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"Make Green, Go Green, by Going Lean”

Presented By Paul V. Burnett October 2007
RSM McGladrey, Inc. is a member firm of RSM International – an affiliation of separate and independent legal entities.

Paul V. Burnett, BSME, MBA
• • • • • • • IBM John Deere Ford Motor Company Detroit Diesel Corporation Applied Materials Sanmina-SCI RSM McGladrey
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How to Go Green? How to Go Lean? Why?

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Doing nothing is not an option!
Governor Arnold Schwarzenegger signed into law emission reduction targets for California: • By 2010, reduce GHG emissions to 2000 levels, • By 2020, reduce the GHG emissions to 1990 levels, • By 2050, reduce GHG emissions to 80 percent below 1990 levels

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Green and Lean
• • • • • 15-30% of a manufacturing company’s monthly energy bill creates greenhouse gases. The energy management within a facility - benchmark competitors. Lean methodologies can be used to reduce waste in the consumption of energy within a manufacturing facility. The ultimate goal - eliminate equipment not needed in the process. If elimination is not possible, minimize the use
– plot energy consumption to predict maintenance schedules and replacement cycles.

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Analysis of Electric Industry CO2 Impacts • The electric industry cannot provide substantial reductions in CO2 emissions in the near future to meet goals • Limited potential to switch to “greener energy” near-term • CO2 reduction must come from reducing demand – supported by new energy efficient technologies – conservation programs • A market-based collaborative systematic approach to demand reduction is a critical success factor (profit potential) 6 .

• DOE has established a minimum 10% energy reduction guideline as attainable through the application of proper maintenance and technology solutions. 7 .The Economic Case For Change • Asset performance management can reduce energy consumption by 6% to 11%.

S.A.G. Index = Availability * Performance * Quality * Energy Efficiency • Availability = All downtime / Scheduled time • Performance = Actual output for scheduled time / Design output for scheduled time • Quality = Total production minus defects or rework / Total production • Energy Efficiency = Design energy consumption/Actual energy consumption 8 .A. Index: Global Asset Sustainability Index G.S.

000 Watts 1HP = .Example: Motor Efficiency 90.000 Watts 100 HP 76.4%) 9 .746 kWatts 15.400 Watts (17.

607 per year.336 kWh/yr./year x (1-(.000 hrs. • Motor operating cost: – (100 HP x . x $.94)) = 87. the estimated savings would be $9.828/.94 efficiency = $69.11/KWh ) / .838 per yr.000 hrs. • At an average cost of 11 cents per kWh. 10 .746 kW/HP x 8.Motor Efficiency Savings • Energy Savings = 90kW x 8.

more energy efficient equipment versus the energy consumption reduction. • 11 . The cost energy today ranges from 10-13 cents per kilowatt-hour.Repair v. Buy • Break even analyses must be based on the increased cost of purchasing a new.

” .APICS Dictionary. 10th ed.Lean Definition • “A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. 12 .

APICS Lean SIG 13 . flexibility of response and methods and techniques to continually seize new opportunities as they arise.” .Lean Enterprise • “An enterprise with a focus on waste elimination and the customer’s needs in all parts of its operations. manufacturing and administration. Emphasis is given to lean structures and processes.

Early Lean Processes Mass Production • • • • • • Early 1900’s Ford Motor Company was a pioneer Assembly line production High volume production Limited number of products Significant cost reductions 14 .

companies have less than 250 employees • Global competition / low cost labor • Demands by customers: • • • • • Higher quality Innovation Mass customization Flexibility Lower Costs • Limited resources Source: U.S.S.Today • More than 96% of all U. Bureau of Census. 2004 15 .

What is Lean? • It is NOT: • Collection of techniques or a methodology • Reduced staffing or low inventories • It IS: • • • • • A philosophy of manufacturing Totally different way of thinking A different value system Seeks to eliminate waste (non-value added activities to the customer) Emphasis on flow manufacturing 16 .

What is Lean? Lean Production Total Quality Management (TQM) Six Sigma Cellular Manufacturing Business Process Improvement (BPI) Just in Time Theory of Constraints Zero Defects SPC TQC Kanban 17 .

Lean Characteristics • Focus is on the improvement of resource utilization: ― Equipment setup time reduced ― Scheduled machine maintenance ― Orderly. 18 . clean workplace ― Pull production being used ― JIT inventory control ― Factory layout in work cell arrangement by products ― Active error elimination ― Improved quality. etc.

The Importance of Waste Elimination • Lean deals with the elimination or reduction of many types of non-value-added activities. often referred to as waste ― The driving force for waste elimination is improved value in the products and services customers buy 19 .

