1. Lean Management
Class 52/16/11

2. Learning Objectives After completing the chapter you will:
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Learning Objectives
After completing the chapter you will:
Understand the concepts of the Toyota Production System and lean management
Learn how a production pull system works
Understand how to eliminate waste in processes
Understand the “rules” of lean management
Understand how to accomplish lean production
See examples of lean concepts applied to manufacturing and service systems

3. 12-3
Lean Production
Lean Production can be defined as an integrated set of activities designed to achieve high-volume production using minimal inventories (raw materials, work in process, and finished goods)
Lean Production also involves the elimination of waste in production effort
Lean Production also involves the timing of production resources (i.e., parts arrive at the next workstation “just in time”) 3

4. Lean thinking
Womack and Jones (1996) defined the principles of lean thinking:
Define value precisely from the perspective of the end customer in terms of a specific product with specific capabilities offered at a specific price and time
Differentiate value from muda, or waste
Can be difficult due to the many steps across departments and companies
Identify the entire value stream for each product or product family and eliminate waste
Apply to three critical activities: product definition, information management, and physical transformation

5. Lean thinking Make the remaining value-creating steps flow
No waiting, downtime, or scrap within or between steps
Suggest application of kaikuku, or radical improvement, as opposed to kaizen, or continuous improvement
Design and provide what the customer wants only when the customer wants it
Let the customer pull the product from the value stream

6. Pursue perfection Lean Thinking
There is no end to the process of reducing effort
The four initial steps interact with one another in a virtuous circle
More precisely defined value challenges steps in value stream to reduce waste
getting value to flow faster exposes muda
harder customers pull, the more impediments to flow revealed

7. Lean Thinking: Lantech
Developed a device that would stretch-wrap pallets with plastic film
Built its four types of machines in batches, called a batch and queue system
Also used this system for processing orders and developing new products
Great complexity with its processes, long time to complete processes, and much of the process time was queue time
Moved to total quality management after it lost a patent infringement suit
Empowered workers but didn’t address processes

8. Lean Thinking: Lantech
New VP of Operations hired an established a dedicated process flow for each of the four product families
Equipment grouped together in four cells
No batches – one unit at a time: continuous flow
All jobs directly linked – no buffers of inventory
Set takt time: available time in a period / customer orders in that period
Changeovers done quickly to accommodate product options
Applied same techniques to office and product development

9. Features of Lean Production
Management philosophy
“Pull” system though the plant
WHAT IT IS
Attacks waste
Exposes problems and bottlenecks
Achieves streamlined production
WHAT IT DOES
Employee participation
Industrial engineering/basics
Continuing improvement
Total quality control
Small lot sizes
WHAT IT REQUIRES
Stable environment
WHAT IT ASSUMES 13

10. Then sub-assembly work is pulled forward by that demand…
Here the customer starts the process, pulling an inventory item from Final Assembly…
Pull System
Customers
Sub
Fab
Vendor
Final
Assembly
Then sub-assembly work is pulled forward by that demand…
The process continues throughout the entire production process and supply chain 4

11. The Toyota Production System
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The Toyota Production System
Based on two philosophies:
1. Elimination of waste
2. Respect for people 5

12. Focused factory networks Group technology Quality at the source
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Elimination of Waste
Focused factory networks
Group technology
Quality at the source
JIT production
Uniform plant loading
Kanban production control system
Minimized setup times 6

13. Minimizing Waste: Focused Factory Networks
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These are small specialized plants that limit the range of products produced (sometimes only one type of product for an entire facility)
Minimizing Waste: Focused Factory Networks
Some plants in Japan have as few as 30 and as many as 1000 employees
Coordination
System Integration 7

14. Minimizing Waste: Group Technology (Part 1)
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Minimizing Waste: Group Technology (Part 1)
Note how the flow lines are going back and forth
Using Departmental Specialization for plant layout can cause a lot of unnecessary material movement
Saw
Saw
Saw
Grinder
Grinder
Heat Treat
Lathe
Lathe
Lathe
Press
Press
Press 8

