Lean Systems 1

Some history After WWII the US population grew faster than before. The growing population lead to a high demand for goods and services. To supply the goods and services production took advantage of our large country and abundant resources like labor and we mass produced many goods. Life was good and businesses made money! In Japan the demand for goods wasnt as large and the country was small. SO, mass production wasnt as easily achieved. The Toyota company began to produce differently than the way US companies produced. One component of this idea was Just-In- Time (JIT) production. A major component of this idea was to not have so much inventory of parts and finished goods. Parts would be brought in and finished goods would be shipped out just-in- time. 2

More history JIT has implications for how large production facilities have to be (and thus the amount of investment needed to make them), on the amount and type of labor used and on the general layout of how production will occur. Lean systems is a broader concept than JIT and by the end of the chapter we want a fuller appreciation of the concept of a lean system. 3

Philosophy of Lean While life was good in the US post WWII folks in Japan, due to their circumstances of country size and resource availability, noticed waste in our system. US producers would even come to see elimination of waste would increase the bottom line. Table 6.1 page 98 lists the seven wastes identified by SUZAKI. These are Overproduction Waiting time Unnecessary transportation Excess processing Too much inventory Unnecessary motion defects 4

Philosophy of Lean 5 The Lean philosophy is 3 fold: -anything that does not contribute value to the product is waste and should be eliminated, -utilize the full capacity of the workers and suppliers (produce quality parts JIT to support the next production process), -engage in continuous improvement of all processes. The real reason or objective in implementing the lean philosophy is to improve profit and return on investment.

Master Schedule 6 Side comment – I say it is a miracle that mankind can put together a car, let alone send a man to the moon! Look at all the parts that go into a car. But, it is done by careful planning. The master schedule is the final assembly schedule and in a lean system is planned for a fixed period of time, such as several months. Within the current period the master schedule is leveled on a daily basis. This means the same quantity of each product is produced each day for the entire period.

Kanban 7 Kanban is a parts withdrawal System designed to have parts flow, or be pulled, from one work center to another. In production there is a connection between the cost of set-up and inventory carrying cost. When it costs a lot to set-up production you make a lot of units to get return on that cost, but then you carry a lot of inventory and warehousing is needed and that costs as well. The lean solution is to reduce set-up time and cost to as little as possible

Other elements of a lean system 8 Labor in a lean system needs to be cross-trained to handle many tasks and teamwork is needed. The plant layout keeps parts inventory right on the floor and not in a separate storage area. Suppliers to a lean system are asked to make frequent deliveries directly to the production line. They are seen as another work center. You may recall from an economics class that firms want to maximize profit. Another way to view this is that investors want to get the best return on their investment. This is really the main objective of the system.

Summary so far 9 In this first section of notes I have gone through some basic ideas of a lean system. Next time I will delve in deeper on some of these same ideas.

Lean Systems 2 Here we continue in the chapter on Lean Systems 10

Master Schedule Side story – I like to play golf and recently I have been playing golf badly (I think I need new grips because the clubs are flying out of my hand!). I called the pro to get a lesson. He said I do things that do not help in hitting the ball. In other words, I do not have a lean swing! Probably more than you want to know, but when I swing the club back I go so far back that I start to lose balance and then hit bad shots. He didnt say it, but I will remember the phrase, keep it lean! Well the master schedule, or final assembly schedule, is a key feature of the lean system because it is the production plan. Lets look at an example from the book. 11

Master Schedule 12 Say over the next month it has been determined that 10,000 units of good A, 5000 units of B and 5000 units of C are needed. If there are 20 days of production in the month then on each of the 20 days: 10000/20 = 500 of A 5000/20 = 250 of B 5000/20 = 250 of C will be made. Now, in a lean system production will NOT have all 500 of A made first and then 250 of B and 250 of C. The production will be mixed and the sequence that will occur in this example is 2 of A, 1 of B and 1 of C. And then the cycle will be repeated. While this may seem odd, the costs of production are balanced across the system.

Master Schedule 13 Again, on each day production requires 500 A, 250 B and 250 C. If you go to Microsoft Excel and put in the numbers 500, 250 and 250 in separate cells you can then call of the GCD function (the greatest common denominator function) to find the great common denominator of the three numbers. As you might guess here that number is 250. (Other situations may not have as obvious of a result.) (If you have the 3 numbers in cells A1:A3 then in cell A4 type =GCD(a1:a3)) Dividing each of the daily production requirement amounts by the GCD gives you the amount of each good in the sequence: 500/250 = 2 of A, 250/250 = 1 of B and 250/250 = 1 of C.

Takt time 14 Takt is the German word for the baton the orchestra director uses to keep the musicians on beat. In lean production it is the time between successive units of production. In a lean system the takt time should be set equal to the average demand rate of the market to match production with demand and thus minimize inventories. Takt time = time available for production divided market demand in that time. Example – say there is 420 minutes of production in a day and demand in the day is 1000 units, then takt time = 420/1000 =.42 minutes per unit. 60 seconds times.42 minutes is 25.2 seconds per unit.

Kanban 15 Kanban is the method of production authorization and materials movement in a lean manufacturing system. Lets define n = total number of containers in a production area D = the demand rate of the using work center C = container size in number of parts usually less than 10% of daily demand T = time for a container to complete an entire circuit, also called the lead time – there is set-up, the container is filled, may sit waiting, moved, in use and returned to be filled again. It is true that n needs to be n = (DT)/C

Kanban 16 As an example, say demand at the next work station is 2 parts per minute and a standard container hold 25 parts. Also say it takes 100 minutes for a container to make the circuit. The number of containers needed is n = ((2)(100)/25 = 8 The maximum inventory would be the nC = DT, since the most that can happen is to have all containers full. Note if the size of the container is changed more or fewer containers might be needed, depending on the new size. Plus, if the lead time (which includes set-up) changes more or fewer containers will be needed. The author stresses lead time should be reduced so in that sense fewer containers would be needed.

Problem 2 page Suppose a lean work center is being operated with a container of size 25 units and a demand rate of 100 units per hour. Also, assume it takes 180 minutes for a container to circulate. A)How many containers are required to operate this system? By using the formula n = DT/C, the number of containers required is:(3 × 100)/25 = 12 containers Note: 180 minutes = 3 hours B) How much maximum inventory can accumulate? The maximum inventory is simply the container size times the number of containers:12 x 25 = 300 units C) How many Kanban cards are needed? Each container will have 2 Kanban cards, one production card and one withdrawal card, so 12 x 2 = 24 Kanban cards are required.

Lean Thinking 18 Womack and Jones extended lean production to what they called lean thinking. Lean thinking has 5 elements: -specify value from the customers point of view -create a value stream map and remove waste -flow the product or service through the system -pull the product or service from the customer -strive for perfection, where perfection here means an affordable product or service, delivered rapidly and on time, that meets the customers needs.