Lean Enterprise The "Lean Enterprise" concept represents a new paradigm in the way businesses are managed in highly competitive market environments. This concept embodies a collective set of principles, tools and application methodologies that enable companies to remove waste from the system and achieve dramatic competitive advantages in speed to market, cost, quality, and delivery performance. • © 2001 V2R Consulting Group

Lean Enterprise • Uses time and the “relentless pursuit of waste elimination” as competitive leverages • Seeks to make value flow from raw material through consumption – Using least amount of resources (time, people, materials, etc.) • Creates a culture of never-ending improvement at all organization levels • © 2001 V2R Consulting Group

Toyota Management System S e n io r M a n a g e m e n t * B u s in e s s O b j e c t iv e s * C u lt iv a t e a s u p p o r t iv e , f a c ilit a t iv e m a n a g e m e n t s t y le * M o d e l p r o c e s s m a n a g e m e n t a p p r o a c h t o a c h ie v e n e e d e d r e s u lt s . ( S e t a n e x a m p le f o r o t h e r s t o f o llo w ) * R e c o g n iz e e a c h le v e l’s r o le a n d t h e n r e in f o r c e in p r a c t ic e .

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The Goal

Dr. C. W. Richards 1/12/99

To paraphrase Tom Peters’ “Turn Manufacturing into a Marketing Weapon,” a chapter in Thriving on Chaos

Manufacturing as a Competitive Weapon

• Shorter throughput (order to delivery) • Lower costs • Higher quality • More flexibility Dr. C. W. Richards 1/12/99

The Strategy

Toyota Motor Company, Toyota Production System, p. 2 Dr. C. W. Richards 1/12/99

The Plan

Dr. C. W. Richards 1/12/99

Cost reduction is the goal

“Cost “CostReduction ReductionIsIsthe theGoal” Goal” There are two ways to increase efficiency: 1) increase production quantity or 2) reduce the number of workers—Taiichi Ohno. In the short term, you may need to

Over time, lower costs, higher quality, and faster development & production times will increase sales. Dr. C. W. Richards 1/12/99

•Reduce people at all levels in the organization

Manufacturing as a Competitive Weapon

A Lean Paradox (Just One of Many) Reducing Reducingcosts costsmeans meansreducing reducingpeople, people,but butififyou youeliminate eliminatepeople people as asaaresult resultof ofimprovement, improvement,you youwill willget getno nomore moreimprovement. improvement. The Toyota Production System clearly reveals excess manpower… Management’s responsibility is to identify excess manpower and utilize it effectively. •Resolve how to maintain mutual trust while reducing people

Hiring people when business is good and production high just to lay them off is a bad practice. On the other hand, eliminating wasteful and meaningless jobs enhances the value of work for workers. Taiichi Ohno.

Dr. C. W. Richards 1/12/99

Implementing the TPS

Al llac tiv itiiteisesmus ttsuppor tt the llofof“shorten ing tt Al ac tiv mus suppor thegoa goa “shorten ingthe thetime timeitittakes takesto toconver conver cus tomer orders in to del i ver ie s . ” Toyo ta Motor Corpora t ion , 1992 customer orders into deliveries.” Toyota Motor Corporation, 1992

Develop A Lean Strategy •Create a sense of urgency •Throughout the enterprise, sell lean/TPS as the solution •Hire a sensei & retain design talent •Establish targets •Resolve how to maintain mutual trust while reducing people •Give preliminary thought to supplier issues •Consider the competitive environment

Design The Manufacturing System •Identify the customer base and product range •Identify takt time & its range ••Apply Apply axiomatic design to create the basic factory system •Eliminate nonessential infrastructure and layers above the factory floor

Establish Flow Within Cells

Establish Pull Between Cells

Strive For Perfection

•Form •Form cells cells based based on on takt takt time time

•Design an information system to produce only the products required by the downstream cells

•Institute kaizen & institutionalize 5Ss throughout organization

•Define •Define standard standard work content work content for for each each operation operation to to be < takt time be < takt time •Separate •Separate worker worker from machine from machine (jidoka) (jidoka)

