Elective course, Operations Process Management (Part of CM_J49 Minor in OM)
Fall 2015
Lean, Lean tools
Lean implementation
Module 11 October 7, 2015
Agenda Module 11
Recap from last session
Defining lean
Relation to process management
Background of Lean
Toyota Production System
Ch. 11 Lean
synchronisation
Chapters 5 - 11
Karlsson & hlstrm 1996
Defining lean
The problem with defining lean simply as methods and tools is that lean tends to become
specific to a certain context or environment. Toyota developed its methods and tools within
the large-scale manufacturing of cars. If lean is defined at a low level of abstraction, an
organization risks misunderstanding what lean is about. This limits the concepts application
areas
In brief, lean is an operations strategy that prioritizes flow efficiency over ressource
efficiency. In other words, lean is a strategy for moving to the right and up in the efficiency
matrix.
3
Lean as an operations strategy to
achieve a goal
Our values define how we should be, regardless of
situation or context. Values are the basis for our very
existence and the state towards which we continually
strive.
Our principles define how we should make decisions
and what we should prioritize. Just-in-time and jidoka
define the direction in which our operations should
develop. Towards the customer! Towards the beautiful
tree!
The methods define how we should perform different
tasks. Methods are the motors that propel us in the right
direction
Tools are what we need to have and activities are what
we need to do to realize a specific method
In order for means to realize a lean operations strategy, the intention must be to eliminate, reduce, and
manage variation, primarily in order to increase flow efficiency; that is a condition.
It is important to bear in mind that Toyotas means were developed within a manufacturing industry,
which is characterized by high volumes and relatively little variation in the products basic design.
4
Focus on throughput time
Recap what was a process
Throughput
3me
Arrival
rate
Variability
of
input
arrival
Figure 5.3
Inputs
Congura3on
of
resources
and
ac3vi3es
Number
of
units
in
the
process
U3liza3on
of
process
resources
Capacity
of
resources
Outputs
Throughput
Rate
Cycle
3me
Variability
of
the
ac3vi3es
within
the
process
Recap: The three laws of processes
1
Units in the system = arrival rate x Throughput time
Throughput time = Units in the system x cycle time (1/arrival rate)
Tradeoff: 100 % ressourceutilization requires units in the
system at all times
More units in the system =>
Higher throughput time
10 persons in the system (WIP)
2 minutes between exits
(Cycle time)
20 minutes throughput time
2 conditions for bottlenecks:
1. When activities in the process
have to follow a certain order.
2. When there is variation in the
process.
The law of bottlenecks:
1. Prior to a bottleneck there is queue
2. Stages after a bottleneck wait to be
activated (work at slower pace)
3. Throughput time is primarily affected
by bottleneck
Jo mere variation i processen desto lngere leadtime.
Eksponentiel sammenhng mellem udnyttelsesgrad og
ventetid:
Nr udnyttelsestraden nrmer sig 100% stiger ventetiden
markant
Hvor meget ventetiden pvirkes afhnger af processens
variation
Process variation is enevitable
The goal is to understand their fundamental causes and eliminate their
consequences
Late supplier
delivery
Rush orders
Machine break
down
Training activities
Power cuts
IT breakdown
Strikes
Order entry
error
PROCESS 1
PROCESS 2
PROCESS 3
PROCESS 4
late pick-up
Fire drill
Error in batch
reports
late lab
analyses
Cooperation
issues
Unplanned
maintenance
Absence
Lack of
space
scrap
8
demand mix changes
Contrasting the traditional
(buffered) and lean approaches
Lean
approach
Focus on producing
only when needed
Traditional
approach
Focus on highcapacity utilization
More stoppages
because of
problems
More production
at each stage
High inventory
means less chance
of problems being
exposed and solved
Extra production
goes into inventory
because of continuing
stoppages at earlier
stages
Fewer stoppages
Lower-capacity
utilization, but
Low inventory so
problems are
exposed and
solved
No surplus
production goes
into inventory
The additional prices of inventory
10
And Inventory conceals
productivity problems
11
The Economic Order Quantity
(EOQ) model
What are the consequences of changing the parameters of H and O
EOQ modellen
450.0
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
-
50.0
100.0
150.0
Holding cost
200.0
