Lean Management

Lean thinking and Six Sigma are two important operating philosophies for success of supply
chain management.
Lean origins back to Toyoto’s Production System.
Taiichi Ohno realized waste of labor, inventories, space and time (known as muda in Japan).
From this came the idea that parts should be produced only as needed by next step – this is
known as kanban system.
Shingo developed concept of poka-yoke which means mistake proofing – this revolved around
designing processes such that mistakes are prevented.
Demind created fourteen-point quality management guidelines.
Lean philosophy revolves around eliminating waste and improving efficiency in
manufacturing and is generated from just-in-time (supplying exactly what customers want when
they want).
Lean focuses on production of goods using less waste, human effort, space, investment,
inventory and engineering time.
Waste is anything that does not add value from customer’s perspective.
Forms of waste include: inventory, waiting, defects/rework, overproduction, motion,
transportation, over processing. (7 Wastes Of Lean)
1. Defects: Anything that has to be redone or is incorrect, causes include weak processes,
incorrect order processing, inadequate education/training, misunderstanding of customer
needs.
2. Overproduction: Too much/or too early production leading to excessive inventory,
causes include unnecessary reports, automation, incorrect order processing
3. Waiting: Idle time created when waiting for parts, signatures, approvals etc which wastes
money, causes include no protocol, too few machines, quality problems, waiting for
signature approval
4. Transportation: Transporting documents and materials, minimize no of touches makes it
lean, causes include poor office layout, extra paper work, poor understanding, large
storage area
5. Inventory: Time wasted managing the inventory, inventory costs, solutions include just in
time, kanban pull system, decrease inventory storage area
6. Motion: Movement of people that does not add value, causes poor office layout, no
visual instructions.
7. Over processing: Extra steps that do not add value e.g. too many signatures, caused by
lack of communication, redundant step
Supply chain objectives include high responsiveness, balancing flow of materials with customer
requirements, achieving low cost and high quality.
Lean emphasises reduction of waste, continuous improvement, synchronization of material
flows, improving quality and customer service.
SCM Evolution: Internal Focus, Functional Integration, Internal Integration, External Integration
Elements of lean production include: waste reduction, lean supply chain relationships, lean
layouts, inventory and setup time reduction, small batch scheduling, continuous improvement,
workforce empowerment.
5S – Waste Reduction – Sort, Set In Order, Sweep, Standardize, Sustain.
5S is building block for kaizen approach to continued improvement. It focuses on elimination of
waste.
1. Sort is sorting through contents to find unnecessary items and removing them, classify
by frequency of use, tag items not needed known as red tagging
2. Set in order is putting necessary items in their place providing easy access, outline
locations of equipment, supplies etc. Use divider lines, marker lines, range lines and limit
lines.
3. Sweep is cleaning the workplace to prevent clutter and contamination.
4. Standardize the process by creating procedure, forms for regular evaluation.
Standardize procedures for red tagging, creating lines and labelling. Also standardize
cleaning schedule.
5. Sustain the system by regular meetings, inspections and daily checks.
Lean Supply Chain Relationships with key customers by employing just in time, keeping safety
stock of raw materials and finished goods to avoid stock outs.
Lean layouts with visual operators on the working floor for movement of people and materials.
Manufacturing cells manufacture similar parts or components saving duplication of labor –
similar parts known as part families.
Reduce inventory levels by reducing order quantities and production lot sizes.
Small batch scheduling reduces costs by: short setup time, reducing inventory costs, helping
catch defects, making firm more flexible.
Kanban is a permission slip to pull material from upstream supply chain partner. Kanban
generate demand by pulling resources. A Kanban (green light, signal) Pull system attempts to
control the flow of work by allocating resources only when there is demand and when capacity is
available
DT(1+S)
# Of Containers =
C
Maximum Inventory = # Of Containers * Container Size
Kaizen system revolves around continuous improvement. It is a continuous approach to reduce
process, delivery and quality problems such as machine breakdown, setups and quality.
Lean green practices revolve around reducing cost of environmental management, improving
environmental performance and carbon-neutralling (offsetting the carbon footprint).
Six Sigma

Six Sigma seeks to improve quality of process outputs by identifying and removing the cause of
defects.
6 Standard Devs mean is perfection with very little chance of defects.
We can find out six sigma level by calculating defects per million opportunity (DPMO).
no of defect
DPMO = × 1,000,000
causes of defect per units ∗ no of units
After calculating the DPMO value, you can compare from this table:

DMAIC Improvement Cycle: Define, Measure, Analyze, Improve, Control is a logical and
structured approach to problem solving and process improvement.
Define the problems, measure the impact through data, analyze and find out reasons, identify
and implement improvement, assure improvements will sustain.
Six Sigma Levels:
Flow Diagrams represent process to show flow of products/customers.
Statistical Tools:
1. Ovals represent wait periods, diamond represents decision. Check sheets are used to
determine frequencies for specific problems. Check sheets can quantify defects by type,
location or cause.
2. Pareto Charts for indicating problems from most to least severe
3. Cause & Effect Diagram – Aid in brainstorming and isolating causes of problem. In
almost all cases, problem causes will be in 4M’s: Manpower, Machine, Material,
Methods
4. Process Mapping – To evaluate any manufacturing or service process
Statistical Process Control allows firms to monitor performance, compare performance to
standard levels and take corrective action.
Control charts are used to monitor process variance and are representations of performance
over a period. If sample means fall within control limits, process is in statistical control.
Natural Variations: Expected & random but not in control e.g. due to environment.
Assignable Variation: Specific causes and can be eliminate
X Bar Chart: Tracks central tendency of sample
R-Chart: Tracks sample ranges or variations