Supply Chain Management

Imagine these scenario

You walk into a hair saloon to get a hair cut.

There is one hair dresser attending to a
customer. There is a chair vacant. You are asked
to wait as there is only one hairdresser who is
busy now.

How do you feel , If you are in a hurry ?

Scenario 2

 You take your girlfriend to an Ice cream parlour. You ask for her favourite
flavor . The sales person says it is out of stock and can he serve you Vanilla
instead . How do you feel ?
 Scenario 3
 A company has an order for a product .
 The raw material is purchased on cash as the supplier demands cash upfront.
 During manufacturing some components get rejected.
 Some more raw material is ordered and there is a delay. The customer’s deadline is
passing and he is furious. Somehow the order is completed and despatched.
 The customer delays payment by 3 months ,the labour force has to be paid for which
 company has to burrow funds from Bank at high rate of interest . The profits on the
order cannot cover the additional interest.
What do you think will happen ?
Scenario 4

 Imagine if there are 3 of the components that are

outsourced. These are delayed which keeps the assembly
waiting. to keep the machine capacity utilized other
components are being produced and inventory keeps on
rising. What do you think of this scenario?

 Let us say the components are run in batch of 200 each.

Once one operation is over the batch is shifted to the other
machine. The order is for 150. But the order is delayed
however there is already a huge inventory . What do you
think this ?
What do we see in all these Scenario ?
Customer
dissatisfaction

Loss for
Inventory company

Waiting Rejection

Delay
Manufacturing process

despatch Customer
Order

Material
Store
purchase

Production store
Hidden Factory

Product & Services Waste

Hidden Factory
Why is it bad ?

 Customer pays for products

 The profit is what is left out from the sales after deducting the cost

 Profit = Sales – cost

 Waste has consumed material, labour, which is cost

 Waste delays the product being despatched to Customer

 What is the solution ?
Lean Management

Lean management refers to a technique developed

• with the aim of

minimising the process waste

• and

maximising the value of the product or service

to the customer,
• without

compromising the quality.

Lean Philosophy

continuous improvement,
respect for people
relentless focus on delivering customer value
Customer Value

 That for which customer is willing to pay

 A coffee shop example

 On receiving the order the brewer moves 4 steps away, picks up cups,
brings to the coffee machine. He then moves 2 steps to left and bends
down to remove the coffee powder, he then puts the coffee powder in the
machine. He switches on the machine and waits to heat up. Then the
coffee is filled in the cup.
 The whole process takes 3 minutes. The coffee is filled in cup in 5 seconds.
Value added & Non Value added
Lean Philosophy

 Waste elimination
 Flow Improvement
Supply Chain Management

Supplier Input Process Output Customer

Performance Criteria

Ensures
delivery to
customer on
time

Ensure
Ensure
surplus by
capacity is
reducing
utilized
cost
Lean Manufacturing
is a manufacturing philosophy which shortens the time line
between the customer order and the product shipment by
eliminating waste.
Business as Usual
Customer Waste Product
Order Shipment

Time
Lean Manufacturing

Customer Product
Order Waste Shipment

Time (Shorter)
Quiz

You feel very hungry , you go to a restaurant ,which of these is the waste
A. Waiter lets you settle down comfortably for a few minutes
B. Waiter quickly brings you menu and waits for your order
C. Waiter brings you water as soon as you sit down
D. You need to pay on cash counter as you order
Quiz

1. Which of these is not waste

A. Floating tender for purchase of material

B. Machining for batch for covering 3 orders so cost can go down
c. Additional paint to make it better
d. Supplying on the delivery date
Session -2
TOYOTA PRODUCTION SYSTEM
EVOLUTION OF LEAN MANAGEMENT
TOYOTA LOOM MANUFACTURING

 1926 – Invention of first Automatic loom with auto rewinding and auto stop when
yarn broke
 Inventor – Sakichi Toyoda , a Carpenter

 Principle of Jidoka – Stop when defect happens preventing further defects from
occuring
 Jidoka – Automation with a human touch
EVOLVING TOYOTA PRODUCTION SYSTEM

 Everyone should tackle some great project at least once in a life time. – Sakichi Toyoda

 Kichiro Toyoda started Toyota Motor corporation in 1930.

 “Learn by Doing, getting your hands dirty.” – foundation of Toyota way “Genchi Genbutsu”

 If you do not understand , First Do, if you make a mistake, improve , if you make a second mistake , again improve &
this is how you improve continuously - Continuous Improvement
TOYOTA AUTOMOTIVE COMPANY

 Kichiro Toyoda visited Ford Motor company in Michigan to see automobile plants

 He was fascinated by US Super markets and how things on shelves were replenished

 This gave rise to Just in Time and Kanban .

SETTING EXAMPLE FOR TOYOTA PHILOSOPHY

 WWII devasted Japan Economy

 Cashflow was a big problem

 Toyota debt was 8X its total Capital Value

 Toyota had to adopt pay cuts and voluntary retirement

 Kichiro resigned from president of the company taking personal responsibility

 Thinking beyond personal gains for the good of company and taking responsibility for problems
FOUNDING PHILOSOPHY OF TOYOTA

 Get the hands dirty

 Spirit of Innovation

 Understanding the Value of company in contributing to Society

 Think deeply about the problem based on actual facts

DEVELOPMENT OF TOYOTA PRODUCTION SYSTEM
 Visit to Ford Motor Company – Taichi Ohno

 Realisation of economies of scale – Mass manufacturing

 Ford were producing 9000 units per month , Toyota were producing 900 units per month

 Toyota had small market with different models

 Ford was cash rich , Toyota was in debt

 Few resources & Capital - need to turn cash around quickly

 No luxury of high volumes, needed to adapt

 Requirement – High Quality, Low Cost, Short lead time and flexibility to match productivity of Ford
LEARNING FROM FORD

 Inefficiencies of Ford

 Large inventory

 Long waiting time

 Hidden defects

 Overproduction to safeguard cost per piece

 Large material handling equipment

 Assembly line
EVOLUTION OF SINGLE PIECE FLOW

Ford’s book “Today •Continuous material flow

•Standardised processes
& Tomorrow” •Eliminating Waste

•warehouse
Toyota lacked •Factory space
•money

Continuous material flow,

flexible to customer demand,
efficient ,
marshalling the ingenuity of workers to continually improve
TOYOTA PRODUCTION SYSTEM

 Pull System – burrowed from Super Market

 JIT – Just In Time – right items at right time in right quantity responsive to customer demands

 Customer – next process burrowed from Deming’s principle

 “Atokotei wa o-kyakusuma” – The preceding process must do what the subsequent process says

 Continuous Improvement – Kaizen

 Shortening lead time by eliminating wastein each step of a process leads to best Quality and lowest cost, while
improving safety and morale
TOYOTA PRODUCTION SYSTEM

 Examine the manufacturing Process – focussed way ( Genichi Genbutsu )

 Use customer’s perspective – what does customer want ? ( Internal – next customer and external) - Value

 Identify Value added steps and non value added steps

 Eliminate non Value added steps

 Continue

 Respect workers to do the above steps –

 Day on day , relentless, practice

EXAMPLE - ENCASHING A CHEQUE IN A BANK

7. On
10.Cash
4. Punch your 8. 12.
2. Go to 3. Wait to 5. Go to 6. Wait is 11. 13. Cash
1. Enter request number Handover 9. Entry in Counted 14. Walk
token get your waiting for token removed Counted Handed
the bank and get a go to the system by out
machine turn area number from manually over
token cash cheque machine
drawer
counter
ANALYSIS

 Who is the customer ?

 What is the value ?

 What is non value added ?

 What is the waste ?

 How to eliminate waste ?

