Lean Management
Class 52/16/11
12-2
LEARNING OBJECTIVES
After completing the chapter you will:
 Understand the concepts of the Toyota
Production System and lean management
 Learn how a production pull system works
 Understand how to eliminate waste in
processes
 Understand the “rules” of lean management
 Understand how to accomplish lean production
 See examples of lean concepts applied to
manufacturing and service systems
12-3
LEAN PRODUCTION
 Lean
Production can be defined as an
integrated set of activities designed
to achieve high-volume production
using minimal inventories (raw
materials, work in process, and
finished goods)
 Lean Production also involves the
elimination of waste in production
effort
 Lean Production also involves the
timing of production resources (i.e.,
parts arrive at the next workstation
“just in time”)
LEAN THINKING
 Womack
and Jones (1996) defined the
principles of lean thinking:

Define value precisely from the perspective of
the end customer in terms of a specific product
with specific capabilities offered at a specific
price and time
Differentiate value from muda, or waste
 Can be difficult due to the many steps across
departments and companies


Identify the entire value stream for each
product or product family and eliminate waste

Apply to three critical activities: product definition,
information management, and physical transformation
LEAN THINKING

Make the remaining value-creating
steps flow
No waiting, downtime, or scrap within or
between steps
 Suggest application of kaikuku, or radical
improvement, as opposed to kaizen, or
continuous improvement


Design and provide what the customer
wants only when the customer wants it

Let the customer pull the product from the
value stream
LEAN THINKING
 Pursue
perfection
There is no end to the process of
reducing effort
 The four initial steps interact with one
another in a virtuous circle

More precisely defined value challenges
steps in value stream to reduce waste
 getting value to flow faster exposes muda
 harder customers pull, the more
impediments to flow revealed

LEAN THINKING: LANTECH
Developed a device that would stretch-wrap
pallets with plastic film
 Built its four types of machines in batches, called
a batch and queue system


Also used this system for processing orders and
developing new products
Great complexity with its processes, long time to
complete processes, and much of the process time
was queue time
 Moved to total quality management after it lost a
patent infringement suit


Empowered workers but didn’t address processes
LEAN THINKING: LANTECH

New VP of Operations hired an established a
dedicated process flow for each of the four
product families






Equipment grouped together in four cells
No batches – one unit at a time: continuous flow
All jobs directly linked – no buffers of inventory
Set takt time: available time in a period / customer
orders in that period
Changeovers done quickly to accommodate product
options
Applied same techniques to office and product
development
FEATURES OF LEAN PRODUCTION
WHAT IT IS
WHAT IT DOES
• Management philosophy
• “Pull” system though the plant
• Attacks waste
WHAT IT REQUIRES
• Employee participation
•
•
•
•
Industrial engineering/basics
Continuing improvement
Total quality control
Small lot sizes
• Exposes problems and bottlenecks
• Achieves streamlined production
WHAT IT ASSUMES
• Stable environment
Here the customer starts
the process, pulling an
inventory item from
Final Assembly…
Then subassembly work is
pulled forward by
that demand…
Customers
PULL SYSTEM
Fab
Vendor
Fab
Vendor
Fab
Vendor
Fab
Vendor
Sub
Final
Assembly
The process continues
throughout the entire
production process and
supply chain
Sub
12-11
THE TOYOTA PRODUCTION SYSTEM

Based on two philosophies:

1. Elimination of waste

2. Respect for people
12-12
ELIMINATION OF WASTE
1.
Focused factory networks
2.
Group technology
3.
Quality at the source
4.
JIT production
5.
Uniform plant loading
6.
Kanban production control
system
7.
Minimized setup times
12-13
These are small specialized
plants that limit the range
of products produced
(sometimes only one type of
product for an entire
facility)
MINIMIZING WASTE:
FOCUSED FACTORY
NETWORKS
Coordination
System Integration
Some plants in
Japan have as
few as 30 and as
many as 1000
employees
12-14
MINIMIZING WASTE: GROUP TECHNOLOGY (PART 1)
Note how the flow lines are going back and forth

Using Departmental Specialization for plant layout can
cause a lot of unnecessary material movement
Saw
Saw
Saw
Grinder
Grinder
Heat Treat
Lathe
Lathe
Lathe
Press
Press
Press
12-15
MINIMIZING WASTE:
GROUP TECHNOLOGY (PART 2)

