Session 1

Introduction

• Product / service – Output of a process comprising many steps

• Product or a service is determined by types of processes used to manufacture or create it
• More the process is simplified, less time and cost it takes to produce the product or
service
• If to manufacture a product a lengthy process with too much waiting time is adopted,
then it increases the cost of the product and will not be ready available
• More waiting time would mean more inventories and blocking of capital
• It becomes difficult for firms to manage the cash flow
What do customers want?

• Today, customers have more choices and there is more availability

• Pressure on firms to reduce the prices
• Customers generally have the following three requirements:
o On time delivery
o Good quality

o Low price
What is value?

• A firm buys raw material and converts it into a product through the series of processes
• Value of the raw material gets additional value at every stage of conversion, and finally
becomes the product value
• Customer has an important role in the fixing the value of product / service
• If customer is not willing to buy a particular product, it means it has no value
• Value of a product / service is what the customer is willing to pay for it
 Set up time Operation time Distance travelled Job waits for
Receive material 0 0 600
Inspect castings 0 60 20 Inspection
Drill two location holes 30 2 100 Loading on machine
Inspect two drilled holes - 15 20 Inspection
Send not ok castings for rework - 10 20 Rework
Drill and ream four holes 30 4 20 Loading on machine
Inspect four holes - 20 20 Inspection
Send not ok castings for rework - 10 20 Rework
Bore bearing hole 30 2 20 Loading on the machine
Final inspection - 15 20 Parts not ok are scrapped

Dispatch ok castings to assembly - - 500 Fork lift

• Inspection – 4 times

• Waiting for all stages

• Transportation of castings
• Any sort of rework
• Scrap
What is waste?

• Any process or any product for which the customer is not willing to pay is considered
as waste
• Waste – Anything which consumes resources and does not add value to the customer
• Value added and non-value added steps
• Non-value added increase the cost of the product
• Elimination of such steps reduce the cost of the product
Types of wastes
• High inventory
• Scrap
• Poor yield
• Downtime
• Long time yield
• Excess labor
• Overtime
• Delay
• Waiting for inspection
Seven types of waste

1. Mistakes that require rectification (rework or scrap)

2. Production of inventory that no one wants
3. Processing steps that are not needed
4. Unnecessary transport of material and sub-assemblies
5. Unnecessary movement of employees involved in the production process
6. People waiting in the downstream processes for completion of upstream work
7. Producing good or services which do not meet the needs of customers
1. Mistakes that require rectification (rework or scrap)

• Any activity which requires additional time / material incurs additional cost
• Use of additional resources – Directly affects the output
• Overtime of workers
• Rework consumes resources
• A company is not paid for all the above
2. Production of inventory that no one wants

• Manufacturing and storing products in anticipation of orders

• Products are overproduced to utilize capacity when there is no clear forecast
• Excess inventory – Losses, obsolescence and storage costs
• Bullwhip effect takes place – Safety stock over safety stock
• Produce what the customer wants in the shortest period of time
3. Processing steps that are not needed

• Many steps do not add any value to the customer

• In purchasing, there are too many signatories of routine nature and do not add any value
to any decision making
• Mandatory approvals in manufacturing process
4. Unnecessary transport of material and sub-assemblies

• Raw materials, tools, testing facilities, etc. are kept at places far from each other
• Employees keep moving from one place to another to get necessary tools / equipment /
materials
• Facilities are not well planned
• Material kept at higher locations for which special equipment are required
• Special equipment not available in-house
5. Unnecessary movement of employees involved in the production process

• Unnecessary movement of employees to get materials, tools and spares

• Searching, reaching for and stacking assemblies, etc.
• Essential facilities – Drinking water, etc. should be located as close to the employees as
possible
• Reduction of such movement can minimize the cycle time
6. People waiting in the downstream processes for completion of upstream work

• Waiting is one of the biggest waste

• Waiting for materials, instructions, machine availability, tools, inspection, next
processing step, etc.
• Cumbersome purchasing procedures
• In manufacturing, when a product is waiting for next operation, there is build-up of
work in progress which increases inventory
7. Producing good or services which do not meet the needs of customers

• Products which fail to meet specifications result in rework / scrap

• Re-inspection after rework
• Knowledge of customer requirement is necessary
Why go for lean?

• High cost of quality

• Delayed supply
• High cost of manufacturing
• Higher inventories
• Order lost to a competitor on basis of price
• High number of customer complaints
• Competitor introducing new products faster
What is lean?

• Lean implies identification and elimination of waste in all the processes involved.
• Lean can be applied to every processes
• Lean also refers to increasing the speed by reducing the process time.
• If manufacturers can eliminate non value added activities, process time can be reduced
and make the whole process faster.
• Lean manufacturing also results in reduction of costs and fast movement of material.
• Lean manufacturing is a business philosophy that continuously improves all the
processes; irrespective of the product being manufactured
Five elements of lean manufacturing

• Customer value

• Value stream
• Value flow
• Customer pull
• Perfection by continuous improvement
Customer value

• Value – It is what the customer is willing to pay for

• Target cost should be worked out before commencing product development
• Process needs to be studied and visible waste should be eliminated
• Best price is not always the lowest price but a combination of quantity, quality and
delivery
• It should be ensured that all the activities do add value
• Cross functional team – Should ensure what the customer wants and what he is looking
in the product
Value Stream

• Stream – Water flowing smoothly in a given path which has a start and an end point
• For a product, the process required should flow smoothly from start to finish
• Value stream – Includes all the activities or steps (Value added and non-value added)
required to bring a product or service to the customer from beginning to the end
• Value Stream (Manufacturing) – Production of product from order taking to delivery to the
customer and collecting money for the same.
Each process should be categorized as follows:
1. Activities adding value to the customer

2. Activities necessary for completing the product

3. Activities not adding value to the customer
Value flow

• Each process activity in the production should be completed close to the rate demand
by the customer
• Value flow – Product produced using the value stream based on the customer
requirement
• The flow should be smooth without any hindrance
• Management should ensure there are no bottlenecks in the process
• Value flow – Should consider inventory. Overflow will cause heavy inventory of
finished goods while low flow will face criticism from customer
• Involved of all personnel is important to achieve the value flow
Obstacles in flow
• Plant layout
• Quality of materials (raw-material)
• Product quality
• Product design
• Tooling
• Downtime
• Maintenance
• Inventory management
• Overtime and low productivity
• Communication
Customer Pull

• In push, the product is manufactured without knowing the specific customer need
• Product is sold to customer by reaching him and requesting him
• Pull – Producing goods / service based on the requirement of the customer
Perfection by continuous improvement

• Necessary to sustain the processes, procedures, standards, efficiency

• It needs to be ensured that organization does not deviate what it has achieved
• Concerned personnel should be involved to make sure that systems are well organized
Lean Thinking

• Customer-focused: Customer needs and expectations “pull” enterprise activities

• Knowledge-driven: Draws upon knowledge and innovation from everyone - workers,
suppliers
• Eliminating waste: All types of waste
• Creating value: Puts premium on “PULL”, not just reducing costs, to benefit all
stakeholders
• Dynamic and continuous: Pursues on-going systemic as well as incremental
improvement - both innovation and continual improvement