CONTINUOUS IMPROVEMENT

 Go to Bank - Bank executive – Bank Manager – Bank Executive - Teller – Cash

 Go to ATM – Cash

 Open your PC and internet - Add beneficiary – approved – wait 24 Hrs - transfer NEFT

 Key in phone number - transfer

14 PRINCIPLES OF TOYOTA PRODUCTION SYSTEM

 1. Long term Philosophy at the expense of short term goals

 2. Create continuous flow to bring problems to surface

 3. Use pull system to avoid overproduction

 4. Level out workload ( Heijunka)

 5. Build a culture of stopping to fix the problem, to get quality right first time

 6. Standardized tasks

 7. Use visual control so no problems are hidden

 14 PRINCIPLES OF TOYOTA PRODUCTION SYSTEM

 8.Use only reliable, thoroughly tested technology that serves your people & purpose

 9. Grow leaders who thoroughly understand the work, live the philosophy and teach it to others

 10. Develop exceptional people and teams who follow your company’s philosophy

 11.Respect your extended network of partners and suppliers by challenging them

 12. Go and see for yourself to thoroughly understand the situation

 13. Make decision slowly by consensus, thoroughly considering all options, implement solution rapidly

 14. Become a learning organisation through relentless reflection ( Hansei) and continuous Improvement ( Kaizen)
BENEFITS OF TPS

Productivity •Output over input resources, profitability

Quality •Meeting customer expectations, reduced complaints, brand image

Cost •Profitability

Delivery •Lead time, cash flow

Safety •Accident free, incident free

Moral •Feel good, motivated, happy workers

SESSION-3
 JIT
Jidoka
Just in Time
Standardisation
& JIT
Today’s Standardisation is the
necessary foundation for
tomorrow’s Improvement.

-HENRY FORD
Need for Standardisation
For implementation Of JIT,
◦ Time for each process should be predetermined
◦ Each process should take same time every time it is performed
◦ There should not be any variation in method as it may cause defect , delay, overproduction
◦ Ensuring Safety
◦ Preventing breakdowns
Taylor’s method
Scientifically determine one best way to do the job

Scientifically develop one best way to train someone to do the job

Scientifically select the most capable person to do a job in that way

Train supervisor to teach their subordinates and monitor them if they followed that way

Create financial incentives to those who followed this and exceed them
Effects of Taylor’s standardisation
Productivity improved
Red Tape
Tall Hierarchical organisational structure
Top down control
Books & Books of written rules & procedures
Slow & cumbersome implementation & application
Poor communication
Resistance to change
Static & inefficient rules and procedure
New requirements
Technology changes are fast

Need for flexibility

Adaptable to change

Empowering employees –respect to workers

Just In Time
Knowledge of what is required

Knowledge of Quantity required

Knowledge of time when needed

Knowledge of rate at which material required

Takt Time
Rate of customer demand

If you Have to supply to customer 1000 pieces everyday

And if you are working 8 hours per day then

Rate of customer demand is : 1000/8 = 125 per hr.

Takt time = time per piece = 1/125 Hr = 60/125 per min = 3600/125 = 28.8 sec

This means that you will require material every 28.8 sec. for 1 unit.
Example
If customer orders for a month is 75000 pieces. What will be takt time for 25 days /8 hr working.

Per day requirement = 75000/25 = 3000

Takt time = 3600 X 8/3000
= 9.6 s

If you need hourly material than you will need = 3000/8 = 375 pieces
If you can keep more material than may be 4 hrs requirement would be 4 x 375 = 1500
If you can keep a day requirement than 3000 pieces will be required everyday.
For very far suppliers or for logistic cost you can allow to keep weekly, fortnightly stocks in exceptional cases
Considerations
Logistic cost

Distance from Customer

Value & Volume of the material

Reliability of the transportation method

Warehouse space

Criticality of the item

Forecasting
Estimate
◦ Rate of customer demand accurately

◦ Safety margin
◦ Seasonal Variations
◦ Trend of customer Demand
A Case study
A company has to fulfil customer orders of 125000 pieces every month . There are 4 operations, A, B, C
and D, The company works in 2 shifts of 8 hrs each,
Operation A requires material “a” 1 per unit this is big size and costly , the supplier is 80 Km away.
Transportation is done by road. Each truck can carry 50 units.
Operation B requires 2 material “ b” & “c”. Part b is supplied by supplier within 5 km which is medium
size and not so expensive. This is required 5 per unit.
Part “c” is screws. Requires 20 per unit.
Operation C does not require any material.
Operation D requires cartons for packing. 1 per unit.
The company wants to implement JIT.
Calculation of material
Rate of demand = 5000/16 = 312.5 ~313 per hr

Part Qty /unit Qty/mon Qty /day Stocks Qty/truck Freq

A 1 125000 5000 50 50 6.25 trucks per hr 10min
B 5 625000 25000 1200 1000 1.56 T per hr 49 min
C 20 2500000 100000 200000 - 4 supplies per 7 days
month
d 1 125000 5000 5000 500 10 trucks per day 96 min
Storage space
Calculate the volume of stock for each part

Create space for each Part

Design shelf storage

Determine storage location

Design unloading docks

Define material handling equipment

Material movement consideration

Signalling - Kanban
Storage at workstation
Signal for replenishment
Signal in advance calculating the time
for replacement
Kanban requirement
Visual Signages

Should be Visible

Actions should be predetermined based on signals

Expedite mechanism in case of failure

Material ordering levels Kanban
Material Red Yellow Green
A
B
C
D
E
Count Free
Looking Window

Material Level available

OK

Reorder

Urgent
Quality Requirement for vendors
First time right

Established process control

Established acceptance norms

Quality System audit & monitoring

Quality certified vendors

Quantity certified vendors

Direct on line – DOL

Session- 5,6
WORKPLACE ORGANISATION
& BATCH PRODUCTION
EARLY MORNING

• You are getting ready for class.

• You had overslept and are already running late for class.
• You can’t seem to find wallet/pen /mobile/socks/belt/keys or whatever ?
• Your bed is a mess, wardrobe is mess, etc.
• In a hurry you step on your mobile crashing it / knock the glass of juice on table/…
• Seems Familiar?
SOLUTION

• What your mother always told you

• Be organised
• Tidy up
• What happen after tidying up
• What happens after a few days?
SYSTEM

• System of organisation
• System of maintaining things in organised way
• System that is in built
• System that is a way of living
5S
JAPAENESE WAY OF ORGANISING
BENEFITS OF 5S

❑ Removes unwanted material from Stock – Inventory reduced without affecting material availability
❑ Less space required
❑ Less effort to handle
❑ Easy to maintain required stock
❑ Fast retrievability
❑ Easy to count
❑ Safe to store
❑ Improves safety
❑ Improves workspace
A WELL ORGANISED STORE
1ST S – (SEIRI )SORT

• Identify what is required and what is not required

• Remove the not required from the workplace
• Need conscious effort to do Seiri
• People keep things because of
• Just in case
• Emotional attachement
• Fear of shortage in future
• Financial implications
2ND S – ( SEITON ) SET IN ORDER

• Arrange the required material

• Place for every thing and everything in its place
• Arrange according to frequency of use
• Most frequent closest
• Most Heaviest closest
EXAMPLE – TOOL BOX
FILE CABINET
TRAIN STATION IN JAPAN
3S – SHINE - SEISO

• Clean with a purpose

• Check for leaks, damages, loose nuts etc.
• Check oil, dirt, grease etc.
• Check loose belts, fraying
• Find the root cause of the above
• Correct
• Outside Garden green – inside hospital clean
4 S – STANDARDISE ( SEIKETSU)

• Prepare work procedures

• Set up check sheets for following the steps
• Use standards for markings, paints, colours uniformly
• Pipelines standards – yellow for gas , blue for air, green for water, red for fire fighting
• Labels, signages in standard size and colour schemes
• Uniforms
5S – (SHITSUKE) SUSTAIN

• Prepare schedule for doing 3S

• Set up audit system to evaluate gaps
• Set up corrective actions to fill the gaps
• Set up training frequency
VISUAL MANAGEMENT

• For information – notice boards

• For information of standards – process control , Work Instructions
• For acceptance norms – picture of defects etc,
• For warning signs – low battery etc.
• For preventing defects – window envelopes etc
EXAMPLE
KPI DISPLAY
QUIZ

• In a library 5S is required to be done , what actions can be taken ?

