1. 8 – 1 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Lean Systems 8 For Operations Management, 9e by Krajewski/Ritzman/Malhotra © 2010 Pearson Education PowerPoint Slides by Jeff Heyl

2. 8 – 2 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Lean Systems Lean systems affect a firm’s internal linkages between its core and supporting processes and its external linkages with its customers and suppliers. One of the most popular systems that incorporate the generic elements of lean systems is the just-in- time (JIT) system. The Japanese term for this approach is Kaizen. The key to kaizen is the understanding that excess capacity or inventory hides process problems. The goal is to eliminate the eight types of waste.

3. 8 – 3 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Eight Wastes TABLE 8.1 | THE EIGHT TYPES OF WASTE OR MUDA WasteDefinition 1.OverproductionManufacturing an item before it is needed. 2.Inappropriate Processing Using expensive high precision equipment when simpler machines would suffice. 3.WaitingWasteful time incurred when product is not being moved or processed. 4.TransportationExcessive movement and material handling of product between processes. 5.MotionUnnecessary effort related to the ergonomics of bending, stretching, reaching, lifting, and walking. 1.InventoryExcess inventory hides problems on the shop floor, consumes space, increases lead times, and inhibits communication. 1.DefectsQuality defects result in rework and scrap, and add wasteful costs to the system in the form of lost capacity, rescheduling effort, increased inspection, and loss of customer good will. 1.Underutilization of Employees Failure of the firm to learn from and capitalize on its employees’ knowledge and creativity impedes long term efforts to eliminate waste.

4. 8 – 4 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Continuous Improvement Figure 8.1 – Continuous Improvement with Lean Systems

5. 8 – 5 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Supply Chain Considerations Close supplier ties  Low levels of capacity slack or inventory  Look for ways to improve efficiency and reduce inventories throughout the supply chain  JIT II  In-plant representative  Benefits to both buyers and suppliers Small lot sizes  Reduces the average level of inventory  Pass through system faster  Uniform workload and prevents overproduction  Increases setup frequency

6. 8 – 6 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Considerations Pull method of work flow  Push method  Pull method Quality at the source  Jidoka  Poka-yoke  Anadon Uniform workstation loads  Takt time  Heijunka  Mixed-model assembly  Lot size of one

7. 8 – 7 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Process Considerations Standardized components and work methods Flexible workforce Automation Five S (5S) practices Total Preventive Maintenance (TPM)

8. 8 – 8 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Five S Method TABLE 8.2 | 5S DEFINED 5S Term5S Defined 1.SortSeparate needed from unneeded items (including tools, parts, materials, and paperwork), and discard the unneeded. 2.StraightenNeatly arrange what is left, with a place for everything and everything in its place. Organize the work area so that it is easy to find what is needed. 3.ShineClean and wash the work area and make it shine. 4.StandardizeEstablish schedules and methods of performing the cleaning and sorting. Formalize the cleanliness that results from regularly doing the first three S practices so that perpetual cleanliness and a state of readiness are maintained. 5.SustainCreate discipline to perform the first four S practices, whereby everyone understands, obeys, and practices the rules when in the plant. Implement mechanisms to sustain the gains by involving people and recognizing them via a performance measurement system.

9. 8 – 9 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Designing Lean System Layouts Line flows recommended  Eliminate waste One worker, multiple machines (OWMM) Group technology  Group parts or products with similar characteristics into families

10. 8 – 10 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Group Technology Figure 8.2 – One-Worker, Multiple-Machines (OWMM) Cell

11. 8 – 11 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Group Technology Drilling DD DD Grinding GG GG GG Milling MM MM MM Assembly AA AA Lathing Receiving and shipping L LL LL LL L (a) Jumbled flows in a job shop without GT cells Figure 8.3 – Process Flows Before and After the Use of GT Cells

12. 8 – 12 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Group Technology (b) Line flows in a job shop with three GT cells Cell 3 LM G G Cell 1 Cell 2 Assembly area A A L M D L L M Shipping D Receiving G Figure 8.3 – Process Flows Before and After the Use of GT Cells

13. 8 – 13 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Kanban System Receiving post Kanban card for product 1 Kanban card for product 2 Fabrication cell O1O1 O2O2 O3O3 O2O2 Storage area Empty containers Full containers Assembly line 1 Assembly line 2 Figure 8.4 – Single-Card Kanban System

14. 8 – 14 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Kanban System Storage area Empty containers Full containers Receiving post Kanban card for product 1 Kanban card for product 2 Fabrication cell O1O1 O2O2 O3O3 O2O2 Assembly line 1 Assembly line 2 Figure 8.4 – Single-Card Kanban System

15. 8 – 15 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Kanban System Storage area Empty containers Full containers Receiving post Kanban card for product 1 Kanban card for product 2 Fabrication cell O1O1 O2O2 O3O3 O2O2 Assembly line 1 Assembly line 2 Figure 8.4 – Single-Card Kanban System

16. 8 – 16 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Kanban System Storage area Empty containers Full containers Receiving post Kanban card for product 1 Kanban card for product 2 Fabrication cell O1O1 O2O2 O3O3 O2O2 Assembly line 1 Assembly line 2 Figure 8.4 – Single-Card Kanban System

17. 8 – 17 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Kanban System Storage area Empty containers Full containers Receiving post Kanban card for product 1 Kanban card for product 2 Fabrication cell O1O1 O2O2 O3O3 O2O2 Assembly line 1 Assembly line 2 Figure 8.4 – Single-Card Kanban System

18. 8 – 18 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Kanban System Storage area Empty containers Full containers Receiving post Kanban card for product 1 Kanban card for product 2 Fabrication cell O1O1 O2O2 O3O3 O2O2 Assembly line 1 Assembly line 2 Figure 8.4 – Single-Card Kanban System

