Summary: Review of Lean Principles Pull Production is favorable to Push Production Inventory is controlled between processes No production can occur without a signal Flow is preferable to Pull: Single Piece Flow FIFO Flow Supermarket Pull

Creating a Pull System Review of Lean Principles In this section we will: Identify reasons why Flow cannot always be implemented List the steps for creating a Pull system Categorize inventory into 3 different types Review of Lean Principles Creating a Pull System Supermarket Pull Systems Daily Supermarket Operation Workshop Summary

Why not use Single Piece Flow Everywhere? Creating a Pull System Why not use Single Piece Flow Everywhere? If Single Piece Flow is the best solution, why would we ever implement FIFO or Supermarkets? When one process stops producing, ALL processes must stop, so Single Piece Flow will not work in the following conditions: Different changeover times between processes Excessive machine downtime Cycle times vary between processes for each product within the family High scrap or rework rates One of the processes is shared by two or more value streams

Creating a Pull System Creating a Pull System Identify the reasons that a Pull system is necessary Calculate the maximum inventory Create a signal system (if required) Implement and improve the processes to reduce the maximum required inventory

3 Types of Inventory Cycle Stock Buffer Stock Safety Stock Creating a Pull System 3 Types of Inventory Cycle Stock Inventory required for the “normal” state Buffer Stock Inventory required to accommodate variation in volume and mix Safety Stock Inventory required to protect against things that could go wrong (within reason)

3 Types of Inventory Example #1: Changeover Creating a Pull System 3 Types of Inventory Example #1: Changeover The stamping press has a lengthy die change (4 hrs on average), but the plating process cannot afford to stop producing during this time (at a rate of 1 unit every 20 minutes). Because the die change is not standardized, it can take 3-5 hours to complete. Sometimes the wrong die will be installed, which takes another hour to correct. Cycle Stock = 12 units (240 min. / 20 min.) Buffer Stock = 3 units (60 min. / 20 min.) Safety Stock = 3 units (60 min. / 20 min.) Total Inventory = 18 units (6 hrs)

3 Types of Inventory Example #2: Machine Downtime Creating a Pull System 3 Types of Inventory Example #2: Machine Downtime Parts are etched before going to final assembly, but the etching machine has uptime issues, and final assembly cannot afford not to produce at a takt of 2 min. Typical breakdowns are corrected in 30 minutes, but depending on the problem, it can take up to 2 hours, and this does not include the time it takes for maintenance to arrive, which could be anywhere from 5 to 30 minutes. Cycle Stock = 15 units (30 min. avg. / 2 min. takt) Buffer Stock = 45 units (90 min. / 2 min. takt) Safety Stock = 15 units (30 min. delay / 2 min takt) Total Inventory = 75 units (2.5 hrs)

3 Types of Inventory Example #3: Interval Creating a Pull System 3 Types of Inventory Example #3: Interval The CNC Lathe has an interval of 5 days (i.e. it takes 5 days to cycle through all products within the family). For Product A, the average 5-day demand is 100 units. However, the peak 5-day demand is 300 units. The CNC Lathe has a scrap rate of 2%. Cycle Stock = 100 units (avg. interval demand) Buffer Stock = 200 units (peak – average) Safety Stock = 6+ units (2% is the avg scrap rate!) Total Inventory = 206+ units (2.06 days)

Classroom Exercise #1: Calculating Cycle, Buffer & Safety Stock Creating a Pull System Classroom Exercise #1: Calculating Cycle, Buffer & Safety Stock A machining process produces 2 parts: part A (2 min. CT) and part B (3 min. CT). The average daily demand is 100 units of A and 50 units of B. Although the total daily demand will always be 150 units, the mix can change by +/- 25 units. The machining process takes 30 minutes to changeover between products and has a 95% uptime and 98% first pass yield. In humid weather, an additional 5% of units need to be scrapped at final assemby. The process works 1 shift of 430 min. What is the Interval of the machining process? How much Cycle, Buffer and Safety Stock is required? Time: 30 minutes

Summary: Creating a Pull System Cycle Stock Inventory required for the “normal” state Buffer Stock Inventory required to accommodate variation in volume and mix Safety Stock Inventory required to protect against things that could go wrong (within reason)

