1. Copyright 2013 John Wiley & Sons, Inc. Chapter 5 Process Improvement: Reducing Waste Through Lean

2. 5-2 Overview

3. 5-3 Introduction 350-bed hospital located in downtown Seattle Chemotherapy patients spending an entire day receiving their weekly chemotherapy treatment To improve this process, Virginia Mason has turned to the concepts of lean management pioneered by Toyota

4. 5-4 Virginia Mason Medical Center (Continued) They completely redesigned the process Everything flows to the patient as opposed to the patient flowing through the process Lean initiatives have resulted in: –Savings of $6 million in capital spending –Freed up 13,000 square feet –Reduced inventory costs by $360,000 –Reduced the distance hospital staff walk each day by 34 miles

5. 5-5 Xerox Established Leadership Through Quality Initiative in early 1980’s Focused on improving business processes to improve customer satisfaction, quality, and productivity Late 1990’s Six Sigma and Lean being adopted by Xerox’s manufacturing and supply chain functions

6. 5-6 Xerox (Continued) Mid 2002 Xerox’s leadership decided to integrate its Lean and Six Sigma programs across the entire enterprise –Called the initiative Xerox Lean Six Sigma Xerox estimates that it achieved an initial $6 million return in 2003 based on a $14 million investment in Lean Six Sigma Expects even bigger gains in the years ahead.

7. 5-7 Honeywell International A diversified technology company with 2004 sales in excess of $25 billion Successfully integrated its Six Sigma initiatives with its lean initiatives Honeywell competes in four major industry segments 1.Aerospace 2.Automation and Control Solutions 3.Specialty Materials 4.Transportation Systems.

8. 5-8 Valley Baptist Hospital in Harlingen, Texas Hospital patient discharge process is often associated with dissatisfaction To address this, they utilized Lean, Six Sigma, and change management techniques One specific goal was to reduce the time from when a patient discharge order was entered into the computer until the time the patient was transported from the room to 45 minutes

9. 5-9 Valley Baptist Hospital Continued Process improvement team began by mapping the current patient discharge process The process improvement team developed a new standard operating procedure consisting of six steps for the patient discharge process Mean time to discharge a patient was reduced by 74% from 185 minutes to 48 minutes

10. 5-10 Five Lean Principles 1.Specify value from the customer’s point of view 2.Identify the value stream –The complete set of activities required to create the output valued by the customer 3.Make value flow through the value stream by eliminating non-value added activities and streamlining the remaining value added steps 4.Have the customer pull value through the value stream 5.Pursue perfection

11. 5-11 History and Philosophy of Lean Lean production is the name given to the Toyota Production System –Also known as synchronous manufacturing or simply lean The Toyota system is known for its minimal use of resources and elimination of all forms of waste, including time Just-in-time (JIT) is a substantial portion of the Toyota system Integral element of supply chain management

12. 5-12 Lean Logic Lean is based on the logic that nothing will be produced until it is needed. A sale pulls a replacement from the last position in the system. This triggers an order to the factory production line. Each upstream station then pulls from the next station further upstream. 14-12

13. 5-13 Lean Production – Pull System 14-13

14. 5-14 Toyota Production System 1.Waste from overproduction 2.Waste of waiting time 3.Transportation waste 4.Inventory waste 5.Processing waste 6.Waste of motion 7.Waste from product defects 1.Lifetime employment for permanent positions 2.Maintain level payrolls even when business conditions deteriorate 3.Company unions 4.Bonuses 5.View workers as assets Elimination of Waste Respect for People 14-14

15. 5-15 Japanese Approach Japan is a small country with minimal resources and a large population Their work systems tend to be based on three primary tenets: 1.Minimizing waste in all forms 2.Continually improving processes and systems 3.Maintaining respect for all workers

16. 5-16 Minimizing Waste Japanese studiously avoid waste –Materials –Space –Labor Pay attention to correcting problems that could produce waste Operations are constantly fine-tuned to increase productivity and yield

17. 5-17 Continuous Improvement Corresponds to the lean principle of pursuing perfection Not a one-time streamlining of the system Ongoing journey to make continuing improvements throughout the system

18. 5-18 Respect for all Workers US industry moving more slowly in this direction Japanese firms have respect and loyalty from their workers Probably because they should respect for and loyalty to their employees in the first place

19. 5-19 Comparison of Traditional Systems and Lean Table 5.1

20. 5-20 Comparison of Traditional Systems and Lean (Continued) Table 5.1

21. 5-21 Priorities, Product/Service Design, and Capacity Priorities: with lean, the target market is usually limited and the options are also limited Product/service design: engineering in the lean firm designs standard outputs and incrementally improves each design Capacity: excess capacities are kept to a minimum to avoid inherent waste, particularly the WIP inventories

22. 5-22 Layout and Workforce Layout: with lean, equipment is moved as close together as possible so that parts can be actually handed from one worker or machine to the next Workforce: lean strives for a broadly skilled, flexible worker who will look for and solve production problems wherever they appear

23. 5-23 Inventory In Japan, inventory is seen as an evil in itself It is a resource sitting idle, wasting money Reduce the inventories until inventory investment is practically gone The result is a greatly improved and smoother production system

24. 5-24 Lowering Inventory Investment to Expose Problems Figure 5.1

25. 5-25 Inventory Hides Problems 14-25

26. 5-26 Suppliers With lean, the desire is for frequent, smooth deliveries of small lots The supplier considered part of the team There is no incoming inspection of the materials to check their quality All parts must be of specified quality and guaranteed by the supplier There is the risk of being dependent on one supplier

