LEAN MANAGEMENT

Course Objective:
To understand issues and challenges in implementing and development in lean
manufacturing techniques from TPS and its contribution for improving organizational
performance.
UNIT–1:
Introduction: Mass production system, Craft Production, Origin of Lean production
system, Why Lean production, Lean revolution in Toyota, Systems and systems thinking,
Basic image of lean production, Customer focus, Waste Management.
CO 1: Students will be able to understand evolution Toyota production system, various forms
of production and basic structure of TPS and concepts.
Introduction to production:
Production is a process of combining material and immaterial inputs in order to make
something for consumption. All economic activities which satisfy human wants and needs are
created in production process.
Definition of Production:
According to Bates and Parkinson:
“Production is the organised activity of transforming resources into finished products
in the form of goods and services; the objective of production is to satisfy the demand for
such transformed resources”.
According to J. R. Hicks:
“Production is any activity directed to the satisfaction of other peoples’ wants through
exchange”. This definition makes it clear that, in economics, we do not treat the mere making
of things as production. What is made must be designed to satisfy wants.
Production Process:
Production is a process in which economic resources or inputs are combined by entrepreneurs
to create economic goods and services.

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Inputs are the beginning of the production process and outputs are the end. It is a
transformation from inputs such as land, labour, capital and other resources into finished
outputs such as goods.
Production Decisions:
i. Whether or not to actually produce or to shut down
ii. ii. How much to produce
iii. What input combination to use and
iv. What type of technology to use
All these decisions are four different decisions but all are interrelated.
Production System:
The production system of an organization is that part, which produces products of an
organization. It is that activity whereby resources, flowing within a defined system, are
combined and transformed in a controlled manner to add value in accordance with the
policies communicated by management. The production system has the following
characteristics:
1. Production is an organized activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and improve
system performance.
Classification of Production System
Production systems can be classified as Job Shop, Batch, Mass and Continuous Production
systems.

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Continuous production:
Continuous production is a flow production method
used to manufacture, produce, or process materials
without interruption. Continuous production is called
a continuous process or a continuous flow
process because the materials, either dry bulk or
fluids that are being processed are continuously in motion, undergoing chemical reactions or
subject to mechanical or heat treatment.
Mass Production:
Mass production is the manufacturing of large quantities of standardized products, often
using assembly lines or automation technology. Mass production facilitates the efficient
production of a large number of similar products. Mass production is also referred to as flow
production, repetitive flow production, series production or serial production.
Batch production:
Batch production is a method of manufacturing where the
products are made as specified groups or amounts, within a
time frame. A batch can go through a series of steps in a
large manufacturing process to make the final desired
product. Batch production is used for many types of
manufacturing that may need smaller amounts of
production at a time to ensure specific quality standards or
changes in the process. This is opposed to large mass
production or continuous production methods where the product or process does not need to
be checked or changed as frequently or periodically.
Shop production:
Job shops are typically small manufacturing systems that handle
job production, that is, custom/bespoke or semi-custom/bespoke
manufacturing processes such as small to medium-size customer
orders or batch jobs. Job shops typically move on to different jobs
(possibly with different customers) when each job is completed.
Job shops machines are aggregated in shops by the nature of skills
and technological processes involved, each shop therefore may
contain different machines, which give this production system processing flexibility, since
jobs are not necessarily constrained to a single machine.

