Lean Management Courseware

CHAPTER 1
1 Lean Management Certification Program

Congratulations on making the decision to enter one of the fastest growing

occupation in today's time - the management occupation! According to the U.S.
Bureau of Labor Statistics, the employment in this area is expected to grow by 17
percent through 2018, which is faster than the average for all occupations. The
Bureau notes that though overall demand for professionals in the industrial
production will not see an increase, project managers who oversee and execute
projects in almost every industry will enjoy good job prospects. Since it is important
that production meets output and quality goals while remaining within budget,
there is a lot of scope in this job for project managers with knowledge and
experience of 'lean' production technique. With things looking bright for managers
with good communication and interpersonal skills, backed with the knowledge of
new production technologies and management practices, this is indeed an
opportune time to become a six sigma lean certified project manager and reap the
benefits that a well-directed and dedicated effort can bring.
The ExpertRating Lean Management Program has been developed by ExpertRating
Ltd, a leader in online testing and certification with over 200,000 certified
professionals in over 40 countries and in over 100 different skill areas. This
certification program is one of the most comprehensive programs available till date
and can successfully guide you towards your goal of becoming a Certified Lean
Project Manager.

You have made the right decision!

Not only have you chosen a Project Management Certification Program that is well
recognized, but you have also made an important and wise decision to enter the
management occupation as a Certified Lean Project Manager. The diversity in the
type of manufacturing, invent of new management techniques and stringent quality
practices will increase the demand for more project managers who are well
informed of these techniques and practices. To remain competitive, Project
Managers who keep themselves updated with the latest management practices and
seek to improve the quality of process outputs by minimizing variability in
manufacturing and business processes using various quality management tools
such as Six Sigma, Total Quality Management, Lean Management and ISO 9000 will
definitely find good job opportunities.

1.1 The Final Certification Test

After you have gone through the complete program material and revised it, you can
appear for the final test. You must appear for the test without referring to the text
material, and it is advisable that you should be well prepared for the test. The
specifications of the test are mentioned below:

The ExpertRating Exam Format

Type of Exam - Multiple choice with one or more correct answers

Duration - 45 minutes to 1 hour

Number of Questions - 40-60

Question Weightage - All questions carry equal marks.

Navigation - You can go back and answer unanswered questions.

Answer Reviews - You can review the questions at the end of the exam by
going back and answering marked questions.

Exhibits - Some exams will require you to answer a question based upon an
exhibit.

Pass marks - 50%

Retake Policy - You can retake the test any number of times by paying the
required retake fee.

Note: Some exams may follow a different format. Please read the exam details
carefully before registering.

All successful candidates will receive a hardcopy Certificate of

Accomplishment stating that they have completed all the requirements of
the Six Sigma Lean Certified Project Management Program process. This
certificate can be used as an instrument for marketing your project
management services as well as for seeking a job. It will take about 3 weeks
to get your certificate through registered post. You will also get an online
transcript that you can immediately use to display your test marks and
highlight the areas you are proficient in. You can link to the online transcript
from your website or ask friends, relatives or business associates to look it up
on the internet.
1.2 Introduction to Lean

Introduction

The word Lean was coined in the early 1990s by Massachusetts Institute of
Technology (MIT) researchers. According to them, " Lean production is aimed at the
elimination of waste in every area of production including customer relations, product
design, supplier networks and factory management. Its goal is to incorporate less
human effort, less inventory, less time to develop products, and less space to become
highly responsive to customer demand while producing top quality products in the most
efficient and economical manner possible".
Henry Ford introduced the concept of mass production. Lean Manufacturing dates
back to the post-World War II era. Its concepts were developed by Taiichi Ohno, a
production executive with Toyota. The Japanese market was facing a lot of
problems as far as fulfilling their demands was concerned. The mass production
methods developed by Henry Ford were not very efficient to economically produce
long runs of identical products. Ford's mass production system did not incorporate
the notion of 'pull' (The concept of pull has been described in the later chapters of
this course.) and this led to over-production. The limitations in Ford's mass
production system as well as the casual attitude towards the mass production
system are the reasons that Taiichi Ohno and not Henry Ford is credited with
introducing the concepts of Lean in their industries.

Lean manufacturing, in the modern times, implies a business system which

arranges and administers product development, processes, suppliers and customer
relations by applying lean principles, practices and tools to minimize waste and
create value for the customers. The Lean Manufacturing takes less space, less
investment, and lesser time than the traditional system of mass production.

Definitions

1. A business performance improvement tool that focuses on enhancing quality, cost,

delivery and people. Exposes waste and makes continuous improvement possible.

2. A philosophy of production that emphasizes the minimization of the amount of all the
resources (including time) used in the various activities of the enterprise. It involves
identifying and eliminating non-value-adding activities in design, production, supply
chain management, and dealing with the customers.

The basic idea contained in the definitions is the elimination of waste. Waste is
generally referred to as 'muda', 'muri' or 'friction' in Lean Manufacturing. (The
concepts have been discussed in detail in the later chapters). According to the
advocates of Lean, a perfect lean enterprise is one from which friction or waste is
absent. However, we cannot ignore the fact that friction is never completely absent,
so there are only degrees of leanness.
Lean Manufacturing and Lean enterprise are two different concepts. Scientific
Management or Lean Manufacturing is an arrangement of synergistic and mutually
sustaining methods that help in running a business or a manufacturing unit and
Lean Enterprise constitutes the entire supply chain or value stream. The main
purpose, however, of both Lean Manufacturing and Lean Enterprise is the
elimination of waste and non-value added activities. If an organization strives to
become a Lean Enterprise it needs equal participation from all the departments
and from all the levels including the upper management, accounts department and
the like. Lean needs to be incorporated as a way of life, as a routine in the
organization to make it successful. Everyone in the value chain, including the
suppliers and vendors, need to understand Lean in order to rename an
organization as a Lean enterprise. The word Lean was coined in the early 1990s by
Massachusetts Institute of Technology (MIT) researchers. According to them, " Lean
production is aimed at the elimination of waste in every area of production including
customer relations, product design, supplier networks and factory management. Its goal
is to incorporate less human effort, less inventory, less time to develop products, and
less space to become highly responsive to customer demand while producing top quality
products in the most efficient and economical manner possible".
1.3 What is Lean Enterprise or Lean Manufacturing?

Features of a Lean Enterprise

1. No waiting time
2. No stocks
3. Reduction in the processing time
4. Line balancing
5. Use of pull system instead of the usual push

Since the past many years, organizations have been manufacturing products much
in advance, thinking that there would be a market for them. The production was
earlier based on sales forecasts and therefore the goods were stocked in case they
were needed in the future. A major difference between mass production and Lean
Manufacturing is that the former is based on sales forecasts and the latter on real
customer demand. The production is based on customer demand in shorter time
leads and not merely on anticipation.

The differences between Lean Manufacturing and the traditional system of

manufacturing or mass production are highlighted in the table given below.
The principles of Lean are now being applied to various sectors including nonprofit
organizations, healthcare and government departments besides the manufacturing
sector. The goods and services produced with the help of Lean make optimum use
of resources and are of very good quality.

Lean Applications in Product Development

There is stiff competition in the market these days and, therefore, it is very
important for organizations to manufacture their products quickly and cheaply. The
product development of an organization is its greatest support because it helps to
develop products which are better, cheaper and reach the customers when they
want it. The entire focus of Lean applications has been on the manufacturing
domain and not on product development. The companies who have applied the
concepts of Lean (like cycle time reduction) in the arena of product development
have achieved significant results.

Paul Adler's research on the product development process in 1998 proves that
conventional product improvement goals such as reduction in the variation,
decreasing process bottlenecks and reducing rework, can reduce the development
time by 30% to 50%. If Lean principles are applied to the process, the development
time can be reduced more significantly. The University of Michigan acknowledged
seven basic principles which account for Toyota's optimized product development
process.

1. A holistic, systems approach

The fundamentals of the product development system like people and processes
should be coordinated and allied to each other. The personnel working on a
product should be highly skilled, astute and controlled for them to utilize the
resources optimally. Their skill should be matched with the process' complexity.
The equipment must be right and everybody must be clear about the solution to
augment the performance of the personnel and the process. The right blend of all
the elements leads to a synergistic system.

2. Customer first approach

The first step in a product development process is the understanding of the

definition of the term value from the customer's perspective. An organization
should cater to both customer needs as well as the long term objectives of the
organization. The product should be developed in a way that the customers are
always satisfied and the resources are also used optimally. The principles of Lean
help in achieving these objectives.

3. A front-loaded process

The engineering process that is applied should be firm and the problem solving
techniques along with cross-departmental participation maximize the effectiveness
of the product development process. The processes should be coordinated in order
to achieve both speed and quality.

4. A continuous improvement process

Learning and consistent measures for improvement should be a part of all the
processes in any organization if it intends to grow. The performance goals that
need to be set for an organization should be precise and should be accomplished in
real-time. Moreover, lessons should be learnt from the goals accomplished and the
employees should always upgrade their knowledge base. In fact, the errors should
be chronicled so that they are not repeated in the future. A problem solving session
can also be held to extract multiple solutions and focus should be on root cause
countermeasures which will prevent recurrence.

5. A synchronized process

For concurrent engineering to be effective, it is important that each ensuing

function should maximize the utility of the established information from the
preceding function as and when it becomes available. The development teams
should, therefore, work with the part of the design data that is unlikely to change
and try to check wastage and save time. Each function's processes should be
designed in a manner which move forward and simultaneously build established
data around as and when it becomes available. This practice is referred to as
simultaneous execution.

6. Standardization for flexibility

Although the two terms are contradictory, yet they are true as far as tools like
renew ability, common structure and standard processes is concerned.
Standardization is important as it helps to eliminate waste out of the product
development process. If the expertise, processes and the design standards are
standardized, there is scope for fixing individual responsibility and flexible product
development capacities. The standards created are also important as far as
downstream lean manufacturing capabilities are concerned.

7. Going back to the source engineering

In today's time of high tech engineering, the engineers spend their time in
their cubicles and the board rooms. However, the set-up should be such that
the engineer remains close to the physical product. Kelly Johnson, the famous
head of Lockheed's legendary Skunk Works once quoted, "An engineer should
never be more than a stone's throw away from the physical product. "The
engineers should spend time at manufacturing plants and dealerships and
sometimes, by personally fitting parts on prototypes. These principles form
the core of a product development process and can be easily applied in a Lean
set-up to minimize wastage and to improve customer satisfaction.
1.4 Foundation of History of Lean Manufacturing

Benjamin Franklin

The concept of Lean Manufacturing is not new and dates back to the time
of Benjamin Franklin. He was of the view that evading needless costs could be more
profitable than increasing sales. Benjamin Franklin was also against piling up stock
in case there was a demand for them in the future. Henry Ford has also cited
Benjamin Franklin's example as a major influence on his work which includes
concepts like just-in-time manufacturing.

Frank Gilbreth

Frank Gilberth was a motion efficiency expert and he noticed that the concept of
waste was taken for granted in the jobs. He observed masons who bent over to pick
up bricks from the ground. The bricklayer was lowering and raising his entire upper
body to get a 5 pound (2.3kg) brick. The introduction of a non-stooping scaffold
which helped to deliver bricks at waist level increased the speed of the masons.
They could now work about three times as quickly by putting in less effort.

Frank Gilbreth added the concept of Motion Study and also invented Process
Charting. Process charts focused attention on all work elements including non-
value added activities which occur in between the 'added' or 'official' activities.

Frederick Winslow Taylor

Frederick Taylor introduced the concepts of Time Study and standardized work. He
is also known as the "father of scientific management." He was a controversial
figure. He applied the concepts of science to management but tended to ignore the
behavioral sciences.

Shigeo Shingo

Shingo who considers Principles of Scientific Management as his inspiration, is the

best exponent of Single-Minute Exchange of Die (SMED) and Poka-Yoke or error-
proofing.

The Ford System

Henry Fordand his right-hand man Charles E. Sorensen created the first ever all
inclusive manufacturing strategy. They arranged a Model T automobile by putting
all the elements of a manufacturing system together. They included people,
machines, tooling and products. Ford gained instant fame and became one of the
richest men in the world, the one who put the world on wheels. He was also the
one to introduce concepts like Lean Manufacturing and Just- in-Time.

The people who tried to follow Ford's footsteps were not very successful. Gradually,
Ford's system began to lose its hold because Ford refused to make changes in his
system alongwith change in time. For instance, Ford's manufacturing system was
depending a lot on the labor force. During the prosperity of 1920s and with the
advent of labor unions, there were clashes between the laborers and the Ford
system. The sudden spurt of product variety in the market was also responsible for
exerting pressure on the Ford system. Annual changes in models and multiple
colors and options did not suit the Ford factories.

However, there were players like Alfred P. Sloan, General Motors, who held a more
practical view. He developed trade and production strategies in a way which could
easily manage very big ventures and handle variety. By the mid 1930s, General
Motors surpassed Ford's supremacy in the automotive market. However, there
were elements in the Ford's system which could still be considered positive even in
the new age. The methods of Ford were a crucial factor in the victory of the Allied
forces in the World War II.

Henry Ford was anti-war and he refused to manufacture armaments even when
war became inevitable. The irony of the situation was when Ford factories finally
agreed to retool for war manufacturing and they did this on a huge scale.

Although the concept of Just-in-Time (JIT) Manufacturing was introduced by the

Japanese, yet the main characteristics of Ford's system were given by Henry Ford.
They include:

1. Materials arrive only when there is a demand for them or when the production
line needs them.
2. Materials do not go from "dock to stock" but from dock to the factory floor.
3. JIT is dependent on reliable transportation and logistics.
4. Inventory binds capital and getting rid of inventory frees capital.
5. Reducing the cycle time also frees capital.

The Toyota System

The victory of the Allied forces and the huge quantities of material used in the war
production caught the attention of the Japanese industrialists. They carefully
analyzed the mass production methods of Henry Ford and the Statistical Quality
Control practices of Ishikawa, Edwards Deming, and Joseph Juran.

If there was Henry Ford and Charles E. Sorensen for Ford, there was Taichii Ohno
and Shigeo Shingo for Toyota Motor Company. They integrated the methods of
Ford and other techniques into a methodology known as the Toyota Production
System or Just-in- Time Production. They also documented the central role of
inventory.

The people at Toyota also observed that Ford's system had inconsistencies and
inadequacies in terms of employees. General Douglas Mac Arthur actively
promoted labor unions in the occupation years.

Toyota soon realized the worth of workers and realized that they had much more
to contribute than just physical labor- they also made a major discovery as far as
product variety was concerned. The Ford system was built around a single and rigid
product. It did not work for different varieties or multiple products.

Flexibility was introduced in the system with the help of Shingo. Shingo, on Ohno's
advice, worked on the setup and changeover problem. He helped to reduce setups
to minutes and seconds and that permitted small batches and a continuous flow
like the original Ford concept. These concepts which were introduced between 1949
and 1975 spread to other Japanese companies as well. The news spread to the
world and the Americans traveled to Japan to study these concepts.

The Americans brought home the aspects like Kanban cards and quality circles. The
underlying principles practices by Toyota were difficult to understand and the
efforts to emulate them lead to failure.

World Class Manufacturing

The American industries like Omark Industries, General Electric and Kawasaki (
Lincoln, Nebraska) could taste success by the 1980s. There were numerous success
stories from everywhere and acronyms like World Class Manufacturing, Continuous
Flow Manufacturing (CFM) and Stockless Production became the lingua franca of
the manufacturing industries.

