Lean Enterprise

Lean EnterpriseLean Enterprise

AgendaAgenda

Lean definition…5 minLean definition…5 min Lean & the automotive history…5 minLean & the automotive history…5 min The Toyota way…10 minThe Toyota way…10 min Lean tools…10 minLean tools…10 min Lean implementation…10 minLean implementation…10 min Q & A (please save them for the end)Q & A (please save them for the end)

WasteEliminated

Lean constitutes a philosophy / culture of how to satisfy customers’ increasing demands for greater value.

An ideal value-creation process exists whenthe fewest number of steps are properlysequenced and made to continually flow.

Let’s start with a definitionLet’s start with a definition

Better, Cheaper, Faster

Value In The Eyes Of The Value In The Eyes Of The CustomerCustomer

Quality, Cost, Schedule

PRODUCTSHIPMENT

CUSTOMERORDER

Lean is a manufacturing philosophy which shortens the time line between the customer order and the shipment by eliminating waste.

Time

Business as Usual

Lean Manufacturing

PRODUCTSHIPMENT

CUSTOMERORDER

Time (Shorter)

Waste

Waste

““Lean Lean Vs.Traditional”Vs.Traditional”

Half the hours of engineering effort.Half the hours of engineering effort. Two-thirds the product development time.Two-thirds the product development time. Half the hours of human effort in the factory.Half the hours of human effort in the factory. Half the defects in the finished product.Half the defects in the finished product. Half the factory space for the same output.Half the factory space for the same output. A tenth or less of in-process inventories.A tenth or less of in-process inventories.

Source: The Machine that Changed the World, Womack, Jones, and Roos, 1990.

Craft Manufacturing Craft Manufacturing Late 1800’s.Late 1800’s. Car built on blocks in the barn as Car built on blocks in the barn as

workers walked around the car.workers walked around the car. Built by craftsmen with pride.Built by craftsmen with pride. Components hand-crafted, hand-fitted.Components hand-crafted, hand-fitted. Excellent quality.Excellent quality. Very expensive.Very expensive. Few produced.Few produced.

Mass Manufacturing Mass Manufacturing Assembly line - Henry Ford 1920s.Assembly line - Henry Ford 1920s. Low skilled labor, simplistic jobs.Low skilled labor, simplistic jobs. Interchangeable parts.Interchangeable parts. Lower quality.Lower quality. Affordably priced for the average family.Affordably priced for the average family. Billions produced – identical.Billions produced – identical.

Lean Manufacturing Lean Manufacturing Cells or flexible assembly lines.Cells or flexible assembly lines. Broader jobs, highly skilled Broader jobs, highly skilled

workers.workers. Interchangeable parts, Interchangeable parts,

even more variety.even more variety. Excellent quality mandatory.Excellent quality mandatory. Costs being decreased through process Costs being decreased through process

improvements.improvements. Global markets and competition.Global markets and competition.

Why Learn from Toyota?Why Learn from Toyota? Reached 2000 goal of 10% market share and moving Reached 2000 goal of 10% market share and moving

toward 2015 goal of 15%--largest in world.toward 2015 goal of 15%--largest in world. Consistently profitable--$10 billion in 2002 (Profit is Consistently profitable--$10 billion in 2002 (Profit is

more than the “Big 3” COMBINED!).more than the “Big 3” COMBINED!). Fastest product development process in auto business.Fastest product development process in auto business. Consistently among top plants in productivity.Consistently among top plants in productivity. Consistently award winning quality levels.Consistently award winning quality levels. Has triggered a global transformation of manufacturing Has triggered a global transformation of manufacturing

to the Toyota Production System aka “Lean to the Toyota Production System aka “Lean Manufacturing.”Manufacturing.”