• At your home what actions will you take for 5S?
BATCH PRODUCTION

• Imagine you are in a government office, first you stand in line at enquiry, after waiting for
a certain time when your time comes you are told to go to another window where you
wait in another Que to get an application form, then you fill the form and stand in
another que to submit the form.
• What do you realise from this ?
• Imagine similar situation at airline ticket counter, then check in , then security check then
boarding.
• What is common in the above two scenario
BATCH PRODUCTION

• At a Doctors clinic , you wait for Dr to arrive. He will usually arrive when there are
about 15 /20 patients are waiting.
• Batch of 15 . If he prescribes some lab test than you have to again stand in the batch for
patiets requiring lab test
• Similar thing happens in manufacturing which has number of operation.
• Each operation has a batch of units can be 10 to 100 say for example.
• The batch is moved after it has completed the operation to the next operation
EFFICIENCY

• Batch production is efficient – economies of scale

• Changeover time is a waste
• Machine utilisation is efficiency
• Production targets based on output in a shift
• Silos working
• Material handling based on batch size
• Transportation is cheaper in big batch size (Container load)
PROBLEMS OF BATCH PRODUCTION

• Production centric rather than customer focussed

• Huge inventories in each process
• Waiting causes increase in lead time
• Hidden defects in piles of material
• Overproduction , may not be required, leftovers
• WIP increase needing more working capital
 BATCH VS SINGLE FLOW

1min. 1 min. 1 min.

Batch of 10 10min 20 Min 21min 1st

30 min 10th
• Single flow
1st part 1 min. 2 min 3 min
10th part 10min 11min 12 min

If the last stage is inspection and we find say 3rd piece defective
Batch production has 27 pieces already in process Single flow has only 2 in WIP
 IMBALANCE

If 2nd process time is 2 mins instead of 1 min

Then for every batch processed
WIP before second process = 2 x Batch size
For batch of 10 WIP = 20 for every 10 min
So by the end of the day of 8 Hrs( 480 min)
WIP will be 960, output will be 240
• Imagine in a more complex process , how much more WIP will be.
WHY BATCH SIZE WAS REDUCED IN LEAN
MANAGEMENT ?
• Ford had huge factory
• Mass production , most efficient car manufacturer
• Economies of scale
• Only one model & single colour
• People could wait for the car
WHAT TOYOTA DID

• Ohno saw huge piles of inventory in Ford between each department

• Big material handling equipment
• Japan market was very small
• Could not afford big size batches
• Cash was in shortage to buy material
• People wanted variety but quantity was low.
• They therefore decided to go for smaller batches , move it through different process faster
out of the factory to get cash quicker
BIG STORE VS SMALL STORE

• Big store has big inventory

• Higher cash is invested
• Big space
• Many people employed to move material
• Small store has little capital
• Buying is in small Qty
• Buying is frequent
• More customer focussed
• Small space so cannot afford to keep idle inventory
IMAGINE A SMALL RESTAURANT

• What are the constraints ?

• What strategy to be followed ?
• If it is the only restaurant in small town ?
• If it is faced by huge competition ?
• If it is in busy industrial are ?
• If it is in high end side of town ?
MUDA - WASTE

• 8 types of waste in TPS

• Non value added waste
• Principle is to increase value added activities as a %
• Necessitates reduction of non value added activities
• Essential non value added activity
 TYPES OF WASTE - MUDA

1. Transport – Material Movement

2. Inventory – Stock of RM, WIP, FG
3. Waiting - Delay
4. Defect
 OVER PRODUCTION

• Overcapacity – Low demand

• Production more than demand
• Goals for production is numbers
• Long setup times
MOVEMENT

• Movement of man in his workplace

• Delays the process time
• Causes Fatigue reducing process time further
OVER PROCESSING

• More than required

• Adds to cost
• Adds to Delays
DEFECT

• Loss of material
• Loss of time worked upon it
• Loss of time on rework
• Cost of Rework
• Additional Labour required
• Additional Inspection time
EXAMPLES OF WASTE ?

• In Your Home ?
• In the college ?
• In office ?
• In Hospital ?
• In Restaurant ?
• In financial apps?
 Y.M. SINGH

WASTE IS OFTEN BUILT INTO JOBS

125

Pre-Gilbreth Bricklaying
THIS IS A REAL EXAMPLE

• Top: "The usual method of providing the bricklayer with

material" (Gilbreth, Motion Study, 1911).

• Bottom: "Non-stooping scaffold designed so that uprights

are out of the bricklayer's way whenever reaching for
brick and mortar at the same time."

126
Y.M. SINGH
 Y.M. SINGH

POST-GILBRETH BRICK LAYING

127

The solution is obvious (in

retrospect), but first we have to
know that we have a problem!
 Y.M. SINGH

ANOTHER EXAMPLE: FABRIC FOLDING

128

Redesign of this job to eliminate

the need to walk doubled its
productivity. We will see that
material waste also hides in
plain sight.
 EXISTING GOVT OFFICE
129
 WASTE INVOLVED
130

• 1. Searching for window to get application form – no visual sign

• 2. waiting
• 3. Movement
• 4. Inventory
• 5. Overprocessing
• 6. Defect
• 7. Transport
 NON VALUE ADDED ACTIVITIES
131

Going to
a Waiting
Waiting Waiting
window in Asking
Redirect at Ask to in Submitti
for Going to Queue Getting Filling for Going to
ed to Queue go to Queue ng the
asking window to get applicati Applicati where window
enquiry at window at applicati
where 4 the on form on form to 3
counter enquiry 4 window on form
to get applicati submit
counter 3
applicati on form
on
 REDEFINE GOVT OFFICE
132

Application Application Application Application Application

forms forms forms forms forms
submission submission submission submission submission

Instructions Application
to fill the forms
form
 SAVING TIME
133

• Earlier version
• Assuming 2 min per person service time, 3 min to fill form
• With no mistake – 34 min
• With a mistake – 44 min
• New system – 5 min
• Saving – 34 min Average – 87%
134

PULL &
CELLULAR
MANUFACTURI
NG
 EXAMPLE
135

• Suppose you have a home delivery for milk , butter, eggs etc
• You sign up and specify the daily Quantity
• It is deposited on your front door in a thermoware so keeps cool.
• But they will supply only once in a week as they have to reduce the cost of transportation.
• The day of the week is not fixed as they will schedule to reduce their inventories
• You store this weekly Quantity in your fridge .
• 1.Imagine if you have a week store on Sunday and the weekly Quantity comes on Monday ?
• 2. Imagine you are on a vacation for a week ?
 NEW SYSTEM
136

• As you consume you send for replenishment through internet

• In case you open a bottle of milk you order another one.
• You will have one bottle and one unfinshed bottle ( so not much Inventory)
• The company has renegotiated with the dairy supplier and similarly orders to him a
consolidated demand every day.
• What is the difference ?
 SUPERMARKET
137

• Warehouse
• With limited Inventory
P
• Based on potential customer demand U
• Quick replacement ( replenishment ) L
• Ask the supplier for replenishment
L
 PUSH VS PULL PRODUCTION
138

• Anticipation of Demand
• Economies of scale
• Apparent flexibility in scheduling
• Inventory before slow process
• Big Batches
• Lot of space
• Additional material Handling
• Hides defect Sales Vs Marketing
• Delays due to additional movements between departments
139

Pull System

pull
pull

Customer Despatch Production

pull
pull pull

Supplier Purchase Stores

 ADVANTAGES
140

• Low Inventory
• Pull is not Inventory Management but Inventory Reduction
• Pull is necessary for JIT
• Resources are used most optimally
 PUSH MANUFACTURING
141

• Departments - schedules
• Similar machines are placed together
• Similar functions together – purchase, Maintenance, Quality, Despatch

Dept. Dept. Dept.

