Cost Reduction in Manufacturing

1. Cost Reduction in Manufacturing Visual Control and Lean Management

2. Cost Reduction Preventative Approaches (Anticipating problems)

3. Cost Reduction Waste Reduction: 5S Visuals help identify normal from abnormal (Mann, 2005) “An organized, orderly, and clean workplace is a safer place to work…Better organization can help you position items to reduce strain from reaching, bending or lifting, and also help you use and store dangerous chemicals safely…Cleaning and inspection will reduce unplanned downtime by enabling you to spot equipment problems before they turn into breakdowns” (PPDT:”The 5S System”, 1997, p. 7).

4. Cost Reduction Organized Work (5S – designing orderliness for flow)

5. Cost Reduction Organized Work (Zones/Labels)

6. Cost Reduction Organized Work (Zones/Labels)

7. Cost Reduction Communicate Process Status (normal/abnormal)

8. Cost Reduction Waste Reduction: Single Minute Exchange of Dies (SMED) A waste-eliminating tool that attempts to reduce setup or changeover times (Hirano & Black, 1989). Changeovers often take place in less than ten minutes (Kalpakjian & Schmid, 2001; Mather, 1988). Mather (1988) explains that in One Touch Exchange of Dies (OTED), changeovers take place in less than one hundred seconds. No Touch Exchange of Dies (NTED) is an ideal condition, but may not be possible. Flexible, programmable machines are seen as an effective method to achieve instant changeover.

9. Cost Reduction Setup Reduction (quick changeover – molds near machines)

10. What is NOT Lean Meetings for troubleshooting problems – Retrospective focus ? discussing old data Managers make decisions to fix problems to meet schedule (schedule = result, making decisions = process) Protecting a culture of old habits: ‘We do that this way because we have always done it that way’ Making improvements to a system (e.g. 5S, SW) and believing you have achieved lean, so you are done – things go wrong in lean systems too (Mann, 2005)

11. Lean Management Do not target ‘Culture’ for change ? target management (culture is a result of management system) You’re 20% complete with new layouts, establishing flow, pull signals, pacing production, standardized work (LHF) - Physical The other 80% comes from a process focus strategy where results take care of themselves – Management support Process Focus = Change becomes habitual (Mann, 2005)

12. Lean Management “As you make improvements to the process, you should expect improved results” (Mann, 2005, p. 9) Anticipate problems before they occur (normal/abnormal) e.g. People = Variation e.g. Automation = Maintenance e.g. System without discipline = Chaos Production leaders train and/or monitor/improve processes Diagnose and eliminate/design out root causes of problems (use standardized work) (Mann, 2005)

13. Lean Management Law of entropy – “…organized systems tend to move toward states of increasing disorganization” (Mann, 2005, p. 21) Checklists, production tracking charts, posting standard work 1. Have to be in place 2. Have to be monitored/ensured they are used as designed

14. Standards (Baseline for CI) Continuous improvement ? Relies on measuring against standards Standards ? Baseline for improvement No standards ? No way to determine if you have improved! “…continually improving the standards is the path to reliable methods – the effective and efficient sequence of operations that is a key component of standard work” (PPDT: “Standard work”, 2002, p. 4-5) Standards are ever changing (if changes in process yield better results, then standards change for the purpose of improving the process) So you can’t really have CI if you don’t have standards!

15. Standards (Characteristics) “Standards must be specific and scientific” (based on facts, not guesswork) “Standards must be adhered to” (Rule/example - consistently followed) “Standards must be documented and communicated so that people will know what they are and can follow them” (provide clear expectations) (PPDT: “Standard work”, 2002, p. 2)

16. Waste Reduction: Standardized Work (easy/safe) Dennis (2002) describes standardized work as “the safest, easiest, and most effective way of doing the job that we currently know” (p. 47). Place people where their skills/abilities/interests are and understand safety should be considered in every operation

17. Cost Reduction Standardized Work (Simple instructions)

18. Standardized Work (applies everywhere) “Standardization identifies standards for every operation and supports adherence to those standards until the next phase of improvement activity occurs” (PPDT: “Pull production”, 2002). Spread best practices (practices that work good to other areas) -Recognize shift to shift differences (& ask why) Leader standard work = first line of defense for focus on process (Mann, 2005) Improve process ? Then standardize

