operations management

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LeanSystems.pptx

Class 18 Lean Systems

Instructor: Mani Lakshmanan

P300 Introduction to Operations Management

Review: Design quality & Conformance quality

How well a product’s designed features match up to the requirements of a given customer group.

Whether or not a delivered product meets its design specifications

Cost of Quality (COQ) Analysis

Prevention costs

Appraisal costs

Internal failure costs

External failure costs

A defect found in later stages is much more costly than a defect found in earlier stages

Exercise 2

What would the standard deviation in the temperature of her oven need to be if she settled for a “Three Sigma” level of quality?

If her oven exactly meets this quality level, what percentage of the time would her oven be operating at a temperature outside the acceptable range?

Sigma Level Defects per Million
66,807
6,210
233
3.4

Six Sigma quality (3.4 defects per million units produced) is probably a bit much to ask of Kristen’s old oven.

Six Sigma

Sigma Level Defects per Million
308,537
66,807
6,210
233
3.4

OM Triangle

Capacity

Inventory

Variability

reduction

Capacity, inventory, and variability reduction (information) are substitute ways to satisfy customers’ demand for products/services.

Quality and Six Sigma, Chapter 6

House Building Game

Lean Operations and TPS, Chapter 8

What is lean?

Operational processes can be described as being lean when they are very efficient and have few wasted resources.

Several terms are used to describe lean systems:

Just-in-time manufacturing (JIT)

Stockless production

Zero inventories

Toyota production systems (TPS)

Outline

Lean Systems Approach

Origins of Lean Systems

Strategic Benefit of Lean Systems

Guiding principles

Implementing Lean Systems: Tools and Techniques

Lean Systems Approach

The lean system approach is a philosophy of operations management

Emphasizes the minimization of the amount of all the resources used in the various activities of the enterprise.

Origins of Lean Systems

Taiichi Ohno, a prominent Japanese businessman, is considered to be the father of the Toyota Production System, which became Lean Manufacturing in the U.S.

Henry Ford’s mass production system

Efficient OM practice such as work standardization, ongoing employee training

Large amounts of inventory and rework

Supermarkets

Customers get

What is needed

At the time needed

In the amount needed

Lean system

View the earlier processes in the production line as a kind of store.

Outline

Lean Systems Approach

Origins of Lean Systems

Strategic Benefit of Lean Systems

Guiding principles

Implementing Lean Systems: Tools and Techniques

Strategic Benefit of Lean Systems

Fact:

Before: American laborers in automobile manufacture were nine times as productive as Japanese laborers in 1937

After: Japanese-owned automotive plants following lean were 30% more productive than U.S.-owned plants using traditional methods

Strategic Benefit of Lean Systems

Principle

Contribution Margin:

The difference between price and the firm’s direct costs (traced to specific product)

Fixed Cost:

Cost of facilities, equipment, capital, and support labor such as management and engineering

$

Production Quantity

Break-even

The amount a firms needs to sell in order to make profit

Strategic Benefit of Lean Systems

Principle

By increasing contribution margin and decreasing fixed costs lean firms reduce the break-even point

Outline

Lean Systems Approach

Origins of Lean Systems

Strategic Benefit of Lean Systems

Guiding principles

Implementing Lean Systems: Tools and Techniques

Guiding principle 1. Precisely specify value for each specific product

Decide functions and features of products and services by consumers’ requirement

Any action that does not generate value must ultimately be regarded as waste

Guiding principle 2. Identify the value stream for each product

Identify value-adding and non-value-adding steps

Optimization of the value-adding activities

Elimination of non-value-adding activities, i.e., waste

Seven Basic Types of Waste

Transportation: units moved unnecessarily

Inventory: units waiting for processing or delivery

Motion: unnecessary or excessive resource activity

Waiting: resources waiting for work/materials

Overproduction: processing more than needed

Over Processing: excessive or unnecessary steps

Defects: scrap, rework or correction

Guiding principle 2. Identify the value stream for each product

Identify value-adding and non-value-adding steps

Optimization of the value-adding activities

Elimination of non-value-adding activities, i.e., waste

Reduce waste by quantify the amount of waste, uncover the underlying root causes, and then attack these root causes

Guiding principle 3. Make Value Flow without Interruptions

Inventory represents an interruption to material flows

Inventory often hides or covers other types of waste

Buffers that hide problems

Removes the urgency needed to identify and address problems

Used to satisfy shortages caused by problems

The more inventory needed for the system to work, the less healthy the system is.

Missed Due Dates

Scrap & Rework

Machine Downtime

Late Deliveries

Too much paperwork

Inventory

Inventory hides problems and slows flow

20

Missed Due Dates

Scrap & Rework

Machine Downtime

Late Deliveries

Too much paperwork

Inventory

Inventory hides problems and slows flow

21

Guiding principle 4. Let the Customer Pull Value from the Producer

Pull System: processes are activated by actual, not forecasted demand

Customer get

what they want

when they want

where they want

Kanban (Pull) Scheduling: output generated in response to actual demand

Uses a signaling device to regulate flows

Guiding Principle 5. Pursue Perfection

Continuous improvement is always possible.

Outline

Lean Systems Approach

Origins of Lean Systems

Strategic Benefit of Lean Systems

Guiding principles

Implementing Lean Systems: Tools and Techniques

Implementing Lean Systems: Tools and Techniques

Total Productive Maintenance (TPM)

Reduce the variability of equipment breakdowns

Goal of zero unplanned downtime

Focus on preventing problems rather than fixing them

Focused Factories

Reduce the variability of customer demand

Group together similar customers and then designing and implementing production systems to serve these specific customers

Implementing Lean Systems: Tools and Techniques

Kanban (Pull) Scheduling: output generated in response to actual demand

Reduce variability of WIP/Inventory caused by random demand

Uses a signaling device to regulate flows

Kanban Scheduling

8–27

Storage Part A

Storage Part A

Machine Center

Assembly Line

Material Flow

Card (signal) Flow

Withdrawal kanban

Production kanban

Implementing Lean Systems: Tools and Techniques

Setup Reduction: shorter, easier changeover leads to smaller batches

Single Minute Exchange of Dies (SMED) approach

Statistical Process Control (SPC): use of statistical tools to monitor processes

Quality at the Source (Q@S): eliminating defects at their origination points

Simplification/Standardization: reduce lead time and process variances of all sorts.

Reduce variability in conformance quality