Dept. D
B C
A

Inventory Inventory Inventory

Buffer Buffer Buffer
 WAREHOUSE
142

• Signal

Sale
 HOW DO YOU FILL PETROL IN YOUR
143

BIKE ?
• Is it on schedule ?
• Or Every Monday Morning ?
 COMPUTER MANUFACTURE
144

• Computer base department

*Each process 1 min
*Batch of 10
• Computer monitor Department *10 min in computer
base
*10 min in computer
monitor
*10 min in testing
*30 min for a batch
of 10
Computer Test Department *WIP 20
10 base & 10
Computer
 VALUE ADDED WORK
145

• 3 minutes – 1 min in each process

• Total time for 10 computers : 30 min
• One Cell where one base, one monitor and test in one cell

Time for first computer out in 3

min
Batch of 10 in 12 minute
WIP - 2
 Lathe Lathe Lathe
146
Lathe

Mill Mill Mill Mill

Grinder Grinder
Grinder

Drill Drill Drill

 Single Piece Flow Layout
147
Lathe Mill

Mill

Grinder

Lathe

Lathe

Drill

Mill
Lathe Drill
148
 ADVANTAGE
149

• Batch size reduction causes faster delivery

• Less WIP
• Quick defect detection
• Less rework
• Less capital
• Quick change
• Flexibility
• Frees up floor space
 OTHER ADVANTAGES
150

• Improves safety – No fork lift

• Improves Morale – more value added work gives workers a meaning to work
• Reduces cost of Inventory
 SIMULATION
151

Product Process required Order in month

P1 ACD 500
P2 BD 200
P3 ABC 600
P4 BC 1000

Process Cycle time Production in 24

Hr
A 30 48
B 20 72
C 10 144
D 45 18
 PUSH PRODUCTION
152

Process Production Despatch Surplus per Surplus end

Required schedule per Requiremen day of month
day t per day
A 48 44 4 100
B 72 72 0 0
C 144 84 60 1500
D 18 28 -10 -250
 DESPATCH SCHEDULE
153

Product Quantity Quantity Surplus or End of month

Required per Despatch shortage
Day
P1 ( ACD ) 20 18 -2 -50
P2 (BD) 8 0 -8 -200
P3 (ABC) 24 24 0 0
P4 (BC)
Process 40 end
Surplus 40 0 0
of month
A 100 +50
B 0+200
C 1500 +50
D -250
 PULL PRODUCTION
154

Product A B C D
P1 20 20 20
P2 8 8
P3 24 24 24
P4 40 40
Daily Schedule 44 72 84 28
Running time hrs 22 24 14 38 *
 NO. OF MACHINES
155

Components No. of Machine Output per Required m/c Surplus/shortage

Machine per day
A 12 4 11 1
B 12 6 12 0
C 6 24 3.5 2.5
D 2 9 3.1 -1.1
Produ A No. of B No. of C No. of D No. of
ct machi machi machi machi
nes nes nes nes
P1 20 5 20 0.833 20 2.22
P2 8 1.33 8 0.87
P3 24 6 24 4 24 1
P4 40 6.67 40 1.67
 CELLULAR LAY OUT
156

P1 P2 P3 P4
 CELLULAR MANUFACTURING
157

• Make cells as per product

• Group machines required as per product
• No. of machines to match the product rate
• Keep machines in order of the process in the cell
• Each cell will produce a product as per the Demand rate
• Different machines in a cell
• The efficiency of the cell is how best they fulfil the demand
 STEPS TO IMPLEMENT CELL MANUFACTURING
158

SYSTEM
• PQ analysis – product Quantity analysis
1. Understand the • Machine – type, numbers, movability, adaptability, size
current situation •
•
Each component cycle times per machine
Takt time for each type of product

• Mapping process flow

2. Converting to • Value stream mapping
process based layout •
•
Making layout for sequential operations
Moving machines adjacent to each other

3. Continuously • Measure lead time

• Production efficiency
Improve situation • TPM, Kaizen,Six sigma
 TRADITIONAL VS CELLULAR LAYOUT
159
 ADVANTAGES OF CELLULAR MANUFACTURE
160

• Customer focussed production

• Lower lead times
• Quick Delivery
• Less inventory
• Flexibility- cells can be replicated depending upon Quantity required
• Coupled with Jidoka multiple machines can be manned by single worker
• Defects down stream are quickly discovered and can be acted upon
• Less supervision and coordination required
 EXAMPLE OF CELLULAR MANUFACTURING
161

• https://video.search.yahoo.com/search/video;_ylt=Awr9Dty1tiZg_wMATzNXNyoA;_ylu=
Y29sbwNncTEEcG9zAzEEdnRpZANDMDE2MF8xBHNlYwNwaXZz?p=cellular+manufac
turing+in+lean+manufacturing+overhead&fr2=piv-
web&fr=mcafee#id=23&vid=9924cc443fe14708e15f2bad598019af&action=view
 BANK LOAN APPROVAL DEPT
162

• Loan officer explains

• Application submitted
• Application forwarded to approval department
• Approved application sent for authorisation
• Authorised loan goes to sanctioning department
• Sanctioning department sanctions
• Send to loan officer
• Loan officer hands over th sanction letter to client
 FLOW
163

• Unhindered movement of product through process

Throughput
Speed
 VALUE
164

• Conversion of material to product

• Customer perceives benefit
• Customer will pay for the benefit provided
• Value is not defined by designers
• Value is not defined by the top management – financial problems ( making short term
profits)
• Value is not defined by the manufacturer (efficiency - big airlines , multistop airliners)
VALUE STREAM MAPPING

• Top down view of the whole operation

• Identify delays, waste & bottlenecks in flow
• Identifies Inventory at various stages of Process
• Helps in speeding up the process by removing these
 VALUE STREAM MAPPING

• Identify the activities in the supply chain

and map them on time scale
• Indicate process time, changeover time
for each process
• Identify the inventory and delay in
between process
EXAMPLE
 LEAN IN PRODUCT DEVELOPMENT
168

• Identify Value
• Define Feature that provide the value
• Define design for the features
• Define the process for creating that design
• Reduce back & forth communication by concurrent design ( CFT)
 CASE STUDY – DEVELOPING LUXURY CAR

• In 1980 , Toyota was known for small compact , fuel efficient,

economic cars
• Mercedes, BMW, Audi, Jaguars were in style
• Toyota decided to develop a Luxury car to entre the market
• They did a focus group study , two groups of 12 people each called
in at Marriot hotel in US
• These were owners of Benz, Audit,Volve & Jaguar
• Reason for purchase and rejection of competitors were tabulated
 DATA OF CONSUMER FOCUS GROUP

Reason for Purchase Reason for rejection of competitors

Benz Quality, Investment Value, sturdy Too Small, weaker style, appeal

BMW Style, handling, functional Too many on road

Audi Style, Space, affordability Poor Quality, poor Service

Volvo Safety, reliability, Quality, sturdy Boxy Styling

Jaguar Most attractive styling Poor Quality ,small interior

 IMAGE

Country Image
European Quality, investment value, sturdy

American Gadgets & Gimmicks, poor quality, big, oversized, sofa on

(Cadillac) wheels (too soft ride), rattle after 6 months

Japanese Too small, no status, busy, no successful image

(Nissan Maxima)
RANK ORDERING OF WHAT WAS IMPORTANT

1. Status & Prestige of image

2. High Quality
3. Resale value
4. Performance
5. Safety
 PROBLEM DEFINITION – NO COMPROMISE GOALS

Great High speed Yet A pleasant ride

handling/stability
Fast & Smooth ride Yet Low fuel consumption
Super quite Yet Light weight
Elegant styling Yet Great aerodynamics
Warm Yet Functional Interior
Great Stability at high speed Yet Great Cd value ( low friction)
CHANGEOVER TIME
PROBLEMS WITH SINGLE PIECE FLOW

• Productivity reduces if there is variety

• Production people do not like to change settings
• Frequent change of setting causes loss of time
• Production is low when there is change
EXAMPLE

• A part requires 1 min of process time.

