Lean Operations: Process Synchronization and Improvement

1. Chapter 10 Lean Operations: Process Synchronization and Improvement

2. Introduction • Lean Operations: • Perfected by Japanese automaker - Toyota • A more efficient process • Adopted in USA by the aerospace industry in 1990’s • Some turnaround times were lowered by 30-50% • Maintenance productivity improved by 25-50%

3. $ Introduction • Overall: • Many industries have adopted lean operations Why?? • Improved performance including: • Cost • Quality • Response time

4. Responsiveness A B Operations Frontier C High Low Price Introduction Quick review:

5. Process 2 Process 4 Product A Process 6 Process 1 Process 3 Product B Process 5 10.1 Processing Networks • Processing Networks:consists of information and material flows of multiple products through a sequence of interconnected processes.

6. 10.1 Processing Networks • Plants & Supply Chains— • Two different levels: • Plants: any singly owned, independently managed and operated facility (i.e., manufacturing site, service unit, storage warehouse) • Supply Chain: a network of interconnected facilities • Diverse ownership • Flows of information and materials between the facilities (i.e., raw materials suppliers, finished goods producers, wholesalers, distributors, retailers)

7. 10.2 The Process Ideal: Synchronization & Efficiency What is an“Ideal Process”? A process that achieves synchronization at the lowest possible cost Process Synchronization The ability of the process to meet customer demand in terms of their quantity, time, quality and location requirements. Process Efficiency Measured in terms of the total processing costs. Less cost, more efficient!!.

8. 10.2 The Process Ideal: Synchronization & Efficiency • Perfectly Synchronized Process that is LEAN will develop, produce and deliver theseONLY on demand: • Exactly what is needed (not wrong or defective products) • Exactly how much is needed (neither more or less) • Exactly when it is needed (not before or after) • Exactly where it is needed (not somewhere else)

9. 10.2 The Process ideal: Synchronization & Efficiency • Just-In-Time (JIT) • When the four “just rights” come together— • Action is taken only when it becomes necessary!!! • In Manufacturing - production of only necessary flow units in necessary quantities at necessary times!!!

10. 10.2 The Process ideal: Synchronization & Efficiency • Synchronized Networks: • Outflow of one process is the inflow to another process!!!! • REQUIRES PRECISE MATCHING OF SUPPLY & DEMAND • All stages are required to be tightly linked with flow of information and product • Ideally – the processing stages are achieved for lowest possible cost!!!!

11. 10.3 Waste and Its Sources • ANYTHING LESSTHAN IDEAL PERFORMANCE IS AN OPPORTUNITY FOR IMPROVEMENT!!! Low Efficiency = High Processing Costs Defective products, high inventories, delays, stock outs Lack of Synchronization

12. 10.3 Waste and Its Sources Waste: producing inefficiently, producing wrong or defective products, producing in quantities that are too small/large, delivering early/late Sources of Waste: • Producing defective products • Producing too much product • Carrying inventory • Waiting due to unbalanced workloads • Unnecessary processing • Unnecessary worker movement • Transporting materials

13. 10.3 Waste and Its Sources • Waste Elimination: • Short term strategies include: • Cycle & Safety inventories • Safety capacity • Non-Value adding activities (transportation, inspection, rework, process control)

14. 10.3 Waste and Its Sources • Waste Elimination (cont’d): • Long-Term Strategy • Improve the overall processes • Build in flexibility, predictability, stability to eliminate temporary fixes. • i.e.→ Reduce setup costs to make it more economical to produce small batches.

15. 10.3 Waste and Its Sources The River Analogy: The boat can sail in shallow water (lean operations) if we are able to find ways to remove the imperfections on the river bottom!!! FG FM WIP Defects Defective Materials Long Setups Machine Breakdowns Long Lead Times Unsuitable Equipment Uneven Schedules Unreliable Suppliers Absenteeism Rigid Work Rules Inefficient Layouts

16. 10.4 Improving Flows in a Plant: Basic Principles of Lean Operations • Many buzz-words for managing and achieving efficiency within a plant: • Lean operations • Just-in-time production • Zero inventory program • Synchronous manufacturing • Agile manufacturing • Toyota Production System (TPS)

17. 10.4 Improving Flows in a Plant: Basic Principles of Lean Operations • LEAN OPERATIONS HAS FOUR OBJECTIVES: • To improve process flows • Efficient plant layout and fast/accurate flow of materials and information • To increase process flexibility • Reducing equipment changeover times & cross-functional training • To decrease process variability • Flow rates, processing times, and quality • To minimize processing costs • Eliminate non-value adding activities (transportation, inspection, rework)

18. 10.4 Improving Flows in a Plant: Basic Principles of Lean Operations WHY????? • First three goals improve Process Synchronization • Last goal improves Cost Efficiency

19. 10.4 Improving Flows in a Plant: Basic Principles of Lean Operations • Classic Example: • Efficiency/Synchronization for mass production: Henry Ford’s Rouge, Michigan plant • Totally integrated with – steel mill, glass factory, machine tools, electrical systems, assembly line, well-trained (well-paid) workers • Minimal low time & cost • Everything in place except product variety!