Lean Manufacturing

In 1990, James Womack authored a book called, "The Machine That Changed
the World". The book vividly described the history of the automobile
manufacturing combined with a study of the Japanese, American and
European automotive assembly parts. He used a new phrase called Lean
Manufacturing in his book.

From then onwards, Lean Manufacturing caught the attention of

manufacturers all over the world. The production houses apply their
interpretation of Lean according to the suitability of their organization.
1.5 Lean Metrics

Metrics are a set of quantifiable parameters which help in the measurement of

effectiveness of a project.Values are collected for the parameters for multiple
instances of the same unit. They are, then, contrasted and then understood so as to
establish a change in the effectiveness. According to a research, companies which
based major business decisions on effective metrics surpassed the ones which did
not use metrics. However it is very important to choose the right metrics because a
lot of bad decisions could be made from misdirected metrics.

In a highly competitive market, time constraints are very important. If the

competitors produce new product or services before your organization, it means
trouble. Implementing good decisions on time is very important for an
organization's success. The three things which need to be kept in mind while
establishing Lean metrics are as follows:

1. Lean metrics are fundamental for decision-making purposes

2. Building a Lean enterprise is an important basis for good metrics
3. The areas which need to be measured should be presented in an easily
understood format.

These three things need to be kept in mind because their absence could negatively
affect the revenue, cycle time and customer satisfaction. Some of the typical "world
class" level of manufacturing operations metrics are given below:

CHAPTER 2
2 Business Process Management

Definition

The basic idea of Lean manufacturing and Lean enterprise or simply Lean are
basically the same, (See Chapter1-Introduction to Lean Enterprise) that is, to
identify and eliminate non-value adding activities from the business enterprise. In
today's competitive global business scenario, Lean enterprise has helped
companies to stay competitive and profitable. Implementation of Lean techniques
helps in minimizing all forms of waste; like reducing scrap costs, reducing cycle
time, and reduction of costs associated with removing errors in products. It results
in improved cash flow, and a greater return on business assets through shorter
production lead times and improved product delivery, and improved customer
satisfaction.

The business enterprise needs to go through a complete organizational and

cultural transformation to embrace the Lean method. A truly Lean manufacturing
plant focuses on two organizational features: it transfers the maximum number of
tasks and responsibilities to those workers who actually add value to the product, and it
incorporates a system for quickly detecting defects. In the same manner, in a Lean
enterprise, the focus is on people who add value to the organization. The
traditional organization moves away from its mass production and traditional
hierarchy mindset to new team and goal oriented setups which focus on flow of
value.

The basic goals of a Lean initiative can be summed up in three points:

1. To improve quality of products and services, in other words, to make products

or service attributes conform to expectations and requirements.

2. To eliminate waste that is any activity that does not add value in the production
process.

3. To reduce lead time which is the total time taken to complete an array of tasks
in a process.

What are Muda or Non-Value Added Activities?

Lean is about making products or services more efficient. Therefore, Lean methods
have become a common industry practice to enhance the efficiency and improve
customer satisfaction. The process starts with identifying waste, which is called
muda, and identifying strain, called muri in Japanese. The Lean method helps to
reduce waste and strain, in an orderly manner in the value stream. The objective of
Lean is that every step must add value in any business.

Henry Ford conceptualized the idea that nothing should be wasted and a use must
be found for everything. Physical waste like idle raw material, defects, or inventory,
and intangible waste that includes waste of time is totally unacceptable in any
production process or service. Identification of muda is a challenging task. Lean
focuses on value adding, which is the opposite of muda. Muda includes all kinds of
defective work, and not just defective products.
a. To understand waste, take an example of a screwdriver. The screwdriver must
take a number of turns to fit the screw into place. This requires a lot of time, even
with a power tool. This is waste because in a manual assembly process, "the cost of
driving a screw can be 6 to 10 times the cost of the screw". In certain analysis like
cost of quality, it would be categorized as a value adding step. But actually it is a
waste.

b. Another example of waste is a left-handed operator having to use a machine that

was meant to be operated by right-handed men.

A non-value added activity is one which neither adds value to the external customer
nor provides any competitive advantage to the organization. Non-value added
activities, like rework and inspection, fail to meet the criteria for value-adding, they
add no value to the final output. They are activities which the customer does not
want to pay for. It is important to note that some non-value added activities are
important and unavoidable. Such activities should either be made a part of value
added activities or eradicated in order to save costs and get a better ROI.

Taiichi Ohno identified the following kinds of muda or non-value added activities:

1.Overproduction

This is one of the most misleading wastes. Overproduction simply means that a
product is made earlier and faster than its requirement. It leads to collection of
unwanted stock. Overproduction happens when an organization wants to produce
products cheaply in bulk, wants to cover up quality deficiencies, breakdown of
machinery, unbalanced workload or a long process set-up. However,
overproduction also leads to the unnecessary production of products which are not
needed and so there is wastage of time, money, resources and personnel.
Performance measurements like equipment utilization and cost-per-piece leads to
overproduction. Push style production control also gives rise to overproduction.

A Lean analysis helps to spot and eradicate the production of units which are no
longer in use or the ones which are obsolete in technology.

2.Inventory

If the supply of a raw material or a finished good or a work-in-process is in excess

of a one-piece flow production process, it is considered a waste. If the inventory is
held for a year it costs approximately 25% of the money spent on producing it.

Lean Manufacturing helps to prevent wastage in terms of unnecessary

performance of work-in-progress or the production and storage of unwanted
products.

3.Defects

Defect is a key waste which includes wastage in terms of men, machines, materials,
sorting or rework. Any product which requires scrapping, replacement or repair is
also included in the category of defective products. The reason why products
develop defects can be many. The main ones include unskilled workers, ineffectual
control over the process, lack of maintenance and imperfect engineering
specifications.

Lean analysis helps to recognize defects in the manufacturing process and helps
eradicate the production of faulty units which cannot be sold or used.

4. Processing

Processing is a waste which adds zero value to the product or service from the
customer's perspective. It comprises of spare copies of paperwork and other
surplus processing for unforeseen problems which might occur in the future. Waste
also occurs in the form of acceleration of process to meet targets. For example,
fitting or straightening parts after heat treatment is a waste because it needs 100%
rework.

Lean methodology is useful in spotting unwanted steps or work elements which

add no value to the product.

5. Transportation

Although transportation is an important aspect of the manufacturing process, yet it

is a non-value added activity as it adds to costs but not to value. In fact, it involves
the use of expensive equipment for the movement of men and material inside and
outside the organization. Costs like space, shelving and the manpower and systems
needed to track the material include the additional money spent on transportation.

By incorporating Lean manufacturing in the organization, the transportation system

can be reformed. Multiple handling of materials, holdup in material handling and
needless handling can be avoided.

6. Waiting

Waiting means idle time. It comprises waiting for parts from up-stream operations,
waiting for tools; arrangements and directions form higher authority. The time
wasted in measuring and procuring information also makes up for idle time and is
considered a waste. Differences in processing times gives rise to a hurry-up-and-
wait effect that causes inventory to accumulate even in systems that supposedly
have extra capacity. Idle time is the one when no value is added. In fact, waiting for
manpower/labor is a matter of greater concern than the usage of machinery.

7. Motion

Any movement in terms of people or machinery that adds zero value to the product
is wastage in terms of motion. The examples of motion waste include time wasted
in hunting for tools, extra product handling, and arrangement of products, walking
and loading. The reasons for motion wastage include poor infrastructure,
incompetent labor, weak processing and constant changes in agenda setting.

Adopting Lean methodology helps as it exposes fruitless efforts and motions

executed by the employees.

8. People

Wastage of manpower is a matter of concern. This kind of wastage depends on the

recruitment process, styles of management, attrition rate, low motivation by the
higher authority and not using the employees' ability to the fullest potential.
Therefore, they contribute to waste in the form of people. People's abilities should
be utilized fully in terms of mental and creative level, their skills and experience.

The main goal of Lean Manufacturing is elimination of waste. Waste can be

eliminated by identifying it and eradicating all non-value-added activities. Non-value
adding activities eat up time, money and resources. However, it should also be
noted that activities like accounting, government laws and regulations are
important and cannot be avoided.
2.1 Theory of Constraints (TOC)

The theory of constraints is a management concept developed by Dr. Eliyahu M.

Goldratt. It is a concept that focuses on identifying and easing the constraint that
restricts an organization's ability to attain a certain targeted level. The philosophy of
this theory aids the organization system to achieve more of its goal by addressing
the system's few current constraints.

According to this theory, the capacity of any manufacturing process is limited by its
capacity constraint resource. That is every process or system has a constraint that
acts as an impediment to attaining more of its goal. A constraint is the bottleneck-
the slowest process step.The workings of a system could be very complex or it
could work on a smaller number of variables; but it will have at least one constraint.
These unknown constraints hinder the organization from achieving exceptionally
high levels of performance. Time lost at the constraint is lost forever. If the
performance is hampered, it means that the generation of profits for the
organization would also be hampered. In order to manage the flow of the system,
these constraints have to be identified and dealt with. Therefore constraint
management focuses efforts at the constraint, since increasing throughput
elsewhere will not increase the overall throughput.

The focus of the theory of constraints is to bring an improvement in the system.

Several business processes lead to a business system. A business system is
comprised of people working in several coordinated and co-dependent processes.
When a process is implemented and the inputs put in place, a business system is
developed. All these processes strive to achieve a common goal. A constraint in the
process is a weak link which hinders the growth of the entire process, thus making
the process weak. The job of a TOC in a production process is to identify the factors
which hamper the speed of the product.

The TOC approach can be implemented in five steps:

1. Identifying the Constraint

A system is like a chain and one weak link in the chain obstructs the performance.
The chain which delivers the worst performance is believed to possess the
constraint. A study of the unwanted symptoms that a system or process is suffering
from can lead to the identification of the constraint or constraints.

2. Exploiting the Constraint

Once the constraint is identified, the next step is to take measures to improve upon
it. The result of the constraint is the limiting factor of the entire process; therefore it
should be ensured that the constraint is performing that function that it uniquely
does to its maximum capacity. A strategy or correcting method should be
developed to exploit the constraint.

3. Subordinating other Activities to the Constraint

All the other activities should be made subordinate to the constraint. The individual
workings of the other processes in the system should be aligned in such a way that
they do not affect the outcome of the constraint. This is for the benefit of the
system. The speed of the other processes is matched to the speed of the
constraint. But the flip side of subordination is that the system should not be
pushed to do more than the capacity of the constraint. This would lead to excess
work-in-process, extended lead times, or even affect delivery times.
4. Elevating the Constraint

If the personnel in authority think that the output being delivered is still not
enough, they should acquire more constraint capability by increasing the
investment in equipment and manpower, or by offloading to other resources. To
put it in simple words, they should "buy more" of the constraint. At times, the
desire for increased throughput raises the demand for more constraint

5. Repetition

If as a result of these steps, a change occurs, go back to step one.

Example: The figure below is a manufacturing process that goes through three
workstations X ,Y , Z. The product requires that it goes through:

Workstation X for 2 minutes

Workstation Y for 4 minutes
Workstation Z for 3 minutes

This means that workstation X can produce 30 pieces per hour, workstation Y can
produce only 15 pieces per hour, and workstation Z can produce only 20 pieces per
hour. In addition to this, it means the process can manufacture only 15 pieces per
hour, which implies station B is the constraint. Even if station Χ is made to run at its
fullest capacity, to achieve "complete machine utilization", inventory will be piled up
in front of station Y. Station Z can process 20 units per hour but Station Y can send
only 15 pieces, so Z can process only 15 pieces per hour. Therefore only 75% of the
capacity of Z will be used.

The Benefits of TOC

1. It increases the ability of the organization to accomplish its goals. It also
increases the net profits and the returns on investments (ROI) for an organization
by applying cost reduction techniques like elimination of unnecessary work or non-
value added activities.
2. It lessens the confusion in the organization.
3. It reduces the production lead time. Lead time is the gap between an order
placement and its delivery.
4. It reduces cycle time of the product. Cycle time is the time gap between the start
of the work and its completion.
5. It reduces the stock-list. It especially lessens the work-in-process in a
manufacturing process and/or the finished goods in a distribution network.
6. It reduces labor-time per piece.
7. It gives capacity to the staff to analyze and resolve routine conflicts.

Shortcomings of TOC

The absence of constraints could help an organization earn unlimited profits.

According to TOC, the conventional methods of cost accounting, such as
efficiency and utilization are faulty. This would mean that the organization
which has applied/ or would apply the TOC would replace the traditional
methods with throughput, inventory and operating expense. It is easy to
calculate the metrics of these methods. However, it becomes difficult when
factors like reality logic trees, undesirable effects, evaporating clouds and
future reality trees need to be calculated during the problem solving stage.
This becomes increasingly difficult for laymen like the front-line managers
and supervisors to calculate.
2.2 Lean Thinking (Five Principles)

Lean thinking is another way to improve processes. Lean thinking helps

organizations to become continually efficient by increasing value and minimizing
waste. Although, Lean Thinking is generally applied to the production process to
improve efficiency, it can be applied to all the facets in the organization. It can be
applied in service organizations as well. Lean converts to smooth process flow,
eliminating waste along the way. The advantages of applying the Lean methodology
are that it leads to shorter cycle times, cost savings and better quality.
Lean thinking embodies five basic principles:

1.Specifies Value

The first step towards Lean is identifying things that create value. Value is
determined by the customers. It is about customer demands and what the
customers are able and willing to pay for. Lean uses methods like focus groups,
surveys and other methods to find out the preferences of the customers regarding
the existing products and services. The voice of the customer (VOC) is very
important to determine the value of a product. The opposite of value is waste
or muda.

When Lean organizations redefine value, they often find that they have discovered
the method to pulling more customers to their product or service and thus more
sales very quickly. The rise in demand is often more than the rate at which the
resources are to be transformed from muda to value creation.

Consider a company, ABC, which manufactures mobile handsets. According to the

sales manager, the sales are getting affected due to the high price of the handset.
However, according to the customer feedback the customers are shifting to other
manufacturers due to absence of facilities like radio and MMS in the handsets of
ABC Company. So, ABC Company should be able to determine the value of the
product according to customer feedback and install radio and other facilities in the
handsets which the customers are looking for.

The product will have value only if it fulfills customer demands. Value plays a major
role in helping to focus on the organization's goals and in the designing of the
products. It helps in fixing the cost of a particular product and service. An
organization's job should be to minimize wastage and save costs from various
business processes so that the cost demanded by the customers lead to maximum
profits for the organization.

2.Identifies Value Stream

Value stream is the stream or flow of all the processes which include steps from the
development of the design to the launch and order to the delivery of a specific
product or service. It is the sequence of steps that a company performs to satisfy
their customers' needs. A value stream consists of product and service flows and
information flows. It includes both value added and non-value added activities.
Waste is a non-value added activity because it consumes resources but creates no
additional value for customers. Although it is not possible to achieve 100% value-
added processes, considerable improvement in processes can be achieved through
the application of Lean methodologies.

According to the Lean Thinking, there should be a partnership between the buyer
and the seller and the supply chain management to reduce wastage. The supplier
or the seller can be categorized according to the need. He can be classified as a
non-significant or a significant supplier or a potential partner. The classification can
help to solidify and improve relations between the supplier and the customers or
supplier and the organization. (Read more about supply chain in Chapter 5-Supply
Chain Management)

For example, take the value chain of a purchase order-to-delivery cycle. The
activities in sequence are receiving the order, processing (or manufacturing) the
order, and delivering the order. The non-value added activities are order entry,
bureaucratic shuffling, excess work-in-process, shipping delays etc.