Seven Popular Wastes • • • • • • • Overproduction Waiting Excessive transportation Inappropriate processing (the hidden factory) Unnecessary inventories Unnecessary motion Defects .Taiichi Ohno Toyota Production System 20 .

Excessive Transportation – – Widely spaced equipment waiting Forklifts not available when needed 21 . Overproduction – – Target and achievement unclear Processes not statistically capable 2. Waiting – – Operators waiting Operators slower than production line 3.The Nature of Wastes 1.

Inventory – – Large safety stocks Variable procurement lead times 22 .The Nature of Wastes (continued) 4. Inappropriate Processing – – Variability in operator’s performance Processes not statistically capable 5.

Motion – – – Double handling Non-standard layouts Equipment widely spaced from each other 7. Defects – – Low material yields Excessive process variability 23 .The Nature of Wastes (continued) 6.

Overproduction – – – Eliminate by reducing setup times. Make only what is needed now. 24 . Balancing uneven loads with flexible workers and equipment. Waiting – – Eliminate through synchronizing work flow. 2.Correcting Wastes 1. Synchronizing quantities and timing between processes.

Inappropriate Processing – – – Why should this item be made? Why is each process necessary? Are any processes being performed that are not part of the work flow? 25 .Correcting Wastes (continued) 3. 4. if possible. Excessive Transportation – Establish layouts and locations to make transport and handling unnecessary.

Reducing all the other wastes reduces the waste in stocks. Smoothing fluctuations in demand for the product. Motion – – – 26 . then mechanize or automate. Otherwise. Improving work skills. Economy improves productivity. there is a danger of automating waste.Correcting Wastes (continued) 5. Inventory – – – – Reduce by shortening setup times. Study motion for economy and consistency. and consistency improves quality. Improve the motions. 6.

At each process. Defects – – – – Develop the production process to prevent defects. Design processes to be failsafe (Poka yoke). 27 . Quality processes yields quality products – automatically.Correcting Wastes (continued) 7. produce no defects. Eliminate the need for inspection.

Can you think of other actions to eliminate waste in your company? 28 .

Leadership Function • Initiate needed change by identifying a vision • Aligning employees to that vision • Motivating to achieve that vision 29 .

Leadership – Lean Change Infrastructure Vision & Lean Strategy Value – No Waste – Flow – Pull – Standard Work – JIT – Champion CEO Plant Management/President Vice President Project & Training Plans ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ ___________________ Sponsors: Manufacturing Engineering Quality Lean Office Facilitator Facilitator Facilitator Team Team Team Team Team Team 30 .

Transparent Workplace 31 .

Transparent Workplace • • • • • • • • Define Processes Value-Added Activities A Value-Added Step Value versus Non-Value-Added Value-Stream Mapping Typical Process Flow Analysis Visual Order – The Five S’s Visual Control 32 .

Transparent Workplace – Processes Definition • A particular method of doing something which involves a number of steps. activities. or operations • Processes are found in manufacturing & service industries • Example: Manufacturing Office Grind Type Contract Turn Obtain Signature Mill Type Envelope Drill Mail 33 .

Process Map 2 Supplier Weekly Orders Total Time: 10 Days Value-Added Time: 6 minutes Production Control Weekly Orders Customer 1 Weekly Schedule Daily 4 Daily 3 Stamping I Weld I Assembly I Paint I Shipping Staging 1 Day 1 Day 1 Day 2 Days 2 Days 3 Days 50 sec 40 sec 90 sec 120 sec 60 sec 5 Process Time Line 34 .

Transparent Workplace – Value-Stream Mapping Process • Map customer requirements (orders) • Map order information flows • Map physical product/material flows • Map plant/office information flows • Add a process time line • Summarize current state  Ask questions at each step to determine waste or non-value-added areas 35 .

Transparent Workplace – Summarize Current State • The % of value-creating time • The number of units of inventory required to support a production unit • Total travel distance versus value-creating distance 36 .

Transparent Workplace – What Are Value-Added Activities? • Add value to products & services that customers are willing to pay for – Improvements that change a product’s or service’s form. fit or function • Other activities use resources but add no value – – – – Some non-value-added activities may be necessary Based on current knowledge or technology Long term goal .Eliminate Remaining non-value-added activities should be eliminated now! 37 .

Transparent Workplace – A Value-Added Step • A process that physically changes the work passing through it that makes it more valuable to the customer • A step requested by the customer .they are willing to pay for it 38 .

supplies Preparing drawings Assembling Shipping to customers Processing customer deposits Examining patients Filing insurance claims Dispensing event tickets Fueling airplane Non-Value-Added Activities • • • • • • • • • • • • • • Waiting/sorting Moving Kitting/staging Counting Inspecting Checking Recording Obtaining approvals Testing Reviewing Copying Filing Revising/reworking Tracking work . Breakthrough Process Redesign 39 . Adair & Bruce A.Transparent Workplace – Value versus Non-Value-Added Value-Added Activities • • • • • • • • • • Entering order Ordering materials. Murray.Charlene B.

