1

What are Lean Systems?

Lean Systems are processes where value added is maximized at each operation by minimizing resources, and eliminating waste and inefficiencies.
Categories of Waste:
Overproduction: Manufacturing an item before it is needed. Inappropriate Processing: Using a diamond cutter to cut paper. Idleness: Delays, waiting, line imbalances, inefficiency Excessive or unnecessary material movement and handling. Motion: Unnecessary effort/movement by workers. Inventory: Excessive, unnecessary inventory increases costs. Defects: Rework and scrap add costs (lost capacity, increased inspections, rescheduling efforts, loss of customer good will. 2 Improper Utilization or Underutilization of Employees

2012 Lew Hofmann

Toyotas Lean Systems

3 2012 Lew Hofmann

Toyotas Production System

Toyotas Production System is one of the most admired lean manufacturing systems in existence.
They have a culture of TQM and continuous improvement.
Employees are encouraged to experiment to find better ways to do their jobs.

Work is completely specified as to content, sequence, timing, and outcome. Services and goods do not flow to the next available person or machine, but to a specific person or machine. (Volkswagen also does this.) Employees who are actually doing the work are actively involved in making improvements.
4 2012 Lew Hofmann

Characteristics of Lean Systems

Minimizes costs and waste Minimizes Inventory Uses the Pull Method of production rather than the traditional push method. Small lot sizes and Short set-up times TQM principles of high quality and continuous improvement. Line Balancing Standardization of work methods and parts Flexible work force Automation Small capacity cushions Close ties and good supplier relationships 5
2012 Lew Hofmann

Are There Different Types?

Yes, but basically they all strive to achieve the same principles. Different Companies use different names.
Stockless Production (HP) Material as Needed (Harley Davidson) Continuous Flow Manufacturing (IBM) Zero Inventory Just-In-Time production (Generic Lean System)
6 2012 Lew Hofmann

PUSH SYSTEMS
The Traditional, but Inefficient production method Raw materials and parts are planned, scheduled and acquired prior to production.
Example: A buffet where food is prepared in advance.

Materials and parts are pushed into the production operation before it starts.
All materials needed for a production run are gathered.

This creates excessive and unnecessary inventory (raw materials and work-in-process)
Thus it increases inventory costs.
7 2012 Lew Hofmann

PULL SYSTEMS
The Preferred Way To Produce

Lean systems are pull systems. Parts and materials are requested and delivered as they are needed.
Example: A restaurant where food is only prepared when orders are placed.

Materials & parts are pulled into the production operation as needed.
They arrive Just In Time to be used in the production process, as illustrated in the Ford plant video. 8
2012 Lew Hofmann

JUST-IN-TIME SYSTEMS
This is the generic term for Lean Systems. Utilizes the Pull systems of production Attempts to minimize inventory Highly dependent on supply chain efficiency. Suppliers must deliver what you need, when you need it.
9 2012 Lew Hofmann

JUST-IN-TIME SYSTEMS
Theory: Just enough of the materials needed for an operation arrive when and where they are needed, just in time to be used. (Pull System) Result: Reduced inventory; especially work-inprocess inventory
EG: Video on the Volkswagen Factory in Dresden.

Goal: To smooth/lean the production process to the point where only minimal inventory is required.
10 2012 Lew Hofmann

A SUPPLY CHAIN EXAMPLE

In the past, businesses dealt with stocking grocery store shelves or restaurants by maintaining a large inventory of all goods to guarantee a supply shortage would not occur.
They stored these products in either warehouses, stores, freezers, or on storeroom shelves.

However, this strategy has become too costly due to stronger competition that demands shorter product life cycles. Thus today, service-driven systems, which are pulled by customer demand, are making inventorydriven (push) systems obsolete.
2012 Lew Hofmann

JIT EXAMPLES
Building A House?
Just-in-Time inventory would not work. It is not a line flow.

Ford Plant in Brazil

Major suppliers produce and assemble the components in the Ford plant as they are needed. There is not an inventory of exhaust systems or suspension systems waiting to be used.

Production lines (or service flows) strive to minimize the inventory of parts and materials.
2012 Lew Hofmann

12

Reducing Inventory
Inventory is expensive (Carrying costs)
So reducing it saves money

Inventory hides problems that create inefficiency and increase costs.

Capacity problems, late vendor deliveries, imbalanced lines, equipment problems

Reducing inventory makes problems visible so they can be corrected.

13 2012 Lew Hofmann

SMALL LOT SIZES

Lots or Lot Size refers to how many items are being made in any given production run.
Lines are set up for the production of a given lot size.

