variability reduces waste (less rework)

Tools That Can Be Used in Each Step of Six-Sigma 1. Define (D) Surveys, focus groups, comment cards Process flow charts Benchmarking 2. Measure (M) Descriptive statistics Run charts Pareto charts 3. Analyze (A) Cause and effect (fishbone) diagrams Process flow charts Data analysis (linear regression, hypothesis testing) 4. Improve (I) Quality function deployment (QFD, house of quality) Project management tools Prototypes, pilot studies 5. Control (C) SPC (statistical process control) ISO 9000 certification Reporting system (dashboards) with various metrics 32 https://www.youtube.com/watch?v=H4vZN-cMJyY

Take Away: Lean Principles Lean is aimed at reducing waste (NO muda) Based on some general principles Kaizen: continuous improvement of processes Jidoka: “stop the line” if defects found during mfg. Heijunka: even flow, accomplished through pull production, and low inventories Lean toolkit: Value stream mapping (VSM) Kanban production control system (type of pull system) Cellular layouts (minimize transportation / moving) 5S (sort, set in order, shine, standardize, sustain) Six-sigma: another process improvement methodology designed to reduce variability in processes