• Changeover to second version takes 3 hours
• For a single flow means every piece change will be only 8 pieces in 24 hours approx.
• Productivity = 8/24 = 0.33/hr, total production possible = 24*60 = 1440 efficiency = 8/1440 x
100 = 0.55
• Production person will try to run say one change in 24 hrs
• Production time will be 24-3 = 21 hours
• Production Quantity = 21 * 60min/1min = 1260 pieces
• Productivity = 1260/24 = 52.5/hr efficiency = 1260/1440 x 100 =87.5%
 # production & efficiency Vs # changes
cycle time 1 min changeover time 3 hr
1600 120
1400 100
100
87.5
# production

1200

efficiency
75 80
1000

62.5
800
50 60
600
37.5 40
400 25
200
12.5 20
0
0 0
1 2 3 4 5 6 7 8 9
No. of changes
 SHORT TERM SOLUTION

• Do not change settings

• Make big batches
• Protect daily /shift production
• Changeover only at the end of shift or start of next shift

What if a customer demands 30 pieces of part A & 20 pieces of part B ?

IMPLEMENTING LEAN SOLUTION

Consider
• You have started eliminating MUDA Conclusion drawn :
Lean Manufacturing does not work
• You have reduced inventory by implementing JIT
• You have organised the workplace eliminating movement
• You think you have implemented Lean Management
• You get some results but then customer demands spike
• With single piece flow you cannot keep up with pace so have jerky single piece
• People will be burdened, equipment starts to break down more often ( MURI)
HEIJUNKA (EVENNESS)

• Mura ( Unevenness ) essential to eliminate MUDA & MURI

• Sometimes there is more work then men & machine can handle
• Other times there may be lack of work
• Let us consider there are three products A , B & C each of same Qty
• Then schedule can be set as ABCABCABC…
• If it is uneven quantities like more A and lowest C
• Since A are sold more so you will make A early in the week then B and end of week C
SCHEDULE

Monday - AAAAAAA
Tuesday – AAAAAAA
Wednesday – A A A A A changeover B B
Thursday – BBBBBBBB B
Friday – B B changeover C C C C
 PROBLEMS WITH THIS APPROACH

• Customers do not buy products predictably –

• suppose C are demanded on Monday you will have to keep inventory

• There is risk of unsold goods –

• If orders for A are not sold by Wednesday , you have to keep them in Inventory

• The use of resources is unbalanced –

• In case C takes more labour than there will be more stress when making C

• Placing an uneven demand on upstream process

• When demand changes than expected order will change for suppliers
• This will cause Bullwhip effect
 SOLUTION

• Monday AA BAA C B
• Tuesday AA BAA C B
• Wednesday A A B A A C B
• Thursday A A B A A C B
• Friday A A B A A C B
Mixed model Production
BENEFITS

• Flexibility to make what the customer wants

• Reduced risk of unsold goods
• Balanced use of Labour & Machines
• Smoothed demand on upstream process and plant’s Supplier
PROBLEM WITH THIS SCHEDULE
C0NFLICT

Customer
Changeover
demand
loss
flexibility

Reduce
changeovers changeover
time
 REDUCE CHANGEOVERS

Set up • Fixtures
change • Tools
requires • Preheating
changes in • Process setting
 SET UP CHANGE PROCESS AT TOYOTA – SHIGEO
SHINGO

Stop the press Remove the bolts Remove the die

Can we do most of these when the

press is running ?

Bring the new die

Start new part Preheat to the machine
Fit it in place
CHANGEOVERS

# activity
elements

External Internal
EXAMPLES

• Stage set up change

• Background change
• Props change
 CLASSIFICATION

• External Set up – those activities that can be done when the press is still running
• Getting the next die near machine position at the level of die table
• Preheating it
• Position the tools for opening bolts
• Position the table at level of die
• Internal Set up – those which need the press needs to be stopped
• Loosening the bolts
• Sliding the die from the position to the table
• Slide the new die in position
• Fasten the bolt
 Efficiency VS co time reduction from 3 hr to 1 hr
120

100

80

60

40

20

0
1 2 3 4 5 6 7 8 9
Series1 Series2
PROCESS OF QUICK CHANGE OVER

• Standardisation – if too much variability

• 5S – place of storage for required tools selected where required
• Observe – video & multiple observers – not to miss smallest detail
• Classify external & Internal elements
• Convert internal to external wherever possible
• Reduce internal by special tools –
• pneumatic instead of manual or hydraulic fasteners,
• Half turn fasteners instead of full thread
• Rails, ball bearing supports etc.
QUICK CHANGE - SMED

• pit stop
• Operation table setup
• Flight preparation
• Changeover time from many hours to few minutes ( Single minute exchange of dies)
• https://www.youtube.com/watch?v=UlIGI3laGAo comparison of earlier & new process of
tyre change
LINE
BALANCING
CHAIN ANALOGY
PROCESS CHAIN

Process Process Process Process

A B C D
 SPEED OF
PROCESS

• Depends on the individual process times

Ta – Time for process A
Tb – Time for process B
Tc – Time for process C

T = Ta + Tb + Tc
T = Process Time
THROUGHPUT TIME
SPEED

Speed depends upon Flow

Example 1
Ta, Tb, Tc are all equal to 10 min

1st part will be completed in 30 min.

2nd part will be completed in ?

SPEED

• Example 2
Ta = 10 min
Tb = 20 min
Tc = 5 min

1st Part will be completed in 35 min.

2nd Part ?
Subsequent parts ?
 TIME OF COMPLETION
Process 1 2 3 4 5 6 7 8 9

A (10) 10 20 30 40 50 60 70 80 90

B (20) 30 40 70 90 110 130 150 170 190

50

C (5) 35 55 75 95 115 135 155 175 195

PROBLEMS WITH THIS IMBALANCE

• Process B is slower
• Process A will overproduce
• Inventory will keep building before Process B
• Process C is fast
• Process C will keep Idling
• Process B will be fully utilised
• Process C may put pressure on Process B if demand escalates causing MURI
• Process A will push Process B again causing MURI
• Process B is bound to break down often causing further delay
A B C

Inventory keeps building

Simulation of process flow with Imbalance

 Balancing
Balanced configuration
Process PT #machines New PT

B A 10 2 5

A
B 20 4 5

B C 5 1 5

C
B
A
B
Process time : 10/2=5 20/4 = 5 5/1=5
LINE BALANCING

• All process should have same speed

• Speed should be equal to Takt time
• Flow will be even
• It will match customer demand
• No machine/Man will be under MURI
• Basic requirement is standardisation
• Equipment should not have breakdowns
• Material should be available
• Men should be trained
SCALE UP

The model we saw had one unit coming out every 5 min.
This means every hour we have 12 units
Takt time = 5 min.
Total production = 24 *12 = 288

Suppose the demand is 1440 per day, you are running 24 Hrs
Takt time = 24*60/1440 = 1 min
How will you do it ?

