1. Lean Manufacturing CHAPTER 9

2. After completing the chapter you will:  Learn how a production pull system works  Study Toyota Production System concepts  Learn about how value stream mapping can be used to identify wasteful activities  See how Kanban cards can be used to control a pull system  Understand how to accomplish lean production  See examples of lean concepts applied to service systems

3.  Five key principles at Solectron to drive ‘Lean’ ◦ Value ◦ Value Chain ◦ Pull ◦ Flow ◦ Kaizen/Continuous Improvement  Lean + Six Sigma ◦ In-depth statistical metrics ◦ Easier identification and quicker resolution of quality issues ◦ Improve Solectron’s quality and reduces waste

4.  In dictionary…  If you describe an organization as lean, you mean that it has become more efficient and less wasteful by getting rid of staff, or by dropping projects which were unprofitable.

5.  In the context of supply chains, ◦ Lean production refers to  a focus on eliminating as much waste as possible  Value chain ◦ Each step in the SC processes should create value. ◦ If a step does not create value it should be removed from the process

6.  Lean production has evolved from ◦ JIT (Just-In-Time) production concepts pioneered in Japan at Toyota.  In the 90s, ◦ The term lean was adopted in place of JIT  To emphasize the goal of systematically eliminating waste throughout their SCs

7.  Lean production ◦ An integrated set of activities designed to achieve production using minimal inventories of raw materials, WIP, and finished goods.  Nothing will be produced until it is needed.

9.  To enable the pull process to work smoothly, ◦ High levels of quality at each stage of the process ◦ Strong vendor relations ◦ Fairly predictable demand for the end product

10.  TPS ◦ Was developed to improve quality and productivity ◦ A lean production  Two philosophies ◦ Elimination of waste ◦ Respect for people

11.  Waste ◦ Anything other than the minimum amount of equipment, materials, parts, and workers which are absolutely essential to production  Seven prominent types of waste ◦ Waste from overproduction ◦ Waste of waiting time ◦ Transportation waste ◦ Inventory waste ◦ Processing waste ◦ Waste of motion ◦ Waste from product defects

12.  Value chain mapping ◦ An approach that has been adopted to analyze a process to identify steps that can be improved.

13.  Focused factory networks  Group technology  Quality at the source  JIT production  Uniform plant loading  Kanban production control system  Minimized setup times

14.  Small specialized plants rather than large vertically integrated mfg. facilities ◦ Toyota has 12 plants located around Toyota City  Plants designed for one purpose can be constructed and operated more economically.

15. Coordination System Integration These are small specialized plants that limit the range of products produced (sometimes only one type of product for an entire facility) Some plants in Japan have as few as 30 and as many as 1000 employees

16.  GT improves product flow ◦ Eliminate movement and queue (waiting) time between operations ◦ Reduce inventory ◦ Reduce number of employees

17.  Do it right the first time and when something goes wrong, stop the process or assembly line immediately.  Andon system (http://www.toyotageorgetown.com/tps.asp)http://www.toyotageorgetown.com/tps.asp  Factory workers become their own inspectors.

18.  JIT ◦ Producing what is needed when needed and no more.  Under JIT, ◦ Ideal lot size or production batch is one.  Keeping transfer quantities small –1/10 of a day’s production.  The goal is to drive all inventory queues to zero, thus minimizing inventory investment and shortening lead times.

19. Work in process queues (banks) Change orders Engineering design redundancies Vendor delinquencies Scrap Design backlogs Machine downtime Decision backlogs Inspection backlogs Paperwork backlog Example: By identifying defective items from a vendor early in the production process the downstream work is saved Example: By identifying defective work by employees upstream, the downstream work is saved

20.  Heijunka ◦ Smoothing the production flow to dampen the reaction waves that normally occur in response to schedule variation ◦ Make adjustments as small as possible by setting a firm monthly production plan for which the output rate is frozen.

21. Not uniformJan. UnitsFeb. UnitsMar. UnitsTotal 1,2003,5004,3009,000 UniformJan. UnitsFeb. UnitsMar. UnitsTotal 3,0003,0003,0009,000 Suppose we operate a production plant that produces a single product. The schedule of production for this product could be accomplished using either of the two plant loading schedules below. How does the uniform loading help save labor costs? or

25.  Cards  Kanban squares  Container system  Colored golf balls

26.  Setting up a kanban system requires ◦ Determination of the number of kanban cards (or containers) needed  Each container represents ◦ The minimum production lot size  Accurate estimate of the lead time needed to produce a container of parts is the key to determining the number of container.

28.  Muffler fabrication needs ◦ Catalytic converter (CC)  Key sentences ◦ Catalytic converters are made in batches of 10 units. ◦ The CC cell can respond to an order for a batch of CCs in approximately four hours. ◦ The muffler assembly fabrication cell averages approximately eight assemblies per hour. ◦ Management has decided to have safety stock equivalent to 10% of the needed inventory

29.  Machines must be quickly set up ◦ To produce the mixed models on the line.  Two types of setup ◦ Internal setups  Must be done while a machine is stopped ◦ External setups  Can be done while the machine is running

30.  Lifetime employment for permanent positions ◦ Permanent workers  Have job security  More flexible  Remain with a company  Do all they can to help a firm achieve its goal ◦ Cooperative relationship between unions and management  Bonuses encourage workers to improve productivity  Management views workers as assets

31.  Partnership with suppliers ◦ Toyota relies heavily on subcontract networks ◦ Some suppliers are usually serving multiple customers ◦ Long term partnerships with suppliers and customers

32.  Lean Layouts and Design Flows  Lean Applications for Line Flows  Lean Application for Workcenter Shops  Six-Sigma Quality  A Stable Schedule  Work with Suppliers

33.  Lean layouts ◦ Balanced work flow with a minimum of WIP ◦ Linked operations through a pull system ◦ Internal and external logistics  Preventive maintenance ◦ Flows are not interrupted by downtime or malfunctioning equipment ◦ Operators perform much of the maintenance

34.  Reductions in setup and changeover times

35.  In a pure lean environment, ◦ No employee does any work until the product has been pulled from the end of the line by the market.  When a product is pulled, ◦ A replenishment unit is pulled from upstream operations.