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MASS PRODUCTION:
Mass production is production of a large number of products that are same or very
similar. This type of production often uses assembly lines where either people or machines
perform the same tasks repeatedly to create as many of a single product as possible, as
quickly as possible, and with as few variations or defects as possible. The concept has been
around for a very long time, but it really became a standard way of doing business when
Henry Ford and the Ford Motor Company began mass producing vehicles in the 1920's. This
is also where the term was originated.
Advantages:
 Efficiency - Producing large numbers of a product is much more efficient than creating
multiple different products in one facility.
 Specialization - When mass producing something, it makes sense to buy or create a
machine that specializes in performing one specific task very well. Without mass
production, a machine like this would not be useful, or would need to be much more
complex.
 Training - Facilities can often be trained on their specific roles quickly, so that they can
perform it properly every time. With other types of production, employees often have to
learn many more tasks, which can take a lot more time.
 Standardization - By mass producing a product, it is easier to eliminate defects or
variation, which allows a company to produce a much more uniform product. This is
good for consumers who will know what they can expect when purchasing.
 Reduced Costs - The costs associated with mass production can be significantly lower
than small-batch production. This is because the supplies can be purchased in bulk, and a
discount can often be secured.
Disadvantages:
 Initial Expenses - Setting up a facility for mass production usually comes with a much
higher cost than just creating individual products. Specialized machinery can be very
expensive, and even cost prohibitive for newer companies.
 Job Satisfaction - Employees who need to perform the exact same task day in and day
out can lose motivation, and this can lead to job dissatisfaction and higher worker
turnover.
 Lack of Flexibility - This kind of production system is not very flexible for making
customizations or unique products for customers.

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 Risk of Production Outages - If one machine fails, it will often shut down the entire
production line until it can be fixed.
Craft Production:
Craft production is the process of manufacturing by hand with or without the aid of tools. The
term Craft production refers to a manufacturing technique applied in the hobbies
of handicraft but was also the common method of manufacture in the pre-
industrialized world, such as in the production of pottery.
Types:
➢ Job Production
➢ Batch Production
➢ Production Line
Advantages:
 Reusability of waste materials:
The materials which are considered as waste usually fill the trash bin. In this type of
business, the most used raw materials are from the recycled wastes, bottles, etc. Some of the
household items such as plastic cups, cans, cardboard box, pins, buttons, magazines and old
clothes are also used to make handicraft products. Therefore, it helps to recycle the waste.
 Improves the creativity and skills:
Whatever talents or skills that you have, can be sold to the customers if it meets the
requirement and quality criteria. You have to create handicraft products with your knowledge
and skills. At first stage, you may make some mistakes but practicing and improving the
creativity can be surely achieved. With proper skills and development, there is a definite
chance to grow your own business. It is the best platform to enhance your interests and skills.
 Availability of raw materials:
Since handicraft is all about making craft with available things (mostly recycled
household waste products), the raw materials are very cheap and easy to purchase. Suppose,
if it is a small scale handicraft industry that produces hand made furniture, clothes and
embroidery designed products, the raw materials are easily available or the industry would
also use recycled products.
 Make money with self employment:
It is one of the best ways to eradicate unemployment. It provides in numerous
opportunities to explore the skills and talents. Women who are homemakers and unemployed
people can spend their leisure time in learning handicraft skills to earn good amount of
income. Income generation depend upon the quality of skills that you have, resources and

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investment you allot for the handicraft business. It is also necessary to find out niche market
and target audience to earn high amount of income.
 Strengthens the economic growth:
Hand made products from a small scale industry or cottage industry (popular in India) can be
easily marketed with the help of trade fairs and exhibitions that showcase the unique talents
to the world. Selling unique products or decorative handcrafted items can increase the export
rate of a country and hence it boost up the economic growth. The economic growth can also
be achieved by employment generation and proper transformation of local raw materials into
useful products.
 Minimum investment:
The business completely depends on individual skills and ordinary raw materials. Therefore,
there is no need for big industry or wasting machines.
 Environment friendly:
The most attractive thing of handicraft items is Eco-friendly property. It uses wood pieces,
recycled plastics, bottles and other waste materials which are converted to beautiful pieces of
handicraft items. They are not machine-made; hence they use less amount of energy and give
minimum amount of waste output. Most of the hand made products are more biodegradable
and environmental friendly than factory-made products. It is also completely free from
hazardous materials and chemicals.
 Good quality and uniqueness:
Only hand made products of good quality arrives to the market. Hence, people can
completely trust and buy them. Usually, handicrafts are unique because creativity plays an
important role in this business. Due to the uniqueness factor, the designs and craft works
really amaze many buyers all around the world.
Disadvantages:
 Economies of Scale:
Craft production it is not possible to produce on a larger scale. This could mean a loss
of profit for the manufacturer however the higher prices of craft produced products can
sometimes make up for this. Price is higher as labour, tools, etc have to incorporated in
the final cost.
 Value of the product:
Although the manufacturing process doe not require machines for the producer, It
takes a great amount of time and effort Therefore it becomes much more expensive for