Value Stream Mapping

Value Stream Mapping is drawing the value stream of the product or process; it is
similar to process mapping. It is a tool to look at how value flows into and through a
process to the customer, and how information flows facilitate the work flow. Apart
from capturing this value flow, it is also used to capture process data on work-in-
progress, processing time, processing unit, idle time, setup time, etc. It is also
known as information and material flow mapping. Value Stream Mapping helps to
locate the wastes in the value chain. After the waste is identified, it is removed. A
current state map can be created when the waste is identified. This leads to the
creation of a future state map with a plan to eliminate the waste. The next logical
step is to implement the plan. This means the value stream is restructured. This is a
basic step towards Lean conversion. It is an effective method to develop an
environment with a reduction in waste. It helps to streamline the work flow by
reducing lead times and lessening excessive operating costs.

After the key suppliers are categorized and the role they play for the organization is
determined, the next thing is to take steps to eliminate wastage. Tools such as
process activity mapping and quality filter mapping are used to identify and reduce
waste within the organization and also between the customer and the supplier.
There are two ways to observe the flow of work-logical and physical. To map a value
stream physically or 'in-plant', one has to actually follow the product through the
production floor, through all its manufacturing process steps and create a drawing
of its material and information flows. Then the point where the waste is occurring
can be identified and removed.

Value Stream Mapping has improved systems by affecting cost, quality, lead times,
and cycle times in a positive manner. Businesses thrive when they add value. Value
Stream Mapping can be applied to all kinds of work processes. Service companies
provide services of value to customers. Manufacturing companies add value to raw
material for customers.

For example, value stream maps can be traced in processes like:

 a patient flowing through a hospital.

 a medical insurance form traveling from the biller to the clearing houses for
approval.
 flow of work through a technical support process.
 the placement of an order to the delivery of the order.

Example

The following example is a value stream map of a leather bag making process. It
shows how cycle time can be reduced. A value added flow chart is used to improve
on the cycle times and eventually productivity, by visually sorting out value-adding
steps from non-value-adding steps in the process.
Role of Value Stream Mapping in Lean Thinking

1. It defines value from the customer's view point.

2. It plots the present state of the value stream.
3. It applies the Lean methodology to spot muda in a process.
4. It helps predict the condition of the process in the future.
5. It develops a conversion plan.
6. It executes the plan.
7. It legalizes the new process.

3. Makes Value-Creating Steps Flow

Flow is the step-by-step flow of tasks which move along the value streams with no
wastage or defects. Flow is a key factor in eliminating waste. The idea of flow is
fundamental to Lean production. Waste is a hindrance which stops the value chain
from moving forward. A perfect value-stream should be one which does not
hamper the manufacturing process. All the steps from the design to the launch of
the product should be coordinated. This synchronization would help to reduce
wastage and improve efficiency.

Customer satisfaction is the main consideration to make the value flow. It is

important to consider the customer demands and the time of the demands. This
theory is known as the Takt Time. The formula to compute Takt Time is-

Takt Time = Available work time / Customer required volume

Work time does not include lunch or tea breaks or any other process downtime.
Takt Time is used to create short-time work schedules.

Example:

Work time/ shift = 27, 600 seconds

Demand/shift = 600 units

Takt time = 27, 600 / 600 = 46 seconds

This means the customer demands only one unit every 46 seconds.

Spaghetti Charts

The current state of the physical work flow is plotted on spaghetti charts. A
spaghetti chart is a map of the path that a particular product takes while it travels
down the value stream. The product's path can be matched to that of a spaghetti
and hence the name. There is a great difference between the distance in the
current set-up and the Lean set-up. The difference in the two distances is known
as muda.

4. 'Pulls' Customers towards Products or Services from the Value Stream

Lean thinking allows customers to 'pull' products and services. A fundamental

principle of Lean is that flow should be 'pulled' from customer demand. Unless a
downstream process requires it, no work is done: this is the idea of a pull system.
The product is not 'pushed' from the production end like traditional systems.

Traditional systems were 'push' systems. The conventional manufacturers believed

in mass production. Mass production means that a product is produced cheaply in
bulk. The product is then stored and the manufacturers hope that the produced
products would find a market. The Lean Thinking advocates the 'pull' system. The
manufacturers who adopt this principle do not produce a product unless it is
demanded by the customer. Production is delayed till there is demand to point out
what the customer wants. This system helps to break away from the batch-and-
queue approach which means more inventory, and longer cycle times due to
waiting.

According to this principle, the value stream pulls the customer towards products
or services. Therefore, the manufacturer would manufacture nothing unless a need
is expressed by the customer. The production gets underway according to the
forecasts or according to a pre-determined schedule. In short, nothing is
manufactured unless ordered for by the customer.

If a company is applying a Lean methodology and the principle of pull, it means that
it would require quickness of action and a lot of flexibility. As a result, the cycle time
required to plan, design, manufacture and deliver the products and services also
becomes very short. The communication network for the value chain should also be
very strong in the value chain so that there is no wastage and only those goods are
produced which are required by the customers. The biggest advantage of the pull
system is that non-value added tasks such as research, selection, designing and
experimentation can be minimized.

5. Perfection

Perfection is one of the most important principles of Lean Thinking. This is

because continuous improvement is required to sustain a process. The reason
behind sustaining a process is to eliminate the root causes of poor quality
from the manufacturing process. There are various methods to improve
perfection and Lean Masters work towards improving it.

Lean Masters

Lean masters are individuals from various disciplines with a common goal.
They are individual contributors who focus on the process to improve quality
and performance. Their work is to achieve efficient results. The results either
may be for their own organization or for their suppliers. The best way to
achieve perfection with the suppliers is through collaborative value
engineering, supplier councils, supplier associations, and value stream
mapping between customers and suppliers.
It is significant that the above mentioned principles be followed diligently in
order to reduce wastage and deliver quality products and services to the
customers. The customers and the suppliers must work in collaboration to
achieve good results. The effort of Lean Thinking should be to minimize
wastage from the value stream and improve efficiency. The Lean Thinking can
be applied with the help of committed leadership, a persuasive change agent
and well-informed employees and suppliers.
2.3 Synchronous Flow Manufacturing (SFM)

Synchronous Flow Manufacturing is a tactic used in production for total self-

improvement. This approach calls for a total changeover in all the parts of the
production system. The manufacturing system is aligned to support the continuous
flow process. This change effort has proven to besuccessful in many companies.

Dr. Eliyahu Goldratt defines SFM as "any systematic way that attempts to move
material quickly and smoothly through various resources of the plant in concert with
market demand." Synchronous flow manufacturing shows that not all activities in
the flow of work add value. SFM plans inventory around these capacity constraint
resources (CCRs) (See Theory of Constraints). It also designs inventory around
operation systems or problems that affect the entire system's output in a
significant manner.

Capacity Constraint Resources disagree with traditional thinking operations on the

production line. Traditional production systems believe in accumulating inventory,
whereas SFM concentrates buffers on only at operations that can affect the overall
throughput to the system. There are no large inventory buffers when work is
synchronous.

Synchronized flow means coordination of timing and activities. It means that all
parts of the system must be continuous and in harmony with each other to avoid
clashing (inventory pileups) and stoppages because of lack of work. When flow is
synchronous, all parts move at an even pace. All parts travel into the process at the
right time at the right place (e.g., in an assembly line) and the work is completed
just ahead of the time when they are needed for assembly. This kind of
synchronization is made possible by the support of the invisible transfer of
information flow that runs parallel to the physical process. This is called an
information 'rope'. This method of working is essentially different from batch and
queue operations.
In SFM, the constraint operation affects the overall throughput of the process, it
'beats the drum' to control the process speed. This means it sets the pace of the
process. The only information exchange is between the capacity-constraining
resource and production starts. Work is pulled into the factory in the form of
production starts by the CCR through an information 'rope'. It is advantageous to
keep a buffer of work upstream for CCR because time lost due to shortage of CCR
cannot be regained.

SFM improves the manufacturing system by way of better throughput, reduced

cycle times and inventories, and decreased operation costs. In other words, it
makes the system 'Lean'. The goal of this system is to balance the production line
with minimum waste, and on-time and defect free production. Lengthy setups or
changeovers, badly designed systems, long-winded paperwork, material movement
are all obstacles to these goals that disrupt the flow of work without adding value to
the work. The adoption of SFM helps removes all this.

The work of a manager in a synchronous flow factory is to ensure that the flow is
not broken, all parts move in harmony. There will be hiccups like human errors,
quality problems, or technical snags. The job of the manager is to get rid these
obstructions and sustain the steady flow.

In an area of increased competition, customer is the king. The company which

adopts this system of synchronous flow manufacturing (SFM) manufactures only
those products for which the customers express their need. The problem solving
team is managed by a leadership team, which comprises of sub teams. These
teams are responsible for identifying and implementing process flow requirements
and they also evaluate the ongoing process. The entire organization acts as a
change agent and helps in the improvement of the process. The efforts of the team
lead the organization to adopt a synchronous flow manufacturing environment.

Advantages

1. Increased customer satisfaction.

2. Decreased attrition rate.
3. Better quality and minimal wastage.
4. Better scheduling, reduced flow time and cost savings.
5. Better control over inventory and reduction in-process inventory.
6. Better utilization of resources.
7. Eradication of non value- added tasks.
8. Improved safety practices.
2.4 Cycle Time Reduction

Lean manufacturing offers another benefit in cycle time reduction. Cycle time is the
total time gap between the start of the task and its completion. Time is money in
business and therefore cycle time is an important criterion while judging a
manufacturing process. Cycle time reduction is one of the most crucial elements of
a successful manufacturing process today.

Cycle time reduction means more efficient processes

Cycle time reduction means recognizing more efficient and effective ways to carry
out processes. Cycle time reduction forms an important facet of the manufacturing
process. It means eradicating or minimizing the non-value added activities which
are a source of wastage. The cycle time can be reduced during activities like the set
up of machines, inspection and during experimentation. Cycle time reduction
increases the production throughput drastically. Also, it decreases the amount of
working capital required and the operating expenses. It is evident that long cycle
times cause inventories to pile up, cause higher costs, and bring down customer
service.

Cycle time is defined by Smith (1998) as:

[Inventory (units)] / [Demand (units/time)]

This does not imply that cycle time will decrease by removing the inventory.
Inventory is, in fact, a result of other things like batch-and-queue operations that
lead to overproduction, waiting, variation in processing times, and other problems.
Attempts at trying to remove the inventory without removing the basic problems
may just reduce demand or throughput. This means the factory will dole out fewer
units but their cycle times will be higher. However, removing the underlying
problems will cause the inventory to self correct itself.

Cycle time reduction means shorter lead times and higher customer satisfaction

Lead time is the time between the customer placing the order and its delivery. This
process is made up of many sub-processes which include taking down the order,
assembling, packaging, and finally shipping the product. When a factory produces
parts on demand, lead time should be cycle time added with processing time. In
electronic processes, processing time is very less.

Modern day customers desire that their orders be filled in at the shortest time
possible. Shorter lead times make this possible; in other words shorter lead times
lead to increase in customer satisfaction because it improves responsiveness to
customer demands. This, at the same time is important for the organization
because it saves time, money, and resources. Instead of manufacturing as per
market forecast, the planning for production can be done according to the orders
received. This has led many producers to reform their supply operations. Customer
feedback, short cycle time and on-time delivery have become critical factors in
retaining old customers and attracting new customers.

It is not just the manufacturing process which contributes to long cycle times. The
causes of its longevity are both internal and external. The "push" manufacturing
model has given way to the 'pull' system or 'demand flow manufacturing' which has
contributed to shortening of cycle times.

The following measures are being taken by the top management to reduce the
cycle time.

1.Management of Demand

The manufacturers can use enhanced sales forecasting processes. At the same
time, it is important to keep the customer feedback in mind so that the production
takes place as and when the customer needs it.

2. Coordination and Communication

It is important to have cross-departmental coordination and communication to

eliminate wastage. The customers want that the cycle time should be reduced to
the minimum. So, it is imperative that all the processes and departments work
together to achieve better results

3. Lean Manufacturing

Lean manufacturing is a very important tool to eliminate wastage. It helps to save

cost, time and resources. Also, there is great cycle time reduction and near perfect
delivery performance.
4. Management of the Supply Chain

It is important to manage the supply chain to reduce the cycle time. The supply
chain should be planned and implemented and there should be coordination in the
supply system. The customers these days are very aware and they want the
delivery to be on time. Moreover, reduced cycle time is good for the organization as
it leads to cost savings and optimization of resources. (See Chapter 5- Supply Chain
Management)

Concurrent engineering, quality function deployment, and integrated product

deployment are also valuable tools for cycle time reduction.

Reducing Cycle Time through Kaizen

Kaizen is a philosophy which strives for continuous improvement. The term

originated in Japan and is applied to all aspects of life there. However, it has
become very popular and is applied both in manufacturing and service
industries. Kaizen is a tool applied in all Lean systems. The Kaizen approach
believes in making minor improvements in ongoing processes and does not
concern itself in making major changes.

The underlying idea of Kaizen is to optimize existing processes. It is a tool

through which the most can be made out of the skills that an organization
and individuals possess, to get immediate results.The aim of Kaizen is to
persuade organizations to achieve quick, transparent, and sustainable
processes. The term is generally used for business processes in America.
Applying Kaizen to business processes can help reduce cycle times and make
processes more efficient. (For more on Kaizen, see Chapter 3- Lean Tools)

For example, in a manufacturing plant, Kaizen can be used to free up lost

capacity. The strategy would be to display the cycle time metrics like current
cycle, the last completed cycle, the average cycle time, small stops, reduced
speed cycles etc. The solution can be found out by displaying the above
metrics to pinpoint performance loss and recover the lost capacity.
2.5 Single Unit Processing (One-Piece Flow)

Single unit processing is a close approximation to continuous flow manufacturing.

In a continuous flow factory, all parts move at an even pace, all parts travel and fit
into the process at the right time and at the right place, without stops (e.g., in an
assembly line or a conveyor belt) . The flow is continuous like water flowing through
a pipe. For example, in a chemical processing factory, raw material and final
product travel in a continuous stream. All processes in a continuous flow factory
like heat treatment, welding, chemical processing is done in one flow. In this kind of
a factory, process control is a very simple procedure; equipment can be
automatically adjusted to the process conditions to get the best quality of product.

It is a common belief that it becomes relatively easy to control a process when it

starts acting like a continuous process. This implies that single unit processing
scores over lot manufacturing or batch and queue manufacturing. In a single unit
manufacturing process, machinery and tools operate one piece at a time, and they
are better than those that handle batches of parts. Single unit manufacturing or
one-piece flow thus approach a continuous flow.

One piece flow can be seen in a chemical processing plant, semi-conductor factory,
in mechanical subassemblies, etc.

Advantages

Lean manufacturing views continuous, one-piece flow or single unit processing as

ideal. Single unit processing or small lot processing eliminates the waste of batch-
and-queue operations. It can lead to significant improvements in quality, cost, on-
time delivery and process.

It is an important concept in the manufacturing industry. It lowers manufacturing

costs and makes material handling efficient. It lowers material handling, machine
and storage equipments, buffer space requirements and manpower requirements.

Single unit manufacturing is a major cause of inventory reduction. This also reduces
the need for inventory. One-piece flow also significantly shortens lead times and
cycle times. Henry Ford's assembly line used one-piece flow. Process control in
single piece flow becomes easier as conditions move toward continuous flow. It is
opposed to batch manufacturing as the batch-and-queue system increases cycle
times and complexes the statistical process control.

A continuous flow operation should have computer controlled handling of

materials. Material handling is done quickly and recurrently, timing is critical, and
there is zero inventory. Human handling of material can lead to disruptions and
pile-ups and shortages which hike up costs.