Revising by using Group Technology Cells can reduce
movement and improve product flow
Grinder
Saw
1
2
Lathe
Lathe
Press
Lathe
Press
Heat Treat
Grinder
Saw
Lathe
A
B
12-16
MINIMIZING WASTE:
UNIFORM PLANT LOADING (HEIJUNKA)
Suppose we operate a production plant that produces a single
product. The schedule of production for this product could be
accomplished using either of the two plant loading schedules
below.
Not uniform
Jan. Units
Feb. Units
Mar. Units
Total
1,200
3,500
4,300
9,000
or
Uniform
Jan. Units
Feb. Units
Mar. Units
Total
3,000
3,000
3,000
9,000
How does the uniform loading help save labor costs?
12-17
MINIMIZING WASTE: INVENTORY
HIDES PROBLEMS
Machine
downtime
Scrap
Work in
process
queues
(banks)
Paperwork
backlog
Vendor
delinquencies Change
orders
Engineering design
redundancies
Inspection
backlogs
Example: By
identifying defective
items from a vendor
early in the
production process
the downstream work
is saved
Design
backlogs
Decision
backlogs
Example: By
identifying defective
work by employees
upstream, the
downstream work is
saved
12-18
MINIMIZING WASTE: KANBAN PRODUCTION CONTROL SYSTEMS
Once the Production kanban is
received, the Machine Center
produces a unit to replace the
one taken by the Assembly Line
people in the first place
Machine
Center
Withdrawal
kanban
Storage
Part A
Production kanban
The process begins by the Assembly Line
people pulling Part A from Storage
Storage
Part A
This puts the
system back
were it was
before the item
was pulled
Assembly
Line
Material Flow
Card (signal) Flow
12-19
RESPECT FOR PEOPLE
 Level
payrolls
 Cooperative
employee unions
 Subcontractor
networks
 Bottom-round
management
style
 Quality
circles (Small Group
Involvement Activities or
SGIA’s)
12-20
TOYOTA PRODUCTION SYSTEM’S FOUR RULES: SPEAR AND BOVER (1999)
1.
All work shall be highly specified as to content,
sequence, timing, and outcome
2.
Every customer-supplier connection must be
direct, and there must be an unambiguous yesor-no way to send requests and receive
responses
3.
The pathway for every product and service
must be simple and direct
4.
Any improvement must be made in accordance
with the scientific method, under the guidance
of a teacher, at the lowest possible level in the
organization
RULE 1: HOW PEOPLE WORK
Focus on the details
 1st unstated rule: every activity must be specified
for success


May seem obvious, but the majority of managers
outside Toyota do not take this approach)
RULE 1: CAR SEAT EXAMPLE
“ When a car’s seat is installed, the bolts are
always tightened in the same order, the time it
takes to turn each bolt is specified, and so is the
torque to which the bolt should be tightened.
Such exactness is applied not only to the
repetitive motions of production workers but also
to the activities of all people regardless of
functional role.”
RULE 1: TOYOTA’S METHOD
Seven-step process with specific steps and
lengths of time
 There is a well developed sequence of events for
each particular job
 When employees deviate from these details it is
obvious

RULE 1: TOYOTA’S HYPOTHESES

Performing the activity tests two hypotheses:
1) The person doing the activity is capable of
performing it correctly
2) Performing the activity creates the expected outcome
Example:
“If they can’t insert the seat in the specified way within
the specified amount of time, then they are clearly
refuting at least one of the hypotheses, indicating
that the activity needs to be redesigned or the worker
must be trained again.”
RULE 2: HOW PEOPLE CONNECT

Every connection must be standardized & direct,
specifying:
people involved
 form & quantity of goods and services
 way requests are made by each customer
 expected time that requests will be met

Rule creates supplier-customer relationship
 Result: “…no gray zones in deciding who provides
what to whom and when.”

RULE 2: APPLICATION
Toyota uses kanban cards to set up direct links
between suppliers and customers
 Other companies use supervisors to answer calls
for help; no specific person assigned


“…when something is everyone’s problem it becomes
no one’s problem.”
Toyota’s workers expected to ask for help
 Testing hypothesis keeps system flexible,
allowing for constructive adjustment

RULE 3: HOW THE PRODUCTION LINE IS
CONSTRUCTED

All products and services flow along a simple
specified path
no forks or loops to convolute the flow; all direct to
specific persons or machines
 change only when production line is expressly
redesigned

Toyota production lines accommodate many types
of products
 All of the rules allow Toyota to conduct
experiments and remain flexible and responsive