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the buyer. Every piece also becomes more valuable so any defects will be more
important.
 Labour:
It takes a great amount of time and effort Slower than mechanized production.
 Flexibility of manufacturer:
May be that the product is not designed for disassembly, so if something goes wrong
during the making of it, there are no interchangeable parts. Therefore it becomes much more
expensive for the buyer.
Step towards Lean Production/ Differences between Mass, Craft and Lean Production:

What is Lean?
Lean is the concept of efficient manufacturing/operations that grew out of the Toyota
Production System in the middle of the 20th century. It is based on the philosophy of defining
value from the customer’s viewpoint, and continually improving the way in which value is
delivered, by eliminating every use of resources that is wasteful, or that does not contribute to
the value goal. Lean is centered on preserving value with less work; with the ultimate goal of
providing perfect value to the customer through a perfect value creation process that has zero
waste. This is done by empowering every individual worker to achieve his or her full
potential, and so to make the greatest possible contribution.

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Time line of Lean:

Toyota Production System in 1930’s – The Toyota way

The term "Lean" was coined in 1988 by John Krafcik and defined in 1996 by James Womack
and David Jones to consist of five key principles.
The basic image of TPS/ Toyota house:

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1. Jidoka -automation with a human touch

It means that when a problem occurs, the equipment stops immediately, preventing defective
products from being produced. The second is the concept of "Just-in-Time," in which each
process produces only what is needed by the next process in a continuous flow.

2. Just-in-Time- make only “what is needed, when it is needed, and in the amount
needed”
Using Just-in-Time, Toyota is able to produce high quality products efficiently through the
elimination of waste. Based on the basic philosophies of Jidoka and Just-in-Time, the TPS
can efficiently and quickly produce products of sound quality, one at a time, that fully satisfy
customer requirements.
3. Heijunka:
Is a Lean method for reducing the unevenness in a production process and minimizing the
chance of overburden.
1. Levelling by volume
2. Levelling by type
Heijunka Box:

4. Kaizen: Continuous Improvement:

Kaizen in practice means that all team members in all parts of the organisation are
continuously looking for ways to improve operations, and people at every level in the
company support this process of improvement. Kaizen also requires the setting of clear
objectives and targets. It is very much a matter of positive attitude, with the focus on
what should be done rather than what can be done. 5 Why’s (Why, Why, Why, Why and
Why) and
1. S’s - SEIRI – Sifting
2. SEITON – Sorting

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3. SEISO – Sweeping and cleaning

4. SEIKETSU – Spick-and-span
5. SHITSUKE – Sustain
Elements of Lean Production:

1. Flexibility:
The best way to improve performance and customer service is to create a highly responsive
manufacturing and supply operation. Flexibility is usually achieved by adequate capacity,
inventory and agile scheduling. The cost of becoming flexible is often relatively small
investment with greater returns. It is also a great insurance policy in case supply chain
forecasting falls short of promises. Flexibility is the ability to be responsive. In the past the
manufacturers depended on a limited product range often supported by a protective market.
2. Cellular Layout:
Cellular manufacturing is a process of manufacturing which is a subsection of just-in-time
manufacturing and lean manufacturing encompassing group technology. The goal of cellular
manufacturing is to move as quickly as possible, make a wide
variety of similar products, while making as little waste as
possible. Cellular manufacturing involves the use of multiple
"cells" in an assembly line fashion. Each of these cells is
composed of one or multiple different machines which
accomplish a certain task. The product moves from one cell to
the next, each station completing part of the manufacturing
process. Often the cells are arranged in a "U-shape" design
because this allows for the overseer to move less and have the