Source: Jeffrey Liker, Author: The Toyota Way

PerceivedPerceived TPS… 10%TPS… 10% Tactical elements - JIT, Built in Quality, StabilityTactical elements - JIT, Built in Quality, Stability

ActualActual 90%90%

Environment Created for People to SucceedEnvironment Created for People to Succeed Problem Solving Culture (Fact Based)Problem Solving Culture (Fact Based) Extensive, Continuing Education and TrainingExtensive, Continuing Education and Training Discipline, Team Work and PersistenceDiscipline, Team Work and Persistence Short Term Actions Linked to Long Term PlanShort Term Actions Linked to Long Term Plan

Lessons Learned: Toyota’s Secret to Success

PhilosophyLong-term Thinking

People and PartnersRespect, Challenge

and Grow Them

ProcessEliminate Waste

ProblemSolvingContinuous

Improvement & Learning

Base management decisions on a long-term philosophy, even at the expense of short-term financial goals

Grow leaders who live the philosophy Respect, develop and challenge your

people and teams Respect, challenge, and help your suppliers

Create process “flow” to surface problems

Stop when there is a quality problem Use pull systems to avoid overproduction Standardize tasks for continuous

improvement Use visual control so no problems are

hidden

Continual organizational learning through Kaizen Go see for yourself to thoroughly understand the

situation.

Kai

zen

Res

pect

+Te

amw

ork

Cha

lleng

e“4 P” Model of the Toyota Way

Source: Jeffrey Liker, Author: The Toyota Way

PhilosophyPhilosophyLong Term ThinkingLong Term Thinking

Traditional ApproachTraditional ApproachPhilosophy

Low Unit Cost

Performance MeasuresUnit Cost, Earned Hours, Absorption

PrincipleImprove Individual

Efficiencies

StrategyStandard Costing and

Standard Hours

ReasonVerify Employee Performance to

Standard, and Cost Estimating

EffectEncourages behaviors

that increase Non Value Added activities

Control MethodManagement reviews

reports, adjusts standards

ResultWaste is

increased andTotal System Cost is higher

MethodTime Studies, Work

Standards

ToolsComputer systems

(MRP), Time Clocks, Reports

Focus on Waste EliminationFocus on Waste EliminationPhilosophy

Waste Elimination

Performance MeasureTotal System Cost,

Quality, and Delivery

PrincipleEliminate Variation

StrategyDevelop consistent process capability

ReasonAble to determine normal from abnormal conditions

EffectAbnormal conditions can

be corrected quickly, return to best method

Control MethodVisual Controls, planned

and automatic audits

ResultWaste is Reduced

andTotal System Cost

is reduced!

MethodStandardized Work and

Procedures

Lean ToolsStandardized Work

Documents, Performance Boards, Andon

ProcessProcessEliminate WasteEliminate Waste

JAPANESE FOR WASTE.DEFINED AS ANY HUMAN ACTIVITY WHICH ABSORBS RESOURCES BUT

CREATES NO VALUE.

“MUDA”

7 Forms of Waste7 Forms of Waste

Typesof

Waste

CORRECTION

WAITING

PROCESSING

MOTION

INVENTORY TRANSPORTATION

OVERPRODUCTION

Repair orRework

Any wasted motionto pick up parts or stack parts. Also wasted walking

Wasted effort to transportmaterials, parts, or finished goods into or out of storage, or between processes.

Producing morethan is needed before it is needed

Maintaining excessinventory of raw materials, parts in process, orfinished goods.

Doing more work thanis necessary

Any non-work timewaiting for tools, supplies, parts, etc..

OVERPRODUCTIONOVERPRODUCTION (The worst type of waste)(The worst type of waste)

Running a machine to produce product that is not needed for the next process (customer). Making product and storing in a warehouse for long periods.Processing more orders through one step than the next step can process.

Producing more than required to meet immediate customer demand.

Waste from Over-productionWaste from Over-production

EXCESS INVENTORYEXCESS INVENTORY

Raw materials in storage. Materials and supplies in storage. Materials at the process.Finished goods stored prior to shipping.

Any inventory that exceeds what is needed to meet immediate customer requirements.

CORRECTIONCORRECTION(Rework)(Rework)

Wrong size / model.Pieces cut wrong.Missing or incorrect information.

Any repairs or additional work performed outside the operators normal work.