RULE 4: HOW TO IMPROVE

What can be improved:
Production activities
 Connections between workers or machines
 Manufacturing pathways


Improvements must be made:
Using the scientific method
 Under the guidance of a teacher
 At the lowest possible organizational level

RULE 4: HOW TO IMPROVE

How do you use the scientific method?
Frame problems using first three rules
 Formulate and test hypotheses
 Question assumptions
 Don’t confuse goals with predictions based on
hypotheses

e.g. Reducing changeover time by two-thirds
RULE 4: HOW TO IMPROVE

Who does the improvement?
Frontline workers, with assistance from supervisors
 Problem scale determines how many organizational levels
are included in the solution


Toyota’s commitment to learning
Operations Management Consulting Division (OMCD)
 Toyota Supplier Support Center (TSSC)

NOTION OF THE IDEAL

People motivated by a common goal
Sense of what the ideal production system would be
 Make improvements beyond what is “necessary”

Very pervasive
 Essential to the Toyota Production System

NOTION OF THE IDEAL

Concrete Definition:

The output of an ideal person, group of people, or
machine:
Is defect free;
 Can be delivered one request at a time;
 Can be supplied on demand in the version requested;
 Can be delivered immediately;
 Can be produced without waste;
 Can be produced in a safe work environment.

ORGANIZATIONAL IMPACT OF THE RULES

The rules create an organization with a nested
modular structure by:
Making people capable and responsible for their own
work
 Standardizing connections between individual
customers and suppliers
 Pushing the resolution of connection and flow
problems to the lowest possible level

ORGANIZATIONAL IMPACT OF THE RULES

Benefit: People can implement design changes in
one part without unduly affecting other parts

Toyota can delegate a lot of responsibility without
creating chaos
COUNTERMEASURES

Kanbans or andon
cords
Temporary responses
to specific problems
 Serve until a better
approach is found or
conditions change
 NOT solutions


Building up inventory
of materials
Ideal system would
have no need for
inventory
 Required in certain
circumstances:

Unpredictable
downtime or yields
 Time consuming setups
 Volatility in the mix
and volume of
consumer demands

12-36
LEAN IMPLEMENTATION REQUIREMENTS: DESIGN FLOW PROCESS
 Link
operations
 Balance
workstation capacities
 Redesign
layout for flow
 Emphasize
preventive maintenance
 Reduce
lot sizes
 Reduce
setup/changeover time
12-37
LEAN IMPLEMENTATION REQUIREMENTS: TOTAL QUALITY CONTROL

Worker responsibility

Measure SQC

Enforce compliance

Fail-safe methods

Automatic inspection
12-38
LEAN IMPLEMENTATION REQUIREMENTS: STABILIZE SCHEDULE

Level schedule

Underutilize capacity

Establish freeze windows
12-39
LEAN IMPLEMENTATION REQUIREMENTS: WORK WITH VENDORS

Reduce lead times

Frequent deliveries

Project usage requirements

Quality expectations
12-40
LEAN IMPLEMENTATION REQUIREMENTS: REDUCE INVENTORY MORE
 Look
for other areas
 Stores
 Transit
 Carousels
 Conveyors
12-41
LEAN IMPLEMENTATION REQUIREMENTS: IMPROVE PRODUCT
DESIGN
 Standard
product configuration
 Standardize
and reduce number
of parts
 Process
design with product
design
 Quality
expectations
12-42
LEAN IMPLEMENTATION REQUIREMENTS: CONCURRENTLY SOLVE
PROBLEMS

Root cause

Solve permanently

Team approach

Line and specialist responsibility

Continual education
12-43
LEAN IMPLEMENTATION REQUIREMENTS: MEASURE PERFORMANCE
Emphasize
Track
improvement
trends
12-44
LEAN IN SERVICES (EXAMPLES)
 Organize
Problem-Solving Groups
 Upgrade
Housekeeping
 Upgrade
Quality
 Clarify
 Revise
Process Flows
Equipment and Process
Technologies
LEAN SERVICES: JEFFERSON PILOT
FINANCIAL

Jefferson Pilot Financial is an insurance
company searching for new ways to grow
Had rising customer expectations
 New products with increased complexity

Had to deal with specialized companies with
lower prices
 Needed a way to improve service and reduce
costs

STEPS TOWARD IMPROVEMENT
Wanted key differentiator to be superior service
 Needed to analyze operations of business units
 With analysis, JPF realized they could increase
revenue through improved operations
 Looked to Japanese practices of “lean production”

LEAN PRODUCTION
JPF could benefit because its operations were
similar to that of a car company
 In 2000, appointed “lean team”
 Initiative has delivered impressive results

Halved time of receipt to application of policy
 Reduced labor cost by 26%
 Reduced rate of errors on policies by 40%


Resulted in 60% increase in new premiums
BUILDING THE MODEL CELL
Company can introduce a lean system without
significantly disrupting operations
 “Model cell” rollout
- company sets up microcosm of its entire process
-Allows managers to conduct experiments and
smooth out kinks while working towards optimal
design

BUILDING THE MODEL CELL
Jefferson Pilot Financial chose section of new
business unit devoted to processing policies
 Unit had 10 employees and handled policies that
did or did not require physician statements
 Lean production built around continuous-flow
processing


Traditional methods have large batches processed at
each step and passed along only after an entire batch
has been processed
If not caught quickly, errors can occur on large scale

Applied seven design practices of Lean
manufacturing to redesign Cell’s Workflow
REDESIGNING THE CELL’S WORK FLOW
1.



Placing Linked Processes near One Another
All steps in a process should be located close to
one another
JPF- Work groups located by function
ex: Employees who receive applications and
employees who sort them on different floors
After teams were placed next to each other
process was done faster and employees were
more aware of being part of a whole
REDESIGNING THE CELL’S WORK FLOW
Standardizing Procedures
 JPF employees had freedom in managing work,
which made it difficult for other workers to fill in
ex: Different systems for storing files
 Lean Team insists files be store alphabetically
and in same drawer at each workstation;
standardized data entry
 Made it much easier for others to help when
workloads were high or workers were absent
REDESIGNING THE CELL’S WORK FLOW
3. Eliminating Loop-Backs
 Loop-Back is when work returns to a previous
step for further processing which typically
creates delays
 Lean Team noticed all sections of each policy
form were sent back to employee who received
initial application
 JPF split receiving team in half
-employees to assemble policies
-employees to receive applications
 Reduced confusion and reduced delays and waste
REDESIGNING THE CELL’S WORK FLOW

4. Setting a Common Tempo
 Applies
the concept of “Takt” (German for
musical meter)
 A baseline was calculated by timing new
employees and challenging employees to
speed the process
 Then appropriate number of employees
assigned to each task
REDESIGNING THE CELL’S WORK FLOW
5. Balancing Loads
 Instead of sorting applications by numerical or
alphabetical order, the work is spread loaded
among different teams
 This keeps an even tempo and leaves no team in
the process idling while another team is working

REDESIGNING THE CELL’S WORK FLOW
6. Segregating Complexity
 While balancing loads of work is important to
keep a smooth flow, it is also important to
separate complicated work
 Some applications are more complex because
they require a physicians statement
 Once the tasks requiring a physician’s statement
were separated into two different teams, the time
to process applications dropped 80%

REDESIGNING THE CELL’S WORK FLOW
7. Posting Performance Results
 Hourly performance is posted and therefore
subject to review


enables the team to review performance and see
where the team is excelling and where it is lagging
Employees at first feared that if they were a
laggard they would be criticized as such.
 However, the postings encouraged teams to strive
to improve, and also served as a way to
benchmark positive performance and reward it

SETTING PERFORMANCE GOALS
Always measure performance & productivity
from customer’s perspective
 JPF changed processing time metric



Previously measured time application was received to
when it was bound, and now measure time between
when customer sends application to when they
receive policy
Shop-floor goals should be connected to CEO’s
performance metrics

Cell productivity ties to the ratio of total acquisition
expenses to value of new paid premiums
SETTING PERFORMANCE GOALS

Look at suppliers through lean-production lens


Established new vendor-selection criteria
Matched metrics with lean-production
requirements

Measured process and put results on white-boards for
all to see
ROLLING OUT THE NEW SYSTEM
Six-month rollout of lean production to rest of
New Business Operations
 Divided operations between status of customers
and complexity of tasks
 Identified other operations that could benefit
from new system
 Helped increase productivity and make more
cost-effective capital investments

CONVINCING SKEPTICS

To ensure effectiveness, needed to communicate
“why” and “how”
Everyone needed to understand why the process was
necessary
 Used plane exercise as example


Skeptics of initiative were convinced through
exponential performance improvements

Staff could perform more cross-functional work and
benefit from having their work visibly represented