Theoretically, only one item at a time can be worked on at any given work station. A lot size greater than what can be immediately worked on creates inventory.
Lot sizes greater than what can be worked on results in excess inventory sitting around waiting to be worked on.
14 2012 Lew Hofmann

SMALL LOT SIZES

The theoretical-ideal lot size is one.
But, no firm can have a lot size of one and zero inventory. You will always have some inventory being worked on. (Work-In-Process Inventory) The ideal lot size is generally more than one. The Cost of inefficiency in making just one item overtakes the cost savings from having low inventory.
15 2012 Lew Hofmann

SET-UPS
Set-Up Costs are the costs of changing a production line from making one type of product to making a different product.
Changing machine programming, dies, and generally getting the production line reconfigured.

Set-Up Time refers to the time it takes to change the line for the next production run.
Reducing the set-up time saves money by reducing the time the line is idle.
2012 Lew Hofmann 16

Reducing Set-Up Time and Cost

J.I.T. requires low set-up costs and times. Short Set-up Times
Small lot sizes require more frequent set-ups
If you have to do 20 set-ups a day, you must be able to do them quickly and cheaply to reduce the idleness.

The Japanese goal for set-up time is called SingleDigit Set-up. (Set-up times of less than 10 minutes.) The longer the set-up time, the fewer setups you want, and the more inventory you need for each. 17
2012 Lew Hofmann

RELIABLE VENDORS & RELIABLE EQUIPMENT

Vendors must be located close to the plant in order to have a lean system.
Enables frequent deliveries of small quantities. Inventories of a few hours are not unusual.

Reliable production equipment is needed.

Equipment failure halts production. Lean systems dont provide extra inventory, so there is no buffer for operating work stations.
18 2012 Lew Hofmann

Steady Demand and Worker Empowerment

Steady & Predictable Demand is necessary.
J.I.T. and small lot sizes require stable production schedules. If demand is uncertain or variable, it usually requires higher capacity cushions (inventory) and defeats the purpose of J.I.T.

Expanded worker and supervisor involvement

Responsibility for the coordination and scheduling of material flows shifts downward to workers and supervisors. Small inventory buffers dont allow time for staff and upper management to get involved. Material or parts shortages on the line have a highly detrimental impact on production. Worker empowerment is needed for fast, on the spot, decision 19 making.
2012 Lew Hofmann

TQM is Necessary
TQM promotes consistently high quality and continuous improvement efforts.
Product defects can stop a production line or process that uses a Lean Systems approach. Workers are the quality control inspectors.
Thus quality is controlled at the source (TQM) by the people on the line. This minimizes scrap and rework, thus reducing workin-process inventory and increasing output rate.
20 2012 Lew Hofmann

Close, Reliable Suppliers and Good Supplier Relationships

Small lot sizes require frequent, reliable deliveries by local suppliers.
Honda has as many as 50 deliveries a day.

If suppliers are not reliable, you cannot have JIT.

Close suppliers and frequent deliveries reduce the need for safety stock and thus lower inventory costs.

Firms converting to leans systems generally make a drastic reduction in the number of suppliers.
A Cooperative Approach with suppliers is essential to ensure reliable, on-time deliveries and consistent quality.
21 2012 Lew Hofmann

Line Balancing and Capacity planning

Line Balancing and Capacity Planning at work stations are critical.
Imbalanced lines create excess work-in-process inventory, longer cycle times (production times), and balance delays (idleness). Lines must be balanced (equal capacities at each work station).

Bottlenecks must be eliminated.

22 2012 Lew Hofmann

Automation & Reliability

Automation of line flows is a key component of lean systems for both services and products. Flexible Flows rarely can have lean systems.
They have lower utilization and jumbled work flows.

Automation is important in order to

lower the cost-per-unit for production. enable line balancing. facilitate higher levels of output.

Preventative maintenance is essential.

Equipment breakdowns stop the line because, in a pull system, work stations are no longer buffered by 23 work-in-process inventory.

2012 Lew Hofmann

Continuous Improvement
One of the philosophies behind Lean Systems is to uncover problems, learn from them, & solve them.
It is a continual process

No production operation has lot sizes of one and/or zero set-up times.
These are goals to continually strive for, but are impossible to economically achieve. The result, however, is a focus on continual improvement.
24 2012 Lew Hofmann

Lean Systems at New Balance (NB) Athletic Shoe Company

The Lawrence, Kansas plant makes footwear styles exclusive to the North American market. Most new designs are first made at Lawrence and then transferred out to other NB American plants, all of which follow the same production methods. NB moved away from the shoe industrys traditional batch and queue method (push system) towards a pull system with small-lot sizes Empowerment: Operators never pass on a defective unit, and they always check the prior operators work as well as their own. (TQM) When deciding how many shoes of each style to schedule, NB thinks of sales orders rather than production orders. Instead of pushing shoes to the market, NB uses more of a pull strategy. Production schedules are driven by market demand. NBs work flow is uniform, and it fosters teamwork and a culture of continuous improvement.
25 2012 Lew Hofmann

KANBAN
Kanban is the Japanese word used in connection with just-in-time' manufacturing. A kanban is a signboard or placard used as a signal for more material.