20. 10.4 Improving Flows in a Plant: Basic Principles of Lean Operations • Efficiency/Synchronization for Mass Production • Ford Motor Company 1910 • Rouge, Michigan Plant Source: <http://www.shadetreemechanic.com/ford_centennial_in_atlanta.htm>

21. 10.4.1 Improving Process Architecture: Cellular Layouts • Process Architecture: the network of activities and resources • One method: FUNCTIONAL LAYOUTS • Different product types follow different routings through the resource pools…enabling each flow unit to be sent to any available station in the pool.

22. Output A B Product 1 Input C D Product 2 10.4.1 Review of Process Architectures: Job Shop Functional Layout: Resources that perform the same function are physically pooled together– JOB SHOPS

23. 10.4.1 Improving Process Architecture: Cellular Layouts • Alternate to Process-based Functional Layout: CELLULAR LAYOUT All workstations that perform successive operations on a given product are grouped together to form a “CELL”

24. 10.4.1 Improving Process Architecture: Cellular Layouts Product 1 A B C Input Output Example: Henry Ford’s Assembly Line for the Model T

25. Facilitates synchronous flow of information and materials between processing stations Physical proximity of cells reduce transportation of low units Moves small batches of flow units quickly Encourages teamwork & cross functional skill development Improved communication between stations Improves synchronization where each station produces parts only if the next station needs them Easier to recognize and report problems Quicker ability to correct defects 10.4.1 Improving Process Architecture: Cellular Layouts + + ADVANTAGES

26. Resources are dedicated to specific cells Resources cannot be used by other cells Lose advantage of resource pooling Worker incentives must be “team” oriented, not individual performance based REMEDIES: Use flexible resources that are cross functional Peer pressure to control productivity of team members 10.4.1 Improving Process Architecture: Cellular Layouts - - DISADVANTAGES

27. 10.4.2 Improving Information & Material Flow: Demand Pull TWO APPROACHES • PUSH: Input availability triggers production where emphasis is on “keeping busy” and maximize resource utilization (as long as there is work) • Planning Tool: MRP (Material Requirements Planning) • MRP: End-Product demand forecasts are “exploded” backwards to determine parts requirements at each station

28. 10.4.2 Improving Information & Material Flow: Demand Pull • PUSH works well under these conditions if: • All information is accurate • Forecasts of finished goods are correct • There is no variability in processing times • If one of these conditions at any stages is not met will DISTURB PLANNED FLOW AND DESTROY SYNCHRONIZATION THROUGHOUT THE PROCESS!!

29. 10.4.2 Improving Information & Material Flow: Demand Pull • Demand-Pull: Where demand from a customer station triggers production. • Consequences of Demand-Pull -- -- -- Each station produces only on demand from its customer station • The demand is actually “downstream” Two requirements to make a pull system work: • Must have a well-defined customer with a well-defined supplier process. • Must produce the quantity needed only when signaled to do so by its customer

30. SUPPLY PUSH: Input availability triggers production Supplier Process Customer Inputs Outputs DEMAND PULL: Output need triggers production Supplier Process Customer Inputs Outputs Information Flow: Material Flow: 10.4.2 Improving Information & Material Flow: Demand Pull

31. 10.4.2 Improving Information & Material Flow: Demand Pull • Demand Signaling: Customer needs a way to signal (inform) the supplier of its need. • Customer’s demand starts a chain reaction – • For withdrawals and replenishments of intermediate parts • EOQ-ROP system is a “Pull” system where ROP triggers production at the supplier and EOQ determines the quantity produced

32. 10.4.2 Improving Information & Material Flow: Demand Pull • Synchronized Pull: When the delivery of parts are in sequence [Suppliers must have greater ability and capability to achieve a synchronized pull effectively]

33. 10.4.3 Improving Process Flexibility: Batch-Size Reduction Each station must know HOW MUCH TO PRODUCE AT A TIME • Level Production: where small quantities are produced frequently to mach customer demand [i.e., if demand is 10000 sedans and 5000 SUVs, the production would call for producing 2 sedans and then 1 SUV, and then repeat the sequence] • Changeover Costs and Batch Reduction:Goal of level production is reduction of changeover costs (fixed setup or transportation costs of each batch) • I.E. In auto production expensive parts like seats are produced in batches of one, wipers in larger batches • Study the Changeover process to: use special tools to speed it up, customize some machines, keep some machines already set up. • Consider “small-batch” production

34. 10.4.4 Quality at Source: Defect Prevention & Early Detection Defective flow units increase average flow time and cost!!! WHY? • It necessitates inspection and rework!!! • Anticipate and then Compensate for the problem: • Hold extra safety inventory in the buffer • This increases avg. flow time and cost • Plan and control Quality: • Prevent defects for occurring in the first place • Detect and correct them as soon as they appear

35. 10.4.4 Quality at Source: Defect Prevention & Early Detection • Defect Prevention • Careful design of both product and process • Simplification & standardization • Mistake-proofing (poka yoke) • Parts are designed to halt automatically when defective units are fed into them (parts are designed to minimize chances of incorrect assembly) • Defect Visibility • Early detection/corrections more effective & economical

36. 10.4.4 Quality at Source: Defect Prevention & Early Detection • Defect visibility (cont’d) • Early detection helps tracing to the source • Contribution to better synchronization and lower costs • Early detection requires constant vigilance and monitoring!! • Decentralized Control • Employees must be empowered with authority and the means to identify & correct problems at the local level

37. 10.4.4 Quality at Source: Defect Prevention & Early Detection • Decentralized Control (cont’d) • In typical plants, line workers don’t feel the responsibility, motivation or security to point out problems. • BEST STRATEGIES OF LEAN OPERATIONS ARE: • Preventing problems through better planning • Highlighting problems as soon as they occur • Delegating problem solving to the local level

38. 10.4.5 Reducing Processing Variability: Standardization of Work Maintenance, and Safety Capacity • Reduce Variability: • Standardize work at each stage and specify it clearly • Advantages to Standardization: • Reduces variability from changing personnel • Reduces variability from one production cycle to the next • Makes it easier to identify sources of waste that can be eliminated

39. 10.4.5 Reducing Processing Variability: Standardization of Work Maintenance, and Safety Capacity • Lean Operations try to: • Minimize carrying safety inventory due to increased flow time • Maintain somesafety capacity as production against variability • These could be extra machines, workers, overtime • These forms of safety capacity should be flexible so that it can be used as needed!!

40. 10.4.6 Visibility of Performance • A company needs to “see” (measure) process performance from the customer’s perspective • I.E. Time per call • Measure Percentage of Customers that had a problem resolved with one call • Actual performance (along with expectations) should be visible at each work cell • Not for punishment, but to provide quick feedback for corrective action

41. 10.4.7 Managing Human Resources: Employee Involvement • SYNCHRONIZATION WITHIN A PLANT REQUIRES: • Cooperation • Contribution • Commitment Elton Mayo’s “Hawthorne Experiments” at Western Electric showed that: Research has shown that workers involved in the decision-making process are better motivated and productive

42. 10.4.7 Managing Human Resources: Employee Involvement In Companies with Lean Operations: • Workers are cross-trained to provide the company with flexible workers. • Workers are in work teams in cells and may perform certain managerial duties such as material ordering, hiring, scheduling • Great importance on recruiting and training of workers

43. 10.4.8 Supplier Management: Partnerships • Outsourcing: Provides a flexible alternative to producing in-house • BUT- - - purchased materials account for a major portion of product cost and are a major source of quality problems!! • Lean approach: • Choose only a few capable suppliers • Cultivate cooperative, long-term relationships

44. 10.4.8 Supplier Management: Partnerships • In Lean Operations: • Suppliers are an extension of the plant • Processing without inventories or quality inspection • Synchronization requires defect-free material • Frequent deliveries, small batches • Supplier’s process be able to produce small quantities on demand

45. 10.4.8 Supplier Management: Partnerships YOU ARE TREATING THE SUPPLIERS AS PARTNERS

46. 10.4.1 – 10.4.8 SUMMARY • Lean Operations aim to sustain continuous flow processing in an economical manner: • Synchronize material and information flows • Increase flexibility • Reduce variability • Decrease processing costs

47. Chapter 10 Lean Operations: Process Synchronization and Improvement Questions??