BUAD306 Lean Operations

A flexible system of operation that uses considerably less resources than a traditional system Tend to achieve Greater productivity Lower costs Shorter cycle times Higher quality

Lean Operations Three basic elements are present in a lean operating environment: Demand driven Waste reduction Culture dedicated to continuous improvement

Lean Operations Goals Ultimate Goal: A balanced system that achieves a smooth, rapid flow of materials through the system to match supply to customer demand Supporting Goals: Eliminate disruptions Make system flexible Eliminate waste

Sources of Waste Inventory Waste from overproduction Waiting time Unnecessary transport Processing waste Product defects/rework Inefficient work methods Underutilization of employees

Lean Operations Building Blocks Product design Process design Personnel/organizational elements Manufacturing planning and control

Lean Ops – Product Design Standard parts Modular design Highly capable production systems Concurrent engineering

Lean Ops – Process Design Small lot sizes Set up time reduction Manufacturing cells  Efficiencies Limited WIP Inventory Quality Improvement Production flexibility – reduced bottlenecks Little inventory storage

Small-Lot Production Ideal size = 1 Requires less space (lower inventory costs) & capital investment Moves processes closer together (increased efficiency) Allows for greater flexibility in scheduling Makes quality problems easier to detect Makes processes more dependent on each other (increases responsibility and quality) Requires set-up time reduction!

Inventory Considerations Inventory Hides Problems Bad design Poor quality Machine breakdowns Unreliable supplier Inefficient layout Decrease inventory to expose problems

Process Design: Fail-Safe Methods Building safeguards into a process to reduce or eliminate the potential for errors during a process Examples Electric breakers Seatbelt fastener warnings ATMs that signal if a card is let in a machine

Lean Ops – Personnel/ Organizational Elements Workers as assets Cross-trained workers Continuous improvement Cost accounting Leadership/project management

Lean Ops – Manufacturing Planning & Control Level loading (smooth production) Pull systems – work moves in response to demand from next step Visual systems (Kanban) Close vendor relationships Reduced transaction processing Preventive maintenance, etc.

Converting to Lean Ops Get top management commitment Decide which parts need most effort by studying the current process and identifying bottlenecks Obtain support of workers Start by trying to reduce setup times Gradually convert operations Convert suppliers to JIT Prepare for obstacles* Read Text

Obstacles to Conversion Workers/management may not be cooperative – education is essential Suppliers may resist the demands of a lean system Management may not be committed Entails a change to the corporate culture– not easy to achieve Read Text

Lean Service Industries Focus is on the time needed to perform the service Speed is often order winner for services Examples: Domino’s Pizza, Fed-X, Jiffy Lube, 911, JIT publishing, etc. Read Text

Harley Davidson Quick Synopsis Why did management decide to get rid of inventory? What did they discover? The presence of what factor could have made it difficult for HD management to implement the changes it needed? Why didn’t they encounter a problem?

Harley Davidson What did HD do to ensure that employees were capable of succeeding in the new environment? What OM topics were relevant to the Harley Davidson case? Which “M” was most critical to helping the company turn-around?

Harley Davidson - Recently Bought Buell in 1998 Global expansion – 2000s Record profits Financial woes – 2008 (sales down 7+%); cut positions 2010 – Plans to set up production in India Q Revenue: up 7.5% to $1.18billion - A- rating, emerging market expansion (+15.5%)

Course Summary Key take-aways: Mathematical-based decision making Efficiency focus / cost containment Importance of forecasting Analysis = key Never be satisfied with the status quo