2.6 Level Loading

Level loading is a process that generates a schedule that is level, consistent, even,
and responsive to the market. The objective of level loading is to produce the same
quantity of a product or item everyday. Level loading is driven by Takt time. A level
loaded schedule is obtained as follows: (Thomas Pyzdek, 1976)

1. Calculate daily work time/ daily quantity needed - Takt Time

2. For each part, list part name, part number, daily quantity needed, Takt Time
3. Sort the list by quantity needed and Takt time. This is the level loaded schedule

2.7 Flexible Process

Flexible processes are lightweight and moveable tools, fixtures, and devices placed
and positioned to improve workplace design, safety, quality and productivity. It is a
production system where a set of identical or complementary devices are
controlled and connected through an automated system. They are opposed to big,
heavy, immovable equipment used in traditional mass production organizations. A
flexible process, as the name suggests, is flexible and responsive to changing
customer needs. Such a process can be reconfigured to give different output for
different customer demands, and it can be done quickly and the output produced
in such a manner is efficient, economical and satisfying to the customer. This
process is designed to meet uncertainty. Flexible processes are associated with
level loading and 'pull' systems. A complete flexible factory would allow the factory
to be reconfigured immediately to manufacture an item as soon the order gets
there.

2.8 Lot Size Reduction

Lot size means the quantity of an item that is ordered from the factory or supplier.
It also means the standard amount that is ordered to the production process. The
ideal lot size for flow is one. If the lot size is large, it gives rise to bigger quality
problems. This is because of inventory pile-up which becomes obsolete with time
and feedback holdups. Large lot size may also lead to benefits like lesser setups,
quantity discounts, and reduced transformation costs, etc. A proper benefit-cost
analysis should be done to achieve a balance between the two and obtain the
optimum level.

CHAPTER 3

3 Lean Tools

Introduction

It is important that all the processes be coordinated in order to achieve a perfect

flow. A process in any organization begins with the order being placed by the
customer and ends with the product being delivered to him. Quality Function
Deployment or QFD is an important tool to improve efficiency and satisfy the
customers. Lean Manufacturing also offers different tools to improve the flow.

Lean is, in fact, most of the times, considered just a set of tools. Kanban, Kaizen and
Poka-Yoke are the most popular tools of Lean. The need for Lean tools grew out of
the problem of inefficiency and standardizing the process. The Lean tools allow a
perfect flow for the organization.

Lean manufacturing begins with the identification of waste and tools like value-
added analysis and value stream mapping are used along with the seven quality
tools and an improvement process known as 'kaizen'. The Lean tools have been
described in detail below.

5S Or Cando

One of the main characteristics of Lean is its simplicity. Lean makes use of simple
tools and techniques to achieve the goal effectively and efficiently. 5S or Cando is
one such simple yet effective tool used in Lean manufacturing. It is a starting point
in Lean Manufacturing. It is a tool which helps to systematize and standardize the
organization. The 5S have been derived from the Japanese words Seiri, Seiton,
Seison, Seiketsu, and Shitsuke. They were a part of the Toyota Lean Manufacturing
System. These 5S make way for prompt spotting of problems and quick solutions.

CANDO refers to Cleanup, Arranging, Neatness, Discipline and Ongoing

Improvement but is fundamentally the same. The 5S help to reduce wastage and
optimize manufacturing efforts by systemizing the work environment. The
execution of this tool helps to "clean-up" the organization and makes it a better
place to work. The English version of the 5S is described below:

1. Sort/ Cleanup

It means to clear the work area. The items which are required or important for a
particular area in the workplace should only have things which are required. The
things which are not required should be sorted out. It means removing broken
equipment or unnecessary tools from the work area where they are not required.
Applying 5S to an office environment means clearance of unnecessary files and
papers which have no use or would be of no use in the near future. This helps in
saving time and removing the unnecessary hindrances in the work.

"Tagging" is a common method which helps to decide which items need to be

thrown away. The area that needs cleaning is marked and the items that need to be
removed are tagged with a red tag and date. If the item or the commodity has not
been in use for a certain period of time, it is disposed of.

Tagging can be described with the help of an example. The items or the files which
are not in use at the moment or would not be in use in the near future can be
stored offline or discarded.

2. Set in Order

The items which are required should be put in a proper place so that they can be
easily accessed when the need arises. Ergonomics are taken into account and the
items are placed within access. This helps in avoiding unnecessary bending,
stretching and walking. Wheels can be put on the items that need to be moved and
tools can be nicely put in a toolbox or storage chests so that they are within easy
reach.

This arrangement can be compared to a kitchen in the house where things are kept
in place for easy reach and also because they are easier to locate. Many toolboxes,
for example, socket wrench sets can be organized this way.

3. Shine

Shine implies keeping the workplace clean and clear. Cleanliness includes
housekeeping efforts and keeping the dirt away from the workplace. Cleanliness
not only ensures improvement in the appearance but at the same time safety while
working. The cleaning should be included in the routine and done by the operators
rather than the cleaners. The operators should clean their own work place and
keep the equipment in good order and in their respective place. Shine or neatness
will leave no room for leaks or malfunctioning of the equipment.

4. Standardize

The clean-up and the storage methods should be standardized. The best practices
should be followed by everybody in the organization to set an example and to
standardize the efforts. Although, it is difficult to inculcate these habits in
everybody, yet the routine should be maintained in order to standardize the new
set-up.

The employees should be motivated to keep their work place clean and rewards in
the form of praise should be bestowed on them to set standards for others to
follow. A computerized planner can help to hold inspections on a regular basis to
determine whether or not the standards are being maintained. The scheduled
preventive maintenance supports ISO 9000's process control requirement.

5. Sustain

The effort to keep the workplace clean and organized should be sustained. 5S
involves a change in the old practices of the organization. The culture change
should be imbibed in every employee of the organization. The stress should be on
raising the bar and efforts should be towards continuous improvements.

This step entails not just cleaning up but finding the underlying causes behind the
issues. The issues should be chronicled in order to know the time and frequency of
their occurrence. The issues can be identified using the Pareto analysis.

The need to hunt for tools, fixtures, and parts is extremely wasteful. Rough
handling and negligence make tools harder to use and increases the set-up time. If
the work place is clean, the problems will be spotted easily and thus fixed well in
time.

Advantages

1. It improves the processes.

2. It reduces set-up times.
3. It reduces cycle time.
4. It decreases accident rates.
5. Machines become more reliable.

This Lean tool motivates the employees to develop their work environment and
ultimately helps in reducing wastage, time and in-process inventory. There is
optimum utilization of space and easy accessibility of tools and materials used
during work. The 5S are also a base for other lean tools like TPM and just-in-time
production. Frustration of the operators is removed due to easy accessibility and
this leads to higher efficiency and deliverance of better quality of goods and
services

3.1 Visual Factory

Visual factory is a term to describe the way data and information is communicated
in a Lean environment. It is an environment where the information is displayed
using charts, signs and 'Andons'. The use of visual methods results in easy
accessibility for those who need it. The current status of all the ongoing processes
becomes clear.

Visual Factory is a tool which allows easy access to information for everybody to see
and understand. This information can be used for continuous improvements. When
information about tools, parts, production systems and metrics are clearly stated,
everybody would understand the position, the current status of the system at a
glance. The presence of information simplifies things and manageability. Visual
factory is like a visual aid which helps to know the what, when, where, who and how
and why of any work place.

Visual factory is executed in two stages-first, the establishment of the information

that needs to be conveyed and second, the way this is done.

To establish the information that needs to be communicated, the current state of

affairs are compared to the goals set for the future. The steps that are required to
move from one stage to the other must be communicated. The way the information
needs to be communicated depends on the end result that is required. The location
and method of the information conveyed also depends on its significance.

Typically this data includes.

 Process metrics
 Work instructions
 General plant information

The process metrics are usually displayed on the machine or cell. The information is
most useful if it is delivered on time. Instant feedback helps in instant
improvement. When light is used to indicate information, it is referred to as an
andon. Generally, the main focus of the visual factory is the andons because they
communicate incredibly real-time process information.

Work instructions are usually displayed in the production areas. The manufacturing
errors can be reduced with the aid of visuals and photographs. Communication can
become more effective if it is conveyed through visuals.

General information about the plant or factory is usually posted in a central

location for everyone to see. In a visual factory environment, the information is
delivered in order to notify, create awareness and stimulate. This helps in easy
communication and world class performance.

Advantages

1. It decreases errors.
2. It motivates the employees and boosts up their morale.
3. It improves the run rates of the machines.
4. It decreases WIP or work-in-progress.
5. It improves machine uptime
3.2 Kanban

Kanban is a word taken from the Japanese language and implies "card-signal".
Kan means visual and ban stands for card or board. Kanban/Pull systems help
in the optimization of resources in an organization. They depend on customer
demands rather than on sales forecasts. There are no stocks which lie in the
store room waiting for the customer demands. Kanban is a signal card which
indicates that the system is ready to receive the input. It helps to manage the
flow of the material in the manufacturing system. According to Taiichi Ohno,
Kanban is the means through which JIT is managed.
The concept of Kanban can be explained with the help of a simple example. In
the kitchen of a pizza outlet, there is a shelf on which the ingredients of the
pizza lie and another shelf on which the freshly made pizzas arrive. These
shelves act as Kanbans. The second shelf on which the prepared pizzas arrive
are a pointer towards the customer needs. When it is empty, it means that
the chef must prepare another pizza. When the chef starts preparing the
pizza, he takes the raw material from the first shelf and thus signals the
supplier or the chef who stores the raw materials, that he has the need for
more.

The concept of Kanban is many years old. The 'two bin system' was used in
the UK much before the Japanese production tools became popular in the
1970s. The Kanban system is very easy to understand and deploy in an
organization. It is very popular in industries where there is a stable demand
and flow. In the manufacturing industry, usually the demand is less and
supplies are more. So, Kanban cannot be applied to the entire manufacturing
process. However, there may be sub-processes to which it can be applied.

Kanban is also referred to as the 'pull' system as everything is pulled in

response to the demands made in the past. The conventional 'push'
methodology was based on the sales forecasts for manufacturing. However,
according to the 'pull' methodology, the production is based on the customer
demands.

The various kinds of Kanban include:

1. Supplier Kanban

It indicates the orders that are given to outside parts suppliers when parts
are needed for assembly lines.

2. In-Factory Kanban

It is used between the processes in a plant.

3. Production Kanban

It indicates the operating instructions for processes which are within a line.
It is a system where the supply of raw materials and other components is
ongoing. The workers have a never ending supply of what, when and where
they need something. Kanban helps in reducing overproduction.

The Kanban system has the following benefits:

1. It decreases the stock and prevents the products from becoming obsolete.
2. It minimizes wastage and scrap.
3. It allows flexibility in the manufacturing process.
4. It increases output.
5. It saves costs.
3.3 Poka-Yoke

Poka-Yoke is a Japanese term which stands for mistake proofing. It is another tool
that supports ISO 9000 and QS-9000. The term was invented by Shigeo Shingo. The
word 'Poka' means inadvertent errors and 'Yokero' means to avoid. This tool can
easily recognize flaws in a product and thwart the manufacturing of incorrect parts.
It is a signal to specify a trait in a product or a process. It is the first step in proofing
a system.

Poka Yoke is a mechanism that prevents a mistake from being made. It is done by
eliminating or hugely reducing the opportunity for an error, or to make the error so
obvious at the first glance, that the defect reaching the customer is almost
impossible. Poka Yoke creates the actions that have the ability to eliminate
mistakes, errors, and defects in everyday processes and activities. In other words, it
is used to prevent causes that give rise to defects. Mistakes are not converted to
defects if the errors are discovered and eradicated beforehand.

Poka-Yoke is a mandatory exercise as it saves time and money for the organization.
Defects like scrap rework and other defects can be prevented in the first place with
the help of Poka-Yoke. Poka-Yoke puts limits on the errors and helps in the
accurate completion of the project.

Example

Gilbreth's (1911) advice to color-code objects to facilitate proper orientation is an

example of error-proofing. He was of the view that colors have a stimulating effect
on the workers as their motions can be made simpler. Colors can be seen quicker
than shapes. Therefore, distinguishing things by making use of different colors is
better than distinguishing them with the help of the print on them.

The various kinds of pipes in a pipe gallery, for instance, can be distinguished by
coloring them in different colors. This kind of distinction also proves very helpful for
the workers who are mostly illiterate.

An analysis of the cause-and-effect relationship of a defect is the first step towards

the mechanism of Poka Yoke. Then a remedy that wipes out the occurrence of the
mistakes that lead to that defect is applied. Poka Yoke solutions can consist of any
way that helps to ensure the mistake will be eliminated for good. It can be the
creation of a check list, an altered sequence of operation, a computer data entry
form, a message that reminds the user to complete a task etc. Poka Yoke has wide
applicability, especially in engineering, manufacturing, and transactional processes.

Poka Yoke can be done in two ways:

The Type-1 corrective action, usually believed to be the most effective form of
process control, is a type of control which when applied to a process eliminates the
possibility of an error condition from occurring.

The second most effective type of control is the Type -2 corrective action, also
known as the detection application method. This is a control that discovers when
an error occurs and stops the process flow or shuts down the equipment so that
the defect cannot move forward.

An error-proofing process looks like the following where both the prevention and
detection of the defects are done:
There are three error-proofing categories

1. Warnings: This prevents the occurrence of the error or defects at the first
place. The first place means the defects at the source before a value is added
to the product.

2. Shutdown : This type of proofing inhibits the errors from progressing

further as it closes the system as soon as the error occurs.

3. Auto Correction: This category of proofing allows correction or self-

correction of the problem that has gone out of hand..
3.4 Single Minute Exchange of Dies (SMED)

Minute Exchange of Dies (SMED) is a method adopted for quick changeovers. This
method was developed in Japan by Shigeo Shingo to reduce output and quality
losses, and it has proven to be very effective. The SMED tool is applicable for all
kinds of industry, be it a small retail shop or a car manufacturing company. SMED is
also known as "Quick Die Change" or "change-over" and it is the time period
between the completion of the last task till the beginning of the next task. The time
required in getting the tools, raw materials and completing the paperwork includes
SMED.

When the last product of a run has been manufactured, the machinery is shut
down and locked out, the line is cleaned, and the tools are removed or adjusted.
This is a description of a typical changeover process. It takes time for the new
process to start because the collectors need to be refilled and the other
performance adjustments need to be made. This changeover in the process can be
reduced using the SMED.

The variety of products is rapidly increasing and companies prefer to deliver

smaller batch sizes. Single-Minute exchange of die allows conversion of batch-and-
queue operations to single-piece or small-lot operations and can also reduce lead
times. The setup time reduction is a key factor as far as increasing profits is
concerned. With the help of SMED, the changeover time can be reduced from hours
to minutes. For instance, the bottling industries spend a lot of time (more than 20%
of the pre-planned manufacturing process) during changeovers. The application of
the SMED system can reduce the changeover time significantly. In some cases, it
can be reduced to less than ten minutes; so the change over time is expressed by a
single digit and thus it is called Single Minute Exchange of Dies.
Example

There is a bolt that secures a die to a press. If the nut has fifteen threads, the
worker needs to turn it fifteen times. However, value would be added only with one
turn which tightens the bolt. The other fourteen are simply waste. The change
which makes the setup require only one turn converts the bolt into a functional
clamp. Robinson (1990) has proven how it is possible to loosen a bolt or screw with
a single turn.