•Incorporate takt time to drive flows

•Develop •Develop quick quick setups & standard setups & standard WIP WIP (SMED) (SMED)

•Institute leveled production (heijunka)

•Standardize •Standardize operations operations

•Use visual control systems •Implement total productive maintenance

•Transfer ownership of all processes to work force •Push lean down to suppliers •Integrate product development •Reduce people at all levels in the organization

Manufacturing as a Competitive Weapon Dr. C. W. Richards 1/12/99

LEAN PRINCIPLES • VALUE • VALUE STREAM • FLOW • PULL • PERFECTION “LEAN THINKING” by JAMES P. WOMACK and DANIEL T. JONES

LEAN PRINCIPLES VALUE VALUE IS DEFINED BY THE CUSTOMER AND EXPRESSED IN TERMS OF A SPECIFIC PRODUCT WHICH MEETS THE CUSTOMER’S NEEDS AT A SPECIFIC PRICE AT A SPECIFIC TIME.

LEAN PRINCIPLES VALUE STREAM THE VALUE STREAM IS THE SET OF ALL THE SPECIFIC ACTIONS REQUIRED TO BRING A SPECIFIC PRODUCT THROUGH THE THREE CRITICAL MANAGEMENT TASKS OF ANY BUSINESS: PROBLEMSOLVING (RUNNING FROM CONCEPT TO PRODUCTION LAUNCH), INFORMATION MANAGEMENT (FROM ORDER-TAKING TO DELIVERY), AND PHYSICAL TRANSFORMATION (FROM RAW MATERIALS TO FINISHED PRODUCTS IN THE HANDS OF THE CUSTOMER).

VALUE STREAM ANALYSIS IDENTIFY THREE TYPES OF ACTIONS: 1. THOSE THAT CREATE VALUE 2. THOSE THAT CREATE NO VALUE BUT ARE UNAVOIDABLE GIVEN CURRENT TECHNOLOGY 3. THOSE THAT CREATE NO VALUE AND ARE IMMEDIATELY AVOIDABLE

LEAN PRINCIPLES FLOW MAKE THE VALUE CREATING STEPS MOVE CONTINUOUSLY.

LEAN PRINCIPLES PULL LET THE CUSTOMER PULL THE PRODUCT AS NEEDED.

LEAN PRINCIPLES PERFECTION CONTINUOUSLY SEEK TO IMPROVE VALUE, MAKE FLOW MORE CONTINUOUS, AND THE ABILITY OF THE CUSTOMER TO PULL FASTER.

LEAN PRINICPLES KEY ACTIONS 1. TIME BASED COMPETITION 2. MUDA (WASTE) ELIMINATION

MUDA - OHNO’S SEVEN WASTES PLUS 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

OVERPRODUCTION WAITING TRANSPORTING INAPPROPRIATE PROCESSING UNNECESSARY INVENTORY UNNECESSARY MOTIONS DEFECTS UNTAPPED HUMAN POTENTIAL INAPPROPRIATE SYSTEMS ENERGY AND WATER POLLUTION

ORGANIZATIONAL STRATEGIES 1. AGILITY 2. VIRTUAL MANUFACTURING

DESIGN STRATEGIES 1. MASS CUSTOMIZATION 2. DESIGN FOR PRODUCTION (DFP) AND DESIGN FOR ASSEMBLY (DFA) 3. QUALITY FUNCTION DEPLOYMENT (QFD) 4. TRIZ (CREATIVE PROBLEM SOLVING) 5. ROBUST DESIGN

IMPROVEMENT 1. 5S – SORT, STRAIGHTEN, SCRUB, STANDARDIZE, SELF-DISCIPLINE 2. KAIZEN 3. KAIKAKU (KAIZEN BLITZ) 4. ROOT CAUSE ANALYSIS 5. TIME CHARTING (PROCESS FLOW CHARTING)

PRODUCTION 1. 2. 3. 4. 5. 6.