NON CONFORMING

WAITINGWAITING

Waiting for assistance.Waiting for assistance. Waiting because equipment is broken down.Waiting because equipment is broken down. Waiting for supplies or materials.Waiting for supplies or materials. Machinery can wait for the operator, but the Machinery can wait for the operator, but the

operator should never wait on the machinery.operator should never wait on the machinery.

Any idle time not spent performing value added work.

TRANSPORTATIONTRANSPORTATION

Moving material to and from the warehouse.Moving material to and from the warehouse. Movement of materials on conveyors.Movement of materials on conveyors. Movement of materials at the process.Movement of materials at the process. Handling and carrying paperwork between Handling and carrying paperwork between

operations.operations.

The movement of material, whether it is manually or automatically.

PROCESSINGPROCESSING

More detailed information than necessary.More detailed information than necessary. Copying drawings and spec sheets not needed.Copying drawings and spec sheets not needed. Doing more finishing than necessary to meet Doing more finishing than necessary to meet

the standards.the standards. Sometimes it is “keep busy work”.Sometimes it is “keep busy work”.

Doing more work than necessary to meet the customer needs or requirements.

MOTIONMOTION

Reaching to pick up materials.Reaching to pick up materials. Turning or bending.Turning or bending. Excessive travel distance or long pattern on Excessive travel distance or long pattern on

automated equipment.automated equipment.

Any physical movement of workers or automated equipment.

People and People and PartnersPartners

Respect, Challenge, and Grow Respect, Challenge, and Grow ThemThem

People People areare the greatest asset the greatest asset

The foundation of The Toyota Way is the The foundation of The Toyota Way is the development of people.development of people.

Focus on internal development before Focus on internal development before extending the process to suppliers.extending the process to suppliers.

Decision making and system development Decision making and system development are pushed down to the lowest levels.are pushed down to the lowest levels.

An empowered team approach is essential.An empowered team approach is essential.

New Paradigm: Non-Blaming CultureNew Paradigm: Non-Blaming Culture

Management creates a culture where:Management creates a culture where:

ProblemsProblems are recognized as are recognized as opportunitiesopportunities

It’s okay to make legitimate mistakes.It’s okay to make legitimate mistakes. Problems are exposed because Problems are exposed because

of increased trust.of increased trust. Emphasis is placed on finding Emphasis is placed on finding

solutions instead of “who did it”.solutions instead of “who did it”.

Problem SolvingProblem Solving

When Standards are not visibleWhen Standards are not visible

Unable to verify

adherance

Not Defined or Visible

Variation of Process

Unable tocorrect variation

DesiredMethod

Unable to understand

variation

Not clear and understandable

The Desired Method is “in our heads” and “everyone knows it”

Desired method not

followed

Visible Standards reduce variationVisible Standards reduce variation

Able to verify adherance to

Standard

Make Standard Visible

Discover Deviation

Correct Deviation

Standard

Report Deviation

Variation is reduced

1.1. Base management decisions on a long term philosophy, Base management decisions on a long term philosophy, even at the expense of short-term financial goals.even at the expense of short-term financial goals.

2.2. Create Continuous Process Flow to bring problems to the Create Continuous Process Flow to bring problems to the surface.surface.

3.3. Use “pull” systems to avoid overproduction.Use “pull” systems to avoid overproduction.

4.4. Level out the workload.Level out the workload.

5.5. Build a culture of stopping to fix problems to get quality Build a culture of stopping to fix problems to get quality right the first time.right the first time.

6.6. Standardized tasks are the foundation for continuous Standardized tasks are the foundation for continuous improvement and employee empowerment.improvement and employee empowerment.

