Lean Production and Materials Management

Introduction to Materials Management

• Introduction to Materials Management, 8e
• Chapman, Arnold, Gatewood, and Clive

Key Concepts

• Waste reduction is central to lean production.
• Takt time synchronizes production with customer demand.
• Kaizen drives continuous improvement.
• Poka-Yoke ensures mistake-proofing.
• Kanban systems pull materials based on demand.
• 5S methodology promotes orderliness and efficiency.

Summary of Lean Production Elements

• Waste (Muda): Eliminating activities that don't add value.
• Takt Time: Matching production rate to customer demand.
• Capable Processes: Ensuring consistent, high-quality output.
• Kaizen: Implementing small, continuous improvements.
• Poka-Yoke: Designing processes to prevent errors.
• Cells: Organizing equipment and workstations for efficient flow.
• Set-up Reduction: Minimizing changeover times.
• Machine Flexibility: Adapting equipment to different products.
• Back Flush: Simplifying inventory management.
• Supplier Partnerships: Collaborating with suppliers for mutual benefit.
• Reducing Inventory: Minimizing excess stock.
• Kanban: Using visual signals to trigger production.
• 5S: Maintaining a clean and organized workplace.

The House of Lean (House of Toyota)

• Foundation is built upon waste and variation reduction.

Focus on Waste Reduction

• Waste Definition: Anything that adds cost without adding value.
• Value Definition: What the customer is willing to pay for, with quality considered at each stage.

Types of Waste (Muda)

• Processing:
  • Unnecessary or inefficient steps.
  • Examples: Scrap, wrong tools.
• Movement (Transportation):
  • Excess movement of materials.
  • Examples: Storage before need, long moves.
• Methods (Motion):
  • Wasted time or effort by workers.
  • Examples: Excess walking, searching for tools.
• Product Defects:
  • Products or services not meeting specifications.
  • Examples: Repair, rework, replacement, inspection.
• Waiting Time:
  • Queuing delays.
  • Examples: WIP build-up, waiting for materials.
• Overproduction (Grandaddy):
  • Production exceeding demand.
  • Example: Equipment running despite no demand.
• Excess Inventory:
  • Inventory above demand.
  • Example: Excess safety stock.
• Unused People Skills:
  • Wasting employee capabilities.
  • Example: Not seeking input from shop floor workers.

Pillar One: Just in Time (JIT)

• Quality:
  • Zero defects.
• Takt Time:
  • Daily demand rate = daily production rate.
  • Heijunka: Supply chain operating on takt time.
• One-Piece Flow:
  • Optimal batch size is one unit.
  • Process flexibility to change volume/mix.
  • Operator flexibility through cross-training.
  • Quick setups to ensure short lead times.
• Pull Systems:
  • Continuous flow production triggered by demand.
  • Cellular layout reduces WIP and simplifies scheduling.
  • Demand pull approach.

Quality Management

• Quality at the Source:
  • Do it right the first time.
• Capable Processes:
  • Repeatable with low or no rejects.
  • Able to produce the required quantity.
• Total Productive Maintenance (TPM):
  • Preventive maintenance plus continuous equipment enhancement.

Cost of Poor Quality

• Investing in quality is more cost-effective in the long term.
• Short-term costs may increase due to quality investments.
• Costs of Failure (~80% of quality costs if little prevention):
  • External Failure Costs:
    • After product reaches the customer.
    • Examples: Warranty, returns.
    • Most expensive due to lost customers.
  • Appraisal Costs (Lean: waste):
    • Conformance to specifications and processes.
    • Finished good inspections and calibration.
  • Internal Failure Costs:
    • Before product release.
    • Examples: Rework, scrap, long lead times, backorders.
  • Prevention Costs:
    • Reduce failure and appraisal costs.
    • Examples: Preventive maintenance, education, training, supplier certification.

Total Productive Maintenance (TPM)

• Prevent breakdowns with maintenance schedules rather than reacting to them.
• Empower workers to maintain their own equipment.
• Results in less downtime and uninterrupted flow.

Center of the House (Respect for Employees)

• Cultivate a culture of involvement and continuous improvement.
• Employees have real responsibility for quality.
• Actively listen to workers on the shop floor.

Continuous Improvement Using Lean

• Lean requires quality and continuous improvement to succeed.
• Lean promotes involvement and empowerment, ensuring quality at the source.
• This reduces lead times, WIP, and lot sizes.

Continuous Improvement (Kaizen)

• Small, incremental steps are taken rather than large changes.
• It's a never-ending process.
• Make the product or process:
  • More effective (doing the right things).
  • More efficient (doing things right).
• End results:
  • Better quality leading to customer satisfaction and increased market share.
  • Improved productivity and waste elimination.
• Necessary for competitive survival.

Continuous Improvement Commonalities

• Ensuring employee involvement and empowerment:
  • Employees are respected and informed.
  • Include employees in decision-making.
  • Focus on improving tasks, not just completing work.
  • Seek employee input with "What do you think?"
  • Set expectations clearly and delegate scheduling, quality, process design, and purchasing.
• Focusing on the customer:
  • The customer is the ultimate definer of quality.
  • Understand what customers are willing to pay for.
  • Consider both internal and external customers.
  • Maintain an ongoing, sustainable cycle of improvement.