A J.I.T. system used by Toyota

A Two-Card, Visually-Coordinated J.I.T. system.

Withdrawal cards (Kanbans) are used by the final assembly workers

Specifies how much material & parts are needed to produce the current lot.

Production-Order cards are used to supply parts & material to the assembly workers.
26 2012 Lew Hofmann

KANBAN EXAMPLE
Bicycle Assembly Area
W.C.

Receiver Post
P.O.

Production order Post

P.O.

Bicycle Fabrication Area

P.O.

Supply/Storage Area
2012 Lew Hofmann

27

1. An assembly worker gets a Withdrawal Kanban from the receiver post that tells how many of each item to withdraw from Supply/Storage.

Bicycle Assembly Area

W.C.

Receiver Post

Production order Post

Bicycle Fabrication Area Supply/Storage Area

2012 Lew Hofmann

28

2. The assembly worker goes to the supply point and gets a cart with all the items specified on the withdrawal card.

Bicycle Assembly Area

Receiver Post

Production order Post

P.O. W.C.

Bicycle Fabrication Area Supply/Storage Area

2012 Lew Hofmann

29

3. There is a Production Order card on the cart that the assembly worker removes and places on the receiver post where someone from fabrication will get it.

Bicycle Assembly Area

Receiver Post

Production order Post

P.O. W.C.

Bicycle Fabrication Area Supply/Storage Area

2012 Lew Hofmann

30

4. The assembly worker places the withdrawal kanban on the full cart and takes it back to the assembly area to assemble.

Bicycle Assembly Area

W.C.

Receiver Post

Production order Post

P.O.

Bicycle Fabrication Area Supply/Storage Area

2012 Lew Hofmann

31

5. Someone periodically removes the production order kanbans from the receiver post, reviews and sorts them for priority, and places them on the production-order post.

Bicycle Assembly Area

Receiver Post
P.O.

Production order Post

P.O.

Bicycle Fabrication Area Supply/Storage Area

2012 Lew Hofmann

32

6. A fabrication worker comes to the Production-Order Post and gets a production-order kanban and an empty cart.

Bicycle Assembly Area

Receiver Post

Production order Post

P.O.

Bicycle Fabrication Area Supply/Storage Area

2012 Lew Hofmann

33

7. Fabrication produces the items specified on the Production-Order Kanban delivers them to the supply/storage area.

Bicycle Assembly Area

Receiver Post

Production order Post

Bicycle Fabrication Area

P.O.

Supply/Storage Area
2012 Lew Hofmann

34

KANBAN SEQUENCE
Bicycle Assembly Area
W.C.

Receiver Post
P.O.

Production order Post

W.C.

P.O.

W.C.

P.O. P.O.

Bicycle Fabrication Area

Supply/Storage Area
2012 Lew Hofmann

35

KANBAN USE
The Kanban system works well in repetitive production environments (Line flows/product focused)
If you are able to achieve small lot sizes and short set-up times, and If your suppliers are close by and can make frequent deliveries using a just-intime system.
36 2012 Lew Hofmann

J I T II
Improves on the JIT concept of having close suppliers.
Supplier reps become full-time, on-site representatives in your production facility Your supplier is in-house at their expense.
Suppliers rep issues purchase orders for you as needed.

Streamlines the purchasing process

Ford took this one step further by having some of their supplier production lines in the Ford plant.
37 2012 Lew Hofmann

Organizational Considerations
The human costs:
Lean-system implementation requires a high degree of regimentation, and sometimes it can stress the workforce.

Increased Employee Cooperation, Trust and Responsibility (Worker empowerment)

Workers and first-line supervisors must take on responsibilities formerly assigned to middle managers and support staff, and thus need training.

Reward systems and labor classifications must often be revamped when a lean system is implemented.
Process layouts may need to be changed.
38 2012 Lew Hofmann

Inventory & Scheduling

Production Schedule Stability: Production schedules must be stable for high-volume, maketo-stock environments. Thus stable supply and demand is important. Set-ups: If the inventory advantages of a lean system are to be realized, small lot sizes must be used, and short set-up times are essential. Purchasing and Logistics: If frequent, small shipments of purchased items cannot be provided by suppliers, then inventory costs go up as more inventory is needed and is sitting idle.
2012 Lew Hofmann

39

SUMMARY
In order to have a lean system you need:
A cooperative relationship with close suppliers who make frequent small deliveries A pull system of production that emphasizes automation, standardization, TQM, balanced lines, small lot sizes and short set-up times. Steady and predictable demand. Job enrichment and empowerment for line workers. A culture of learning and continual improvement
40 2012 Lew Hofmann