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ability to more readily watch over the entire process. One of the biggest advantages of
cellular manufacturing is the amount of flexibility that it has. Since most of the machines are
automatic, simple changes can be made very rapidly. This allows for a variety of scaling for a
product, minor changes to the overall design, and in extreme cases, entirely changing the
overall design. These changes, although tedious, can be accomplished extremely quickly and
precisely.
3. Pull System:
A pull system is a Lean technique for reducing the waste of any production process. Applying
a pull system allows you to start new work only when there is a customer demand for it. This
gives you the opportunity to reduce overhead and optimize storage costs. Born in the late
1940’s, a lean pull system has the purpose of creating a workflow where work is pulled only
if there is a demand for it. Essentially, the purpose of implementing a pull system is to build
products based on actual demand and not on forecasts. By doing so, your company can focus
on eliminating waste activities in the production process. As a result, you’ll be able to
optimize your resources and reduce the possibility of overstocking.
4. Kanban:
The system originates from the simplest visual stock replenishment signalling system, an
empty box. This was first developed in the UK factories producing Spitfires during
the Second World War, and was known as the “two bin system.” In the late 1940s, Toyota
started studying supermarkets with the idea of applying shelf-stocking techniques to the
factory floor. In a supermarket, customers generally retrieve what they need at the required
time—no more, no less. Furthermore, the supermarket stocks only what it expects to sell in a
given time, and customers take only what they need, because future supply is assured. This
observation led Toyota to view a process as being a customer of one or more preceding
processes and to view the preceding processes as a kind of store.
Six Rules of Kanban:
→ Each process issues requests (kanban) to its suppliers when it consumes its supplies.
→ Each process produces according to the quantity and sequence of incoming requests.
→ No items are made or transported without a request.
→ The request associated with an item is always attached to it.
→ Processes must not send out defective items, to ensure that the finished products will be
defect-free.
→ Limiting the number of pending requests makes the process more sensitive and reveals
inefficiencies.

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Kanban Card:
Kanban cards are a key component of kanban and
they signal the need to move materials within a production
facility or to move materials from an outside supplier into the
production facility. The
kanban card is, in effect, a
message that signals a
depletion of product, parts,
or inventory. When
received, the kanban triggers replenishment of that product,
part, or inventory. Consumption, therefore, drives demand
for more production, and the kanban card signals demand
for more product—so kanban cards help create a demand-driven system.
5. Small lots:
A famous step toward perfection in a lean production system
is a lot size of one. With smaller lot sizes, you need less
inventory, and hence you can react faster to changes in the
production system. While the Western world often also aims
for smaller lot sizes, there seems to be many cases where
further lot size reduction is considered too expensive.
6. Quick Setups:
Single-minute Digit exchange of die (SMED) is one of the many lean production methods for
reducing waste in a manufacturing process. It provides a rapid and efficient way of
converting a manufacturing process from running the current product to running the next
product. This rapid changeover is key to reducing production lot sizes and thereby reducing
uneven flow (Mura), production loss and output variability. The phrase "single minute" does
not mean that all changeovers and startups should take only one minute, but that they should
take less than 10 minutes (in other words, "single-digit minute"). Closely associated is a yet
more difficult concept, One-Touch Exchange of Die, (OTED), which says changeovers can
and should take less than 100 seconds. A die is a tool used in manufacturing.
7. Uniform Production Level:
Uniform load scheduling is a synonym for mixed-model sequencing, an approach to
scheduling in which each product is made in small batches and in a mix such that daily
production of a given product approximately matches average daily demand for that product.