Pear-shaped holes in flanges allow the flange to be placed over the bolts which
hold it down. The bolt heads pass through the large openings of the pear-shaped
holes. A small turn puts the narrower parts of the pear-shaped openings under the
bolt heads, and single turns clamp the flange into place. It is very simple to remove
the flange, as a single turn on each bolt is enough to loosen it.

The SMED tool is an important part of the Lean Manufacturing as it helps to save
costs. Decreasing setup time at capacity constraining resources is very significant
because the throughput of the entire organization is at stake at these nodes. The
SMED process reduces setup time and increases utilization, improves competence
and quantity. Switchover required for machinery and rooms when switching from
one room to another can be done in a short span of time and it serves as an
important agent of changeThe SMED tool applies to almost every aspect of
production-machining, shaping, painting, assembly and bottling.

External and Internal Setup

The main idea behind the concept of "exchange of die" is to perform as much set
up work as possible while the machine is working on another job. This is known as
the external setup or the set up which is done outside the machine. This kind of a
set-up can be performed while a worker is working on the machinery or using a
particular tool. Internal setup, on the other hand, is the one which requires the
machinery to shut down and the tools to stop. There is no loss of processing time in
the external set up as in the internal setup.

Benefits

1. It brings about a decrease in the raw material stock and tools.

2. It decreases the flow time.
3. It helps in eradication of waste and decrease in non-value added activities.
4. It increases quantity.
5. It increases elasticity.
6. It decreases costs in terms of raw material and waste
7. It increases the cash flow
8. It increases competition
9. It improves customer satisfaction
3.5 Standard Work

Standard Work means the basic or standard process. It is important to standardize

the work before the Lean tools are applied to a manufacturing process. The
elements of standard work include the speed of work matched to the customer
demand, the process ladder to complete a task and material required by a worker
to finish the task. Standard work helps improve stability, quality, production and
safety in the organization. Each step in every process should be clear and must be
repetitive. Variations in the process cause quality problems and require rework
which hikes up the costs.

In the earlier times, the workers used to work according to their judgment.
Whenever the workers made some modifications or improvements to their jobs,
they would not share it with their co-workers. Therefore, there was no knowledge
retention. When the workers died or retired, the knowledge about the change
would go with them because it was not a common practice to record the changes.
There was no knowledge sharing or best practice deployment. However, with the
advent of the standardization of work, these things have changed.

Standard work is an important tool in the area of employee empowerment as well

as continuous improvement. In conventional work environments, the rules or
changes were laid down by the industrial engineers or the higher authority.
However, in the current day the change agents are the employees themselves. They
are the ones who practically work and know the changes which are required in the
organization. Thus they solve problems and assume responsibility for the same.
They can be held accountable for the standards they create for themselves.

Example

Retention and dissemination of information help in the standardization of work.

Juran and Gryna (1988) have stated two examples.
1. An investigation of crankshaft damage showed that only one worker's product
was involved. The workplace was designed for right-handed workmen and he was
left-handed. So, sometimes he bumped the crankshaft into a nearby conveyer. This
was a human factors and workplace design issue.

2. There was only one worker in the aircraft assembly plant who met his production
quota consistently. His secret was that he had taken the powered screwdriver
home and rebuilt its motor. When this was done with to other screwdrivers the
productivity of the company shot up.

Juran and Gryna were in favor of incorporation of skills which were beneficial for
the process.

Given below is a diagram which shows that if the work is non- standardized and
unorganized, then there would be a lot of rework and scrap. However, if the work is
standardized and everything is organized and systematic, then rework and defects
would be reduced by a significant amount. The standard work shown below also
qualifies for the 5S tool (standardize).
The important thing to observe while creating a standardized work environment is
the elimination of non-value added activities like waiting, unnecessary motion and
piling up inventory. Also, the activities that may appear to be necessary but are no
longer important need to be eliminated.

Once the non-value added activities get eliminated, then emphasis should be laid
on improving the value-added activities. Once all this is accomplished, the next step
should be to create a standard way of working.

The norms that are established to standardize the work should be clearly
documented. The documentation ensures that the rules are being followed and the
work is being carried out in a consistent manner to ensure efficiency and eradicate
waste. The documents should be regularly modified for continuous improvement
as it brings to fore the areas that need development.

Standardized work requires employee feedback and control. It is a benchmark for

other tools like 5s and pull methods. Establishing standards leads to minimal
wastage and improves efficiency. The standard work should be continuously
upgraded and the efforts of improvement should be sustained.

Advantages

1. Standard work is important to achieve consistency. Moreover, if the

standards are recorded, it would lead to a consistency in the performance
levels and thus delivering high quality products and services.

2. Standard work helps in ongoing improvement. It helps everyone to follow

the same procedures and work in the same manner. However, it is not
important that the standards should be rigid and permanent. New standards
can be created if they help in improving the performance.

3. Standards are the measure of performance. A fair output rate can be set
and work of two employees can be compared.

4. Standard work also ensures that the work is carried out in a safe manner. If
the standards are enforced effectively, they ensure safety because the unsafe
practices are eradicated from the organization.
5. Establishment of standards is essential during the training of new
employees.
3.6 Kaizen

Kaizen is a philosophy which strives for continuous improvement. The term

originated in Japan and is applied to all aspects of life there. However, it has
become a very popular tool and is applied both in manufacturing and service
industries. Kaizen approach believes in making minor improvements in ongoing
processes and does not concern itself in making major changes. The idea of Kaizen
is to optimize existing processes. The basic aim is to persuade organizations to
achieve quick, transparent, and sustainable processes. The term is generally used
for business processes in America.

Kaizen became a fad in the business world when it was first introduced to the
corporate world by Masaaki Imai through his book Kaizen: The Key to Japan's
Competitive Success in 1986. The book was translated in fourteen languages. One of
the committed followers of Kaizen includes Toyota. Imai soon realized that the
concept was not being executed in a proper fashion. So, he introduced an advanced
form of kaizen in his book Gemba Kaizen: A Commonsense, Low-Cost Approach to
Management. Through this book, Imai stressed the significance of the shop floor to
bring about continuous improvement in an organization.

There are two mechanisms in any given organization- process improvement and
process control. Control means to sustain the current improved performance of the
process. If there are no indications regarding the deviation in the performance of
the process, then standard operating procedures (SOPs) are considered. On the
other hand, improvement implies conducting experiments and altering the
performance to produce better results. When the improvement is made, the SOPs
are altered and a new way of doing things is established.

According to Imai (1986) the job responsibilities regarding the improvement and
maintenance of a process are divided according to the level of position held by
personnel in the organization. The figure below represents how and where Kaizen
fits in an organizational hierarchy.
In the figure drawn above, there is a portion which goes beyond Kaizen. It is a point
of radical innovation. This is where Lean Thinking is related to Six Sigma. The figure
drawn below illustrates the point.

Positions and Responsibilities

1. Top Management
 They should be determined to introduce Kaizen as a corporate strategy.
 They allocate resources and support and give direction to Kaizen efforts.
 They develop policy for Kaizen and cross-functional activities.
 They help to achieve the goals set through Kaizen policy deployment and audits.
 They build systems, procedures and structures which are favorable for Kaizen.

2. Middle Management

 They help to deploy and execute the policies of Kaizen according to the directions
given by the top management.
 They make use of Kaizen in functional capabilities.
 They setup, preserve and improve standards and staff.
 They provide training to the staff and make them 'Kaizen-conscious.
 They help employees to develop skills and tools for problem-solving.

3. Supervisors

 They make use of Kaizen in functional roles.

 They make plans related to Kaizen and give a direction to the customers.
 They motivate the workers by communicating with them.
 They help to maintain discipline.
 They provide suggestions for Kaizen.
 They support small group activities.

4. Workers

 They take on Kaizen with the help of the suggestion system and small group
activities.
 They follow discipline.
 They engage in continuous self-development activities.
 They increase their skills and performance expertise with cross education.

The Kaizen approach is related to the PDCA cycle given by Deming/Shewhart. This is
because like PDCA, it involves planning, doing, checking and acting. Kaizen
approach is scientific in approach. The methodology is applied to all the aspects of
the production cycle in Japan and to research and development in other countries.

CHAPTER 4

4 Total Productive Maintenance

1. Definition

Total Productive Maintenance (TPM) is a management system or a maintenance

philosophy which helps in the optimization of production machinery. It involves
employees across all levels and strives for organized equipment maintenance. TPM
reduces the production losses occurring due to repairs to a great extent. In the
earlier days, till the 1950s, no precautions were taken for the maintenance of
machinery. However, the factory managers soon realized the importance of
preservation of machinery to increase production.

During the 1970s, the theory of 'productive maintenance' appeared. According to

this concept, preventive measures were taken to maintain the machinery according
to a specified schedule. The technical or the engineering staff is mainly responsible
for the maintenance of the equipment.

TPM originated from Total Quality Management or TQM. TQM had evolved as a
result of Dr. W. Edwards Deming's principles of quality management on the
Japanese industry. The concepts of quality introduced by Dr. Deming were very
popular and became a way of life for the Japanese industries. He introduced
statistical procedures and quality management methods that came to be known as
Total Quality Management.

The aim of any TPM program is to reduce the losses which happen as a result of
maintenance of the machinery. The reason behind keeping the equipment in good
shape is to manufacture high quality products with no unplanned downtime.

2. Origin

The original source of the concept of TPM is debated. According to some, it was
invented by American manufacturers about forty years ago. Some say that it was
invented by Nippondenso, a Japanese manufacturer of automotive electrical parts
in the late 1960s. The concepts associated with TPM were derived and executed in
the Japanese industries by Seiichi Nakajima, an officer with the Institute of Plant
Maintenance in Japan. The first widely held TPM conference took place in the
United States in 1990.

The concept of TPM followed the theory of productive maintenance. The theory of
productive maintenance was not appropriate for the maintenance environment.
According to the theory of TPM, everybody from the workers to the top
management is involved in the equipment maintenance. Everybody in the
organization should feel that it is their moral duty to maintain the machinery. The
operators of the machines have to examine, clean, oil and alter the machines
themselves. They also have to perform simple calibrations on their machines.
Simply put, everybody in the organization should be familiar with terms like zero
breakdowns, maximum productivity and zero defects.

TPM gives a lot of freedom and at the same time provides a sense of responsibility
in the employees. TPM is an effort that requires some time for effective
implementation. It is initially carried out in small teams and gradually it spreads to
the entire organization.

3. Application

Maintenance and production were seen as two different things in conventional

times. TPM developed as a result of the emerging role of maintenance in increasing
productivity and asset availability. TPM is a shift from the process of reactive or
corrective maintenance environment to a preventive maintenance environment.

The application of the TPM concepts in an organization requires total commitment

from the entire staff. It is imperative to hire a TPM coordinator for the purpose. The
job of the TPM coordinator is to disseminate the knowledge of TPM concepts
among the employees. It is not an easy task to convince the employees to change
their routine way of working to a new way.

When the coordinator is convinced that the work force is able to comprehend the
TPM concepts, the action teams who would carry out the TPM program are formed.
The operators of the machine, maintenance personnel, supervisors and upper
management are included in a team. These are people who have a direct bearing
on the issue at hand. Each team member is held equally responsible for their
actions. The TPM coordinator heads the team until the concepts are practically put
to use and the team members become proficient with them. The teams often begin
by addressing small problems and move on to solve the problems involving
complexity.

The tasks of the action teams include indicating the problem areas, specifying a
course of action and implementing the corrective measures. In good TPM
programs, the team members pay a visit to the cooperating plants to study and
evaluate the work in progress using the TPM methodology. The comparative
process is a measurement technique and a significant aspect of the TPM
methodology.

Ford, Eastman Kodak, Allen Bradley and Harley Davidson are some of the big
names using the TPM methodology. There has been tremendous hike in
productivity by making use of the methodology. Also, there has been a great
reduction in down time, decrease in the stock of spare parts and increase in the
number of on-time deliveries.

TPM is the done thing these days. The importance of TPM in some companies is
such that their success depends on it. It is suited for all kind of industries like
construction, transportation and many other industries. The most important
consideration for a TPM program remains full commitment from the entire work
force because it would result in high ROI.

4.1 Lean Manufacturing and TPM

TPM helps to eliminate waste out of the production process by decreasing or

eradicating the manufacturing time which is lost during the failure of machines. The
goal of TPM is to make sure that the machines are always available for
manufacturing. Maximum value can be added to a product by diminishing or
reducing the defects and rework, by removing the slow running equipment and
reducing the downtime.

Lean systems reduce excess capacity and link all the machines and processes. If
one machine stops, productivity comes to a standstill. The true value of TPM is
realized when the maintenance issues are dealt with and total productive
maintenance programs are carried out. Lean Manufacturing is dependent on
Kaizen or continuous improvement and TPM allows for Kaizen in maintenance
programs. Issues can be resolved if they are tackled at the root level.
TPM decreases the maintenance cost to a significant amount and increases
equipment availability and profitability. A lot of teamwork is involved in carrying out
TPM programs and there is a lot of employee involvement. All this contributes in
successfully carrying out the manufacturing process and in helping the organization
become Lean. TPM endows the tools with the ability to turn the maintenance
operations into a competitive advantage.

TPM is a major accessory of Lean Manufacturing. If the machine uptime is not

foreseeable, and if the process capability is not prolonged, then production cannot
be matched with the pace of sales. It is not important for the machines to run all
the time to be productive. To state an example from ordinary life, you use a car to
go somewhere. It is not important for the car to run all the time to prove that it is
productive and running in a proper condition. Similarly, the machines must be
ready when they are needed by the operator and they must be shut down in a way
that they are ready for use the next time the need arises.
It is important to calculate the change that has taken place with the help of any new
initiative taken by the organization. OEE or Overall Equipment Effectiveness is a
metric to calculate the success of the TPM programs. It is a simple and easy to
understand metric and helps to gauge the success of the TPM program and to seek
areas for improvement.

CHAPTER 5

5 Supply Chain Management

Introduction

The term Supply Chain Management was invented by Keith Oliver, of strategy
consulting firm Booz Allen Hamilton in 1982. The Supply Chain Management is the
process of planning, executing and managing the actions of the supply chain.
Supply chain management helps to gratify the requirements of the customers as
best as possible. A supply chain constitutes the movement and storage of the
reserves, supplies and finished goods from the point-of-origin to the point-of-
consumption.

The supply chain management extends the theory of constraints (TOC), just-in-time
(JIT) and lean manufacturing techniques to every entity in the supply chain. Supply
chain management is the management of materials as they move in a process from
a dealer to a producer to the wholesaler to the seller and finally to the customer. It
is about synchronizing and amalgamating these flows both within and among
companies. The supply chain management treats customers and suppliers as
trading partners whose success would depend on the entire supply chain.

Labor costs can be reduced by increasing efficiency, and the cost of materials can
be reduced by educating the suppliers about Lean Manufacturing. The leanest JIT
systems work the best when the suppliers deliver small batches. If the lead time
(the time between placement of an order and its delivery) is long, then it will hinder
the internal time reductions. This is where supply chain management comes in.

A. Defective Supply Chain

According to Walker (2001), the largest barrier to successful supply management is

the lack of trust between the trading partners. An example of this is the purchasing
department which tries to squeeze concessions from the suppliers. This creates
distrust and makes it defective. Some of the reasons that make a supply chain
defective are listed below:

1. Lack of Communication

Absence of communication is one of the major factors that lead to distortion in the
supply chain. A proper supply chain requires coordination among everybody
starting from the wholesaler to the retailer, and finally to the customer. Proper
communication leads to minimum amount of wastage and optimum utilization of
resources.

It is not just important to ensure that the shipment is proper and that the product
reaches the customer in time. For Supply Chain Management to be effective, it is
important for all activities, ranging from acquisition till the final delivery of the
product, to be coordinated and incorporated using smart management techniques.
Incorporation and communication are, therefore, the key concepts in a Supply
Chain Management.

There should be a proper link among all the people involved in the supply chain
and there should be proper exchange of information among them. The '3cs',
namely, cooperation, communication and coordination should be developed in an
effective manner to subdue the effect of dead times and piled up inventory.

Information exchange can develop the contacts all along the supply chain by
hastening the process of communication. It also helps in building competitive
advantages like improving the capability of the organization by satisfying the
variations in commercial demand, improving its novel capabilities, improving its
competitiveness as a whole and finally delivering a better customer service and
thus increasing the number of satisfied customers.

2. The Beer Game

The traditional beer game was introduced in the 1960s by MIT. It is a simulation
which shows what happens when nobody manages the supply chain. It replicates a
production and distribution system and is used as a teaching tool in operations
management courses. The original form of the game was played on a large board
and there were four locations on it. They represented the factory, the distributor,
the wholesaler and the retailer. Inventory was represented by pennies. A stack of
cards represented external demand. There were four players who managed one of
the four supply chain components and each player's aim was to reduce the total
holding and backorder costs borne by the component.

The purpose of every link in a supply chain is to satisfy the customers and gain
maximum profit. Cutting down on the inventory costs can be very helpful. The
order sheets are the only mode of communication in the entire supply chain. The
lack of communication leads to huge piles of stock, unfilled back orders and
dissatisfied customers.

This kind of a problem usually arises in a physical or business process control

system which has communication lags. There is a response to the system. However,
the response is due to unstable feedback loop and not because of actual customer
demand.

Take an example of a retailer of umbrellas. When rains occur in the dry season, the
demand for umbrellas shoots up. This increased business represents random
variation but not a change in the actual average demand. Therefore, the retailer
sends a larger order to the wholesaler. It can be possible that the order takes some
time to be processed and the retailer, upon seeing his stocks falling, may send
another order. The thing to remember here is that the order sheets are the only
medium of communication.

It is possible that the retailer's sales decline not because of a change in the average
demand but because of random variation. Moreover, the wholesaler's deliveries
also arrive at the same time. Now the retailer is overstocked and he would stop
placing any new orders. These unsteady signals of large orders and/or duplicate
orders work their way upstream to the distributor and the factory. Therefore, it
creates quite a lot of confusion.

3. Sub Optimization

The best part about the supply chain management is the fact that it warns against
sub optimization. An organization which adopts the supply chain management
does not just think about increasing its own efficiency and profits without looking at
the overall effects of its actions. Sub-optimization is the biggest enemy of supply
chain management.

According to Schragenheim,
1. "To maximize the revenue of the entire chain, links must make decisions in the
interest of the entire chain."
2. "To protect the interests of the links, the chain must make decisions in the
interests of the links."

The problem of the supply chain management is to resolve the often-inherent

conflict between these two objectives.

There is no denying that clear communication is very important in a supply chain. It

is as important during the order placement in the beer game as it is during the
specification of the ingot sizes and compositions. Sub optimization leads to less
profit for every link involved in the chain.

B. Value Stream

A Value Stream is one which helps in the identification of value-added and non-
value added activities. A value-added process or activity is the one which adds value
to a product or a service. The value is determined by the customer or client of the
company or an internal customer who receives the output of the process or activity.

A product or service is believed to generate value if the customer is willing to pay

for that process or activity, the process or activity physically transforms the process
or activity, and also if the process or activity is correctly performed the first time it is
undertaken.

The non-value added activities have been discussed in an earlier chapter.

The Lean Supply chains work together with the suppliers to build new products and
produce the components and subassemblies without any hindrances.

5.1 Advantage of Applying Lean to the Supply Chain Management

1. Reduces the Supply Base

Lean Manufacturing helps to reduce the supply base of an organization to a bare

minimum. The suppliers are reduced significantly, usually only one supplier is
maintained for a company and the rest are left out. In the past, the companies used
to have a large number of suppliers which made it impossible to fully understand
the potential of any one of them. It was difficult to determine the best company in
terms of quality, capacity and cost structure. The convention was to divide the
number among many suppliers so that company's negotiating power and control is
low at all of them. Another important feature was that their main focus was on
price as far as decisions regarding buying are concerned.

Benefits of Lean

1. Applying Lean to the supply chain helps speed up the expansion and execution
operations. This is possible because of the presence of fewer suppliers who make
fewer mistakes and therefore cause less disruption.
2. Lean helps in building a healthier relationship with a supplier as it reduces the
number of suppliers and therefore makes it easier for an organization to know the
capabilities of the supplier better.
3. Lean turns an organization into a major customer of the important suppliers
which effects the quality, price, delivery and capacity decisions.
4. Lean helps to decrease the number of variables with which the production,
quality and dependability has to cope with to produce better products.
5. Lean Manufacturing helps the design engineers to work in close proximity with
the supplier engineers to take decisions about the functions, costs and quality
improvements in products.

2. Help to Build Long Term Relationships

Lean Manufacturing helps to build partners in the form of suppliers. This becomes
possible because of the presence of few suppliers who become loyalists for the
organizations over a period of time. This helps in the success of the organization
and its future growth. The organization's product design and implementation
process should be molded keeping in mind a long-term relationship with the
suppliers, apart from other factors. A lot of data should be exchanged between the
supplier and the organization and there should be close harmony between them in
the areas of technology, expansion plans and corporate culture.

The problem with traditional organizations was that they did not believe in building
long-term relationships. They switched to another supplier if there were differences
between them on matters of price or delivery. The conventional organizations
never discussed issues of technology, plant locations or major quality initiatives
with their suppliers. They only released knowledge that was needed for immediate
purchase. All this has changed in the current day with the recognition of the
significance of supply chain management.

Advantages

1. Application of Lean to the supply chain permits candid discussions at all the
levels between the supplier and the organization. The discussions permit
negotiations about the technical, cost and quality issues about the product.
2. The issues of expansion, capacity planning, quality and improvements in
dependability can be discussed easily.
3. Lean Manufacturing helps to disseminate knowledge about new technologies so
that a good consensus can be reached at. Lean also allows for barter of information
about itemized cost data which can help reduce the duplication of costs, and
generate savings which can be shared.

3. Helps to Manage Suppliers by Forming Commodity Teams

A Lean organization should bear in mind that important issues with the main
suppliers can be a key to several functional areas. A commodity team should be
formed to take fundamental decisions and the emphasis should be laid on
managing the total cost rather than giving importance to the immediate pricing.
The commodity team should comprise of personnel from every department
including purchases, sales, production and quality.

In conventional organizations, only the purchasing department was involved in

taking core decisions. They emphasized only on the price, that is, the immediate
cost. They did not share information with their suppliers. So, they did not have any
data about such things as the cost of poor quality, inventory and transportation
issues.

Advantages

Lean Manufacturing helps in creating a common platform for departments like

engineering, manufacturing, quality and reliability. These departments play a key
role in choosing and controlling strategic suppliers. These departments also help to
quantify the intangible costs and thus help in taking fundamental decisions about
the cost of a commodity.

4. Helps to Certify Suppliers

Companies that apply Lean techniques have teams consisting of people from cross
functional departments who perform a variety of activities. This helps in approving
the role and actions of the suppliers. These companies can create a certification
process for their suppliers. This would help to measure the suppliers' capabilities.
The important thing to be kept in mind during the certification is that the process
should contain only those norms which are significant for the organization. The
certified suppliers should be kept motivated by awarding them public recognition
and having an appraisal system in place.

There was no such thing as certifying the suppliers in traditional times. The reason
behind this was that this system was not considered important by the organization
and they had too many suppliers, so certification was a tedious task.

Advantages

1. Certification creates a standard for the suppliers and they know what exactly the
organization need from them.
2. The suppliers are motivated to deliver their best performance for the
organization. They cut down on their mistakes and create leaner operations.

5. Links Suppliers through Technology

Lean Manufacturers makes use of modern technology like the internet to associate
with their suppliers. The Internet helps to easily establish contacts and exchange a
lot of information about the statistics, schedules and the order status. An
organization can also issue data about technology roadmaps, quality programs and
capacity planning.

The traditional companies had a difficulty communicating with their suppliers due
to the language barrier and distant time zones. So, they wasted a lot of time and
manpower in exchanging information about schedules and new technology.

Advantages

1. Lean helps to decrease the chaos and makes things easier and simpler. A lot of
information can be exchanged in a systematic manner.
2. It helps to downsize the manpower in both the organizations.
3. It helps to improve the relations with the suppliers by motivating them through
the exchange of important information.
4. Every department in the organization has easy access to information.
Conclusion

It is important to manage the supply chain to reduce the cycle time. The supply
chain should be planned and implemented and there should be coordination in the
supply system. Today customers are very aware and they want the delivery to be
on time. Moreover, reduced cycle time is good for the organization as it leads to
cost savings and optimization of resources.

Lean is a very effective tool and plays a vital role in Supply Chain Management.
Lean helps in coordination as it enables the reduction in the number of suppliers.
Lean also makes the supply chain become systematic because it enables the
suppliers to deliver material in small batches. The supply chain becomes very
controlled; there is easy accessibility of information and a huge increase in cost
savings. Lean also helps in strengthening the relationship between an organization
and its suppliers

CHAPTER 6

6 Implementation of Lean Manufacturing

Introduction

Taichi Ohno and Shigeo Shingo developed and carried out Lean Manufacturing at
Toyota Production Systems over a period of 20-30 years. They developed a mental
model for the implementation of the same.

Ohno was the first one to visualize an ideal production system in terms of
workflow. He drew inspiration from observations made by Eiji Toyoda at Ford
Motor Company. The ideal production system was to have a series of workstations
with no piles of stock lying between the stations. The final output would be
delivered to the customer exactly when they raised a demand to buy it. According
to Ohno, inventory was the main reason for the occurrence of waste. The main aim
of Ohno's and Shingo's model was to build on Toyota's model and resolve the
issues that arose by applying this model.
Example

One of the reasons for the piling up of stock is the scale of the equipment. If an
organization has certain equipment which is very big in size, it would affect
batching, set up, workflow and ultimately lead to a high inventory. If the equipment
is very large, it would produce multiple products. The production of multiple
numbers of products will give rise to a changeover because each different product
would follow a different route because of different steps and processes. A large
batch of products would be produced which may not be required and that would
give rise to a huge pile of stock. This is shown in the figure given below:
The huge stock that gets piled up will give rise to all kinds of waste as far as
handling the material, space and quality is concerned.

Shigeo Shingo found a solution for large equipment and reducing changeover
times. The SMED system was developed to reduce changeover times. The size of
the equipment was scaled down with the help of Cellular Manufacturing or one-
piece flow and the simple manner with which it is carried out.

Lean Enterprise is not merely a set of mutually supporting techniques. It involves a

change in the entire organization's culture and thought processes. The Lean
methods should be imbibed in every employee and be made a part of the routine,
as a way of life.

6.1 Change Management

Change Management consists of two steps:

1. It means to convince the organization that change is inevitable.

2. It also involves getting the personnel in the organization to accept and imbibe the
change, if possible.

This is important as change is most effective when it is adopted by the people

themselves rather than when forced upon them. Frederick Winslow Taylor
described the need for change management about ninety years ago. According to
Taylor's original version of scientific management, the managers used to bring in a
change in the organization by introducing work efficiency methods and rewarding
the employees for implementing the same. One of the ways to introduce this was
to select a group of workers and reward them for helping increase the efficiency.
The other workers would follow suit and strive to work harder to gain the benefits
themselves.

Taylor wanted the workers to leave their brains behind when they left the
organization. His point of argument was that he was dealing with unskilled worker
whose primary interest lay in the hike in wages rather than any other intrinsically
motivating work. However, the truth was that Taylor wanted the frontline workers
to suggest ways to make their job more efficient. He believed in worker
empowerment and was way ahead of other thinkers of his time in implementing
this idea. He wanted the workers to apply "kaizen blitz" or "the one best way" to
their work. Therefore, he applied scientific management with worker participation.
When the workers actively participated to implement the change, they were able to
ingrain the change faster.

The most important thing when a change is to be implemented is a commitment

from the top management. Their commitment is very important for a continuous
improvement program. Another thing to be kept in mind is the standards for
performance measurement standards. In the example stated above, the main goal
is to reduce the inventory and this can be done by reducing the size of the
equipment.

Standard and Davis (1999) defines three standards for appropriate performance
measurements:

1. Measurements must be goal-oriented, defined to the point and quantifiable.

2. The performance must be controlled by the people of that particular department. This
is also a criterion for "self-control".
3. The criterion for measurement must provide motivation for the employees and thus
help them to achieve the goals of the organization.
In an earlier chapter it was described how the Theory of Constraints limits the pace
at which downstream operations work. For instance, if the equipment's utilization is
increased, it may not be under the control of a particular department. This may be
because lack of demand from an earlier operation could limit the manufacturing
operation. The theory of constraints uses three measurement standards:

 throughput, which includes the finished goods which have been sold to the
customers
 inventory, which includes the investments made by an organization in the products
and services that it plans to sell
 operating expense

2. Eliminating Classification of Jobs

If an organization wants to become Lean, the system of classification of jobs should

be abolished. The employees should be provided cross- training to perform more
than one job. Henry Ford believed that anything that affected the organization's
welfare was part of an employee's job. Taiichi Ohno was also against restrictive
work rules. He was of the view that defining employees' jobs hindered the
implementation of work cells and cellular manufacturing.

Workers' unions must be in favor of the abolition of restrictive work rules. The
intelligent workers and managers should know that work rules result in the closure
of the organization and job losses and they should be against work rules.

3. Lean Does Not Mean Downsizing

Lean does not mean reducing or cutting down on the work force and making
the rest of them work much harder for the same pay. It also does not mean
downsizing the workforce after the productivity is doubled because of
implementing the Lean principles. This kind of practice is very de-motivating
for the employees and could act as a deterrent to their commitment. This
could also hinder the flow of production as this kind of behavior is very
demoralizing.

Womack and Jones are (1996) are of the view that the workers should not be
laid off. They believe that they should be reassigned work in the
improvement programs or given some other work. The improvements in
manufacturing will help the business to expand and also reduce costs and
this, in turn, would help increase productivity. This is where the importance
of cross-training and the elimination of job classifications are felt.

Lean Manufacturing helps to get rid of certain job positions. The workers
should be ready to give up their earlier positions and take up more
responsible and challenging jobs. According to Taylor, this kind of a
progression is a result of the application of scientific management. Scientific
Management gives more emphasis to the frontline workers and they should
be ready for a transformation.

In return for workers' commitment, the management should be ready for a

hike in the wages of the workers. If the manufacturing becomes efficient and
if the company is able to save costs, then the management should also be
willing to pay incentives and increase the salary of the workers.
6.2 Deploying Lean in the Organization

Deploying Lean in an organization means bringing in a cultural change. A certain

guidelines need to be followed while deploying Lean in the manufacturing process.
They are:

1. Identifying Value

The organization should be able to ascertain the demands created by the existing
and the potential customers.

2. Mapping the Value Stream

The flow of the work and information must be identified to determine how it
creates value. Measures to identify the non-value added activities must be taken
and muda must be reduced.

3. Distribution of Work

The work must be distributed evenly among the employees and the process must
be balanced.

4. Standardizing the Process

The key processes must be identified and work should be reduced in terms of
variation, errors and defects.

5. Elimination of "Just-in-Case" Activities and Resources

The delivery of the products should be "just-in-time". No extra items should be

ordered from the suppliers and there should not be a huge pile of inventory.
Temporary or per diem workers or labor should not be hired to deal with
"unforeseen" issues.