14 Principles of The Toyota Way14 Principles of The Toyota Way


7.7. Use visual control so no problems are hidden.Use visual control so no problems are hidden.8.8. Use only reliable, thoroughly tested technology Use only reliable, thoroughly tested technology

that serves your people and processes.that serves your people and processes.9.9. Grow leaders who thoroughly understand the Grow leaders who thoroughly understand the

work, live the philosophy, and teach it to others.work, live the philosophy, and teach it to others.10.10. Develop exceptional people and teams who Develop exceptional people and teams who

follow your company’s philosophy.follow your company’s philosophy.11.11. Respect your extended network of partners and Respect your extended network of partners and

suppliers by challenging them and helping them suppliers by challenging them and helping them improve.improve.


12.12. Go and see for yourself to thoroughly understand the Go and see for yourself to thoroughly understand the situation.situation.

13.13. Make decisions slowly by consensus, thoroughly Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly.considering all options; implement decisions rapidly.

14.14. Become a learning organization through relentless Become a learning organization through relentless reflection and continuous improvement.reflection and continuous improvement.

Basic Tools for eliminating wasteBasic Tools for eliminating waste Do not focus efforts on implementing tools.Do not focus efforts on implementing tools. Focus on creating specific results and Focus on creating specific results and

utilize tools accordingly.utilize tools accordingly.

Kanban

5S’s and Visual

Factory

Pull

Standardized Work

Process

TAKTtime

Error Proofing

Value stream mapping

Total Productive

Maintenance

KanbanKanban

A pull material replenishment system, A pull material replenishment system, based on the principle that material is based on the principle that material is pulled through the production process pulled through the production process based on actual usage of material, put in based on actual usage of material, put in what comes out.what comes out.

Kanban uses visual signals, usually a Kanban uses visual signals, usually a card, to move material through the value card, to move material through the value chain.chain.

Cellular ManufacturingCellular Manufacturing

Layout: U-shape or semi-circle.Layout: U-shape or semi-circle. Equipment movable and placed closely Equipment movable and placed closely

together yield better sq. footage per together yield better sq. footage per operator.operator.

Quick feedback between operators.Quick feedback between operators. Workers in manufacturing cells typically Workers in manufacturing cells typically

are cross trained to perform multiple are cross trained to perform multiple tasks. tasks.

Captures best practices.Captures best practices. Posted at the work station / visual.Posted at the work station / visual. Reference documentReference document

work sequencework sequence job layoutjob layout time elementstime elements safetysafety

Developed with operators.Developed with operators. Ensures discipline and consistency of the Ensures discipline and consistency of the

process.process.

Standardized Work Standardized Work

Error Proofing Error Proofing

Preventing accidental errors in the Preventing accidental errors in the manufacturing process.manufacturing process. Error detectionError detection Error preventionError prevention

A way to achieve zero defects.A way to achieve zero defects. Causes of errors…Causes of errors…

Omission of stepsOmission of steps Not following sequenceNot following sequence Missing partsMissing parts Error in set-upError in set-up

TAKT TimeTAKT Time

TAKT Time Volume (Daily production requirement)

Time (Available seconds per working day) =

Cycle Time =Actual time required for a worker to complete one cycle of his process

Sets pace of production to match pace of demand.

Total Productive MaintenanceTotal Productive Maintenance

Structured approach to maintaining equipment and Structured approach to maintaining equipment and insuring stable manufacturing processes. insuring stable manufacturing processes.

Practice of preventing the loss of productive machine Practice of preventing the loss of productive machine time.time.

TPM involves everyone in identifying, monitoring, and TPM involves everyone in identifying, monitoring, and correcting the root causes of each of these lossescorrecting the root causes of each of these losses. .

Value stream mappingValue stream mapping

The visual representation allows to see The visual representation allows to see where costs can be reduced and where costs can be reduced and improvements can be made.improvements can be made.

A future state can be designed where A future state can be designed where wasted steps are left out, and continuous wasted steps are left out, and continuous flow and pull production are introduced.flow and pull production are introduced.

CUSTOMER

IND. DIST.