27. 5-27 Planning and Control In the lean approach, the focus is on control Procedures are kept simple, visual, and made as routine as possible No planning and forecasting for an uncertain future Rather, the firm attempts to respond to what actually happens in real time with flexible, quick operations

28. 5-28 Quality The traditional approach to quality is to inspect the goods at critical points in the production system This is to weed out bad items and correct the system With lean, the goal is zero defects and perfect quality The most important elements are the workers

29. 5-29 Maintenance In the traditional approach, maintenance has been what is termed corrective maintenance, –Preventive maintenance is also common In lean organizations, the maintenance function assumes greater responsibility and has greater visibility The enterprise relies much more heavily on the operator for many of the maintenance tasks –Especially simple preventive maintenance

30. 5-30 Specify Value At the heart of lean is the concept of value Value is ultimately defined by the customer Must consider what and how much a customer is willing to pay Another common definition of value is that it is the opposite of waste (muda)

31. 5-31 Seven Categories of Waste 1.Overproduction –Creating more than is needed at a particular point in time 2.Inventory –Raw materials, work-in-process, finished goods 3.Waiting –Delays that prevent a worker from performing their work 4.Unnecessary transport –Any time a worker or part must move, it is considered waste

32. 5-32 Seven Categories of Waste (Continued) 5.Unnecessary processing –Having extra steps in a process 6.Unnecessary human motions –Not using the human body efficiently and effectively 7.Defects –Parts that must be reworked or scrapped

33. 5-33 Identify the Value Stream Includes all activities from the raw materials to the delivery of the output to the consumer –Value added and non-value added Activities are categorized as: –Value-added Patient diagnosis – Non-value-added but necessary Requiring patients to sign a HIPAA form –Non-value-added and not necessary Waiting for the doctor

34. 5-34 Kanban System  Kanban system – A production control approach that uses containers, cards, or visual cues to control the production and movement of goods through the supply chain.  Key characteristics:  Uses simple signaling mechanisms to indicate when specific items should be produced or moved.  Can be used to synchronize activities either within a plant or between different supply chain partners.  Are not considered planning tools, but rather control mechanisms that are designed to pull parts or goods through the supply chain based on downstream demand.

35. 5-35 Kanban System  Two-card kanban system – Uses one card to control production and another card to control movement of materials.

36. 5-36 Kanban System for Two Work Centers Figure 13.5

37. 5-37 Release of Finished Materials from Work Center B Figure 13.6

38. 5-38 Pulling of Raw Materials into Production at Work Center B Figure 13.7

39. 5-39 Removal of Finished Materials from Work Center A Figure 13.8

40. 5-40 Two-card System Summary  A downstream system station pulls finished material out of work center B.  Work center B pulls raw material into production.  Demand for more raw material in work center B pulls finished material out of work center A.

41. 5-41 Pull System  Pull system – A production system in which actual downstream demand sets off a chain of events that pulls material through the various process steps.  A kanban system is also called a pull system.

42. 5-42 Pull Value Through the Value Stream A way to capitalize on the increasing strategic importance of fast response to the customer is to minimize all the lead times Lean enterprises rely on pull systems whereby actual customer demand drives the production process A pull system is a control-based system that signals the requirement for parts as they are needed in reality

43. 5-43 Sequential Production System with Two Machines Figure 5.5

44. 5-44 Kanban Process Figure 5.6

45. 5-45 Kanban/JIT in Services Many services must provide their service exactly when it is demanded JIT is being adopted in other services that use materials extensively Many of the techniques used in manufacturing are applicable to services The advantages manufacturers accrue through JIT provide equal advantages to services

46. 5-46 Pursue Perfection 1.Sort –Distinguish work that must be performed from work not needed 2.Straighten –Everything in its place 3.Scrub –Keep workplace clean 4.Systemize –Standardized procedures for maintaining order 5.Standardize –Make steps 1-4 a habit

47. 5-47 The Visual Factory The objectives are to help make problems visible, help employees stay up to date on current operating conditions, and to communicate process improvement goals Problems can be made visible through the use of charts displayed throughout the workplace These plot trends related to quality, on time delivery performance, safety, machine downtime, productivity, and so on

48. 5-48 Kaizen and Poka Yoke Kaizen translates into continuous improvement Lean requires a continuous series of incremental improvements Goal of poka yoke is to mistake-proof work activities in a way that prevents errors from being committed

49. 5-49 Equipment Impacts Waste Breakdowns –No longer creating value Setups –Setup or changeover takes time Stoppages –Loss because output unacceptable Reduce speed –Running machine at lower rate Yields –Waste and scrap too high

50. 5-50 Key Components of a Total Productive Maintenance Program Identifying ways to maximize equipment effectiveness Developing a productive maintenance system for maintaining equipment over its lift cycle Coordinating the work of engineering, operations, and maintenance employees Giving employees the responsibility to maintain the equipment they operate

51. 5-51 Benefits of Lean 1.Cost savings 2.Revenue increases 3.Investment savings 4.Workforce improvements 5.Uncovering problems

52. 5-52 Lean Six Sigma Merger of lean and Six Sigma An organization that focuses only one waste elimination will miss opportunities to enhance effectiveness Focusing only on reducing variation also limits the overall effectiveness of the process Six Sigma and lean have proven to be excellent complements to each other