6. Build Strong Relationships with Suppliers

The Supply Chain should be made a part of the work process. The delivery and
information system of the organization should be incorporated with that of the
supplier.

7. Use Design for Six Sigma

The most important thing for an organization is customer satisfaction. New ways
should be found out to keep the existing customers satisfied and bring in new
customers. New designs and methodology should be adopted irrespective of the
investment already made in the form of existing assets and processes to keep the
customers happy.

8. Autonomation

Autonomation is a word coined by Taiichi Ohno to describe a manufacturing system

which imitates the human autonomic nervous system. According to him, the
production system automatically adjusts to external and internal conditions. Just
like your body reacts to conditions of heat and cold, in the same way, the
manufacturing system automatically reacts to rising or falling demands. When the
demand rises, production rises and when the demand falls, the production falls.
Lean uses tools like Takt time, Theory of Constraints and visual controls to keep a
control on the production.

9. Role of the Senior Management

The senior management plays an important role in the implementation of their

Lean Manufacturing. They need to discuss and agree on their vision for Lean. The
management must also brainstorm to identify the project leader and the goals.

10. Building a Lean Team

The Lean plan must be communicated to the workforce and a lean implementation
(involving five to six people) of the volunteers must be formed. The role of the team
members must be demarcated.

11. Pilot Project

A pilot project must be chosen and run for two to three months. The pilot should be
rolled out to all the departments one by one. It should be evaluated, reviewed and
lessons should be learnt from the mistakes. The results should be evaluated and
feedback should be encouraged.

The Lean implementation can be divided into three important stages. They are:

1. Data Collection Stage

2. Data Analysis Stage
3. Data Implementation Stage

The Lean implementation can be summed up in the form of the following diagram:
Conclusion

Lean is applicable not only to manufacturing but to all other functions of the
organization such as transportation and delivery. A "lean enterprise" is always
better than a "lean manufacturing" unit. The application of the Lean principles to
the supply chain management has been discussed in an earlier chapter.

If the senior management is not willing to commit or does not posses the requisite
knowledge, Lean transformation efforts fail. Lean should be viewed as a long term
objective. The emphasis should be to make the whole organization turn Lean
instead of focusing on one particular area.

CHAPTER 7

7 Lean and Six Sigma

Introduction

A question frequently asked in organizations is, "should Six Sigma or Lean methods
be used to improve on quality of operations?" To understand this, it is essential to
know the similarities and differences between Six Sigma and Lean production. In
spite of the differences in the way they work, they have inherent similarities. The
goal of both Lean and Six Sigma is to improve the way organizations run. Both are
quality enhancement techniques which improve quality of the product or the
service attribute the organization is involved in producing. It is not a question of Six
Sigma or Lean; it is Six Sigma and Lean. Any of them can be integrated into the
system depending on the size and the scope of the project to give beneficial results.

The Lean system is based on the Toyota Production System. A Lean system can
greatly improve productivity as compared to outdated mass production systems
like batch- and -queue operations. It stresses on the prevention of waste,
improvement of quality, reduction in delays, manufacturing costs and total costs. A
Lean system's distinctive tools and techniques can help the organization to reduce
costs and shorten lead times, and achieve just-in-time manufacturing.

A. What is Six Sigma?

Six Sigma is a way to improve quality. Quality here means reducing defects or non-
conforming units to a dramatic level of 3.4 defects per million opportunities. Six
Sigma projects have been applied to complex, and even organization wide
problems and not surprisingly, they have been known to deliver breakthrough
results. Six Sigma uses well established quality improvement and productivity
enhancement techniques and tools.

The aim of Six Sigma programs is to reduce variation in processes, which are the
main causes of defects in the business product and service requirements.
Sigma-written with the Greek letter 'σ'- is a measure of process variation or spread.
Process improvement can be achieved by reducing that spread, delivering output
which is more consistent and has lesser defects, and increases customer
satisfaction. The word 'Six Sigma' means six standard deviations between the
process mean and the specification limits. This means that the process spread is
reduced by reducing σ until the specification limit is 6σ away from the process
mean. A shift of the process mean by 1.5σ over time is allowed. This means that if
the process drifts 1.5 standard deviations, defective output would be only 3.4 per
million opportunities or 0.00034%.

Six Sigma also refers to process capability. It refers to the capability of any process
to produce a defect free product; in other words, a product that is within the
specification limit. Process capability indices measure the ability of the process to
meet specifications. Process capability assures sigma defect rates only when the
process is under statistical control and is a normal distribution.

DPMO (defects per million opportunities) is a common term used for 'defect rate' in
Six Sigma. Another s igma metric is the 'sigma level'. Organizations striving for Six
Sigma quality focus their efforts to produce these near perfect figures in their
businesses.

7.1 Goals and Methodologies of Six Sigma

Goals of Six Sigma

Six Sigma addresses business problems by using a data driven approach to analyze
the root causes and carve out a solution. At a strategic level, it aligns the
organization to the marketplace and delivers results. At an operational level, it
aligns the business product or service characteristics with customer specifications
and greatly decreases process variation, which is the main cause of defects.

Methodologies and Tools of Six Sigma

The improvement process of Six Sigma is known as DMAIC (Define, Measure,

Analyze, Improve, and Control)Learning Object content.

 Define the selected project's characteristics that need to be improved or goals,

using tools like Pareto charts, process maps, critical-to-quality trees, work
breakdown structures, etc. Derive goals from customer requirements through
Voice of Customer (VOC) tools like surveys, focus groups, interviews, customer
complaints etc.
 Measure the current process capability (baseline) and establish project metrics to
steer projects towards the expected goals; using graphical and statistical tools like
flow charts, process maps, SIPOC, cause and effect matrix, histograms, run charts,
box-whisker plots, scatter diagrams, probability distributions etc.
 Analyze the current process to comprehend the problem and find out their root
causes; using statistical tools such as correlation and regression analysis, scatter
diagrams, hypothesis testing, ANOVA, and non-parametric tests.
 Improve the current process by identifying the solutions, and applying the
solutions to the problems using tools such as design of experiments (DOE), EVOP,
 Response Surface Analysis etc.
 Control the improved process by applying standardization, and constant
monitoring to prevent the process from backsliding by applying tools such as
control charts.

When a new product or a process has to be developed, or when a process needs to

be revamped, a method called DFSS (Design for Six Sigma) is used. A process used
in DFSS is called DMADV (Define, Measure, Analyze, Design, and Verify).

The detailed steps for each phase are described as follows:

Define Phase

This is the first phase of DMAIC. In this phase, the key factors like Critical to Quality
(CTQ) variables and problems present in the process and as identified by the
customers are defined. A process is an ordered sequence in which input
metamorphoses into an output. The process that needs to be amended is clearly
defined by a tool called SIPOC which stands for Supplier-Input-Process-Output-
Customer.

The Voice of the Customer is critical to define the goals of the organization. There
are other issues to be taken care of as well and they include cycle time, cost and
defect reduction. The essence of Six Sigma is to solve problems that are impacting
business. The process of improvements starts immediately with the "Define" step.
When a Six Sigma project is launched, goals are chalked out to have an idea about
the degree of satisfaction among customers. These goals are further broken up into
secondary goals such as cycle time reduction, cost reduction, or defect reduction.

The Define Phase comprises of base lining and benchmarking the processes that
need improvement. Goals and sub-goals are specified and the infrastructure to
accomplish these goals is established. An assessment of changes in the
organization is also taken into consideration.

Measure Phase

The second phase is the measure phase in which the reviewing of information and
collection of data takes place. This phase helps measure the performance of the
ongoing process. In this phase the data collected is quantified. The process is
measured in terms of defects per million opportunities. This is imperative for Six
Sigma because only if the measurement is correct will the results be good. The
important thing to be kept in mind while measuring is that there should be cost and
time savings.

The important thing required in this phase is that the measurement system should
be one which can be substantiated when required. It should be orderly and correct
to the last detail.

Analyze Phase

The Analyze phase is the one where the interrelation between the variables and the
impact they have on the quality is studied. This is also the phase where the root
cause of the defect is analyzed, new opportunities are searched for and the
difference between the current and the target performance is found out. The idea
behind this kind of analysis is to find out the inputs that directly affect the final
output. Also, it can help to answer several questions like:

 The analysis helps to determine the blend of inputs that can affect the output
 If an X input is changed, will it alter output Y? (In the equation Y=f(Χ), Χ are the
inputs, and Y is the final output)
 If one input is changed does it affect the other inputs?

In the analysis phase, it becomes easy to determine the variables which

would affect the CTQ factors.

Improve Phase

The Improve phase comes next in DMAIC. The personnel working on the
project select the method that would work best for the project keeping the
organizational goals in mind. The root cause analysis is chronicled in the
Analysis stage. The Improve stage is the one which implements the
conclusions drawn through root cause analysis.

In this phase, an organization can improve, retain or negate the results of

root cause analysis. In this phase (like the analysis phase), the Open-Narrow-
Close approach is used. The approach makes it easy to narrow down the
options and choose the best solution. However, the emphasis remains on
choosing the result which leads to maximum customer satisfaction. This is
also the phase where an innovative resolution is found out and it is executed
on an experimental basis.

Control Phase

It is very important to maintain the standard that has been established. The
control phase is the one where improvements that have taken place are
sustained. This is done by chronicling the improvements and also keeping a
check on the new process that has been created by mitigating the defects.
This is done so that the defects that were earlier present in the process or the
product are absent in the new process or product.

All the major QC tools are used in Six Sigma. Tools like Benchmarking, SPC,
and QFD etc. are used frequently. Some general tools have been bent and
applied according to Six Sigma requirements like project charter, SIPOC, CTQ
trees etc.

A review is held after each phase of DMAIC or DFSS to ensure that all the
necessary work and follow-ups are done.

Six Sigma is an efficient way of correcting processes because Six Sigma

stresses on using data, statistical analysis and designed experiments to make
intelligent decisions. Since it focuses on bottom line impact, involving the
management is a precursor to any Six Sigma initiative. A Six Sigma
improvement program cannot be successful without the involvement of the
management. It involves the roles of the executive leadership, the champion,
the deployment personnel, and the Master Black Belts, Black Belts and Green
belts who apply Six Sigma techniques.
7.2 A Comparison: Lean Thinking Vs. Six Sigma

A few pointers to Lean and Six Sigma are listed below:

1. A Lean system views waste as anything that does not produce value, but Six
Sigma views waste as process variation.
2. Lean focuses on process flow, and Six Sigma focuses on process variation which
causes defects.
3. Lean uses process flow tools like value stream mapping, process mapping etc. to
eliminate waste. Six Sigma uses methodologies like DMAIC and DFSS to eliminate
problems. Six Sigma uses statistical tools and analytical tools to find out the root
causes of process variation and eliminate them.
4. Six Sigma, like Lean Thinking also focuses on customer satisfaction, prevention of
defects and waste, and cycle time reduction.

To look at how Lean relates to Six Sigma, the word "quality" needs to be analyzed in
a different manner.

Quality is a measure of value added by a productive endeavor. The difference between

potential and actual quality is called Muda. (Thomas Pyzdek, 1976)

Six Sigma describes quality in terms of defects rather than in terms of value. But
when quality is defined in terms of value, it can be seen that Six Sigma also tries to
achieve ways to reduce muda or waste. Six Sigma is: (Thomas Pyzdek, 1976).

 A general approach to reducing muda in any environment.

 A collection of simple and sophisticated methods for analysis of complex cause
and effect relationships.
 A means of discovering opportunities for improvement.

Comparing this with Lean, Lean has readymade solutions to eliminate muda.
Lean offers tried and tested solutions to these problems. Six Sigma can also
be applied to the problems addressed by Lean, but Six Sigma goes beyond
that, it has the power to tackle problems at the organizational level. However
both methods tend to converge because both aim to deal with the problem
of muda. They use two different approaches to get the same end result -
process improvement. The conclusion that can be drawn is that these two
approaches complement each other. It is not a question of Six Sigma or Lean;
it is Six Sigma and Lean. In areas where it is seen that Lean will solve the
problem, it should definitely be used. Six Sigma methods also help with Lean
and Six Sigma will help when it is time to push improvement in administrative
and other non-manufacturing areas. Similarly when Lean is not solving the
problem, then Six Sigma (in case when processes show excess variability) can
be used to help identify and address the root causes of the problems.
7.3 What is Lean Six Sigma

Lean Six Sigma is a fusion of Lean and Six Sigma techniques. Organizations applying
this technique in their business and service processes take the key ideas of both
the methodologies to achieve significant process improvement.

The goals of Lean Six Sigma are similar to both the methodologies:

1. To deliver higher quality of service (high sigma) with greater speed (Lean)

Lean Six Sigma projects start with finding out the needs and wants of the customer,
because it is the customer who will spend money on the organization's products.
Here the customers are not just the external customers; the internal customers
(people who work for the organization) also present valuable inputs into the quality
of the product or what they want from the company they are working for. The
customer data collected from the Voice of Customer (VOC) tools like surveys, focus
groups, customer complaints, interviews, etc. present valuable information about
whether products and services are meeting the expectations of the customers. The
organization focusing on customers should build up an environment where their
daily work is molded keeping customer desires in mind. The goal is to improve
quality by eliminating defects or non-conforming products. If a pizza delivery chain
promises the home delivery of a pizza in 30 minutes and takes 35 minutes to do the
same, it is a defect.

Example

A pizza chain discovers that its customer satisfaction levels were going down. They
started to analyze where the problem lay by listening to the Voice of the Customer.
A survey conducted by them brought to light the critical to quality requirements
(CTQ) of the customers, which they had to improve on to reverse the problems.
They were:

 On-time delivery (within 30 minutes)

 Taste and appearance of pizza
 Friendly service
 Hotness of pizza
 Variety in the menu

Another goal is to achieve consistency in the products and services. What is the
probability that the customers are constantly getting what they need? What are the
chances that the pizza chain is baking pizzas that have tastes or sizes of pizzas or
delivery speed that are consistent?
Quality, speed of the process, and low cost are linked. Low quality and slow speed
makes the process expensive and pushes up the cost of the product. Therefore the
idea of efficient quality is to deliver products with no defects, on time (with speed)
and at the lowest possible price.

2. To improve processes by eliminating defects and observing how work flows

through the process

Improving processes means reducing or eliminating variation, and improving the

process flow or speed. Methods like DMAIC and DFSS are used to improve
processes. (DMAIC and DFSS are not discussed in length in this course. However a
brief description is given in the earlier part of this chapter) A great deal of emphasis
is laid on studying the flow of work between people and work units and training
people with the necessary expertise to improve on their work areas.

One of the most common sources of problems in a process is variation. As stated

elsewhere in this chapter, the word "sigma" is used to denote the amount of
variation in a process. A process becomes efficient when it reaches the "sigma
level". (This concept has been briefly discussed in the earlier part of this chapter.) When
the process performance is compared with customer requirements and it is seen
that the performance does not meet those requirements, which means it is
producing a lot of defects, it means the process has a lot of variation. Reduced
variation means making processes more consistent, more predictable to get high
levels of quality. For example, a customer expecting a delivery 'by noon' will be
satisfied if he gets the delivery between 11 am and 1 pm. Refer to the figure below
to understand variation better.
Another problem in a process is the work flow, or the physical path of how the work
flows in an office or in a factory floor. The best way to improve the process is to do
away with waste or non-value adding activities in the process steps. There are
process steps which are not really necessary in the process; the process flow can be
made quicker by eliminating those steps. Unnecessary steps add complexity, cost
and time. Another way is to redesign how work physically flows though a plant.
Work flows from one person to the other and from one workstation to another.
Waste can be identified by using tools like flowcharting, process mapping, value
stream mapping and various other tools.

