Chapter 7, Lean Thinking and Lean Systems INTRODUCTION to Operations Management Chapter 7, Lean Thinking and Lean Systems 5e, Schroeder McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Outline Evolution of Lean Lean Tenets The Lean System Stabilizing the Master Schedule Controlling Flow with the Kanban System Reducing Setup Time and Lot Sizes Changing Layout and Maintaining Equipment Cross-Training, Rewarding, and Engaging Workers Guaranteeing Quality Changing Relationships with Suppliers Implementation of Lean

Evolution of Lean Toyota Production System (TPS) Developed in the 1960s in Japan Also known as Just-in-Time (JIT) manufacturing First introduced into U.S.A. in 1981 at Kawasaki motorcycle plant in Lincoln, Nebraska Lean Production Term coined in late 1980s Popularized in 1990s by Womack, Jones & Roos, “The Machine That Changed the World”

Lean Tenets Specify exactly what creates value Improve the value stream Design the flow to avoid waste Produce only what the customer pulls Strive for perfection 5 Whys 5 S Poka-yoke (mistake proofing)

Elements of Lean System Level master schedule Use of Kanban system Small lot sizes (lot size one) Quick changeover (set-ups) Multifunction workers Efficient layout (linear flow, low inventories) Quality and continuous improvement Close relationships with suppliers Frequent deliveries from vendors

The Seven Wastes Overproduction: Producing more than the demand for customers resulting in unnecessary inventory, handling, paperwork, and warehouse space. Waiting Time: Operators and machines waiting for parts or work to arrive from suppliers or other operations. Customers waiting in line. Unnecessary Transportation: Double or triple movement of materials due to poor layouts, lack of coordination and workplace organization. Excess Processing: Poor design or inadequate maintenance or processes requiring additional labor or machine time. Too much Inventory: Excess inventory due to large lot sizes, obsolete items, poor forecasts or improper production planning. Unnecessary Motion: Wasted movements of people or extra walking to get materials. Defects: Use of materials, labor and capacity for production of defects, sorting our bad parts or warranty costs with customers.

Inventory as Waste “If all our suppliers are guessing, you end up with inventory, which is the physical embodiment of bad information.” –Paul Bell, Dell, Inc. Europe. Source: Economist, 1 April 2000, p. 57.

Figure 7.2, Inventory Covers Problems Bad Design Water Level Poor Quality Lengthy Setups Machine Breakdown Inefficient Layout Unreliable Supplier

Water Level Lowered To Expose Problems Bad Design Poor Quality Water Level Lengthy Setups Machine Breakdown Inefficient Layout Unreliable Supplier

Water Flows Smoothly (Problems Pulverized) Water Level

The Lean System Affects every aspect of plant operations Lot sizing Scheduling Layout Suppliers Labor relations Affects the rest of the firm Engineering Marketing HR Finance

Stabilizing the Master Schedule Production horizon set according to demand Production schedule repeated each day Supply & demand matched through ‘takt’ time concept (speed of output) Level production to create uniform load Strive for production of lot size one Produce the right quantity each day—no more and no less.

Kanban System Kanban means “marker” A “pull” production system A physical (normally visual) control system Normally composed of cards and containers (production card and withdrawal card), but can be any type of signal Number of containers:

The Kanban System Signals the need for more parts The Kanban system uses simple cards or signals to strictly control production The basic idea is that no station is permitted to produce more than is immediately required by the succeeding station This simple idea prevents the buildup of inventory Reducing lead time is the key No computer is required!

Figure 7.4: Kanban System

Figure 7.5: Kanban Cards

Examples of Kanban Signals Kanban cards Tags on a board Golf balls Lights Faxes/phone calls Yelling 21

Reducing Setup Times and Lot Sizes increases available capacity increases flexibility reduces inventory Reduce setup times and run times simultaneously to reduce lot sizes and throughput times Single-digit setup Times (Shigeo Shingo [d. 1990] or SMED System) Small lots require short setups!

Figure 7.7: Initial Layout Before Lean Final Assembly Work Centers Stockrooms Supplier A Supplier B

Lean Layout Final Assembly Supplier A Supplier B

Lean Layout with Group Technology Final Assembly Line 1 Line 2 Supplier A Supplier B

Engaging Workers Multifunction workers Cross-training New pay system to reflect skills variety Teamwork Suggestion systems Need full worker understanding and cooperation

Guaranteeing Quality Quality is essential in a lean system Defects produce waste No inventory to cover up mistakes Defects discovered quickly by the next process System designed to expose errors and get them corrected Makes continuous improvement possible

Changing Relationships with Suppliers Suppliers required to make radical changes Viewed as the ‘external factory’ Co-location Fewer suppliers Frequent deliveries to production line No inspection—high quality Integrated supplier programs

Features of Integrated Supplier Programs Early supplier selection, preferably in the design phase Family of part sourcing to allow supplier to take advantage of Group Technology Long-term relationships with small number of suppliers Paperwork reduction in receiving and inspection to reduce costs

Implementation of Lean Systems Establish a cross-functional team Determine what value the customer needs Construct a value stream map and use it to eliminate waste Flow or pull demand from the customer Implement the changes Repeat the cycle on another process

Summary Evolution of Lean Lean Tenets The Lean System Stabilizing the Master Schedule Controlling Flow with the Kanban System Reducing Setup Time and Lot Sizes Changing Layout and Maintaining Equipment Cross-Training, Rewarding, and Engaging Workers Guaranteeing Quality Changing Relationships with Suppliers Implementation of Lean

End of Chapter Seven