1. Lin/Operations/Lean Ops1 Lean Operations Module u House Building Game »The transition to Lean Ops u The Paradigm of Lean Operations: The ideal »Basic philosophy of Lean Ops »Methods for synchronization & waste reduction »Managing variety & flexibiltiy u Approaching the ideal : TPS »Continuous improvement »Toyota Production System (TPS)

2. Lin/Operations/Lean Ops2 Paradigm of Lean Operations: In Search for the Holy Grail = The ideal Process u Synchronization of all flows »1 x 1 »production on demand »defect free u At lowest possible cost u Waste = Gap between ideal and actual è How do we set up a system to continually reduce waste ? 1. Improving synchronization 2. Visibility for continuous improvement

3. Lin/Operations/Lean Ops3 Toyota’s waste elimination in Operations 1. Overproduction 2. Waiting 3. Inessential handling 4. Non-value adding processing 5. Inventory in excess of immediate needs 6. Inessential motion 7. Correction necessitated by defects

4. Lin/Operations/Lean Ops4 House Game Improvements: What did your team do?

5. Lin/Operations/Lean Ops5 Lean Tool #1: Cut Batch Sizes A Simple Example u What is the theoretical flow time of the process? u What is the capacity of the process? u What does that imply for the amount of inventory needed in the process? 1 min/job A B C D

6. Lin/Operations/Lean Ops6 Synchronize: Cut Batch Sizes Batch Mfg (Batch size = 4) Flow Mfg (Batch size = 1) Example: A 1 min/job B C D Elapsed Time 1 1 1 1 1 0 4 8 2 2 2 2 2 3 3 3 3 12 4 4 4 BCD A 1-4 0 4 8 5-8 9-12 12 13-16 16 20 A BCD 5 5 6 17-20 5-8 1-4 9-12 1-4 13-16

7. Lin/Operations/Lean Ops7 Lean Tool #2: customer demand pulls product -- Synchronization with demand Supplier inputsoutputs ProcessCustomer PUSH: Inputs availability triggers execution Supplier inputsoutputs ProcessCustomer PULL: Outputs need triggers execution

8. Lin/Operations/Lean Ops8 Implementation: Kanban Production Control Systems Kanban Processing center i Processing center i + 1 WIP Job

9. Lin/Operations/Lean Ops9 Synchronize: Just-In-Time operations JIT = have exactly what is needed, in the quantity it is needed, when it is needed, where it is needed. u Reduce transfer batches u Pull rather than push work u Set up cells

10. Lin/Operations/Lean Ops10 Lean Tool #3: From Functional Layoutto Cells Production Control FA Base Cut Roof Cut Base Assy Production Control FA Base Cut Roof Cut Base Assy Production Control FA Base Cut Roof Cut Base Assy

11. Lin/Operations/Lean Ops11 Managing Flows: the Process View & product cells u Recall: “By rethinking the IBM Austin assembly plant and introducing cells, distance traveled by a card was cut from 1.5 miles to 200 yards. Floor space was reduced to half and production tripled with about the same number of workers.” u Pro’s of cells: u Con’s of cells:

12. Lin/Operations/Lean Ops12 Teams in Cells and Lean Ops: Human Resources issues u Advantages –Consistent with the moral ideal of “autonomy.” –Empowers the workforce through participation and autonomy in managing daily activities –Gives unprecedented responsibility to workers: »Immediate and impartial feedback of problems »Investigation of process improvements »Monitoring quality »They also gain better understanding of the process u Challenges: –Less WIP means more tight coupling and less autonomy »Rigid procedures and interdependence of cells –Team dynamics: incentives, team pressure, … –From monthly 30-day goals before to 3-minute goals now »Does not leave much room for variability

13. Lin/Operations/Lean Ops13 Lean Tool #4: Quality at the Source

14. Lin/Operations/Lean Ops14 Quality at the Source u Fool-proof/Fail-safe design (Poka-Yoke) u Inspection –Self –Automated (Jidoka) u Line-stopping empowerment (Andon) u Human infrastructure

15. Lin/Operations/Lean Ops15 How to run Lean Operations: Managing Variety u Monthly Production Requirement:  How should production be scheduled for the month?

