MAR 3203 Chapter 16: Lean Operations

Lean operations

Eliminates waste through continuous improvement and focus on exactly the customer wants; driven by workflow initiated by the pull of the customer’s order

Encompasses all the related approaches and techniques of both JIT and TPS

When implemented as a comprehensive operations strategy, Lean sustains competitive advantage and increases overall returns

Just-in-time (JIT)

Continuous and forced problem solving via a focus on throughput and reduced inventory

Toyota Production System (TPS)

Focus on continuous improvement, respect for people, and standard work practices

Eliminate waste

Waste is anything that does not add value from the customer point of view

No bad parts
No inventory
No waste
Only value-added activities

Resources like energy, water, and air shouldn’t be wasted either

Minimize inputs and maximize outputs

Ohno’s seven wastes

1. Overproduction: Producing more than the customer orders or producing early

2. Queues: Idle time, storage, and waiting

3. Transportation: Moving material between plants or between work centers more than once

4. Inventory: Unnecessary raw material, work-in-process (WIP), finished goods, and excess operating supplies

5. Motion: Movement of equipment or people that adds no value

6. Overprocessing: Excessive work on a product

7. Defective product: Returns, warranty claims, rework, and scrap

The 5Ss

1. Sort/segregate — when in doubt, throw it out

2. Simplify/straighten — methods analysis tools

3. Shine/sweep — clean daily

4. Standardize — remove variations from processes

5. Sustain/self-discipline — review work and recognize progress

U.S. managers also add (6) Safety — built in good practices, and (7) Support/maintenance — reduce variability and unplanned downtime

Remove variability

Variability is any deviation from the optimum process

• Lean systems require managers to reduce variability caused by both internal and external factors

• Inventory hides variability

• Less variability results in less waste

Sources of variability

• Poor processes that allow employees and suppliers to produce improper quantities or nonconforming units

• Inadequate maintenance

• Unknown customer demands

• Incomplete or inaccurate drawings, specifications, or bills of material

Improve throughput

The rate at which units move through a process

The manufacturing cycle time is the time between the arrival of raw materials and the shipping of the finished order

A pull system increases throughput

Pull systems and throughput

By pulling material in small lots, inventory cushions are removed, exposing problems and emphasizing continual improvement

• Manufacturing cycle time is reduced

• Push systems dump orders on the downstream regardless of the need

Lean and Just-in-time (JIT)

JIT with its focus on rapid throughput and reduced inventory is a powerful component of Lean

• Materials arrive where they are needed only when they are needed

• Identifying problems and driving out waste reduces costs and variability and improves throughput

• Requires a meaningful buyer-supplier relationship

Supplier partnerships

Exist when a supplier and purchaser work together to remove waste and drive down costs

Four goals of supplier partnerships:

1. Removal of unnecessary activities like receiving, incoming inspection, and excessive paperwork

2. Removal of in-plant inventory by delivery in small lots directly to the department as needed

3. Removal of in-transit inventory by encouraging suppliers to locate nearby and provide frequent, smaller shipments

4. Improve quality and reliability through long-term commitments, communication, and cooperation

Consignment inventory

An arrangement in which the supplier maintains title to the inventory until it is used

Concerns of suppliers

1. Diversification: Ties to only one customer increases risk

2. Scheduling: Don’t believe customers can create a smooth, coordinated schedule

3. Lead time: Short lead times mean engineering or specification changes can create problems

4. Quality: Limited by capital budges, processes, or technology

5. Lot sizes: Small lot sizes may transfer costs to suppliers

Lean layout tactics

• Build work cells for families of products

• Include a large number of operations in a small area

• Minimize distance

• Design little space for inventory

• Improve employee communication

• Use poka-yoke devices

• Build flexible or movable equipment

• Cross-train workers to add flexibility

Lean inventory tactics

• Use a pull system to move inventory

• Reduce lot size

• Develop just-in-time delivery systems with suppliers

• Deliver directly to the point of use

• Perform to schedule

• Reduce setup time

• Use group technology

Lean quality tactics

• Use statistical process control (SPC)

• Empower employees

• Build fail-safe methods (poka-yoke, checklists, etc.)

• Expose poor quality with small lots

• Provide immediate feedback

Toyota production system (TPS)

Three components are (1) continuous improvement, (2) respect for people, and (3) standard work practice

1. Continuous improvement: Build an organizational culture and value system that stresses improvement of all processes, kaizen — make it part of everyone’s job

2. Respect for people: People are treated as knowledge workers, engage mental and physical capabilities, and empower employees

3. Standard work practice:

   • Work is completely specified as to content, sequence, timing, and outcome

   • Internal and external customer-supplier connections are direct

   • Material and service flows must be simple and directly linked to the people or machinery involved

   • Process improvement must be made in accordance with the scientific method at the lowest possible level in the organization

Jidoka

Stopping production because of a defect, entrusted to all employees if any quality problems are spotted

Lean organizations

Understanding the customer and their expectations, functional areas communicate and collaborate to make sure customer expectations are met, and Lean tools are implemented throughout the organization

Attributes:

• Respect and develop employees by improving job design, constant training, and building teamwork and commitment

• Empower employees by pushing responsibility to the lowest level possible

• Develop worker flexibility through cross-training an reducing job classifications

• Build processes that destroy variability

• Develop collaborative partnerships with suppliers to help them accept responsibility for satisfying end customer needs

• Eliminate waste by performing only value-added activities

Building a Lean organization

Transitioning to a Lean system can be difficult, so leaders should build a culture of continual improvement, have open communication and demonstrated respect for people

• Gemba walks are going to where the work is actually performed

Lean sustainability

Lean and sustainability are two sides of the same coin as both

• Maximize resource use and economic efficiency

• Focus on issues outside the immediate firm

• Drive out waste because it adds nothing for the customer, while it is expensive and has an adverse effect on the environment

Lean in services

The Lean techniques used in manufacturing are used in services. Forecasts in services may be very elaborate, with seasonal, daily, hourly, or even shorter components

• Suppliers: Every restaurant deals with its suppliers on a JIT basis

• Layouts: Lean layouts are required in restaurant kitchens where cold food is served cold and hot food hot

• Inventory: Stockbrokers drive inventory down to nearly zero every day

• Scheduling: Airlines must adjust to fluctuations in customer demand through personnel availability