Supermarket Pull Systems In this section we will: Introduce the concept of Supermarket Pull Systems Discuss the differences between FIFO Lanes and Supermarkets Learn how to calculate the amount of inventory required for each part in the Supermarket Review of Lean Principles Creating a Pull System Supermarket Pull Systems Daily Supermarket Operation Workshop Summary

Supermarket Pull Systems Guiding Question #5: Where must we use supermarket pull systems? Purpose: Provide production instruction to upstream processes that cannot be linked in flow. production kanban withdrawal kanban Supplier Process Customer Process replenished product withdrawn product supermarket

Supermarket Pull Systems Guiding Question #5: Where must we use supermarket pull systems? The difference between FIFO & Supermarkets: FIFO responds to a known demand Supermarkets hold inventory for an unknown demand Example: The Supplier Process has a 30 minute changeover The takt time is 5 minutes and the value stream has 3 products What maximum inventory must the FIFO lane accommodate? What maximum inventory must the supermarket accommodate?

Types of Supermarket Pull Systems Top-Up System Signal Kanban 2-Bin Kanban 3-Bin Kanban Multi-Card Kanban Simple but poor inventory control Complex but excellent inventory control

Supermarket Pull Systems Top-Up Pull System Material is delivered at a set period, and any material that was consumed during this period is replenished Cycle Stock = avg. consumption during the period Buffer Stock = peak – avg. consumption Safety Stock = late delivery + peak defect rate Ideal for small, low-cost parts where high inventory control is not essential E.g. Nuts, bolts, washers, etc.

Top-Up Pull System Example Supermarket Pull Systems Top-Up Pull System Example Every month, the hardware supplier comes into the facility and fills up all of the hardware containers (nuts, bolts, screws, etc.). Each container is marked with a line to indicate how much to fill it. The inventory is equal to the average monthly consumption (cycle stock), plus a buffer to handle peak production periods (buffer stock), and an allowance for up to 2 days incase the supplier is late delivering.

Supermarket Pull Systems Top-Up Pull System Advantages: Very easy to use (no signals required) Disadvantages: Inventory hovers at the high end because it gets replenished regardless of consumption Very inefficient for the material handler: Must visit this location every period Must bring enough material to completely replenish the inventory (no way to know how much has been consumed)

2-Bin Kanban Pull System Supermarket Pull Systems 2-Bin Kanban Pull System Material is stored in 2 containers of a set quantity. Every period, a material handler takes away empty containers and returns them the next period. Cycle Stock = 2 x avg. period consumption Buffer Stock = 2 x (peak – avg. consumption) Safety Stock = late delivery + peak defect rate Ideal for processes that consume many parts, especially if each part has a different rate of consumption E.g. Assembly processes

2-Bin Kanban Pull System Example Supermarket Pull Systems 2-Bin Kanban Pull System Example The material handler checks the assembly process every hour. As each container is emptied, it is placed in a specific location. The material handler retrieves these empty containers and spends the rest of the hour replenishing them. They then return the replenished containers to the assembly process and collect any containers that are now empty.

2-Bin Kanban Pull System Supermarket Pull Systems 2-Bin Kanban Pull System Advantages: Easy to understand and use Parts are only delivered if they have been consumed Disadvantages: Each bin requires twice the period demand for cycle stock This makes inventory levels rather high. For example, if the material handler delivers product every hour, then there will be 4 hours of inventory (2 hours per bin).

Multi-Card Kanban Pull System Supermarket Pull Systems Multi-Card Kanban Pull System Cards are used to signify a set amount of material. When that material is consumed, the card is returned to the supplier to indicate that more inventory is required. The supplier places returned cards on a board and uses them to determine which product to build next. Cycle Stock = Avg. consumption for supplier interval Buffer Stock = Peak – Avg. consumption for interval Safety Stock = late delivery + peak defect rate Ideal for processes that have an interval E.g. Machining processes or Suppliers (where the interval = delivery frequency)

Multi-Card Kanban Pull System Example Supermarket Pull Systems Multi-Card Kanban Pull System Example At the end of each day, the Team leader collects the kanban sheets from the boxes of material that the assembly process opened. They fax these sheets to the supplier and shreds them. The supplier receives the faxed sheets and places them on a board. When this product is the highest on the board, the supplier will changeover. As each box is completed, the sheet is placed on it, and it is sent to shipping for delivery.