19. Standardized Work (Consistency/Predictability) “Standardization is the practice of setting, communicating, following, and improving standards. Manufacturing processes depend on standardization. It promotes consistency through uniform criteria and practices” (PPDT: “Standard work”, 2002, p. 3) Harry and Schroeder (2000) explain that best practices should be standardized, and that standardizing methods used to correct problems will prevent problems from reoccurring. This will also allow methods to be transferred to other functions of the organizations. Mather (1988) explains that standardizing products and processes can help with forecasting (leads to predictability). Simple instructions, color-coding, procedures, metrics

20. Cost Reduction Standardized Work (Simple visual instructions)

21. Cost Reduction Standardized Work (Simple visual instructions)

22. Standardized Work (Flow!!) Hirano & Black (1988) explain that standardizing work can maintain good flow. Mann (2005) explains that lean management is focuses on the process - standardized work and visual controls make it easy to see normal from abnormal Good companies have a plan to fix flow when it breaks down. Great companies have a plan to fix flow before it breaks down. Reactive companies rely on managers to fix flow when problems occur

23. Moving Product Batch- Make many, move many (typical of a push system) Continuous/one piece flow – make one move one, sequential FIFO Lanes- First In First Out, inventory buffer where continuous flow cannot be achieved Supermarket- Pull system, supply buffer where continuous flow cannot be achieved (may incorporate FIFO) KEY: To reduce waste, implement flow Cost Reduction

24. Moving Product (Push vs Pull Systems) PUSH Traditional practice Forecast Scheduling Production batched & stored Inventory - used when needed Controlled by work orders & schedules

25. Cost Reduction Waste Reduction: Kanban Authorize work or work amount - Kanban cards can control components, kits, equipment, products Kanban can identify bottlenecks and other problems in the production system (O’Grady, 1988). Kanban is simply a demand signal from the customer to authorize the beginning of work. Kanbans control work-in-process, help to regulate product lead times, and facilitates immediate feedback on abnormalities (Feld, 2000). The Kanban system ultimately creates flow production and eliminates inventory and overproduction and exposes waste (PPDT:”Kanban”, 2002).

26. Cost Reduction Waste Reduction: Kanban Kanban is another tool that is used to control the amount of waste produced by a system (Hernandez, 1989; Hirano & Black, 1988; Kalpakjian & Schmid, 2001; O’Grady, 1988). Systems can operate with two cards, production card and conveyance card (or other signals). Cards authorize production or movement of parts. Some systems use one card where others do not require any cards. Without authorization, no work is necessary. Cards are passed from the END of production system and PULL the work from previous stations. Goal is actually to eliminate need for cards – to make production intuitive

27. Cost Reduction Kanban Cards (authorize work ? no card = no work)

28. Cost Reduction Kanban Cards (authorize/control current work)

29. Cost Reduction Kanban Cards (authorize material movement)

30. Cost Reduction Supermarkets (Supplier buffers for flow – Kanban reorder points)

31. Cost Reduction FIFO Lanes First In First Out production Visual indication of status FIFO Lanes (with standardized work – remedy for abnormal) Kanban cards to authorize work may be used in conjunction with FIFO lanes Supermarkets may utilize FIFO Lanes

32. Cost Reduction FIFO Lanes (first in first out – control order of repair)

33. Cost Reduction FIFO Lanes (visual indication of need)

34. Lean Production Takt = Customer demand rate – basis for the rate of production (heartbeat of production) Pitch = Interval of time to pace production, multiple of takt - Provides opportunity to recover from abnormal/unstable condition Demand/Sales = 200 products/week Total Production Time Available = 2000 min/week Takt time = 2000 min/200 p = 10 min/p (have to make product every 10 minutes to meet customer demand) Hourly Pitch = 60 min/takt 10 min/p = 6 (we supplying enough work to system to make 6 products every hour)