16. Lin/Operations/Lean Ops16 Synchronize: Heijunka Mixed Level/Balanced Production Batch Production Schedule Mixed Production Schedule (AAAABBBB..)(ABAB...) Product Apr/12.................15...........................30 Apr/12....................15.......................30 A B time FGI time FGI

17. Lin/Operations/Lean Ops17 Reducing Waste: Reduced Setup Times u What happens if we have long setup/changeover times? u How do synchronized production with variety (product mix)?

18. Lin/Operations/Lean Ops18 Synchronize: Heijunka Uniform Plant Loading u This does not mean building a single product. u Rather: –maintain a stable mix of products, –and firm frozen schedules based on actual orders u Benefits: u Costs:Must reduce scale economies

19. Lin/Operations/Lean Ops19 Reducing Waste: Mixed-Load Pickup and Delivery Part A Plant Part B Plant Part C Plant Assembly Line Part A Plant Part B Plant Part C Plant Assembly Line Individual Pickup Mixed-Load Pickup

20. Lin/Operations/Lean Ops20 THE DICE GAME Average Capacity of Each Stage = OUTPUT Buffer INPUT Buffer 6 Face Fair Dice Average Process Capacity = Play The Game Unfair Dice which rolls into either 3 or 4 Average Capacity of Each Step = Average Capacity of The Process =

21. Lin/Operations/Lean Ops21 The impact of inventory and variability: Output of Match Game 6-face die (  =1.9) 2-face die (  =0.7)

22. Lin/Operations/Lean Ops22 Reducing waste: Increase Problem Visibility Lower the Water to Expose the Rocks Scrap & Rework Missed Due Dates Too Much Space Late Deliveries Poor Quality Machine Downtime Engineering Change Orders Long queues Too much paperwork 100% inspection Inventory

23. Lin/Operations/Lean Ops23 Time plays the role of Inventory in Lean Service Operations TIME

24. Lin/Operations/Lean Ops24 Toyota Motor Manufacturing, USA

25. Lin/Operations/Lean Ops25 Toyota financial performance Fig 1: The Economist, 2005. Fig 2: Barron’s 2004.

26. Lin/Operations/Lean Ops26 Impact of Toyota Name on Resale Value 2002 Model Year MSRP 2005 Resale Value w/45K miles Resale/ MSRP Corolla CE $ 12,568$ 10,05080% S $ 12,793$ 10,80084% LE $ 13,383$ 10,50078% Prizm Base $ 14,330 $ 8,72561% Lsi $ 16,395 $ 9,58058% Resale values taken from Cars.com for average condition January, 2005.

27. Lin/Operations/Lean Ops27 The Changing Cost of Warranty Management Warranty Problems per Vehicle vs. Warranty Costs (*) (**) (*)JD Power 1QS, May 2001(**) Business Week Article, June 25, 2001.

28. Lin/Operations/Lean Ops28 Continuous Improvement: Kaizen u Increase visibility of waste u Targeted improvements –Active worker involvement –Time for experimentation –Supplier involvement u Exploratory stress u Human infrastructure

29. Lin/Operations/Lean Ops29.... Lean Operations: Best Implementation is TPS u TPS is a production management system that aims for the “ideal” through continuous improvement u Includes, but goes way beyond JIT. Pillars: –Synchronization –Quality at Source –Continuous Improvement (Kaizen): through visibility & empowerment

30. Lin/Operations/Lean Ops30 Learning Objectives Lean Operations u Paradigm of Lean Operations: ÕStrive for the ideal by eliminating waste u Flow Synchronization –Reduced batch sizes »Level Mixed Production: Heijunka –Pull production control systems (vs. push) »Implementation: Kanban –Layout: Cellular operations –Quality at the source u Continuous Improvement –Increase problem visibility (river analogy) –Kaizen