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The term uniform load scheduling describes this scheduling method for two reasons. First,
under this approach, each product is made every day, and in the same number of units. Thus,
the production load from one day to the next will be uniform. Second, the demand for
components used in those products will be uniform from one day to the next.
8. Quality at the source:
This principle is one of the most important tenets, which will help achieve true excellence. It
is about quality at the source or built-in quality. There is no organization that can succeed
without the highest quality of service or product. Jidoka began as a concept by Sakichi
Toyoda as a simple device which stopped a shuttle on an automatic loom if the thread broke.
This prevented the machine from creating a defective product, along with alerting the
operator to a problem. This simple but effective concept of autonomation (or automation with
a human touch) enabled an operator to operate multiple machines instead of one operator for
every machine. The sale of the patent for this innovation was sold to a UK textile mill, which
subsequently funded the new family business called Toyota.
9. Total Productive Maintenance:
A main pillar of the Toyota Production System (TPS) is Total Productive Maintenance
(TPM). The essential strategy is to eliminate the potential of a problem. That is, eliminate a
problem before it occurs.
TPM`s Basic Elements:
a. Maximizes equipment effectiveness.
b. Establishes a thorough system of preventative maintenance (PM) for the equipment`s
entire life span.
c. Implemented by various departments (engineering, operations, maintenance).
d. Involves every single employee- from top management to workers on the floor.
e. Based on the promotion of productive maintenance through workforce motivation
management via autonomous small group activities.
In the Toyota Production System, maintenance
personnel function as plant doctors. They are a vital resource
to the company. They diagnose, fix and cure illnesses but
they also practice preventative medicine. They stop
sicknesses before they occur. When a problem or
abnormality occurs, the standard TPM instruction is:

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1. STOP
2. CALL
3. WAIT
The designated personnel then investigates the abnormality, identifies the cause, takes
the appropriate measures, and keeps a record in order to do kaizen. - now or in the future.
If the machine or operation is not stopped immediately upon sighting an abnormality,
unnecessary defects will be produced resulting in waste.
10. Supplier Network:
Toyota Motor Corp has a diverse supply chain to support
its business operations. In Japan, Toyota buys directly
from 200 component suppliers. Based on data from
Toyota’s headquarters, the 200 suppliers account for 2
billion units of which 150,000 types are purchased
monthly. The total value of purchased components is
pegged at $300 million a month.

The Principles of Lean: Customer focus

The principles of Lean were first introduced in the book The Machine That Changed the
World (1991) by James P. Womack, Daniel T. Jones and Daniel Roos. The authors studied
several manufacturing systems and wrote the book based on their observations at Toyota. The
Lean Enterprise Institute summarized these principles to the following:

1. Identify Value:
The first lean principle, identifying value, is also the first step in the journey to become
lean. This step requires businesses to define what customer’s value and how their products
or services meet those values. In this case, value requires:
• Designing products to meet the needs of customers

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• Removing features that do not specifically meet those needs

By designing products to meet specific needs, businesses will eliminate wasteful steps
that may have been required for unwanted features. Design for Six Sigma (DFSS) is one
method that can help businesses identify value. Using DFSS, companies can systematically
define, measure, and analyze what their customers want. Companies can then design
products tailored for their customers.
2. Map the Value Steam
The second lean manufacturing principle is mapping the value stream. A value stream
is the complete life-cycle of a product, which includes the product’s design, the customers’
use of the product and the disposal of the product. This step requires companies to identify
and map the product’s value stream. Lean tools like Value Stream Mapping (VSM) can be
used to visually map out the entire product flow. Once the value stream is mapped, it will
be easier to find and minimize steps that do not add value.
3. Create Flow:
The third lean principle is creating flow. Efficient product flow requires items to move
from production to shipping without interruption and can be achieved by strategically
organizing the work floor. Every factor, from people and equipment to materials and
shipping, must be taken into account to ensure products seamlessly move through the
production process. A well-organized work floor will result in reduced production time,
inventory size and material handling.
4. Establish Pull:
Closely related to creating flow, the fourth lean principle requires businesses to use a pull -
based production system. Traditional production systems use a push system, which starts
with purchasing supplies and proceeds by pushing material through the manufacturing
process, even when there isn't an order. While push systems are easy to create, they often
result in large inventories and a significant amount of work-in-progress (WIP). A pull
system, however, pulls a customer's order from the shipping department, which then
prompts new items to be manufactured and signals that additional supplies need to be
purchased. Lean manufacturing tools like Kanban can help businesses establish a pull
system to control the flow of materials in a production system.
Using a pull system, businesses will:
• Increase output
• Maximize usable workspace
• Reduce inventories

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• Eliminate overproduction and underproduction

