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Lean Enterprise

Chapter 12

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Learning Objectives

Describe the concepts of lean production and lean thinking.

Explain the different kinds oaf waste present in a production system.

Describe the components of a lean production system.

Discuss new advances related to lean thinking.

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Toyota and Lean Thinking

Toyota sold more than 2.3 million vehicles in the first three months of 2008.
The overarching reason for its phenomenal performance over the years has to do with a production philosophy known as the Toyota Production System or as lean production.
Toyota pioneered the “just-in-time” manufacturing system, in which suppliers send parts daily (or several times a day) and are notified electronically when the assembly line is running out.
Toyota’s President, Katsuaki Watanabe said, “What is important is to be number one in quality.”

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What is Lean Production?

Lean production: a sociotechnical production system whose main objective is to eliminate waste by concurrently reducing or minimizing supplier, customer and internal variability
The idea of the of Toyota Production System (TPS) is to produce the kind of units needed, at the time needed, and in the quantities needed, so that unnecessary intermediate and finished product inventories can be eliminated.
Lean thinking is more than a set of techniques and approaches; it is a mindset for all employees and managers that focuses on waste elimination and variability reduction in all business processes.
Lean production concepts can be easily applied in service-sector applications as well.

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Lean Thinking

Scholars credit Henry Ford with developing the original principles behind lean thinking such as the Ford Production System (FPS).
The Toyota Production System and Japanese manufacturing approaches such as just-in-time (JIT) inventory, kanban, and kaizen received increased interest from US manufacturers during the 1970s when Japanese products started gaining market share during the U.S. oil crisis.

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Lean Production Core Components

Lean principle 1: The value in a production system should be defined from the customers’ point of view for each product family.
Lean principle 2: Each production step should be evaluated in terms of its contribution to value creation. Those actions that do not add value should be eliminated.
Lean principle 3: The value-creating sequence of steps should be organized in a tight and integrated sequence to develop a smooth flow toward the customer.
Lean principle 4: Instead of organizing production to push finished products to the customers, products pulled by the customers should be the driver for planning, organizing, and scheduling upstream production activities.
Lean principle 5: All members of the organization should pursue perfection through continuous improvement.

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Figure 12.3: Components of a Lean Production System According to Shah and Ward (2007)

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Discussion Starter

Can we use lean production in a service environment?

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Lean Health Care
at the Hospital for Sick Children

The Hospital for Sick Children (SickKids) has applied lean production principles to improve the efficiency of several of its units, such as it cytogenetics analysis laboratory.
An employee group was established, and the demand on the laboratory for each type of data was identified.
Based on the Current State Map, the employee group identified the areas of the process that could be changed to improve workflow and reduce waste.
For each kaizen, a working group was set up to develop a practical solution to the challenge.

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Waste Elimination

Muda: a Japanese term for production activities that are wasteful and do not add value to the goods or services
Mura: waste associated with the unevenness of the processes
Muri: the waste resulting from overburden or unreasonableness

Source: Value RF

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General Types of Waste

Waste Resulting from Overproduction
Waste Resulting from Setup Time
Waste Occurring During Processing Time
Waste Resulting from Waiting Time
Waste Resulting from Transportation
Waste Resulting from Movement
Waste Resulting from Inventory
Waste Resulting from Poor Quality

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Figure 12.4: Wastes
in a Production System

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Components of
Lean Production Systems

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Pull Production System

Pull system: a production system that uses customer demand as the primary driver for production planning
Push system: a production system that focuses on maximizing the use of production capacity, and therefore is based on estimated customer demand

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Fast Fashion and
Lean Thinking at Zara

Zara offers the latest trends in high-fashion clothing for men, women, and children.
The secret behind Zara’s success is lean thinking applied to the retail environment.
The company introduces new items every week, which keeps customer coming back again and again to check out the latest styles.
Zara is still very profitable because of its use of pull production when other competitors are using push production.
Zara’s lean thinking strategy means that it can ignore many of the constraints of traditional push manufacturing and react quickly to changing market needs.