36.  The rules of the flow layout ◦ Employees to keep completed units at their workstation ◦ If someone takes the completed work away, the employee must move upstream in the flow to get additional work to complete.

37.  Workcenters vs. Lean ◦ Lean can be used if demand can be stabilized  Stabilizing demand ◦ Easier when the demand is from downstream  Internal customer ◦ Rather than an end customer  Distributor  Individual purchaser

39. Quality & Lean ◦ When employees are responsible for quality,  Lean works at its best because only good quality products are pulled through the system ◦ When all products are good,  No “just-in-case” extra inventory is needed. Quality & Product Design ◦ Standard product configuration ◦ Fewer and standardized parts

40.  Lean production requires… ◦ A stable schedule over a lengthy time horizon  Level scheduling  Freeze windows  Underutilization of capacity

41.  Level schedule ◦ Material to be pulled in uniform pattern ◦ Uniform enough to allow the various elements of production to respond to pull signals ◦ A given production system equipped with flexible setups and a fixed amount of material in the pipelines can respond

42.  Freeze window ◦ Period of time during which  the schedule is fixed  no further changes are possible  Backflush ◦ Parts are periodically removed from inventory and accounted for based on the number of units produced

43.  Under lean production ◦ Hedge providers  Excess labor  Excess machines  Overtime  Underutilization = excess capacity ◦ Cheaper than carrying excess inventory  When demand is ◦ Greater than expected  Overtime, part-time labor ◦ During idle periods  Work group activities, workstation housekeeping, special projects

44.  Sharing information ◦ Sharing a firm’s projected usage requirements with its vendors,  Vendors have a long-run picture of the demands ◦ Linked online  Sharing production scheduling  Confidence ◦ Confidence in the supplier or vendor’s delivery commitment allows reductions of buffer inventories ◦ Some suppliers even deliver to a location on the production line

46. 1.Design Flow Process 2.Total Quality Control 3.Stabilize Schedule 4.Kanban Pull 5.Improve Product Design 6.Reduce Inventory More 7.Work with Vendors

47.  Successfully applied by service firms  Suitability depends on ◦ Firm’s markets ◦ Production and equipment technology ◦ Skill set ◦ Corporate culture  10 applications are introduced

48.  Organize problem-solving groups ◦ “Quality circles” are extended from mfg. to services ◦ Honeywell, First Bank, Miller, etc  Upgrade housekeeping ◦ Only the necessary items are kept in a work area ◦ Everything is clean and in a constant state of readiness ◦ McDonald’s, Disneyland  Upgrade Quality ◦ Process quality ◦ Consistently producing products and services ◦ McDonald’s

49.  Clarify process flows ◦ Clarification of flows can improve process performance ◦ Fedex, Supermaids  Revise equipment and process technologies ◦ Speedi-Lube, A hospital  Level the facility load ◦ McDonald’s, Post office  Eliminate unnecessary activities ◦ A step that does not add value is a candidate for elimination

50.  Reorganize physical configuration ◦ Work area configuration  Introduce demand-pull scheduling ◦ Demand-pull (customer-driven) scheduling is necessary ◦ Wendy’s  Develop supplier networks ◦ Cooperative association of suppliers and customers working over the long term for mutual benefit.

51.  Lean  Toyota Production System ◦ Elimination of waste  GT, Heijunka, Kanbansystem, etc ◦ Respect for people  Lean implementation requirements  Lean Services

52. Lean Production seeks to achieve high volume production using which of the following? a. Minimal inventory of raw materials b. Minimal inventory of work-in-process c. Minimal inventory of finished goods d. All of the above e. None of the above

53. In the Toyota Production System, the “elimination of waste” involves which of the following? a. Overproduction b. Waiting time c. Transportation d. All of the above e. None of the above

54. In the Pull System the partner that begins the process of “pulling” is which of the following? a. Customers b. Vendors c. Fabrication personnel d. CEO e. All of the above

55. A Lean Production program requires which of the following? a. Employee participation b. Total quality control c. Small lot sizes d. Continuing improvement e. All of the above

56. Inventory has been known to hide which of the following production problems? a. Scrap b. Vendor delinquencies c. Decision backlogs d. All of the above e. None of the above

57. You want to determine how many kanban card sets you need for an operation. You find that average number of units demanded is 1,000 per hour, the lead time to replenish the order for this item is 10 hours, the container size is 10 units, and the safety stock is estimated to be 5% of the expected demand. Which of the following is the desired number of kanban card sets? a. 1050 b. 1000 c. 605 d. 500 e. None of the above

58. When trying to implement Lean system a “stabilized schedule” includes which of the following? a. Demand pull b. Backflush c. Fail-safe methods d. All of the above e. None of the above

59. End of Chapter 9