Conventional Method is to see how to speed up processes

CELL MANUFACTURING

• The model is one cell producing at Takt time of 5 min

• If the takt time is 1 min then you need
5*1 = 5 cells

B B B B B
A A A A A
B B B B B
C C C C C
B B B B B
A A A A A
B B B B B
 ASSEMBLY OPERATIONS

• Man instead of machine involved

• Increase operation stations for balancing
• If it is not possible to balance perfectly and too much
difference between operations
• Example

Operation Time # stations

A 3 1 1
B 5 5/3 1.67 Combine and
C 4 4/3 1.33 make 3 stations

Real Example
METHODS TO BALANCE

• Increase no. of stations /Machines for higher time

• Combine activities that have faster speed to match Takt time

• A= 10 min, B = 15 min, C = 4 min, D = 6 min, E = 10 min

• Combine C & D
• A= 10 min, B = 15 min, C+D = 10 min, E =10 min
LINE BALANCING

Split activities from operation that have longer

process time
A= 10 min , B1 = 5 min, B2 = 5 min , B3 = 5 min,C = 4
min, D = 6 min, E 1= 3 min, E2 = 7 min

A B C D E

A B1 B2 B3 C D E1 E2
• Combine activities and make equivalent no. of stations
• A, B1+B2, B3+C, D+E1, E2

• Some amount of Imbalance is tolerable.

A B1 B2 B3 C D E1 E2

10 5+5=10 5+4 = 9 6+3 =9 7

ADVANTAGES OF LINE BALANCING

• Higher productivity
• Optimum use of resources
• Less waste
• Lower lead times
• Flexibility
• Scaling up is quicker
• Less inventory
• Lower waiting time
LEAN SIX SIGMA
LEAN SIX SIGMA

• Lean – waste reduction, increase flow

• Six Sigma – variation reduction , improvement , 3.4 defects ppm

• Lean Management was started by Toyota

• Six Sigma was started by Motorola
• Later both tools were merged as one body of knowledge and called Lean Six sigma
SIX SIGMA AND LEAN

• Problem Solving methodology – DMAIC

• Problems dealing with – Quality, Delivery, Lead time reduction, Productivity
improvements etc.
• These may also involve lean tools for lead time reduction by eliminating waste
• Defect is one of the waste defined in Lean Management
• Six Sigma tools can be used to eliminate defects
• Control phase of six sigma is standardisation tool of lean management
Six Sigma Lean

Lean Six
Sigma
 COMMONALITY & DIFFERENCES

Parameter Six Sigma Lean

Customer focus Customer Delight Customer Value
Measurement Data Based Observation Based
Approach Process Mapping SIPOC Value stream Mapping
Intention Continual Improvement - Continual Improvement - Kaizen
Breakthrough
Sustenance Control Standardisation
Method Reduce Variation Reduce Waste
Metrics DPMO NVA %
Philosophy Defect prevention Waste elimination
Team Approach Cross functional Cross functional
KAIZEN &
TPM
“IT’S ONE SMALL STEP FOR MAN, ONE
GIANT LEAP FOR MANKIND.”

- NEIL ARMSTRONG
GREAT MEN ARE NEVER
BORN ONLY SMALL BABIES
ARE
CHANGE

• Power of small change

• 1 Rs saving with 1 % interest everyday can make it 37 times at the end of year
• Suppose you save 1 Rs everywhere you spend. Money accumulated for 1Rs invested at 10%
everyyear
• Everyone does same in your family 70

60

50

40

30

20

10

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
 DEMING’S VISIT TO TOYOTA

• 1950’s situation
• Post war situation
• Quality was poor
• Toyota was in huge loss
• What Deming would say to the workers –
• How do we make Toyota a world class company ?

Ask yourself what one small improvement can you do to make your activity better ?
KAIZEN

Kai – change
Zen – improvement
Change for improvement
Everyday, everybody, everywhere – Masaki Imai
Waste reduction
Productivity improvement
Sustained continuous improvement
“KAIZEN IS EVERYDAY IMPROVEMENT—EVERY DAY IS A
CHALLENGE TO FIND A BETTER WAY OF DOING THINGS. IT NEEDS
TREMENDOUS SELF-DISCIPLINE AND COMMITMENT.”
– MASAAKI IMAI, FOUNDER OF KAIZEN INSTITUTE
CONSTITUENTS

• Everyone involved
• Small Change
• Incremental change
• Sustained change
METHODOLOGY

• Kaizen Events
• Cross functional teams formation
• Identification of improvement areas
• Value stream Mapping – 5 why for analysis
• Rapid implementation – 72 Hrs
KEY ENABLERS

• Management Commitment
• Employee empowerment
• Gemba Walk – MBWA
• 5S
 EXAMPLES

Toyota Motor Manufacturing (UK)

Making parts move on trolleys alongside worker and sticker picker saved 35.1 seconds per car.
Equivalent to 10 years of work when applied globally.

Toto
Toshiyuki Masatsugu thought of stabilizing hanging screwdrivers with flexible cords,
eliminating additional 3.33 man-hours per month. For a company of 100 employees on
minimum wage, his practice of kaizen saved as much as ¥13,385,476.125 ($124,337.94)
every year.

• https://www.youtube.com/watch?v=wot9DFzFRLU
 EXERCISE –
HOW CAN YOU IMPROVE ORDER TAKING PROCESS AT COFFEE CAFÉ
DAY ?
• Customer dissatisfaction : long time for your order to be taken.
• Existing process
you walk in
go to the counter,
pick up the menu card or look at the menu display,
you stand in the Queue,
order when your turn comes,
pay ,
get the receipt ,
look for a place to sit and
wait for your order to be served.
TYPES OF KAIZEN

• A single improvement at localised like

Point Kaizen machine, station

• Multiple point kaizen that improves a line for

Flow kaizen example line layout

• A series of kaizens, overhauling the total value

System Kaizen stream , for example, business processes
WHAT CAN GO WRONG ?

• 5S done
• Standardisation
• Just in Time implemented
• Flow established
• Cell manufacturing established
Machine
• Line balancing done
breakdown
• Jidoka implemented
• Kaizen practised on continuous basis reducing waste on sustained basis

TPM
TPM – TOTAL PRODUCTIVE MAINTENANCE

• Upkeep of machines in a proactive , preventive and predictive state for perfect

production
• Objective
• No breakdown
• No Small stops or slow running
• No defects
• No accidents

Metrics: OEE – overall equipment Effectiveness

PILLARS OF TPM
AUTONOMOUS MAINTENANCE

• Self Ownership of the machine

• Clean
• Lubricate
• Inspect
• Tighten

Benefits
Pride of ownership
Predictive & proactive steps can be taken before failures can happen preventing failures
Keep machines in top condition
Free maintenance people to focus on major problems
PLANNED MAINTENANCE

• Scheduled maintenance : maintenance is planned at specific interval

• Preventive actions are taken based on predictive measures
• Benefits
• Reduces unplanned breakdowns
• Maintenance can be planned without disruption to production schedule
• Keep small stock of wear & failure prone parts
QUALITY MAINTENANCE

Design error detection and prevention into production processes.

Apply Root Cause Analysis to eliminate recurring sources of quality defects.