CUSTOMER

DIRECT END CUSTOMERS

CUSTOMER

NEVADARECEIVING

CUSTOM PAINT

FABRICATING

FINAL ASSEMBLY

WAREHOUSE

SHIPPING

SUPPLIER

COMPONENTS

SUPPLIER

SHEET STEEL

SUPPLIER

PLATING

SALES / MARKETING

SALES ORDER

"J D EDWARDS"MRP

UPDATE DAILY

MTOCOORDINATOR

REVIEW

REQUEST TO WAREHOUSE

INFORMATION FLOW

MATERIAL FLOW

LIQUID PAINT

POWDER PAINT

FORM/WELD/GRIND

COVER LINESUPPLIER

PRE STAMPED BLANKS

DOCK TO DOCK TIME FLOW (CONTROL PART = BODY - MANUAL 1 LINE)

RECEIVING-STEEL FABRICATING PAINTFORM/WELD/GRIND FINAL ASSEMBLY WAREHOUSE

5 DAYS 1.9 DAYS .9 DAYS .1 DAYS 13 DAYS

2.9 DAYS TOTAL IN PROCESS

O DAYS

MODIFICATION SERVICES

CENTRAL PLANNING

SOPFORECAST

LAYOUT

PROGRAMMING

DISTRIBUTION PLANNERS

CUSTOM PRODUCT STAGING

MTO"STANDARD" SPECIAL FINISH

RELEASE BY MTO

COORDINATOR

PURCHASING

PLANNERS

PACKETW/O ROUTING

PRINT ROOM

SYSTEM BACK FLUSH DISPATCH

MTOWORKORDER

CRIB

CUSTOMER

IND. DIST.

CUSTOMER

DIRECT END CUSTOMERS

CUSTOMER

NEVADA

RECEIVING

CUSTOM PAINT

FABRICATING

WAREHOUSE

SHIPPING

SUPPLIER

COMPONENTS

SUPPLIER

SHEET STEEL

SUPPLIER

PLATING

SALES / MARKETING

SALES ORDER

"J D EDWARDS"MRP

UPDATE DAILY

MTOCOORDINATOR

REVIEW

REQUEST TO WAREHOUSE

INFORMATION FLOW

MATERIAL FLOW

LIQUID PAINT

POWDER PAINT

FORM/WELD/GRIND

COVER LINE

SUPPLIER

PRE STAMPED BLANKS

MODIFICATION SERVICES

CENTRAL PLANNING

SOPFORECAST

LAYOUT

PROGRAMMING

DISTRIBUTION PLANNERS

CPS

MTO"STANDARD" SPECIAL FINISH

RELEASE BY MTOCOORDINATOR

PURCHASING

PLANNERS

PACKETW/O ROUTING

PRINT ROOM

MTOWORKORDER

CRIB

1/HOUR

1/HOUR

1/HOUR

FIP/GLUE

FINAL ASSEMBLY

SHIPPING RESULTS

HEIJUNKA -PRODUCTION LEVELING BOX

DOCK TO DOCK TIME FLOW (CONTROL PART = BODY - MANUAL 1 LINE)

RECEIVING-STEEL FABRICATING PAINTFORM/WELD/GRIND FINAL ASSEMBLY WAREHOUSE

3 DAYS .2 DAYS .2 DAYS .1 DAYS 5 DAYS

.5 DAYS TOTAL IN PROCESS

O DAYS

Visual managementVisual management

Systems that enable anyone to immediately Systems that enable anyone to immediately assess the current status of an operation or assess the current status of an operation or process at a glance, regardless of their process at a glance, regardless of their knowledge of the process.knowledge of the process.

ElementsElements Visual displays: relates information and data to Visual displays: relates information and data to

employees in the areaemployees in the area• charts charts • metricsmetrics• proceduresprocedures• process documentationprocess documentation

Why would you change?Why would you change?

Why would you go through Why would you go through the effort of rolling out the effort of rolling out Lean?Lean?

If we don’t change and improve, this is where weIf we don’t change and improve, this is where weAll are heading…….All are heading…….

ImplementationStarts with Education and Communication

INFORMATION

UNDERSTANDING

COMMITMENT

ACTION

Awareness

Personal & Org. Goals Linked.

Empowerment, Passion

Execution(Production SystemBecomes Culture)

Expand training.