250.0
Ordering costs
300.0
350.0
400.0
450.0
Total costs
12
Background for Lean
Developments in the Automotive Indstry
The advances of Henry Ford
14
From craft manufacturing to mass
production (1913-14)
Before 1913: Teams of workers
construct cars on sawhorses
After october 1913: Assembly of cars take place
on moving assembly lines. After refining the
process the time per car is brought down from
12 hours to approximately 90 minutes
April 1913: First trials with assembly line work. The
Flywheel magneto production time is reduced from 20 to
approx. 5 minutes by specialization in 29 operations 15
The impact of the assembly line
Ford, his competitors soon realized, had made a remarkable discovery. His new
technology actually reduced capital requirements. Thats because Ford spent
practically nothing on his assembly line less than $3,500 at Highland Park
and it speeded up production so dramatically that the savings he could realize
from reducing the inventory of parts waiting to be assembled far exceeded this
trivial outlay. (Womack & Jones, 1990)
Mins. of effort to
assemble
Craft production
(Fall 1913)
Mass production
(Spring 1914)
Percentage
reduction in effort
Engine
594
226
62%
Magneto
20
75%
Axle
150
26.5
83%
Major Components
into a Complete
Vehicle
750
93
88%
16
Sharp decline in labour hours
Wilson, J.M., McKinlay, A., 2010. Rethinking the assembly line: Organisation, performance and productivity in Ford Motor
Company, c. 190827. Bus. Hist. 52, 760778.
17
Enabling the reduction of prices
For the Ford T the development in price shows a 85% experience curve
Ford Model T
1000
900
800
Price per unit (in $)
700
600
500
400
300
200
100
0
0
10
12
14
Aggregate production (million units)
But Ford would face significant challeges moving to the Model A in 1928
(Abernathy, W.J., Wayne, K., 1974. Limits of the learning curve. Harv. Bus. Rev. 52, 109)
18
The dominance of US automotive
manufactures challenged
1955 was the first year with +7 million cars sold in the US
The big three (Ford, GM and Chrysler) completely dominated the US market for
automobiles (95% marketshare)
NA accounted for almost 75% share of the World Motor Vehicle Production
It was also the year that the downhill slide began
Womack, J.P., Jones, D.T., Roos, D., 1991. The machine that changed the world. How Japans secret weapon in the global auto
wars will revolutionize western industry. HarperPerennial, New York, NY.
19
International Motor Vehicle
Program (IMVP)
The International Motor Vehichle Program (IMVP) was founded in 1985 at
MIT and is the oldest and largest international research consortium aimed
at understanding the challenges facing the global automotive industry.
Phase One (19851990) documented huge performance differences in manufacturing,
supply chains, and product development across companies and countries. Developed the
name lean production to characterize the new paradigm that challenged mass production
Phase Two (19901998) examined barriers to the adoption of lean and renewed efforts by
mass production-oriented firms to innovate
Phase Three (19982008) tracked disruptive changes in the auto industry, including
massive reductions in vertical integration, increases in outsourcing, experiments with
modularity, and the influx of new technologies.
Phase Four (2013Present) will study disruptive technologies and new business models
affecting the evolving global automotive industry and the broader mobility domain
20
GM Framingham vs Toyota Takaoka vs
NUMMI Freemont 1987
1989
GM Framingham
Toyota Takaoka
NUMMI Fremont
Assembly hours per car
31
16
19
Assembly Defects per
100 Cars
135
45
45
Assembly Space per
Car
8.1
4.8
7.0
Inventories of Parts
(average)
2 weeks
2 hours
2 days
Classic mass
production
Classic lean
production
Diffusing lean
production
NUMMI was to make no compromises on lean production. The senior managers were all
from Toyota and quickly implemented an exact copy of the Toyota Production System
We found that NUMMI matched Takaokas quality and nearly matched its productivity.
Space utilization was not as efficient because of the old GM plants poor layout.
Inventory was considerably higher than at Takaoka, because almost all parts were
transported 5,000 miles across the Pacific rather than five or ten miles from neighboring
supplier plants in Toyota City.
Womack, J.P., Jones, D.T., Roos, D., 1991. The machine that changed the world. How Japans secret weapon in the global auto
wars will revolutionize western industry. HarperPerennial, New York, NY.