• Eliminate errors caused by having too much WIP
5. Seek Perfection:
The final lean manufacturing principle requires companies to seek perfection. While
seeking perfection may seem straightforward, it is often one of the most difficult principles
to successfully apply in the workplace. Seeking perfection requires companies to
continuously improve their practices and often requires a shift in the workplace culture.
Principles of lean:
→ Specify value from the standpoint of the end customer by product family.
→ Identify all the steps in the value stream for each product family, eliminating whenever
possible those steps that do not create value.
→ Make the value-creating steps occur in tight sequence so the product will flow smoothly
towards the customer.
→ As flow is introduced, let customers pull value from the next upstream activity.
→ As value is specified, value streams are identified, wasted steps are removed, and flow
and pull are introduced, begin the process again and continue it until a state of perfection
is reached in which perfect value is created with no waste.
3P’s of Lean Thinking:
→ Purpose: What customer problems will the enterprise solve to achieve its own purpose of
prospering?
→ Process: How will the organization assess each major value stream to make sure each
step is valuable, capable, available, adequate, flexible, and that all the steps are linked by
flow, pull, and levelling?
→ People: How can the organization ensure that every important process has someone
responsible for continually evaluating that value stream in terms of business purpose and
lean process? How can everyone touching the value stream be actively engaged in
operating it correctly and continually improving it?
Lean Production Importance/ Why Lean production:
1. Improved Customer Service: The first principle of Lean is identifying value as
perceived by the customer; customers need to be provided with what they want, when
they want and where they need it. A company is successful as long as the customers are
satisfied. If a company always supplies top quality products and services on time, at the
right place, those satisfied customers are going to keep on returning, allowing the
business to thrive.

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2. Easy Management: One of the major advantages of implementing Lean into

organization is getting more done with less people. As waste is reduced there is less
space and manpower required to manage. The workflow results in manufacturing cells
which puts machines close together so that a single operator can manage many pieces of
equipment with the minimal energy. The workers’ main task is to enhance skill level and
properly maintain the system, once it is implemented. The Lean approach starts at the
bottom of an organization and proceeds up unlike Six Sigma which is a tops-down
management philosophy, in which the management imposes changes on the work
process. In Lean system, each individual worker within a work cell tries to improve his
or her performance. A role of the management is to go on the factory floor and check
what is happening and in accordance provide additional training, promotion, and
learning.
3. Improved Quality and Fewer Defects: A lot of the activity in a lean environment is
focused on quality improving. Without waste and its additional costs such as transport or
inventory, the products value gets increased the quality also enhances. In a top quality
production there are fewer defects and if they occur they are easily eliminated.
4. Reduced Waste: Waste is a significant product within any process. The Lean Approach
is focused on improving process speed and quality through reduction of process waste.
Waste consumes energy, money, and is of no value to the customer. Another approach,
Six Sigma, which also aims to make processes and the business more efficient, identifies
waste as results from variation within the process and tries to reduce it by eliminating
variations in the process. In The Lean Approach, reduced waste means less transport, less
moving, less waiting, less space required and reduces all variations throughout the
process.
5. Financial Benefits: If the LEAN principles are properly set in the organization, the
financial benefits are highly significant. A satisfied customer will make any business
operate smoothly. The reduction in waste and defects adds additional money which
should be set into quality improvement and the better product quality ensures higher
profit. The money saved on product storage and inventory management adds additional
cash flow in the company. However, less employees means additional training for
workers but with clear work instructions and standardized work the job is easily and
more eagerly performed. Managing satisfied workers is easily conducted and makes any
business prosper on the long run. Lean Manufacturing is a business philosophy which
has proven highly successful since it can reduce costs, eliminate waste, increase

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productivity, maintain high levels of quality and thus make a significant increase in your
profit.
Systems Thinking:
Dealing with complexity and coping with increasing dynamics has become the main
challenge in project and program management.