Benefits
• Specifically targets quality issues with improvement projects focused on removing root sources
of defects.
• Reduces number of defects.
• Reduces cost by catching defects early (it is expensive and unreliable to find defects through
inspection).
FOCUSSED IMPROVEMENT

• Small CFT to identify areas of improvement on continuous basis

• Benefits
• Increases OEE by working proactively in eliminating potential causes,
• Harnesss collective talent of employees to create a culture of continuous improvement
EARLY EQUIPMENT MANAGEMENT

• Use the knowledge of TPM in design of new equipment

• Benefits
• Less startup problems
• Easier to maintain
OTHER PILLARS

• Training & Education

• Upgrade skills in maintenance and TPM tools for maintenance people, workers & managers
• Learn preventive, predictive tools for effective maintenance

• Safety Health & Environment

• Eliminates potential health and safety risks, resulting in a safer workplace.
• Specifically targets the goal of an accident-free workplace.
TPM in administration
extend to administrative processes like procurement, order processing etc.
OEE – OVERALL EQUIPMENT EFFECTIVENESS

• The % of time the equipment was producing good parts

• It is of 3 parts
Availability – % Time the machine was running out of available time
Performance - % speed to rated speed
Quality - % Ok parts

• OEE = Availability x Performance x Quality

• World class companies have OEE of 85%,
Six Big Losses OEE Category Examples
Unplanned Stops Availability Loss Tooling Failure, Unplanned
Maintenance, Overheated
Bearing, Motor Failure
Setup and Availability Loss Setup/Changeover, Material
Adjustments Shortage, Operator Shortage,
Major Adjustment, Warm-Up
Time
Small Stops Performance Loss Component Jam, Minor
Adjustment, Sensor Blocked,
Delivery Blocked,
Cleaning/Checking
Slow Running Performance Loss Incorrect Setting, Equipment
Wear, Alignment Problem
Production Defects Quality Loss Scrap, Rework
Reduced Yield Quality Loss Scrap, Rework
Comments
There is flexibility on where to set the
threshold between an Unplanned Stop
(Availability Loss) and a Small Stop
(Performance Loss).
This loss is often addressed through
setup time reduction programs such
as SMED (Single-Minute Exchange of
Die).
Typically only includes stops that are less
than five minutes and that do not require
maintenance personnel.
Anything that keeps the equipment from
running at its theoretical maximum
speed.
Rejects during steady-state production.
Rejects during warm-up, startup or other
early production.
INTEGRATION OF LEAN
MANAGEMENT INTO
OPERATIONS
 21

245 NEED FOR CHANGE

• Long Lead times Lantech

• Reduced profitability Development time for new product 3-4 years

• Too much inventory

Employee hours per machine 160
• Too many breakdowns
Manufacturing space per machine 100 sq ft
• High cost Delivered defects per machine 8
Inventory inprocess &FG $2.6m
Production throughput time 16 weeks
Competition
Production delivery lead time 4 – 20 weeks
246 CHANGE MANAGEMENT

Policy

monitoring People

Tools &
Techniques

Slides 21
 21

247 POLICY

• Commitment of Top Management

• Demonstrate the commitment
• Lead from the front
• Allay the fears
• Hire a consultant (Lean Sensei)
• Build a system

Slides 21
 21

248 PEOPLE

• Training & Education

• Visit to established organisation
• Involve & train everyone
• Cross Functional Teams
• Enthusiastic and positive to work as change agents
• Representatives from all areas

Slides 21
 21

249 ORGANISATION STRUCTURE

Lean Manager

Value stream Value stream Value stream

Manager Manager Manager
Development production assembly
Slides 21
 21

250 TOOLS & TECHNIQUES

• Foundation of 5S
• Identification of Value
• Value stream mapping
• Kaizen
• Line Balancing
• Cell manufacturing
• Quick Change
• Jidoka
• TPM

Slides 21
 21

251 5S IMPLEMENTATION

• Divide whole organisation plant into zones

• Each Zone is led by a leader
• All those who work in that zone are members
• Red tag events
• Decision are taken by empowering the team

Slides 21
 21

252 KAIZEN

• Form CFT
• Identify Area for improvement
• process or point Kaizen
• Rapidly improve

Slides 21
 21

253 5 PRINCIPLES

Slides 21
 21

254 IDENTIFY VALUE

Customer

Value Non Value

Necessary Pure
waste waste

Slides 21
 21

255 VALUE

Customer is willing to pay

RM Finished
product

Slides 21
 21

256 VALUE STREAM MAPPING

• Look at the big picture

• Identify repetitive product lines
• Identify the current state
• Draw up a future state
• Implement flow Kaizen
• Assign responsibilities

Slides 21
 21

257 CURRENT STATE BOX SCORES

Measures Current State

Total Lead Times 23.5 Days
Value creating Time 184 sec
Changeover time 10 min in assembly
1 hour in stamping
Uptime 80% in welding/Assembly
85% in stampinh
Scrap /Rework 5%
Inventory 17,130 pieces
Every Part made Every 2 weeks
Slides 21
 21

258 FUTURE STATE

Measures Current State Future State

Total Lead Times 23.5 Days 4.5 Days
Value creating Time 184 sec 169 Sec
Changeover time 10 min in assembly 0 min in assembly
1 hour in stamping 10 min in stamping
Uptime 80% in welding/Assembly 100% in weld/assembly
85% in stampinh 99% in Stamping
Scrap /Rework 5% 0.5%
Inventory 17,130 pieces 3250 pieces
Every Part made Every 2 weeks 8 Hrs
Slides 21
 21

259 CREATING FLOW

• Calculate Takt time

• Line balancing to match takt time
• Cell manufacturing to change over from Batch & Queue to SPF

Slides 21
 21

260 FLOW ANALYSIS TOOLS

• Sphagetti Diagram
• Swim Lanes

Slides 21
 21

261 SWIM LANES

Slides 21
 21

262 SUPPORTING ACTIVITIES

• Quick changeovers
• Zidoka
• 5 why problem solving

Slides 21
 21

263 ESTABLISH PULL

• Kanban
• Super market

Slides 21
 21

264 EXTENDING VALUE STREAM

• Involve suppliers
• Involve subcontractors
• Involve sales up to POS
• Carryout Value stream Mapping

Slides 21
 21

265 ROADMAP

Value stream
Quick Change,
Sphagetti
Pilot Swim Lanes Jidoka, 5 Why
team
Policy Training Kaizen Flow
Eliminate
waste

Organisation Every Value Pull

one –
5S
Hire a CFT Takt time,
sensei line balancing, Kanban, JIT,
Slides 21 Cell Standardisation

K a i z e n
INVOLVMENT
OF TOP
MANAGEMEN
T&
CHALLENGES
BOTTLENECK IS ON TOP OF THE BOTTLE
TOP DOWN VS BOTTOM UP

• Top Down
• Generic to specific
• Big picture
• Effect of macro factors
• Strategic decisions
Bottom Up
Specific to Generic
Minute details
Fail to see the goal
Tactical decisions
LEAN IMPLEMENTATION

• Strategic decision
• Change management
• Culture change
• Mindset change
• Pulling people out of comfort zone ( Who moved my cheese ? )
• Breaking organisational Inertia
• Big risk involved in disruption
WHO IS AFFECTED MOST ?

• Company losing profits

• Revenue growth gowing down
• Market share of the company declining
• Customer complaints rising
ADVANTAGES

• Knowing ground realities

• Setting example
• Motivation
• Helps in overcoming resistance when it looks contrary to belief
• Helps in breaking mind sets ( Leap of faith)
• Quick decisions
• Action “just do it “ oriented
EXAMPLES

• Toyota brought change by Eiji Toyoda, head of Toyota Motor company after WWII
• Instructed Taichi Ohno the CEO to implement
• Pat Lancaster , Kentucky – invented stretch wrap ,founded Lantech corporation
implemented Lean by hiring Ron Hicks VP and put him to change Lantech to a lean
organisation
• Art Byrne , president &CEO of Wiremold company initiated himself by imparting training
for two days followed by a kaizen event with the trained employees.
CHALLENGES

• Excess manpower
• Relocation of heavy machines to create single piece flow
• Downsizing the machines for reducing batch size
• Keeping machines uptime all time high
• Keeping Quality defects to almost zero
CASE STUDY – WIREMOULD INC.