KANBAN SET-UP REDUCTION MIXED MODEL PRODUCTION DEMAND SMOOTHING GROUP TECHNOLOGY BOTTLENECK REDUCTION (THEORY OF CONSTRAINTS)

QUALITY 1. SHORT RUN STATISTICAL QUALITY CONTROL 2. POKAYOKE (FAILSAFING) 3. ZERO DEFECTS 4. SIX SIGMA

A TPS Glossary • 5Ss—five Japanese words, all beginning with an “s” sound, which establish the cultural environment for continuous improvement • Cycle time—for a machine or cell, time from completion of one item to completion of the next. Cycle times must harmonize with takt time (which defines balanced production). Often confused with throughput time, which is the length of time a part is in the cell (also, “factory throughput time,” from the start of production to delivery). • Heijunka—(fm. Japanese*, “smoothing, making level”) production leveling. Involves producing in sequences like abacababac rather than aaaaabbbcc (where a, b, and c are models or products). Solves problems inherent in the TPS that can cause queuing and line stoppages. • Jidoka—(fm. Japanese, “automation with human characteristics”) separation of worker and machine. Implies that machines will stop if an error occurs. Alternative is “people watching machines work.” Allows manning of cell to vary with demand. Encourages teamwork and facilitates kaizen. Dr. C. W. Richards 1/12/99 *Many thanks to Lennart Kampman of the Copenhagen Business School for his translations and interpretations.

A TPS Glossary, II • Just-in-time—“In a flow process, the right parts needed in assembly reach the assembly line at the time they are needed and only in the amount needed.” (Ohno, p. 4). As Ohno explains, this does not imply that the parts must arrive exactly when needed. Instead, a pull (kanban) system is used. Toyota explains that the goal of JIT is “to translate each order into a delivery of a finished, quality vehicle as quickly and efficiently as possible.” • Kaizen—(fm. Japanese “kai,” change, modify, improve and “zen,” goodness, virtue - not the zen in Zen, which comes from the original Chinese, “Chan”) continuous improvement. Activities carried out by the members of a cell or other unit in order to improve production within that unit. May involve work process or machines. Ultimate goal is to shorten throughput times and increase the ratio of processing (“value added”) time to total time, leading to an eventual reduction in manpower. Other improvement efforts are kaikaku, or radical change, carried out under the direction of sensei. Dr. C. W. Richards 1/12/99

A TPS Glossary, III • Kanban—(fm. Japanese for “signboard”) Primary means for controlling production in the TPS. Kanban are usually cards that the downstream cells take to the upstream cells in order to withdraw (pull) parts. The upstream cell then uses the kanban as shop orders to replenish just the parts taken. • Lean production—producing with a shorter delivery span, at lower cost, with greater quality, and with more flexibility (variety on the line; quicker introduction of new models) • Sensei—teacher, commonly of the martial arts; used to denote an expert with a track record of implementing the TPS • SMED—single minute exchange of dies. Very rapid set-ups so that heijunka sequences can be produced economically

Dr. C. W. Richards 1/12/99

A TPS Glossary, IV • Takt time—(fm. the German for meter or measure, as in music) pace of customer demand. Time to produce one item sold, e.g., a car every 2 minutes or an aircraft every 8 days. Cycle times of all components of the factory must harmonize with takt time (axiomatic design ensures this), or shortages & build up of inventory will occur. • Toyota Production System (TPS)—only known example of a lean production system. Pillars of the TPS are just-in-time (pull) and jidoka. These rest on leveled (heijunka) & balanced production, and lead time reduction, which depends on reducing set-up times to under 10 minutes (ideally less than 1). The basic form evolved at Toyota from 1948 to 1973, largely under the guidance of Taiichi Ohno. Dr. C. W. Richards 1/12/99

A TPS Glossary, V • Total Productive Maintenance—ensuring that machines are 100% available during the production period. Generally requires operating machines at well under full utilization to allow time for maintenance & modification • Value added—a term used by Toyota only in connection with kaizen, where it is generally synonymous with “processing” (see Ohno, p. 57) • Visual control—management by sight. The TPS arranges the factory so that abnormalities stand out and so can (and will) be eliminated. More info? Most of these terms are well defined and illustrated in Lean Thinking, by James P. Womack and Daniel T. Jones (New York: Simon & Schuster, 1996) Dr. C. W. Richards 1/12/99