15. Minimizing Waste: Group Technology (Part 2)
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Minimizing Waste: Group Technology (Part 2)
Revising by using Group Technology Cells can reduce movement and improve product flow
Grinder 1 2
Lathe
Press
Saw
Lathe
Heat Treat
Grinder A B
Lathe
Press
Saw
Lathe 9

16. Minimizing Waste: Uniform Plant Loading (heijunka)
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Minimizing Waste: Uniform Plant Loading (heijunka)
Suppose we operate a production plant that produces a single product. The schedule of production for this product could be accomplished using either of the two plant loading schedules below.
Not uniform Jan. Units Feb. Units Mar. Units Total
1,200 3,500 4,300 9,000 or
Uniform Jan. Units Feb. Units Mar. Units Total
3,000 3,000 3,000 9,000
How does the uniform loading help save labor costs? 12

17. Minimizing Waste: Inventory Hides Problems
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Minimizing Waste: Inventory Hides Problems
Example: By identifying defective items from a vendor early in the production process the downstream work is saved
Work in
process
queues
(banks)
Change
orders
Engineering design
redundancies
Vendor
delinquencies
Scrap
Design
backlogs
Machine
downtime
Decision
Inspection
Paperwork
backlog
Example: By identifying defective work by employees upstream, the downstream work is saved 14

18. Minimizing Waste: Kanban Production Control Systems
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Minimizing Waste: Kanban Production Control Systems
This puts the system back were it was before the item was pulled
Once the Production kanban is received, the Machine Center produces a unit to replace the one taken by the Assembly Line people in the first place
Withdrawal
kanban
Storage Part A
Storage Part A
Machine Center
Assembly Line
Production kanban
Material Flow
Card (signal) Flow
The process begins by the Assembly Line people pulling Part A from Storage 15

19. Cooperative employee unions Subcontractor networks
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Respect for People
Level payrolls
Cooperative employee unions
Subcontractor networks
Bottom-round management style
Quality circles (Small Group Involvement Activities or SGIA’s) 21

20. Toyota Production System’s Four Rules: Spear and Bover (1999)
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Toyota Production System’s Four Rules: Spear and Bover (1999)
All work shall be highly specified as to content, sequence, timing, and outcome
Every customer-supplier connection must be direct, and there must be an unambiguous yes- or-no way to send requests and receive responses
The pathway for every product and service must be simple and direct
Any improvement must be made in accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization 21

21. Rule 1: How People Work Focus on the details
1st unstated rule: every activity must be specified for success
May seem obvious, but the majority of managers outside Toyota do not take this approach)

22. Rule 1: Car Seat Example
“ When a car’s seat is installed, the bolts are always tightened in the same order, the time it takes to turn each bolt is specified, and so is the torque to which the bolt should be tightened. Such exactness is applied not only to the repetitive motions of production workers but also to the activities of all people regardless of functional role.”

23. Rule 1: Toyota’s Method
Seven-step process with specific steps and lengths of time
There is a well developed sequence of events for each particular job
When employees deviate from these details it is obvious

24. Rule 1: Toyota’s Hypotheses
Performing the activity tests two hypotheses:
1) The person doing the activity is capable of performing it correctly
2) Performing the activity creates the expected outcome
Example:
“If they can’t insert the seat in the specified way within the specified amount of time, then they are clearly refuting at least one of the hypotheses, indicating that the activity needs to be redesigned or the worker must be trained again.”

25. Rule 2: How People Connect
Every connection must be standardized & direct, specifying:
people involved
form & quantity of goods and services
way requests are made by each customer
expected time that requests will be met
Rule creates supplier-customer relationship
Result: “…no gray zones in deciding who provides what to whom and when.”

