Principles of Lean Management Systems Randy CookKarina Hauser Clinical ProfessorAssistant Professor

Introductions

Proper method for sleeping in class Proper method for sleeping in class

Why Lean? Why Toyota?

Brief Toyota HistoryBrief Toyota History

THE BUSINESS CASETHE BUSINESS CASE

Danaher S&P 500 GE Comparison Industrial ConglomeratesComparison Industrial Conglomerates

Toyota Autoliv GM Ford Comparison AutomotiveComparison Automotive

LEARNING FROM TOYOTA VS. COPYING TOYOTA

Toyota Production System Toyota Production System PROBLEM SOLVING PEOPLE & PARTNERS PROCESS PHILOSOPHY

4 Ps4 Ps  Philosophy as the Foundation  Maintain continuity of purpose through corporate philosophy  Process  The right process will produce the right results  People and Partners  Add value to the organization by developing your people and partners  Problem Solving  Continuously solving problems drives organizational learning

Toyota Production System Toyota Production System Jidoka Just-in-Time Pull & Flow Standardization Stability Customer Focus Quality, Cost, Delivery, Safety and Environment, Morale Basic Image of Lean Production Flexible, motivated team members continually seeking a better way Involvement

Toyota Production System Toyota Production System Jidoka Just-in-Time Pull & Flow Standardization Stability Flow Heijunka Takt time Pull System Kanban Visual Order (5S) Involvement Poka-yoke Zone Control Visual Order (5S) Problem Solving Abnormality control Separate human & machine work Involvement Standardized work Kanban, A3 thinking Standardized work, 5S, Jidoka TPM, Heijunka, Kanban Visual order (5S) Hoshin planning Customer Focus Hoshin planning, Takt, Heijunka Involvement, Lean Design, A3 Thinking Lean Activities Involvement Standardized work 5S TPM Kaizen circles Suggestions Safety activities Hoshin planning

The Toyota Way The Toyota Way Jidoka Just-in-Time Pull & Flow Standardization Stability Involvement Flexible, motivated team members continually seeking a better way PROBLEM SOLVING PEOPLE & PARTNERS PROCESS PHILOSOPHY Customer Focus Quality, Cost, Delivery, Safety and Environment, Morale

The Transformation ModelThe Transformation Model Jidoka Just-in-Time Pull & Flow Standardization Stability Customer Focus Quality, Cost, Delivery, Safety and Environment, Morale Involvement Flexible, motivated team members continually seeking a better way PROBLEM SOLVING PEOPLE & PARTNERS PROCESS PHILOSOPHY

Principles – Systems - ToolsPrinciples – Systems - Tools

Tool DrivenTool Driven  Event based: one-time, or infrequent tool based events with little or no sustaining  5S event, Kaizen event, Value Stream Map with no connection to action, install Andon lights, implement Kanban cards (and stop). 17

System Driven System Driven  A system is an integrated series of parts and subsystems, with a clearly defined objective  Toyota found that the system was guided by asking the question, “What is the need?”  A System defines approach, use of tools, measurement & feedback, and is self-sustains.  A system could be based on a single tool, or a combination of tools  The complete Lean system has been difficult to grasp as a whole. There has been a tendency to cherry pick tool based activities.

 I am going to show you a set of number = symbol combinations (for example 1 = ├ )  I will give you a few seconds to view the combinations then right down as many as you can remember. 6 = 7 = 8 = 9 = 1 = 3 = 4 = 5 = 2 =

Principles DrivenPrinciples Driven  Company philosophies and culture are based on principles  Principles are the most correct map or paradigm for navigating today’s environment  Principles are valid in the past, present and future  Principles guide “thinking”, which in turn guides behaviors, systems, and culture 20

Shigeo Shingo Shigeo Shingo

The Shingo Prize ModelThe Shingo Prize Model

The Next Generation of the ModelThe Next Generation of the Model TPS TQM

New Mental Models: 7 WastesNew Mental Models: 7 Wastes  Unit Cost Reduction  Who can understand it?  How long does it take?  How well does it drive improvement?  Who is the focus?  Identify & Eliminate Waste  Who can understand it?  How long does it take?  How well does it drive improvement?  Who is the focus?

LEAN IS A PRINCIPLE DRIVEN MANAGEMENT PHILOSOPHY AND ORGANIZATIONAL CULTURE WHICH DRIVES INCREDIBLE LEVELS OF CONTINUOUS IMPROVEMENT Summary

14 Management Principles

Philosophy as the FoundationPhilosophy as the Foundation 1.Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.