Example

An organization's design engineers were taking too much time to apply design
changes in one of their products. When they analyzed the process, they realized
that they needed approvals to go ahead from four different managers. This slowed
the decision making process. Upon looking closely at the necessity of getting all
four approvals, they discovered that two of them did not provide any special know-
how to the process. Therefore the design team changed the process steps by
narrowing down to only two approvals from two managers. These helped the
redesign process move at a faster rate, and quicken the total process speed,
because the remaining two managers took very less time to review the design, and
arrive at a decision, and let the rest of the process move.

Thus Lean Six Sigma focuses on process improvement.

3. To work as a team to get the most efficient results

Lean Six Sigma lays emphasis on team work. This just doesn't include teams
working on improvement efforts, but a creation of an environment where there is
room for cohesive discussion and suggestion-giving, and a sense of team effort in
all process achievements. Teams should be motivated, appreciated or remunerated
rightly for their contribution towards positive improvement. There should be an air
of sharing and learning.

Lean Six Sigma stresses on building effective communication and collaborating

skills by encouraging team work and team management. Team roles are assigned
to get the best output. Teams are trained to listen, organize, and taught decision
making techniques through the use of various tools. Brainstorming, affinity
diagrams, multivoting, tree diagrams, interrelationship diagraphs are some of
them.

4. To arrive at decisions based on data

The very basis of Lean Six Sigma is data collection. Without data, the very basis of
process analysis gets nullified. When information about customer requirements is
needed, data needs to be collected. When the process is to be improved, data on
defects, variation and process flow are required. Data is essential because it helps
save a lot of time and money and it streamlines research and helps in making
crucial business decisions. To monitor process performance, historical data on the
process is required. Data can be analyzed to know where the root causes of
problems lie, what the current state of the process is, and which solutions will apply
in the process. Data can be interpreted to arrive at important conclusions. For
example, how many of your customers are happy with the product you delivered?
How many times did the average handling time go beyond the permissible limit?
How many times did your pizza delivery men deliver the pizza in time?

The four important kinds of data are:

 Customer satisfaction
 Speed of delivery/ lead time/ cycle time
 Revenue/costs/ expenses data
 Quality/ errors/ defects

There are numerous tools for data gathering and data analysis and Lean Six
Sigma uses them all throughout the project. Many of them are statistical and
graphical tools like Box plots, stem and leaf plots, scatter diagrams,
histograms, run charts, trend charts, correlation and regression analysis,
ANOVA etc.
7.4 Laws and Implementation of Lean Six Sigma

The Five laws of Lean Six Sigma

The five laws of Lean Six Sigma have been formulated to provide guidance to
improve quality and business processes. These five laws are a fusion of important
ideas from Lean Enterprise and Six Sigma methods.

Law 0: The Law of the Market

Quality is shaped by customer needs and is placed at the highest level on the
priority list. Getting sustained revenue growth without this is impossible; it is the
customer who determines what quality standards should be. It is called law zero
because everything else is centered on this law.

Law 1: The Law of Flexibility

The speed of any process depends on how flexible the process is. This means how
smoothly people can switch between tasks or how easily a task can be reconfigured
without affecting the process speed. For example, inflexibility in the plant floor is
seen in queues, rigid set ups and changeover times. In service processes,
bureaucracy is seen as inflexibility. Change from one computer system to another
also reveals how inflexible a process is.

Law 2: The Law of Focus

Data has shown that 20% of the activities in a process cause 80% of the delays or
the problems. So all efforts should be directed on that '20%' for better process
results.

Law 3: The Law of Velocity(Little's Law)

The speed of any process is inversely proportional to the amount of its work-in-
progress (WIP). This means, as WIP increases, the speed goes down. Therefore
efforts should be directed at reducing the WIP at any given time.

Law 4: The Law of Complexity and Cost

The complexity of the service or product usually adds more cost and work-in-
process than either poor quality (low sigma) or slow speed (un-Lean) process
problems. For example, one of the initial improvement targets should be reducing
the range of products a work group is involved in producing.

Implementing Lean Six Sigma

Implementing Lean Six Sigma takes time, effort, and money. But companies still
adopt this methodology because it churns out better products and services; it cuts
costs and gives higher returns on investment, and gives job security to its
employees.

Any Lean Six Sigma project entails starting out with the following activities:

 Selecting the projects that are linked to the core organizational goals
 Training the people according to Lean Six Sigma requirements

1. Initialization

A Lean Six Sigma program starts at the executive level, with management training
and planning. The chief executive of the enterprise should understand the nature
of Lean Six Sigma and how the Lean Six Sigma project will affect the core business
of the company.
2. Execution

Once the CEO formally decides to proceed he should depute a deployment leader
who will oversee the working of the project. The deployment leader along with the
top management will develop a series of directives, policies, and rules alongwith
this project. New positions and new roles like Champions, Green Belts, and Black
Belts will have to be created and trained to staff Lean Six Sigma efforts. There will
be existing staff like Process Managers and Business Unit Managers who will have
to expand their responsibilities to fit into the Lean Six Sigma framework.

Selecting the right projects is the foremost activity. This means selecting projects
that are linked to the organizational goal, that will have the biggest payoff , that are
realistic in scope, that have measurable metrics, and that can be completed with
the available resources. After the teams are selected, their roles and responsibilities
have to be defined, and appropriate training has to be given to them to make them
familiar with new procedures that are put into place for the deployment of the Lean
Six Sigma project.

Project selection and training generally occurs in batches, once a group of people
are trained, they start work on the initial projects.

Most Lean Six Sigma projects go through the DMAIC steps. Once the DMAIC project
is underway, a 'tollgate' review should be held between each of its phases, to
ensure that the project is moving in the right direction, and adjustments can be
made wherever necessary. Team dynamics should also be looked into, and all kinds
of unproductive friction among team members should be corrected.

It takes restraint to stumble upon valid answers to issues troubling an organization.

Restraint is provided to an organization in the form of DMAIC. The whole process of
DMAIC involves a lot of steps like gathering data, learning lessons and sustaining
the efforts. These steps may, sometimes seem, to be very lengthy and
monotonous. However, one thing that DMAIC assures is the fact that it provides a
step-by-step effort and proves to be a very fruitful exercise.

3. Assessment

An unbiased and timely assessment of the project has to be done to ensure that
the project implementation plan is happening in the right manner and any gaps
between the actual level of the process and the expected or desired level of the
process can be covered in time. The positive results of the completed project
should be sustained. An analysis of the cost and benefits should also be done to get
the maximum benefits in the stipulated time frame of the project.

Implementing Lean Six Sigma in Service

Lean Six Sigma has been applied to a range of sectors like healthcare, banking, and
aerospace industry in their service and business processes. Although the objectives
of these sectors are totally different from each other, each of them found out that
the most effective way to achieve their objectives was to integrate Lean and Six
Sigma in their processes. Getting improved quality with better speed can only be
achieved when both Lean and Six Sigma methods are applied.

Applying Lean Six Sigma in service sectors helps achieve a fast rate of improvement
in customer satisfaction and quality, cutting costs, increasing process speed, and
invested capital. A blend of Lean and Sigma is required because only Six Sigma can
bring a process under control though the use of analytical and statistical tools likes
SPC. Similarly, just applying Six Sigma alone cannot greatly improve process speed
and decrease lead times. The application of Lean techniques together with Six
Sigma makes this possible.

CHAPTER 8

8 Lean Enterprise and Non-Manufacturing Services

Introduction

Organizations in the recent past have applied a lot of information technologies to

their business to improve revenue, customer satisfaction and to decrease
operational costs. Many process improvement technologies like Six Sigma and Lean
are being applied to organizations to determine whether these information
technologies are giving a satisfactory return on investment (ROI). Lean is an
excellent tool to increase margins, retain customers and reduce stress. It can be
applied in the front office of a small firm or a coffee shop in the nearby street.

The application of Lean to businesses means identifying the causes of waste,

productivity lost and customer dissatisfaction. The next step is to modify the
internal processes to eliminate these causes. The success stories in the
manufacturing processes have encouraged the retailers and service sectors to
apply Lean to non-manufacturing operations.

Any organization can be described in terms of the value stream and any value
stream consists of waste. This waste can be detected and eradicated by applying
the Lean principles. Therefore, Lean is not limited to manufacturing but has been
applied successfully to various non-manufacturing environments like financial
services, healthcare, military, non-profit foundations and government
organizations. The Lean manufacturing process adopted by the manufacturers can
be applied to the service sector to build a robust and effective process.

Both the sectors face challenges like increasing productivity and at the same time
saving costs. Both the sectors are labor intensive and there is a need to optimize
capacity and respond to changing market trends.

The important thing while applying Lean to non-manufacturing is to follow a

systems approach and not a command-and-control approach as applied in Lean
manufacturing processes. The systems approach helps in delivering improved
service, generating better revenues and costs savings, and at the same time
boosting the morale of the employees.

The hierarchical decision-making system, that is the command-and-control

approach, is characterized by high costs and poor service quality, and there exists a
wide gap between the higher authority and the lower managers and workers. By
adopting a system approach, the managers can be reconnected with their
operations by taking purpose-related measures (like improvement in services and
customer satisfaction) rather than activity-related measures (like budgets and
achieving the targets). This would help the higher authority to get closer to the
middle and lower management and exploit opportunities for improvement.

Thus organizations should shift their focus from command-and-control

management to local control. Better results can be achieved if activities of the
employees are controlled at the point where work is being done. The aim should be
not just to achieve the goal, but to stress on learning, improving and implementing
it as a routine.

8.1 Examples of Lean Enterprise and Non-Manufacturing Services

1. Lean and Financial Services

Countries like China, Poland, India and Russia are fast emerging as consumers and
producers of products and services. Moreover, the baby boomers in the United
States are experiencing retirement. These two major events will open remarkable
prospects for financial services. The financial service industries must be ready to
compete globally. To achieve this, the financial industries must adopt efficient
systems and practices like Lean. Some companies like Bank of America and
JPMorgan Chase have already led the way for Process Excellence in Financial
Services with Lean Six Sigma programs.

Lean is used in financial services and helps to create customer value by carefully
selecting the projects. The cash flow of the financial services can be streamlined by
applying Lean principles to them. Lean also helps to streamline the processes,
improve capacity and customer satisfaction. Some of the important things to be
kept in mind while applying Lean to financial services are:

 Customer needs
 Eliminating non-value added activities
 Improving total shareholder returns by driving revenue, profits and return on
assets
 Drawing, maintaining and upgrading personnel who provide excellent customer
experience
 Creating returns of approximately 10 times the investment made by shareholders
in approximately two years

The processes in financial services such as portfolio management, insurance claims,

financial long-term healthcare planning and retirement planning measure customer
satisfaction per executive or a new account opening or profits gained or the level of
customer satisfaction. The processes where Lean can be applied in various financial
services are described below.

Banks

Processes such as loan applications, small business and consumer loans, monthly
dispensation of the bank statement should make use of the measurements of
deposit assets, market share and client capture along with factors like level of
customer satisfaction and profitability.
Credit Unions

The processes in the credit unions must make use of deposit assets, margin loan
per unit, customer satisfaction and profitability as their scale of measurement in
processes like mortgage applications, auto loans and personal savings accounts.

Insurance Companies

The processes in the insurance companies like claim resolution, quoting and
company assessments must use measurements like new group enrollments,
leverage of client base for referrals and profitability and level of customer
satisfaction.

2. Lean and Healthcare

Lean is good for any industry which has a clearly defined set of activities running to
manufacture a product or service. Healthcare units like diagnostic labs make the
introduction of Lean Healthcare innate and its effects are initially very visible. Once
Lean gets incorporated in one part, it quickly spreads to other areas as well.

The cost of health care is rising by the day and the health care providers are facing
increasing pressure to reduce costs, provide the patients with better safety and
care, improve profits and reduce errors to avoid litigation and reduce dependence
on government funds and insurance premiums.

The needs of a patient come foremost in the priority list of the healthcare sector.
The tests performed on the patients and the care provided to them can make a
difference to their lives. Therefore, hospitals are investing big money to install
information system projects. However, they have not succeeded much in their
purpose due to lack of real process change to take advantage of the information
system itself.

The Lean healthcare is a process which generates value by eliminating waste and
delivering best quality of products and services at a low cost. One of the challenges
in implementing a Lean strategy is that people find it challenging to identify waste
in the tasks they are so involved in. All workers, especially the healthcare workers
want to feel that their work adds value.

The nurse, who serves the patients and hunts supplies for them, is doing that to
help the patients. She does not realize the fact that she is wasting valuable time in
hunting for supplies. If the supplies were readily available on a specialized counter
or a shelf, she would be able to work more efficiently and help serve the patient
quicker. She would also be able to put that wasted effort to some productive use.

Key processes are those which support the "core" products. The "core" product in
healthcare consists of a visit to the doctor, or a visit to the emergency ward or to
the operation theatre. The processes for these core products should be identified
and duties should be allocated to the personnel to fix responsibility for improving
that particular process.

A healthcare system should focus on six key areas:

1. The healthcare system should adopt the policy of "patient first" like other
organizations who put the "customer first".
2. The system should adopt a "no-layoff" policy.
3. The organization should adopt a defect alert system for the entire organization.
4. Innovation and brainstorming should be encouraged.
5. Elimination of waste should be a priority.
6. Accountable leadership should be made compulsory.

The 'no layoff' policy is important for the implementation of Lean thinking. The
healthcare workers will commit and involve themselves in the improvement work if
they are satisfied that their jobs are secure. Attrition, which is common in this
sector, makes organizations redirect and reassign personnel to other important
and urgent work. It is a common trait among healthcare employees that they do
not view themselves as working for the whole organization. Instead they are
particularly loyal towards their own department or care team. The foundation of
Lean thinking is customer/patient satisfaction, and healthcare employees should
understand that they work for patients. This means they may be reallocated
depending on the requirements of the patient.

The defect alert system is an important element of the Toyota Production System
and is known as "stopping the line". Every worker in the Toyota plant has the
authority and duty to stop the assembly line as soon as somebody detects an error
or defect in the production system. The supervisors and workers fix the problem
there and then so that the problem does not get ingrained in the final product.

Example
A Virginia Mason hospital staff nurse noticed one of the patients wearing a pink-
color wrist band. The pink wristband signified that the revival of the patient had
been withheld. However, she felt something wrong with it as she remembered that
the patient had recently been diagnosed with operable lung cancer. She enquired
the patient about the significance of the wrist band and came to know that the
wristband meant allergies to certain drugs.

The nurse immediately replaced the pink wristband with an orange one which was
meant for drug allergies. She also reported the incident to her manager who called
a Patient Safety Alert. A new procedure was developed on the same day to print
"Allergy Alert" on the orange wristbands.

Conclusion

Lean in not a new concept but it is definitely new for the non-manufacturing sector.
Many aspects of the Toyota Production System and the Ford System do apply
excellently to the non-manufacturing industries. Lean management has proven to
deliver exceptional results which help to eliminate waste in non-manufacturing
units with the results which are easily comparable to other manufacturing units.
Leaders in the non-manufacturing industries who have adopted Lean principles are
of the view that the organization should create a culture where the people are
ready to adopt the Lean principles. If the people are not receptive, the Lean efforts
are bound to fail.

The Lean management tools can be applied to the non-manufacturing units with as
much ease as they are applied to the manufacturing enterprises. Lean helps in
creating an efficient, effective and truly responsive system for the customers.