1. 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

2. 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

3. 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: 3

4. 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

5. 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

6. 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

7. 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

8. 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

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

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

11. 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

12. “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

13. 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

14. 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”

15. 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

16. 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
Now, let’s see how to do that 16

17. 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

18. A Process Flow Chart

19. 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

20. 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

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

22. 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

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

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

25. 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

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

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

28. Some (Short) 5S Videos How to “Set in Order”
How Kyocera has implemented 5S in its corporate office, in particular the “Sustain” 28

29. 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

30. 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

31. 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)

32. 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

33. 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