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OPERATIONS MANAGEMENT for MBAs Fourth Edition. Meredith and Shafer. John Wiley and Sons, Inc. Topic 8: Process Improvement / Lean Operations. Outline. Overview of Lean Traditional versus Lean 5 Lean Principles Benefits of Lean and 6 sigma Homework #3, #4. Lean Thinking .
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OPERATIONS MANAGEMENTfor MBAs Fourth Edition Meredith and Shafer John Wiley and Sons, Inc. Topic 8: Process Improvement / Lean Operations Chapter 5: Process Improvement: Reducing Waste Through Lean
Outline • Overview of Lean • Traditional versus Lean • 5 Lean Principles • Benefits of Lean and 6 sigma • Homework #3, #4
Lean Thinking • Five lean principles: • Specify value from the customer’s point of view. • Identify the value stream, the complete set of activities required to create the output valued by the customer. • Make value flow through the value stream by eliminating non-value added activities and streamlining the remaining value added steps. • Have the customer pull value through the value stream. • Pursue perfection.
Japan • Their work systems tend to be based on three primary tenets: • Minimizing waste in all forms. • Continually improving processes and systems. • Maintaining respect for all workers.
Traditional Systems versus Lean • Priorities • Product/Service Design • Capacity • Layout • Workforce • Inventories • Suppliers • Planning and control • Quality • Maintenance
1. Specify Value • At the heart of lean is the concept of value, ultimately defined by the customer. Also, the opposite of waste. • Waste is often classified into one of the following seven categories: • Overproduction • Inventory • Waiting • Unnecessary transport • Unnecessary processing • Unnecessary human motions • Defects
2. Identify the Value Stream • The value stream includes all activities (value added and non-value added) from the creation of the raw materials to the final delivery of the output to the end consumer. • Activities within a value stream map are often broadly categorized as: • Value-added (e.g., patient diagnosis) • Non-value-added but necessary (e.g., requiring patients to sign a HIPAA form) • Non-value-added and not necessary (e.g., waiting for the doctor)
Effectiveness • Resource Avail X Efficiency X Rate of Quality Output • OEE = Avail X Performance X Quality • Efficiency = average actual output / capacity • Example: Call Center, available 96% of its operating hours. The center handles on average 750 call per hour but was designed to be able to handle 1000 calls per hour. 8% of the customers have to call back because of unacceptable service. • Determine the call center efficiency and overall effectiveness. • Assume the call center availability follows a triangular distribution with availabilities as low as 80% and as high as 99%, with 96% being most likely. Further assume the demand follows a uniform distribution ranging from 600 to 900 calls per hour. Finally assume the call back rate varies via a normal distribution with mean 8% and a standard deviation of 3%. Use simulation techniques to arrive a range for call center effectiveness. What are the managerial implications?
5. Pursue Perfection • 5S • Visual Factory • Kaizen • Poka yoke • Total productive maintenance Overall equipment effectiveness
Benefits of Lean • Five primary types of benefits: • Cost savings • Revenue increases • Investment savings • Workforce improvements • Uncovering problems