Systems Thinking:

What is a System?
A set of elements or parts that is coherently organized and interconnected in a pattern or
structure that produces a characteristic set of behaviors, often classified as its “function” or
“purpose.” (Donella Meadows)

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Components of a System:
Elements:
→ Typically the most obvious part of a dynamic system.
→ Changing elements often has very little effect on the system
Interconnections:
→ Often involve the flow of information
→ Changing relationships usually changes system behaviour
Function:
→ Typically the least obvious part of a dynamic system.
→ A change in purpose changes a system profoundly.
Systems: Key Points
1. A system is more than the sum of its parts
2. Many of the interconnections in systems operate through the flow of information
3. The least obvious part of the system, its function or purpose, is often the most crucial
determinate of the system’s behaviour
4. System structure is the source of system behaviour. System behaviour reveals itself as a
series of events over time
Tenets of System Thinking:
1. Interdependence of objects and their attributes
2. Holistic Approach
3. Goal Seeking
4. Inputs and outputs
5. Transformation of inputs to outputs
Systems Thinking Diagram:

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System 1 vs System 2 Thinking:

• System 1 and System 2 are two distinct modes of decision making:

• System 1 is an automatic, fast and often unconscious way of thinking. It is autonomous
and efficient, requiring little energy or attention, but is prone to biases and systematic
errors.
• System 2 is an effortful, slow and controlled way of thinking. It requires energy and
can’t work without attention but, once engaged, it has the ability to filter the instincts of
System 1.
Examples of System 1 Thinking:
• How would you decide:
• Which seat to take in a waiting room?
• Which chicken dish to buy? or
• Whether to change sketch pen colours?
• System 1 is capable of making quick decisions, based on very little information.
Examples of System 2 Thinking:
• How would you decide :
• Which college to attend?
• Which house to buy? or
• Whether to change careers?
• These are the types of decisions that engage System 2. They require attention and slow,
effortful, considered responses.

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Habits of System Thinkers:

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Waste Management:
TPS is known more generically as “lean manufacturing.” It was largely created by Toyota
founder Sakichi Toyoda, his son Kiichiro Toyoda and Toyota chief engineer Taiichi Ohno.
The primary goal of TPS is to eliminate waste, called “muda.” The “seven wastes” is a tool to
further categorize “muda.”

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7 types of muda:
1. Overproduction
2. Waiting
3. Transporting
4. Inappropriate Processing
5. Unnecessary Inventory
6. Unnecessary/Excess Motion
7. Defects
1. Overproduction:
Simply put, overproduction is to manufacture an item before it is actually required.
Overproduction is highly costly to a manufacturing plant because it prohibits the smooth flow
of materials and actually degrades quality and productivity. The Toyota Production System is
also sometimes referred to as “Just-In-Time” manufacturing because every item is made just
as it is needed. Overproduction may create excessive lead times, result in high storage costs
and make it difficult to detect defects. The simple solution to overproduction is turning off
the tap; this requires a lot of courage because the problems that overproduction is hiding will
be revealed. The concept is to schedule and produce only what can be immediately sold or
shipped.
2. Waiting:
Whenever goods are not moving or being processed, the waste of waiting occurs. Much of a
product’s lead time is tied up in waiting for the next operation; this is usually because
material flow is poor, production runs are too long and distances between work centers are
too great. Linking processes together so that, one feeds directly into the next can dramatically
reduce waiting.
3. Transportation:
Transporting products between processes is a cost incursion which adds no value to the
product. Excessive movement and handling cause damage and are an opportunity for quality
to deteriorate. Transportation can be difficult to reduce due to the perceived costs of moving
equipment and processes closer together.
4. Inappropriate processing:
Many organizations use expensive high precision equipment where simpler tools would be
sufficient. Toyota is famous for its use of low-cost automation, combined with immaculately
maintained machines. Investing in smaller, more flexible equipment where possible will
greatly reduce the waste of inappropriate processing.

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5. Unnecessary Inventory:
Excess inventory increases lead times, consumes productive floor space, delays the
identification of problems and inhibits communication.
6. Unnecessary/Excess Motion:
This waste is related to ergonomics and is seen in all instances of bending, stretching,
walking, lifting and reaching. These are also health and safety issues, which in today’s
litigious society are becoming more of a problem for organizations.
7. Defects:
Rework or scrap have a direct impact to the bottom line and can result in a tremendous cost to
organizations.

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