Fatal Leap

Sample Implementation MapSample Implementation Map

Start with training for a small group (2 months). Start with training for a small group (2 months). Assign full time resources.Assign full time resources.

Create a need for Lean, sell idea to top Create a need for Lean, sell idea to top management (1 month).management (1 month).

Continue training, larger group (4 months).Continue training, larger group (4 months). Assessment of plants (2 months).Assessment of plants (2 months). Value Stream mapping (2 months).Value Stream mapping (2 months).

Split tasks in two month periods, easier to sell.Split tasks in two month periods, easier to sell.

Implementing LeanImplementing Lean Corporate inertia is required. An Corporate inertia is required. An inspiredinspired leader at leader at

the top is required who takes responsibilities for the top is required who takes responsibilities for change, usually the COO.change, usually the COO.

No cookie cutter approach; needs to take into No cookie cutter approach; needs to take into account current culture, resources, etc.account current culture, resources, etc.

Change agent has to fully understand Lean Thinking. Change agent has to fully understand Lean Thinking. By participating hands on to a point to teach others.By participating hands on to a point to teach others.

You can achieve WIP and other cost reductions in 6 You can achieve WIP and other cost reductions in 6 months to a year, but 5 years to sustain leanliness.months to a year, but 5 years to sustain leanliness.

Look upstream and downstream. Include entire Look upstream and downstream. Include entire organization (at some point in time).organization (at some point in time).

Mapping processes raises awareness about current Mapping processes raises awareness about current states and spark new ideas to improve.states and spark new ideas to improve.

Implementing LeanImplementing Lean Top management must agree simple goals to Top management must agree simple goals to

migrate to lean. Designate resources and numerical migrate to lean. Designate resources and numerical goals with time frames.goals with time frames.

Teams must have authority and resources to exist.Teams must have authority and resources to exist. Careful with taking too much. Despite the Careful with taking too much. Despite the

enthusiasm. Bring projects parallel with resources (3 enthusiasm. Bring projects parallel with resources (3 – 4 tasks / year).– 4 tasks / year).

Operating managers need continual education and Operating managers need continual education and assessment to assure no backsliding.assessment to assure no backsliding.

Show lean is to protect jobs. One slip to honor Show lean is to protect jobs. One slip to honor commitment will take years to overcome.commitment will take years to overcome.

Implementing LeanImplementing Lean Remove the anchor draggers early. Small group of Remove the anchor draggers early. Small group of

managers usually less than 10% who simply can managers usually less than 10% who simply can not accept new ideas or cooperate.not accept new ideas or cooperate.

A plan for lean is like a forecast for future path. So A plan for lean is like a forecast for future path. So the process needs frequent modification.the process needs frequent modification.

Create Lean accounting system (ABM is of great Create Lean accounting system (ABM is of great help) or value stream product based costing. help) or value stream product based costing.

Start with CFO involve him or her and ask what Start with CFO involve him or her and ask what kind of management accounting system can cause kind of management accounting system can cause our performance team leaders to always do the our performance team leaders to always do the right lean thing. You still need financial accounting right lean thing. You still need financial accounting for GAAP requirements.for GAAP requirements.

Evidence of Progress toward LeanEvidence of Progress toward Lean

Smaller lot sizesSmaller lot sizes Increased capacity / throughputIncreased capacity / throughput Higher inventory turnsHigher inventory turns More available floor spaceMore available floor space Improved workplace organizationImproved workplace organization Improved quality : reduced scrap / re-workImproved quality : reduced scrap / re-work Reduced inventories : raw, WIP, FGReduced inventories : raw, WIP, FG Reduced lead timesReduced lead times Greater gross marginGreater gross margin Improved participation & moraleImproved participation & morale

Q & AQ & A

Good Lean resources to expand your Good Lean resources to expand your knowledge…knowledge… Lean ThinkingLean Thinking The Toyota WayThe Toyota Way The Machine that changed the worldThe Machine that changed the world The Toyota Productive SystemThe Toyota Productive System