Chapter Seven Lean Thinking and Lean Systems

1. Chapter Seven Lean Thinking and Lean Systems Operations ManagementContemporary Concepts and Cases 5/e

2. Evolution of Lean Lean Tenets The Lean System Stabilizing the Master Schedule Controlling Flow with the Kanban System Reducing Setup Time and Lot Sizes Changing Layout and Maintaining Equipment Cross-Training, Rewarding, and Engaging Workers Guaranteeing Quality Changing Relationships with Suppliers Implementation of Lean Chapter Outline

3. Evolution of Lean • Toyota Production System (TPS) • Developed in the 1960s in Japan • Also known as Just-in-Time (JIT) manufacturing • First introduced into U.S.A. in 1981 at Kawasaki motorcycle plant in Lincoln, Nebraska • Lean Production • Term coined in late 1980s • Popularized in 1990s by Womack, Jones & Roos, “The Machine That Changed the World”

4. Lean Tenets • Specify exactly what creates value • Improve the value stream • Design the flow to avoid waste • Produce only what the customer pulls • Strive for perfection • 5 Whys • 5 S • Poka-yoke (mistake proofing)

5. Elements of Lean System • Level master schedule • Use of Kanban system • Small lot sizes (lot size one) • Quick changeover (set-ups) • Multifunction workers • Efficient layout (linear flow, low inventories) • Quality and continuous improvement • Close relationships with suppliers • Frequent deliveries from vendors

6. The Seven Wastes

7. Inventory as Waste • “If all our suppliers are guessing, you end up with inventory, which is the physical embodiment of bad information.” –Paul Bell, Dell, Inc. Europe. Source: Economist, 1 April 2000, p. 57.

8. Figure 7.2, Inventory Covers Problems Bad Design Water Level Poor Quality Lengthy Setups Machine Breakdown Inefficient Layout Unreliable Supplier

9. Water Level Lowered To Expose Problems Bad Design Poor Quality Lengthy Setups Water Level Machine Breakdown Inefficient Layout Unreliable Supplier

10. Water Flows Smoothly (Problems Pulverized) Water Level

11. The Lean System • Affects every aspect of plant operations • Lot sizing • Scheduling • Layout • Suppliers • Labor relations • Affects the rest of the firm • Engineering • Marketing • HR • Finance

12. Stabilizing the Master Schedule • Production horizon set according to demand • Production schedule repeated each day • Supply & demand matched through ‘takt’ time concept (speed of output) • Level production to create uniform load • Strive for production of lot size one • Produce the right quantity each day—no more and no less.

13. Kanban System • Kanban means “marker” • A “pull” production system • A physical (normally visual) control system • Normally composed of cards and containers (production card andwithdrawal card), but can be any type of signal • Number of containers:

14. The Kanban System • Signals the need for more parts • The Kanban system uses simple cards or signals to strictly control production • The basic idea is that no station is permitted to produce more than is immediately required by the succeeding station • This simple idea prevents the buildup of inventory • Reducing lead time is the key • No computer is required!

15. Figure 7.4: Kanban System

16. Figure 7.5: Kanban Cards

17. Examples of Kanban Signals Kanban cards Tags on a board Golf balls Lights Faxes/phone calls Yelling

18. Reducing Setup Times and Lot Sizes • Reducing setup times: • increases available capacity • increases flexibility • reduces inventory • Reduce setup times and run times simultaneously to reduce lot sizes and throughput times • Single-digit setup Times (Shigeo Shingo [d. 1990] or SMED System) • Small lots require short setups!

19. Figure 7.7: Initial Layout Before Lean Final Assembly Work Centers Stockrooms Supplier A Supplier B

20. Lean Layout Final Assembly Supplier A Supplier B

21. Lean Layout with Group Technology Final Assembly Line 1 Line 2 Supplier A Supplier B

22. Engaging Workers • Multifunction workers • Cross-training • New pay system to reflect skills variety • Teamwork • Suggestion systems • Need full worker understanding and cooperation

23. Guaranteeing Quality • Quality is essential in a lean system • Defects produce waste • No inventory to cover up mistakes • Defects discovered quickly by the next process • System designed to expose errors and get them corrected • Makes continuous improvement possible

24. Changing Relationships with Suppliers • Suppliers required to make radical changes • Viewed as the ‘external factory’ • Co-location • Fewer suppliers • Frequent deliveries to production line • No inspection—high quality • Integrated supplier programs

25. Features of Integrated Supplier Programs • Early supplier selection, preferably in the design phase • Family of part sourcing to allow supplier to take advantage of Group Technology • Long-term relationships with small number of suppliers • Paperwork reduction in receiving and inspection to reduce costs

26. Implementation of Lean Systems • Establish a cross-functional team • Determine what value the customer needs • Construct a value stream map and use it to eliminate waste • Flow or pull demand from the customer • Implement the changes • Repeat the cycle on another process

27. Evolution of Lean Lean Tenets The Lean System Stabilizing the Master Schedule Controlling Flow with the Kanban System Reducing Setup Time and Lot Sizes Changing Layout and Maintaining Equipment Cross-Training, Rewarding, and Engaging Workers Guaranteeing Quality Changing Relationships with Suppliers Implementation of Lean Summary

28. End of Chapter Seven