• Manpower was divided into 3 class

• Those who added value
• Those whose activity was essential but non value added
• Those who did not add value

The last class was asked to go .

The second class who were ageing were asked to go voluntarily with a compensation.
The reduction was done by 30% , even though it was required to be 50% in anticipation of growth in orders

The reduced manpower was then addressed by Byrne giving them the guarantee that no more job loss can happen on
improvement.
CHANGING THE MIND SET

Top Management’s Fear

Fulfilment of Customer demand
Production manager’s fear

Loss
loss of efficiency
Procurement manager’s Fear Dislodging
material shortages
Maintenance Manager’s Fear
from
comfort
of
Breakdowns zone Job
Development Manager’s Fear
Dilution of Design
Quality Manager’s fear
defect may pass due to pressure
WORKER’S MINDSET

• Hidden agenda of management

• Management wants to fleece workers
• Skill developed are special to himself
• Would not like to share special techniques developed by self
• No margin for relaxation
BREAKING MIND SET

• Advantage of breaking down barriers

• Understanding each other’s view point
• Elimination of red tapism
• Understanding of work flow
• Understanding one’s contribution to the product realisation process
• Bringing about ownership
UNION RESISTANCE

• Restriction to do only one type of work for which hired

• Restricts flow
• Sceptical of management offer of saving jobs of every person.
• Believed it to contain fine print
• Resisted multiskilling
• Resistance to multi machine operation as in cell manufacturing
EXECUTIVES FEAR

• How to retain jobs of workers if sales fall ?

• Five lines of defence
• 1. Reduce overtime
• 2.put extra people on kaizens
• 3. In source some of the components
• 4. Cut the workweek
• 5. Develop new product line to grow business
PURCHASED GOODS & RAW MATERIAL

• Dependence on price as selection criteria

• Implementing JIT only caused massive inventory at supplier end
• Increased cost of holding inventory
• Suppliers suffered loss of margins
• They refuse to cut down large batches and sacrifice efficiency
• The production of these batches not in sync with dynamic requirement
TIMEFRAME

• Top management impatiency – quick ROI

• Sustenance of efforts and early results
• 3 to 5 years time
ORGANISATIONAL INERTIA

Difficult to move towards change

Bigger the organisation higher the inertia.
Belief that tough times are temporary
No backup &support system to keep improvemens going
Lack of monitoring
LEAN
STRATEGY &
ACCOUNTIN
G
MARKET SCENARIO - SOLE SUPPLIER

Customer

Customer customer

Supplier
SOLE CUSTOMER

Supplier
B
Supplier
Supplier A
C

Customer
 FREE MARKET

Supplier Customer

Supplier Customer

Customer
Supplier
Customer

Supplier Customer

Supplier Customer

Customer
Supplier
 BUSINESS DYNAMICS

Profits

Customer
orders

Customer
value Delivery Quality Service
price

expenses
 LEAN STRATEGY - EXTERNAL

• Reach customer quickly

• Lower cost
than
• Better Quality
competitor
• Flexibility
• New product launching quickly
LEAN STRATEGY - INTERNAL

• Reduce cost
• Reduce non value added cost
• Reduce space cost

• Improve productivity
• Improve ROI
• Increase turnover
 LEAN AS GROWTH STRATEGY

• Resources are freed

• Man
• Space Why
• Tool not
• Capacity
grow?
• Jobs need to be safeguarded
• New products are getting developed faster
 LEAN ACCOUNTING

Lean accounting is streamlining accounting

processes within a company to maximise
productivity, service, quality, and profit.
MIND SET CHANGE FOR ACCOUNTANT

• Method of accounting cannot be same as before

• Cost & Expenses are to be looked at from a different perspective
• Costs have to be allocated on products based on value stream mapping
• Inventory will be product based and not in total to identify efficiency
PRODUCT COSTING

• Usually it is done based on Direct material +Labour + OH and then indirect cost are
apportioned based on some measure say machine hrs.
• This is not the true cost.
• Since apportioning is only approximation some product may be overpriced & some
underpriced.
• Though this method is simple but it is not correct
• Value stream costing is better method based on cell manufacturing
EXAMPLE

• A company manufacturers 3 types of product A, B & C.

• They have different operations and may be using different machines.
• Some machines may be having more breakdowns or spares required may be high which is
accounted for in the Indirect OH.
• Since the products are manufactured in different quantities it may not be equal
apportionment
• Naturally the OH cost allocated will vary & may not be in true proportion of use.
INVENTORY - CONVENTIONAL ACCOUNTING

• Inventory is accounted not as an expense but as an asset

• This reduces the expense and increases the profit
• Even though the material in Hand is not converted yet it is still considered as an asset
• Usually banks that provide finance will go by this figure
• It is therefore a tendency by the publicly traded companies to hold inventory
 EXAMPLE

Mass production methods

Opening stock 576,000
Direct material purchase 924,000
Direct labour 958,000
Indirect Manufacturing cost 465,000
Subtotal 2,923,000
Less closing stock -576,000
Total cost of Production 2,347,000
Sales 2,500,000
Profit 153,000
Cash 153,000
LEAN MANAGEMENT EFFECTS

• Reduced Inventory
• Reduced procurement
 EXAMPLE
Mass production methods Lean Production method
Opening stock 576,000 576,000
Direct material purchase 924,000 637,000
Direct labour 958,000 958,000
Indirect Manufacturing cost 465,000 465,000
Subtotal 2,923,000 2,636,000
Less closing stock -576,000 -100,000
Total cost of Production 2,347,000 2,536,000
Sales 2,500,000 2,500,000
Profit 153,000 (36,000)
Cash 153,000 440,000
FURTHER EFFECTS

• Reduced labour ( cutting out NVA)

• Increased output – sales ( increased productivity, reduced downtime, reduced defects)
• Reduced indirect expenses ( reduced NVA, inventory handling costs, material handling
costs )
• These may vary as per product type but in conventional accounting will be considered
equally to all
• It will be difficult to know which products are in profit and which are not.
LEAN ACCOUNTING

• Accounting is about showing figures of what happened

• It is observation
• It fails to drive lean efforts traditionally
• Lean accounting has measures that can drive improvements
• It can show if the actions are in true direction & effective
SOME MEASURES

• Units per person

• Dock to dock days – lead time
• On time shipment
• FTR ( First time Right )
• Average Cost
• ITR = Inventory Turn Ratio = Material Consumption / Inventory x 12
• VAPCO – Value added per employee cost
VAPCO

• VAPCO = (Sales- cost of production) / labour cost

• This will measure how productive is labour utilised.
• Applicable mostly where manual operations, assembly operations are involved
• Use of multimachine operations, elimination of wasteful indirect activities will improve
VAPCO
ADVANTAGES OF LEAN ACCOUNTING

• Cost control
• Improved company culture
• Less ‘waste
• Financial management practices
• Drivers for improvement
DISADVANTAGE OF LEAN ACCOUNTING

• Difficult to switch from traditional accounting

• High cost of implementation
• Inventory problems
• Having to do 2 sets of financial reports
QUIZ

• Suppose you do exercise of waste reduction by eliminating a non value activity. Which of
these will improve?
• A. Inventory
• B. Lead time
• C.VAPCO
D. FTR
QUIZ

• In order to improve FTR which activity needs to be done

• A. Reduce lead time
• B. Increase uptime
• C. reduce rework
• D. Eliminate waiting
QUIZ

• A company has implemented JIT , which of the following measure will show the
effectiveness.
• A. Dock to Dock days
• B. ITR
• C. FTR
• D.VAPCO