35. Cost Reduction Lean Production (Pitch Boards/Heijunka Boxes) Pitch – Controls amount of work per unit time/takt (Scheduling/regulating work) Boards/Charts/Boxes - Used to schedule – May use tags, markers, whiteboards Likely color-coded ? Green = Normal, Red = Abnormal

36. Cost Reduction Pitch or Interval (work per unit time/takt – using FIFO & Pull)

37. Cost Reduction Waste Reduction: Value-Stream Mapping (VSM) A graphic tool that illustrates the current state or condition to reveal improvement opportunities, or to apply Kaizen activities (Dennis, 2002). Value-Stream Maps visually document information and material flow (or people/processes). Used to develop a future state map, or ideal condition that represents improvement goals. Maps reveal targets for Kaizen activities to implement process improvements and reduce waste.

38. Cost Reduction Value Stream Maps Posted where people work - People learn/know their role in a system Visual - everyone sees flow of material, people, or processes CS/FS posted to illustrate long/short term goals and associated plans Mapping Value Streams helps with alignment

39. Cost Reduction Lean Change Process: CS to FS After values/strategic goals are determined: 1. Develop current state map – people see where they are in the flow (current situation) 2. Develop a future state map – people see where the company wants to go (ideal situation) 3. Develop a plan – time phased plan/path to get to future state (implement after agreement). Determine how you will measure your level of attaining the future state (goals, metrics)

40. Cost Reduction Lean Change Process: CS to FS Plan Developing the Implementation Plan Involves: 1. Defining Goals/Objectives – What is the purpose of your plan? 2. Determining Tasks – Activities that will meet a particular goal. In detail, what will you do to accomplish the goal? 3. Determining Timeline - Start/finish times for each objective. When do you expect to meet the goal or objective? 4. Determining Responsibilities – Making assignments. Who is responsible for meeting each goal/objective? 5. Audit – Rating or measurement on completeness. How close are we to meeting the objective?

41. Cost Reduction Sustaining Lean Change Through Education/Training (everyone learns foundation, what/why/how) Through Communication (everyone sees results/metrics, everyone sees costs) Through Vision (everyone knows objectives, goals, plans)(instill leadership, commitment, pride)(to stay in business)

42. Cost Reduction References Degarmo, E. P., Black, J. T. & Kohser, R. A. (2003). Materials and processes in manufacturing. Hoboken, NJ: Wiley. Feld, W. M. (2000). Lean manufacturing: Tools, techniques, and how to use them. New York: St. Lucie. Hernandez, A. (1993). Just-in-Time quality: A practical approach. Englewood Cliffs, New Jersey: Prentice Hall. Hernandez, A. (1989). Just-in-Time manufacturing: A practical approach. Englewood Cliffs, New Jersey: Prentice Hall. Hirano, H. & Black, J. T. (1988). JIT factory revolution: A pictorial guide to factory design of the future. Cambridge, Massachusetts: Productivity Press. Kalpakjian, S. & Schmid, S. R. (2001). Manufacturing engineering & technology. Upper Saddle River, New Jersey: Prentice Hall. Majima, I. (1992). The shift to JIT: How people make the difference. Cambridge, Massachusetts: Productivity Press. Mann, D. (2005). Creating a lean culture: Tools to sustain lean conversions. New York: Productivity Press. Mather, H. (1988). Competitive manufacturing. Englewood Cliffs, New Jersey: Prentice Hall. O’Grady, P. J. (1988). Putting the Just-In-Time philosophy into practice. New York: Nichols Publishing. Parks, C. M. (August 2003). The bare necessities of lean. Industrial Engineer. Productivity Press Development Team. (1997). The 5S system: Workplace organization and standardization. Portland, Oregon: Productivity. Productivity Press Development Team. (2002). Pull production for the shopfloor. (2002). New York: Productivity Press. Productivity Press Development Team. (2002). Kanban. (2002). New York: Productivity Press. Productivity Press Development Team. (2003). Identifying waste on the shopfloor. (2003). New York: Productivity Press. Schroeder, R. G. (2008). Operations management: Contemporary concepts and cases. New York: McGraw-Hill Irwin. Swanson, C. A. & Lankford, W. M. (1998). Just-in-Time manufacturing. Business Process Management Journal, 4, 333.