26. Rule 2: Application
Toyota uses kanban cards to set up direct links between suppliers and customers
Other companies use supervisors to answer calls for help; no specific person assigned
“…when something is everyone’s problem it becomes no one’s problem.”
Toyota’s workers expected to ask for help
Testing hypothesis keeps system flexible, allowing for constructive adjustment

27. Rule 3: How the Production Line is Constructed
All products and services flow along a simple specified path
no forks or loops to convolute the flow; all direct to specific persons or machines
change only when production line is expressly redesigned
Toyota production lines accommodate many types of products
All of the rules allow Toyota to conduct experiments and remain flexible and responsive

28. Rule 4: How to Improve What can be improved:
Production activities
Connections between workers or machines
Manufacturing pathways
Improvements must be made:
Using the scientific method
Under the guidance of a teacher
At the lowest possible organizational level

29. Rule 4: How to Improve How do you use the scientific method?
Frame problems using first three rules
Formulate and test hypotheses
Question assumptions
Don’t confuse goals with predictions based on hypotheses
e.g. Reducing changeover time by two-thirds

30. Rule 4: How to Improve Who does the improvement?
Frontline workers, with assistance from supervisors
Problem scale determines how many organizational levels are included in the solution
Toyota’s commitment to learning
Operations Management Consulting Division (OMCD)
Toyota Supplier Support Center (TSSC)

31. Notion of the Ideal People motivated by a common goal Very pervasive
Sense of what the ideal production system would be
Make improvements beyond what is “necessary”
Very pervasive
Essential to the Toyota Production System

32. Notion of the Ideal Concrete Definition:
The output of an ideal person, group of people, or machine:
Is defect free;
Can be delivered one request at a time;
Can be supplied on demand in the version requested;
Can be delivered immediately;
Can be produced without waste;
Can be produced in a safe work environment.

33. Organizational Impact of the Rules
The rules create an organization with a nested modular structure by:
Making people capable and responsible for their own work
Standardizing connections between individual customers and suppliers
Pushing the resolution of connection and flow problems to the lowest possible level

34. Organizational Impact of the Rules
Benefit: People can implement design changes in one part without unduly affecting other parts
Toyota can delegate a lot of responsibility without creating chaos

35. Countermeasures Kanbans or andon cords
Temporary responses to specific problems
Serve until a better approach is found or conditions change
NOT solutions
Building up inventory of materials
Ideal system would have no need for inventory
Required in certain circumstances:
Unpredictable downtime or yields
Time consuming setups
Volatility in the mix and volume of consumer demands

36. Lean Implementation Requirements: Design Flow Process
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Lean Implementation Requirements: Design Flow Process
Link operations
Balance workstation capacities
Redesign layout for flow
Emphasize preventive maintenance
Reduce lot sizes
Reduce setup/changeover time 23

37. Lean Implementation Requirements: Total Quality Control
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Lean Implementation Requirements: Total Quality Control
Worker responsibility
Measure SQC
Enforce compliance
Fail-safe methods
Automatic inspection 24

38. Lean Implementation Requirements: Stabilize Schedule
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Lean Implementation Requirements: Stabilize Schedule
Level schedule
Underutilize capacity
Establish freeze windows 25

39. Lean Implementation Requirements: Work with Vendors
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Lean Implementation Requirements: Work with Vendors
Reduce lead times
Frequent deliveries
Project usage requirements
Quality expectations 27

40. Lean Implementation Requirements: Reduce Inventory More
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Lean Implementation Requirements: Reduce Inventory More
Look for other areas
Stores
Transit
Carousels
Conveyors 28

41. Lean Implementation Requirements: Improve Product Design
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Lean Implementation Requirements: Improve Product Design
Standard product configuration
Standardize and reduce number of parts
Process design with product design
Quality expectations 29

42. Lean Implementation Requirements: Concurrently Solve Problems
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Lean Implementation Requirements: Concurrently Solve Problems
Root cause
Solve permanently
Team approach
Line and specialist responsibility
Continual education 29

43. Lean Implementation Requirements: Measure Performance
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Lean Implementation Requirements: Measure Performance
Emphasize improvement
Track trends 29

44. Lean in Services (Examples)
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Lean in Services (Examples)
Organize Problem-Solving Groups
Upgrade Housekeeping
Upgrade Quality
Clarify Process Flows
Revise Equipment and Process Technologies 30

45. Lean Services: Jefferson Pilot Financial
Jefferson Pilot Financial is an insurance company searching for new ways to grow
Had rising customer expectations
New products with increased complexity
Had to deal with specialized companies with lower prices
Needed a way to improve service and reduce costs