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Small Batch Sizes

Batch: a quantity of products that are produced together

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Short Setup Times

Setup: the set of activities needed to change or readjust a process between successive batches of products
Single-minute exchange of dies

This approach allowed automobile manufacturers to reduce the setup time for changing dies from several hours to just a few minutes.

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Just-In-Time Inventory

Just-in-time (JIT): an inventory management approach designed to make the “right amount of inventory available at the right time” at all times
Based on the pull production system
Widely used

Examples in addition to Toyota: Harley-Davidson and Hewlett-Packard

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Kanban

Kanban: a word that means “card” or “visible record” in Japanese and refers to the cards used to control the flow of production through a factory

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Uniform Production Planning

Part commonality or modularity: standardization of components across multiple products
Simplification
Takt Time: the maximum cycle time allowed for producing a product in order to meet demand

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Continuous Improvement or Kaizen

Kaizen: a Japanese term that means “continuous improvement”
Quality at the source: a practice in which each employee is responsible for the quality of his or her own work; therefore, each person acts as his or her own quality inspector
Jidoka: an approach for automated quality monitoring of equipment guided by a human touch

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Close Supplier Relationships

Concurrent Engineering: a process in which multiple units/departments within an organization/supply chain are committed to working interactively to conceive, approve, develop, and implement new product development programs that meet predetermined objectives

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JIT II at Bose Corporation

Bose Corporation was founded in 1964.
During a hiring freeze, the director of purchasing and logistics for Bose Corp. came up with an innovative idea that not only reduced the negative effects of the freeze but also provided numerous other benefits.

Solution: Arrange for representative of suppliers to work on-site at Bose on a full-time basis

Arrangement known as JIT II, a term that signifies an extension of the JIT approach.

JIT II can be considered an excellent example of vendor-managed inventory and a long-term customer-supplier partnership.

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Table 12.1: Definitions of Five S

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Visual Controls

Visual indicators that are placed in plain sight of all employees so that everyone can quickly and easily understand the status and performance of the work system

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Preventative Maintenance

Lean production systems have little slack or buffer inventory between the work stations, so any unplanned downtime can be very disruptive.
Preventive maintenance can reduce the frequency and duration of machine downtime.

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Preventative Maintenance (cont’d)

Maintenance is done on a schedule that balances the cost of the preventive maintenance program against the risks and costs of machine failure.
Another tactic is to make workers responsible for routine maintenance of their own equipment and to develop employees’ pride in keeping their machines in top condition.

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Value Stream Mapping (VSM)

A visualization tool developed as part of the Toyota Production System that has now become an essential component of a lean production system.
Visually maps the flow of materials and information from the time products come in the back door as raw material, through all production process steps, and until they move off the loading dock as finished products
Can serve as a starting point to help management, engineers, production associates, schedulers, suppliers, and customers recognize waste and identify its causes

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New Advances in Lean Production

Technology in Lean Production
Lean Production and Six Sigma = Lean Six Sigma

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Technology in Lead Production

New forms of automated reasoning, learning, and control are now being used in production facilities. These include expert systems that use a set of “intelligent rules” to make logical decisions to solve a specific problem or control an operation or machine, advanced search algorithms to solve complex optimization problems, and “intelligent agents” that perform such tasks as machine scheduling, material transfer, and Web auction bidding.

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Lean Production
and Six Sigma = Lean Six Sigma

Lean Six Sigma: a management approach that combines the key components of both lean production and Six Sigma concepts

The Lean Six Sigma utilizes five different “laws” in order to make the process successful:

Law of the market: Customer needs define quality and are the highest priority for improvement.

Law of flexibility: The speed of any process is proportional to its flexibility.

Law of focus: Data show that 20 percent of the activities in a process cause 80 percent of the problems and delay. (This law is also known as the Pareto principle).

Law of velocity: The speed of any process is inversely related to the amount of work or things in the process.

Law of complexity and cost: The complexity of a service or product offering generally adds more costs and work-in-process inventory than either poor quality (low sigma) or slow speed process problems.