The Right ProcessThe Right Process 2.Create a continuous flow to bring problems to the surface. 3.Use “pull” systems to avoid overproduction 4.Level out the workload 5.Build a culture of stopping to fix problems 6.Standardized processes are the foundation for continuous improvement 7.Use visual control so no problems are hidden 8.Use only reliable, thoroughly tested technology that serves your people and process

People and PartnersPeople and Partners 9.Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others 10.Develop exceptional people and teams who follow your company’s philosophy 11.Respect your extended network of partners and suppliers by challenging them and helping them improve

Continuous Problem SolvingContinuous Problem Solving 12.Go and see for yourself to thoroughly understand the situation 13.Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly 14.Become a learning organization through relentless reflection and continuous improvement

General Concepts

Lean is a Way of Thinking:Lean is a Way of Thinking:  Setting priorities  Making decisions  Problem solving  Learning  Management approach

Lean is an Integrated Management System  Management Philosophy  Human Resource Management  Operations Management  Sales and Marketing Management  Financial Management  Information Technology Management  Product and Process Design

Lean is Learning: PDCALean is Learning: PDCA  Plan  Understand completely the current situation  Identify in detail the future state  Do  Implement specific changes  Check  Measure results according to future state  Act  Convert new learning into organizational learning  Repeat PDCA

PDCA at all LevelsPDCA at all Levels  Strategy Setting  Corporate Planning  Coaching (Management)  Process Improvement  Problem Solving

Toyota Production SystemToyota Production System Stop & Fix Pass No Defect Pull & Flow Standardization Stability Customer Focus Quality, Cost, Delivery, Safety and Environment, Morale Involvement Flexible, motivated team members and partners continually seeking a better way

TPS or House of LeanTPS or House of Lean  Stability  Standard Work  Pull and Flow  Pass No Defect  Involvement  Customer Focus - Defining Value

What is the purpose of Your Company?

Defining Company Purpose and Philosophy Stop & Fix Pass No Defect Pull & Flow Standardization Stability Customer Focus Quality, Cost, Delivery, Safety and Environment, Morale Involvement Flexible, motivated team members and partners continually seeking a better way

It’s all about VALUE!It’s all about VALUE!  Society  Community  Customers  Employees  This requires long-term existence  This requires growth  All this requires long-term, consistent profitability

Cost View of QualityCost View of Quality TLSpecUSpec Cost

Value View of QualityValue View of Quality TLSpecUSpec Loss To Society

Another Look at PurposeAnother Look at Purpose Company Purpose Learning Community ST: Capable People LT: Learning to Improve Learning Enterprise ST: Capable Partners LT: Learning Enterprise Internal People Business External Value-Adding Contributor ST: Profitable LT: Growth and Contributing to Society Lean Systems ST: Capable Processes LT: Value Stream Improvement

Value Drives ProfitabilityValue Drives Profitability  Value  relative worth, utility, or importance of something  Profitability is also  the difference between the customer’s perception of value and the cost of creating it  Value has different meanings to different types of customers Profitability  Selling at a price greater than the cost of producing a product or service

Value Attributes of ConsumersValue Attributes of Consumers Consumer  Product (service) performance and benefits  Cost – What does it cost for the total time of ownership?  Quality – Does it meet my needs?  Convenience – How easy is it to get?  Timeliness – How quickly can I get it?  Personalization – Will the business treat me as special? Do they know me?  Ethical Issues – Is the business acting responsibly? Ethical Issues  Style/Fashion – Is the product the most current style?  Technology – Do I need technical skills to use this product?

Value Attributes of Business Customers  Business  Potential to add value to the products or services they sell to other customers  Return on investment is the key criterion  Cost – What does it cost for the total time of ownership?  Quality – Does it meet our specifications?  Delivery Dependability – Does the firm meet delivery promises?  Flexibility – Can they adapt to special needs?  Response Time – How quickly can they get it to us?

Consumption ExperienceConsumption Experience  Provider selection  Purchase or Service experience  Product or Service use  Maintenance, repair, etc.  Product disposal and replacement  Or repeat service Studying the consumption experience is crucial to understanding the value proposition

Definition of FlowDefinition of Flow  Speeding up the delivery of Value to the Customer (internal or external) approaching the value added time

Definition of WasteDefinition of Waste  Anything that delays flow of value to customers (internal or external)

Value StreamValue Stream Basic Producer ConvertersFabricatorsAssemblers Support Services Transport Storage Finance, etc.