Building Lean Systems
Nothing focuses the mind better than the
constant sight of a competitor who wants
to wipe you off the map.
Wayne Calloway
Craft Production
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In 1955, Japanese had produced 0.1/9 million cars. 25 years
later, they produced just over 11/39 M units. Slipping to second
since taking the lead from France in 1904, US produced 8M.
Japan's rise was fueled by lean-thinking. It is widely accepted
that these principles originated in Japan. What is not widely
known is that a number of these principles were created in US .
Two French manufacturers built the first car in 1890. They saw
no future in this business  granted the right to Armand
Peugeot. Peugeot made five cars in 1891 and 29 in 1892. By
1905, hundreds of enterprises in Europe and the U.S. were
producing cars in small volumes using craft production
techniques  no two cars were alike.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
2
Mass Production; Cost Dimention
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The title of the first mass producer belonged to Ransom E. Olds.
Ford introduced the concepts of flow and throughput velocity.
The moving assembly line reduced assembly time from 12
worker-hours to about 1.5  1,000 cars a day in 1914.
Ford's goal  reduce waste in any form-not just within the
factory walls. The flow time was about 81 hours from the mine to
the finished car. Price dropped from $1,000 to $260.
This happened despite the fact that existing supply chains
consisted of independent and inflexible enterprises.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
3
Product Differentiation; Variety Dimension
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Not all Henry Ford’s contributions were beneficial.
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Managerial style: excessive attention to details  disregarding
important decisions that cost the enterprise thousands of dollars.
Strategy: equated throughput velocity with product uniformity; a
standard model with a single color.
This managerial style, combined with his strategy, Ford lost
market share to GM between the 1920s and WWII.
Under the leadership of Alfred P. Sloan, GM was taking
advantage of a perceived shift in the buying patterns of the
American consumer  introducing a new model every year.
Ford’s market share; 1921 (55%)  1927 (15%).
Besides Ford's many contributions to mass production, he was
also the inspiration for many of the concepts and tools used in
the Toyota Production System (TPS). However, it was Sloan who
ultimately took mass production techniques to new heights.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
4
Glory Days; Pouring Money into infrastructure
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Sloan succeeded where Ford did not by devising an organization
suitable for a mass production system, putting in place a
management system for controlling the multiple-enterprise
conglomerate that GM had become. By the time Sloan retired in
1946, GM was the biggest enterprise in the world.
It is little wonder that when Fortune chose the "businessman of
the century" in its 1999 issue, Sloan made it to the final four.
The winner, however, was Henry Ford.
The three decades after World War II were the glory days of the
American automobile industry. The economy in Europe was just
beginning its long recovery; foreign competition was minimal.
The economy was flourishing as the U.S. Government poured
money into rebuilding infrastructure. Mass production and
vertical integration were key factors for dominance of the "Big
Three" automakers, as well as U.S. manufacturing in general.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
5
The High Cost of Complacency
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The U.S. industry flourished well into the 1960s. Demand >>
Supply in the absence of foreign competition. A golden era, but
a problematic period in a number of ways.
The three automakers had become a cartel led by GM. Cartels,
like their more integrated cousins, monopolies, tend to become
ineffective/inefficient because they can afford to be.
Innovation took back seat after the War. The Oldsmobile
transmission, introduced in the 40s, was the last major U.S
innovation. There was little to distinguish 60s cars from 50s.
Mass production as conceived by Henry Ford  deliver products
quickly to the customer. It was morphed into a batch production
system  economies of scale. Large batches  large WIP and
finished goods inventories.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
6
Mass Production  Batch Production
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With plenty of WIP to buffer any production delays, defects found
on the shop floor did not generate a sense of urgency to fix the
problem so it did not occur again. Worse, quality problems often
escaped unnoticed until after the product was sold.
The U.S. auto industry was badly in need of a shake-up. It got it
in the 1970s when the oil crisis hit. Gas guzzlers suddenly lost
their appeal and soon the world's largest market was clamoring
for smaller, fuel-efficient cars. This opened the door for imports
from Japan
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
7
Toyota Production System (TPS)
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In 60s, Japanese were building compact cars with fuel economy.