Pillar Two: Jidoka (Automation with a Human Mind)

• Correct issues at the first instance to find the root cause.
• Poka-yoke:
  • Mistake-proof the process or design.
  • Automated or manual line stop after defect detection.
  • Consider what humans and machines do best.
  • In-station control using andon (signal lights).

Poka-Yoke (Fail-Safe Design)

• Attempt to "mistake-proof" processes.
• Change the process or resources to eliminate reliance on human experience and knowledge.
• Examples:
  • Color-coded parts.
  • Templates.
  • Use of counters on operations.
  • Design plugs to only be inserted one way.

Takt Time

• Takt Time = $\frac{\text{Available Production Time}}{\text{Rate of Customer Demand}}$
• Example:
  • $\frac{445 \text{ Minutes } \times 2 \text{ Shifts}}{890 \text{ Units per Day}} = 1 \text{ Minute per Unit}$
• Store/supermarket:
  • Controlled inventory schedules an upstream process through a kanban signal.
• Pacemaker:
  • Sets a pace for processes to achieve takt time.

Heijunka Scheduling Techniques

• Using control limits; if demand stays within plan, the plan should not change.
• Avoid over-reacting to demand changes.
• Use takt time to manage and control time.
• Prioritize regular orders; don’t let large or unusual orders disrupt them.
• Use ATP logic in master scheduling software.
• Implement "milk runs" with frequent small batches delivered on one vehicle.

Level Production Planning

• Level the master schedule for capacity and material.

Lean Production Environment

• Flow manufacturing.
• Process flexibility.
• Uninterrupted flow through heijunka, line balancing, and linearity.
• Supplier partnerships.
• Total employee involvement with quality management, TPM, and continuous process improvement.

Focus on Work Flow

• Flow manufacturing or work cells.
• Work towards process, machine, and operator flexibility.
• Achieve quick changeover with short setup times for smaller lot sizes.

Process Flexibility

• Machine flexibility and quick changeover.
• Reduced order quantity, queue, and manufacturing lead time.
• Reduced WIP inventory and improved quality.
• Improved process and material flow.
• Single Minute Exchange of Die (SMED) methodology distinguishing internal versus external setup.
• Operator flexibility and standardized work.

Planning and Control for Lean Production

• Forecasting, sales and operations planning, and production planning are still needed for long-term resource planning.
• Master Production Scheduling focuses on level and stable schedules.
• Shorter lead times reduce time fences.
• MRP is effectively used to plan for supplier parts and capacity.
• Use pull production instead of MRP planned orders.
• Capacity management involves adjusting employees in cells and line leveling.

Working with Inventory

• Reduce the number of transactions using backflush inventory usage.
• Address risks of missing usage if scrap or processing problems occur by eliminating quality and processing issues.

Push vs. Pull

• Push: Production based on an advance schedule.
• Pull: Produce only what is needed, when needed, emphasizing lot size reduction.

Supplier Partnership

• Long-term commitment, trust, and shared vision.
• Quality at the source and point of use delivery.

Reducing Order Costs

• Set up reduction, backflushing, and process improvement.
• Supplier partnerships with vendor managed or shared information and point of use delivery.

Impact of Lot Size Reduction

• Moving toward downward order costs after reduction.

Potential Downside

• More exposure to stockouts.

The Kanban System

• Reacts to usage and "pulls" replacement material based on signals.

Kanban Rules

• Every container should have one, but only one, kanban.
• No partial containers stored to simplify inventory counts.
• No production or movement without a card.

Alternatives to Two-Card Kanban

• Single card systems where the empty container serves as the move signal.
• Color-coded containers and designated storage spaces.
• Computer systems generating the signals.
• Workflow signals to suppliers.

Using Kanbans for Process Improvement

• When the system runs smoothly, there is an opportunity to improve.
• Remove a small amount of inventory and observe where it causes a problem.
• Conduct process improvement in the impacted area until the process is smooth again, then restart. (rocks in the stream).

Additional Lean Production Tools

• Value Stream Mapping:
  • Process flow analysis focusing on reducing non-value-added activities.
• Kaizen:
  • Structured approach to continuous process improvement (Kaizen event/blitz).
• Takt Time:
  • The "heartbeat" of the system based on customer usage.

5S Approach

• Focus on orderliness and cleanliness:
  • Sort, Straighten (Set in Order), Shine, Standardize, Sustain.
• Visual management (Andons), lean accounting, activity-based costing, and box score.

System Alternatives – MRP/ERP

• Advantages:
  • Forward-looking, handles volatility and uncertainty well.
• Disadvantages:
  • Highly data dependent, can be difficult to implement.

System Alternatives – Lean Production with Pull

• Advantages:
  • Significant reduction in inventory, responsive, promotes continuous improvements.
• Disadvantages:
  • Less capable in volatile environments, does not handle design changes easily.