46. Steps Toward Improvement
Wanted key differentiator to be superior service
Needed to analyze operations of business units
With analysis, JPF realized they could increase revenue through improved operations
Looked to Japanese practices of “lean production”

47. Lean Production
JPF could benefit because its operations were similar to that of a car company
In 2000, appointed “lean team”
Initiative has delivered impressive results
Halved time of receipt to application of policy
Reduced labor cost by 26%
Reduced rate of errors on policies by 40%
Resulted in 60% increase in new premiums

48. Building the Model Cell
Company can introduce a lean system without significantly disrupting operations
“Model cell” rollout
- company sets up microcosm of its entire process
-Allows managers to conduct experiments and smooth out kinks while working towards optimal design

49. Building the Model Cell
Jefferson Pilot Financial chose section of new business unit devoted to processing policies
Unit had 10 employees and handled policies that did or did not require physician statements
Lean production built around continuous-flow processing
Traditional methods have large batches processed at each step and passed along only after an entire batch has been processed
If not caught quickly, errors can occur on large scale
Applied seven design practices of Lean manufacturing to redesign Cell’s Workflow

50. Redesigning the Cell’s Work Flow
Placing Linked Processes near One Another
All steps in a process should be located close to one another
JPF- Work groups located by function
ex: Employees who receive applications and employees who sort them on different floors
After teams were placed next to each other process was done faster and employees were more aware of being part of a whole

51. Redesigning the Cell’s Work Flow
Standardizing Procedures
JPF employees had freedom in managing work, which made it difficult for other workers to fill in
ex: Different systems for storing files
Lean Team insists files be store alphabetically and in same drawer at each workstation; standardized data entry
Made it much easier for others to help when workloads were high or workers were absent

52. Redesigning the Cell’s Work Flow
3. Eliminating Loop-Backs
Loop-Back is when work returns to a previous step for further processing which typically creates delays
Lean Team noticed all sections of each policy form were sent back to employee who received initial application
JPF split receiving team in half
-employees to assemble policies
-employees to receive applications
Reduced confusion and reduced delays and waste

53. Redesigning the Cell’s Work Flow
4. Setting a Common Tempo
Applies the concept of “Takt” (German for musical meter)
A baseline was calculated by timing new employees and challenging employees to speed the process
Then appropriate number of employees assigned to each task

54. Redesigning the Cell’s Work Flow
5. Balancing Loads
Instead of sorting applications by numerical or alphabetical order, the work is spread loaded among different teams
This keeps an even tempo and leaves no team in the process idling while another team is working

55. Redesigning the Cell’s Work Flow
6. Segregating Complexity
While balancing loads of work is important to keep a smooth flow, it is also important to separate complicated work
Some applications are more complex because they require a physicians statement
Once the tasks requiring a physician’s statement were separated into two different teams, the time to process applications dropped 80%

56. Redesigning the Cell’s Work Flow
7. Posting Performance Results
Hourly performance is posted and therefore subject to review
enables the team to review performance and see where the team is excelling and where it is lagging
Employees at first feared that if they were a laggard they would be criticized as such.
However, the postings encouraged teams to strive to improve, and also served as a way to benchmark positive performance and reward it

57. Setting Performance Goals
Always measure performance & productivity from customer’s perspective
JPF changed processing time metric
Previously measured time application was received to when it was bound, and now measure time between when customer sends application to when they receive policy
Shop-floor goals should be connected to CEO’s performance metrics
Cell productivity ties to the ratio of total acquisition expenses to value of new paid premiums

58. Setting Performance Goals
Look at suppliers through lean-production lens
Established new vendor-selection criteria
Matched metrics with lean-production requirements
Measured process and put results on white-boards for all to see

60. Rolling out the New System
Six-month rollout of lean production to rest of New Business Operations
Divided operations between status of customers and complexity of tasks
Identified other operations that could benefit from new system
Helped increase productivity and make more cost-effective capital investments

61. Convincing Skeptics
To ensure effectiveness, needed to communicate “why” and “how”
Everyone needed to understand why the process was necessary
Used plane exercise as example
Skeptics of initiative were convinced through exponential performance improvements
Staff could perform more cross-functional work and benefit from having their work visibly represented