Value Stream Costing Production Labor Production Materials Production Support Machines & equipment Value Stream All other Value Stream Costs 40 Operational Support Facilities & Maintenance .

Traditional Accounting and Lean Controls System/Issue Production Inventory Control Traditional Accounting • Work Order • Production tracking • Inventory Cycle Count Lean • Kanban • Visual signals • Five S Procurement • Purchase order approval • Three way match in AP • Detailed inspection • Rework or scrap • Standard cost • Variance Reports • Analysis of Variance • Key Suppliers • Master POs • Supplier Certification • Standardized work • Single-piece flow • Cell/VS CSFs and measures • Analysis of Root Cause Quality of Products Production Cost Control 41 .

.ISO 9000 • These costs are not allocated to the Value Stream • They are treated as sustaining costs of the business – Budgeted – Controlled • No need for full absorption costing • Value Stream costing proves relevant. accurate cost info about the Value Stream 42 .Costs Outside the Value Stream • Identify tasks not related to the Value Stream – Exp.

Transparent Workplace – Value-Stream Mapping (VSM) • Observe & record the flows of orders. goods and information for a product family – Product family: A group of product variants passing through similar processing steps that use common equipment • Mapping identifies waste situations for improvements 43 . materials.

What are some value-added & non-value-added activities at your company? 44 .

Transparent Workplace – Visual Order – The Five S’s • To eliminate waste. you must first find it • Visual order makes waste evident and is a good starting point for managing resources • Toyota Production .Five S’s as the method for exposing waste & poor utilization of resources 45 .

Transparent Workplace – Visual Order – The Five S’s Sort Set in order Shine Standardize Sustain 46 .

Transparent Workplace – Lockheed & Boeing’s Six S’s SORT SUSTAIN STRAIGHTEN 6S SHINE STANDARDIZE SAFETY 47 .

parts. easy to get & easy to return • Shine: Conduct cleanup to identify abnormalities • Standardize: Put a system in place to readily identify abnormal conditions • Safety: Identify & eliminate dangerous & hazardous conditions • Sustain: Make a habit of properly maintaining & following standard practices 48 .Transparent Workplace – The Six S’s • Sort: Classify tools. instructions into necessary & unnecessary • Set in Order: Make it visible & easy to use. 3 Es = easy to see.

Transparent Workplace – Visual Control • Awareness of what’s happening – Manpower: Skill levels. continuous training – Machines: Develop Maintenance schedules and use them – Materials: Demand Signals indicating shortages. performance. shadow boards for location of tools – Methods: Standard Worksheets and Operating Procedures – Measurements: Performance trends – Display schedule – Quality targets – Reductions in setup & lead times 49 .

Pull versus Push Production Strategy Lean Principles Value Value Stream Flow Pull Perfection 50 .

Pull • No one upstream should produce any good or service until the customer downstream asks for it • Kanban Lean Principles Value Value Stream Flow Pull Perfection 51 .

Push • • • • • Build product to forecast Excess inventory Poor utilization & distribution of product Filled distribution channels 50% of all books manufactured are shredded Lean Principles Value Value Stream Flow Pull Perfection 52 .

not just inside your production facility Lean Principles Value Value Stream Flow Pull Perfection 53 .Pull • • • • Design Schedule based on actual demand signals Produce exactly what the customer wants Flow takes place throughout the supply chain.

Pull • Benefits • High throughput • Excellent protection against stock-outs • Higher flexibility • Less congestion • Shorter lead times • Higher customer service Lean Principles Value Value Stream Flow Pull Perfection 54 .

Perfection • Begins with visualizing the “perfect” process • Continuous process to remove waste by eliminating effort. space and defects Lean Principles Value Value Stream Flow Pull Perfection 55 . time.

A. Select an small area with high visibility and a manageable number of variables for the first G.S. The journey is never-ending and definitely not easy (especially at first) but the results are well worth the effort.Final Thoughts – Lean and Green • • • • There is a social responsibility component to saving energy and reducing the amount of CO2 emissions. 56 . Green as a marketing tool. Assessment and Lean project.

QUESTIONS? 57 .

5298 58 . Senior Consultant . BSME. Burnett. Inc. Suite 300 Cedar Rapids.Operations and Financial 221 3rd Ave SE.Paul V. MBA RSM McGladrey. IA 52401 319.298.