19. 8 – 19 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Kanban System Storage area Empty containers Full containers Receiving post Kanban card for product 1 Kanban card for product 2 Fabrication cell O1O1 O2O2 O3O3 O2O2 Assembly line 1 Assembly line 2 Figure 8.4 – Single-Card Kanban System

20. 8 – 20 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. The Kanban System KANBAN Part Number:1234567Z Location:Aisle 5 Bin 47 Lot Quantity:6 Supplier:WS 83 Customer:WS 116 1.Each container must have a card 2.Assembly always withdraws from fabrication (pull system) 3.Containers cannot be moved without a kanban 4.Containers should contain the same number of parts 5.Only good parts are passed along 6.Production should not exceed authorization

21. 8 – 21 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Number of Containers Two determinations Number of units to be held by each container  Determines lot size Number of containers  Estimate the average lead time needed to produce a container of parts Little’s law  Average work-in-process inventory equals the average demand rate multiplied by the average time a unit spends in the manufacturing process

22. 8 – 22 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Number of Containers WIP = (average demand rate)  (average time a container spends in the manufacturing process) + safety stock WIP = kc kc = d ( w + p )(1 + α) k = d ( w + p )(1 + α) c where k =number of containers d =expected daily demand for the part w =average waiting time p =average processing time c =number of units in each container α =policy variable

23. 8 – 23 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Number of Containers Formula for the number of containers k = Average demand during lead time + Safety stock Number of units per container WIP =(average demand rate)(average time a container spends in the manufacturing process) + safety stock

24. 8 – 24 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Determining the Appropriate Number of Containers EXAMPLE 8.1 The Westerville Auto Parts Company produces rocker-arm assemblies A container of parts spends 0.02 day in processing and 0.08 day in materials handling and waiting Daily demand for the part is 2,000 units Safety stock equivalent of 10 percent of inventory a.If each container contains 22 parts, how many containers should be authorized? b.Suppose that a proposal to revise the plant layout would cut materials handling and waiting time per container to 0.06 day. How many containers would be needed?

25. 8 – 25 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Determining the Appropriate Number of Containers SOLUTION a. If d =2,000 units/day, p =0.02 day, α =0.10, w =0.08 day, and c =22 units k = 2,000(0.08 + 0.02)(1.10) 22 = = 10 containers 220 22 b.Figure 8.5 from OM Explorer shows that the number of containers drops to 8. Figure 8.5 –OM Explorer Solver for Number of Containers

26. 8 – 26 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Application 8.1 Item B52R has an average daily demand of 1000 units. The average waiting time per container of parts (which holds 100 units) is 0.5 day. The processing time per container is 0.1 day. If the policy variable is set at 10 percent, how many containers are required? k = d ( w + p )(1 + α) c = 6.6, or 7 containers = 1,000(0.05 + 0.01)(1 + 0.1) 100

27. 8 – 27 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Other Kanban Signals Cards are not the only way to signal need Container system Containerless system

28. 8 – 28 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Value Stream Mapping (VSM) Value stream mapping is a qualitative lean tool for eliminating waste Creates a visual “map” of every process involved in the flow of materials and information in a product’s value chain Work plan and implementation Future state drawing Current state drawing Product family Figure 8.6 – Value Stream Mapping Steps

29. 8 – 29 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Value Stream Mapping Figure 8.7 – Selected Set of Value Stream Mapping Icons

30. 8 – 30 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Value Stream Mapping Figure 8.8 –A Representative Current State Map for a Family of Retainers at a Bearings Manufacturing Company

31. 8 – 31 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. House of Toyota A key challenge is to bring underlying philosophy of lean to employees in an easy-to-understand fashion The house conveys stability The roof represents the primary goals of high quality, low cost, waste elimination, and short lead-times The twin pillars, which supports the roof, represents JIT and jidoka

32. 8 – 32 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. House of Toyota Highest quality, lowest cost, shortest lead time by eliminating wasted time and activity Just in Time (JIT)  Takt time  One-piece flow  Pull system Culture of Continuous Improvement Jidoka  Manual or automatic line stop  Separate operator and machine activities  Error-proofing  Visual control Operational Stability HeijunkaStandard WorkTPMSupply Chain Figure 8.9 – House of Toyota

33. 8 – 33 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Operational Benefits and Implementation Issues Organizational considerations  Human costs of lean systems  Cooperation and trust  Reward systems and labor classifications Process considerations Inventory and scheduling  Schedule stability  Setups  Purchasing and logistics

34. 8 – 34 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem A company using a kanban system has an inefficient machine group. For example, the daily demand for part L105A is 3,000 units. The average waiting time for a container of parts is 0.8 day. The processing time for a container of L105A is 0.2 day, and a container holds 270 units. Currently, 20 containers are used for this item. a.What is the value of the policy variable, α? b.What is the total planned inventory (work-in-process and finished goods) for item L105A? c.Suppose that the policy variable, α, was 0. How many containers would be needed now? What is the effect of the policy variable in this example?

35. 8 – 35 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem SOLUTION a.We use the equation for the number of containers and then solve for α: k = d ( w + p )(1 + α) c so α = 1.8 – 1 = 0.8 = 3,000(0.8 + 0.2)(1 + α) 270 (1 + α) = = 1.8 20(27) 3,000(0.8 + 0.2)

36. 8 – 36 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall. Solved Problem b.With 20 containers in the system and each container holding 270 units, the total planned inventory is 20(270) = 5,400 units c.If α = 0 k = = 11.11, or 12 containers 3,000(0.8 + 0.2)(1 + 0) 270 The policy variable adjusts the number of containers. In this case, the difference is quite dramatic because w + p is fairly large and the number of units per container is small relative to daily demand.

37. 8 – 37 Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall.