1. 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.

2. 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

3. 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”

4. 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)

5. 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

6. 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.

7. 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.

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

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

10. Water Flows Smoothly (Problems Pulverized)
Water Level

11. 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

12. 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.

13. 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:

14. 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!

15. Figure 7.4: Kanban System

16. Figure 7.5: Kanban Cards

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

18. 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!

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

20. Lean Layout
Final
Assembly
Supplier A
Supplier B

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

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

23. 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

24. 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

25. 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

26. 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

27. 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

28. End of Chapter Seven