21
Assembly plant characteristics,
Volume producers, 1989
Region
J/J
J/NA
A/NA All E
Size of repair area (%)
4.1
4.9
12.9
14.4
Inventory (days 8 samples)
0.2
1.6
2.9
2.0
Work force in teams (%)
69.3
71.3
17.3
0.6
Job rotation (0 4 scale)
3.0
2.7
0.9
1.9
Suggestions/employee
61.6
1.4
0.4
0.4
No of job classes
11.9
8.7
67.1
14.8
Training new workers (hrs)
380.3
370.0
46.4
173.3
22
Surveying the automotive industry
(1989) - Productivity
Productivity (hrs/vehicle)
Assembly Plant Productivity, Volume Producers, 1989
100
90
80
70
60
50
40
30
20
10
0
J/J (8)
J/NA (3) US/NA (14) US&J/E (9) E/E (13)
Parent Location/Plant Location
Best
Weighted Average
NIC (11)
Worst
Womack, J.P., Jones, D.T., Roos, D., 1991. The machine that changed the world. How Japans secret weapon in the global auto
wars will revolutionize western industry. HarperPerennial, New York, NY.
23
Surveying the automotive industry
(1989) - Quality
Quality (assy defects/100 vehicles)
Assembly Plant Quality, Volume Producers, 1989
200
150
100
50
0
J/J (20)
J/NA (6)
US/NA (42)
E/E (5)
Parent Location/Plant Location
Best
Weighted Average
NIC (7)
Worst
Womack, J.P., Jones, D.T., Roos, D., 1991. The machine that changed the world. How Japans secret weapon in the global auto
wars will revolutionize western industry. HarperPerennial, New York, NY.
24
Findings from the world survey
These findings require a dramatic reordering of our mental map of the
industrial world, which we believe many readers will find very difficult: We
must stop equating Japanese with Lean production and Western with
mass production.
In fact, some plants in Japan are not particularly lean, and a number of
Japanese-owned plants in North America are now demonstrating that lean
production can be practiced far away from Japan.
At the same time, the best American-owned plants in North America show
that lean production can be implemented fully by Western companies, and
the best plants in the developing countries show that lean production can
be introduced anywhere in the world.
25
High productivity
Relationship between productivity
and quality (two trends)
Quality is
free
Relationship
Expected
Trade-off
relationship
High Quality
Womack, J.P., Jones, D.T., Roos, D., 1991. The machine that changed the world. How Japans secret weapon in the global auto
wars will revolutionize western industry. HarperPerennial, New York, NY.
26
Manufacturability is conductive to
high performance in the factory
Womack, J.P., Jones, D.T., Roos, D., 1991. The machine that changed the world. How Japans secret weapon in the global auto
wars will revolutionize western industry. HarperPerennial, New York, NY.
27
Differences in innovation strategy
and product variety
28
Craft, mass and Lean producers
The craft producer uses highly skilled workers and simple but flexible
tools to make exactly what the consumer asks for one item at a time
The mass producer uses narrowly skilled professionals to design
products made by unskilled or semiskilled workers tending expensive,
single-purpose machines. These churn out standardized products in
very high volumes.
The lean producer, by contrast, combines the advantages of craft and
mass production, while avoiding the high cost of the former and rigidity of
the latter. Towards this end, lean producers employ teams of
multiskilled workers at all levels of the organization and use highly
flexible, increasingly automated machines to produce volumes of
products in enormous variety.
Womack, J.P., Jones, D.T., Roos, D., 1991. The machine that changed the world. How Japans secret weapon in the global auto
wars will revolutionize western industry. HarperPerennial, New York, NY.
29
Toyota Production System
30
Toyota Production System
Christer
Karlsson
Toyota
Production
System
TPS
Jidoka
0-fault,
stop
the
line
Muda
Waste
Kaizen
Cont.
improvement
Main
pillars
Just-in-Time
Pull,
flow
Standardized
work
Takt
time
Working
Standard
in
P
sequence
stock
Heijunka
Kanban
Overall
leveling
Control
signs/cards
Genchi
genbutsu
Andon
Pokayoke
Go
see
the
Visual
control
Stop
devices
problem
Across
the
system:
Hoshin
Jishuken
Nemawashi
Goals
with
targets
Management
driven
Kaizen
Preparation
for
change
Yokoten
Across
everywhere
communication
31
TPS and Henry Fords system
Toyota adapted the large-scale, highly efficient, constant-flow production
philosophy of the Ford Rouge complex to its small-scale facilities in an
interesting way.