2-Bin Kanban Pull System Supermarket Pull Systems 2-Bin Kanban Pull System Advantages: Excellent control of inventory Minimizes the amount of inventory required Disadvantages: Requires signals to be sent repeatedly Is more sensitive to changes in data than the other systems (needs to be kept up to date) Requires delivery of material almost every period

Summary: Supermarket Pull Systems Purpose: Provide production instruction to upstream processes that cannot be linked in flow. production kanban withdrawal kanban Supplier Process Customer Process replenished product withdrawn product supermarket

Daily Supermarket Operation In this section we will: Discuss how to further reduce inventory levels Review of Lean Principles Creating a Pull System Supermarket Pull Systems Daily Supermarket Operation Workshop Summary

Daily Supermarket Operation Inventory Hides Waste Reference: The New Manufacturing Challenge, Kiyoshi Suzaki, The Free Press

Daily Supermarket Operation Reducing Inventory Cycle Stock: Increase the frequency / reduce the interval Reduce cycle time - Improve machine uptime Reduce defect rate - Increase available run time Reduce changeover time Buffer Stock: Reduce the causes of variation Reduce downstream batch sizes (including customer orders) Level load production schedules Safety Stock: Improve process reliability

Daily Supermarket Operation Reducing Inventory Inventory requirement calculations are a great place to start, but theoretical calculations can either miss factors, and they can also be overly cautious Monitor inventory levels for a three months, and record the maximum range of inventory for each product (the highest amount – the lowest) Remove half of the difference between this amount and the maximum and keep monitoring

Reducing Inventory Example Daily Supermarket Operation Reducing Inventory Example After 3 months of operating the new multi-card kanban system, the company has identified that the following: Product Max High Low Range New Max A 30 28 4 24 27 B 20 6 14 17 C 50 45 11 33 41 Since product A fluctuated between 4 and 28 units of inventory for 3 months, this is a strong indication that only 24 units of inventory is actually required. To be safe, the company removes only half of the difference (3 units) and keeps monitoring.

Summary: Daily Supermarket Operation Cycle Stock: Increase the frequency / reduce the interval Reduce cycle time - Improve machine uptime Reduce defect rate - Increase available run time Reduce changeover time Buffer Stock: Reduce the causes of variation Reduce downstream batch sizes (including customer orders) Level load production schedules Safety Stock: Improve process reliability

Workshop Summary Review of Lean Principles Creating a Pull System In this section we will: Review some of the key concepts presented during this workshop. Review of Lean Principles Creating a Pull System Supermarket Pull Systems Daily Supermarket Operation Workshop Summary

Lean Definitions Push vs Pull Workshop Summary Lean Definitions Push vs Pull Push Production: Production is triggered by a forecasted schedule. Each process attempts to build to this schedule and “push” their finished products onto the next process whether that process is ready for them or not. Pull Production: The schedule is delivered to a single process (called the “pacemaker”). Production is triggered at upstream processes by consumption of a constrained amount of inventory which is used to buffer against problems.

Hierarchy of Process Connections Workshop Summary Hierarchy of Process Connections Single Piece Flow No inventory is allowed to accumulate between processing steps. FIFO Flow A controlled amount of inventory is allowed to accumulate between processes. Inventory is consumed in the same order it is produced (i.e. First In First Out). Supermarket Pull Systems A controlled amount of inventory is maintained between processes. As the customer process consumes a product, a signal is delivered to the supplier process to replace it. The supplier is not authorized to produce without this signal.

3 Types of Inventory Cycle Stock Buffer Stock Safety Stock Workshop Summary 3 Types of Inventory Cycle Stock Inventory required for the “normal” state Buffer Stock Inventory required to accommodate variation in volume and mix Safety Stock Inventory required to protect against things that could go wrong (within reason)

Types of Supermarket Pull Systems Workshop Summary Types of Supermarket Pull Systems Top-Up System Signal Kanban 2-Bin Kanban 3-Bin Kanban Multi-Card Kanban Simple but poor inventory control Complex but excellent inventory control

Workshop Summary Reducing Inventory Inventory requirement calculations are a great place to start, but theoretical calculations can either miss factors, and they can also be overly cautious Monitor inventory levels for a three months, and record the maximum range of inventory for each product (the highest amount – the lowest) Remove half of the difference between this amount and the maximum and keep monitoring

It’s up to you… “Whether you think you can, or think you can’t… Workshop Summary It’s up to you… “Whether you think you can, or think you can’t… …chances are, you’re right!” - Henry Ford