Unable to achieve either the vast levels of vertical integration or the
standardized product volume Ford managed at this single complex,
Toyota nevertheless paid homage to the concept of continous flow by
byilding a local network of adaptable suppliers and integrating them with
assembly plants.
But instead of building a standardized product like Fords Model T, Toyota
achieved the capability of flexibly producing a wide variety of products
using continous-flow principles, something Henry Ford would never have
attempted.
Womack, J.P., Jones, D.T., Roos, D., 1991. The machine that changed the world. How Japans secret weapon in the global auto
wars will revolutionize western industry. HarperPerennial, New York, NY.
32
Conceptualization of lean production
by Karlsson & hlstrm
Lean production
Lean
development
Lean
procurement
Supplier involvement
Supplier
hierarchies
Simultaneous
engineering
Larger
subsystems from
fewer suppliers
Strategic
management
Black box
engineering
Lean
+
Manufacturing
Elimination of
waste
Cross-functional
teams
Integration
instead of
co-ordination
Continous
improvement
Multifunctional
teams
Lean
distribution
Lean
enterprise
Lean buffers
Global
Customer
involvement
Network
Aggressive
marketing
Knowledge
structures
Zero defects/JIT
Vertical information
systems
Decentralized
responsibilities/
integrated
functions
Pull instead of
push
Fundamental principles
Multifunctional teams
Vertical information systems
No buffers
No indirect resources
Networks
33
Karlsson & hlstrm, 1996, International Journal of Operations & Production Management, Vol. 16 No. 2 1996, pp. 24-41.
Waste The 7 (or 8) Muda
Elimination of waste is central to lean management and TPS
Waste are activities that consume time, resources and space, but do not
contribute to satisfying customer needs.
Ohno identified seven wastes to be addressed by the Toyota system
1.
2.
3.
4.
5.
6.
7.
Over-production
Waiting time
Transport
Over processing
Inventory
Motion
Defectives
34
Elimination of waste
Karlsson & hlstrm, 1996, International Journal of Operations & Production Management, Vol. 16 No. 2 1996, pp. 24-41.
35
Syncronization between stages
Push and pull principles
36
The Kanban system for production
control in a pull system
[Link]
37
Multi purpose equipment enable
flexibility
Using several small machines rather than one large one allows
simultaneous processing, is more robust, and is more flexible
Reducing setup times is critical to enable level production
38
Leveling production - Heijunka
(small batches)
39
Small order and lot sizes reduces
inventory
Delivering smaller quantities more often can reduce inventory levels
40
Creating flow efficiency
Levelled scheduling and mixed modelling: mixed modelling becomes
possible as the batch size approaches one
41
Methods for eliminating variation The 5Ss
Sort (Seiri) Eliminate what is not needed and keep what
is needed.
Straighten (Seiton) Position things in such a way that
they can be easily reached whenever they are needed.
Shine (Seiso) Keep things clean and tidy; no refuse or
dirt in the work area.
Standardize (Seiketsu) (Textbook: Maintain cleanliness
and order perpetual neatness ? Usually: Standardize
the way work is done; best practice, documentation
Sustain (Shitsuke) Develop a commitment and pride in
keeping to standards.
42
Lean and agile
The degree of complexity of products/services and the uncertainty of
demand influence the relative emphasis of lean or agile supply-chain
principles
43
Reducing process variability
enable flow efficiency
44
Implementing lean production
The important point to note, however, is that lean should be seen as a
direction, rather than as a state to be reached after a certain time.
Therefore, the focus lies on the changes in the determinants, not on their
actual values. It should also be noted that all the determinants might not
point in the right direction all the time. There could be instances where
they can send mixed signals. However, keeping this in mind, the model is
a helpful tool for companies to check that they are not deceiving
themselves. Karlsson & hlstrm, 1996, p. 41
45
Becomming lean?
The goal of a lean operations strategy is to improve flow efficiency
without sacrificing resource efficiency, and ideally improving it. The
strategy would be realized when the goal is achieved. There are two
extreme ways of defining a goal: static or dynamic.
Toyotas basic view is that there are always going to be problems. The key
is to ensure that all is to ensure that all employees know how to fish and
Toyotas improvement projects are geared towards teaching employees to
fish
46
Backup slides
One of Fords first assembly plants
outside USA (1919 Heimdalsgade 42)
48
Ford on Sluseholmen (1924) then among
the most modern factories in Europe
49