Low cost by adopting the JIT production management philosophy
and system. JIT owes its conception and evolution to two
individuals, Toyoda and Ohno.
Inspired by Henry Ford's book, Today and Tomorrow, Kiichiro
Toyoda had formulated as early as 1936 a clear mental picture of
the production system he wanted. To produce only what was
needed on a given day to initiate a production run only when it
was needed, rather than in anticipation of a demand.
Slips were passed around indicating the number of parts to be
made or processed that day. This was the origin of the kan-ban.
Toyoda began convincing suppliers to cooperate with his JIT
system. He also changed the traditional layout of the plant so
that machine tools were organized in a flow line.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
8
Pull System
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In 1950, Kiichiro Toyoda's cousin, Eiji Toyoda, toured Ford Co.
An important process he learned about during the trip was the
Ford suggestion system. This concept became one of the major
building blocks of continuous improvement (kaizen).
He sought the help of Ohno to produce cars in small batches
more efficiently than the big U.S. enterprises were able to.
Ohno has credited Ford’s contributions to TPS for a number of
elements in the TPS- flow, waste elimination, kaizen and pull
production.
Ohno’s important U.S. discovery was the supermarket. Japan
did not have many self-service stores yet. Ohno set up a pull
system where each process is a supermarket for the succeeding
process. Each production line arrayed its diverse output for the
following line to choose from. Each process would produce to
replenish only the items that the downstream process had used.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
9
Set-up Time Reduction
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Like Ford, Ohno emphasized waste reduction. Waste is so
prevalent that we learn to live around it. He modified Ford's
ideas to reflect modern market demands. Ford had offered his
customers cars in only one color to reduce changeover times.
This apparent inflexibility had become a corporate millstone for
U.S. Industry.
The Japanese refused to accept changeover times as a
constraint. They focused relentlessly on reducing changeover
times. They were enabled to provide variety without large lots.
The TPS is the antithesis of large-lot production, not mass
production (moving flow).
Japanese autos were now highly competitive against the U.S.
and other foreign cars, both in quality and cost.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
10
Lessons Learned
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In their enthusiasm to catch up with the Japanese in the 80s, the
US automakers attempted to implement JIT too quickly and in a
piecemeal fashion. (1) drastically reduced their inventory of
parts, (2) asked suppliers to deliver just when needed.
Their own internal processes were not reliable. They were unable
to give suppliers clear visibility on their production schedules.
Left in the dark about when the next delivery request would
come, suppliers built up finished goods inventory so as to better
respond to requests from the automakers for JIT supplies.
The suppliers ended up building the wrong products.
JIT philosophy states that components should not be produced
before they were needed but they should be made Just In Time.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
11
Lessons Learned
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Every step in the supply chain had to work in harmony to
produce when a product is needed, not a single moment before.
This philosophy never intended to have the supplier maintain a
stock of finished goods to supply material just in time.
At the same time, relationships with the suppliers were
adversarial. No long-term contracts and components were
generally sourced from multiple vendors mainly based on price.
Simply adopting tools and techniques piecemeal does not lead to
a lasting competitive edge. Without a complete understanding of
the core concepts and principles of lean thinking, there is
considerable potential for doing more harm than good.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
12
Lessons Learned
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For instance, lean emphasizes eliminating waste - any activity
that absorbs resources but creates no value. If the enterprise
has not fully understood the core concepts of lean, wasteremoval activities could lead it down the wrong path.
We may think when non-value-adding activities are eliminated,
the enterprise will become more efficient through workforce
reduction. Nothing could be further from the truth. When lean is
viewed as a cost-cutting initiative or an opportunity to reduce
the workforce, employees will naturally resist it, leading to
eventual migration back to the old way of doing things.
On the other hand, if it is made clear that freed-up resources
would be productively deployed elsewhere, implementation
efforts would have a much better chance of success. Freeing up
resources for productive deployment elsewhere is at the very
core of lean thinking.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
13
The goal of lean thinking
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Eliminate muda (waste)
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Eliminate any activity that creates no value
A way to do more & more with less & less
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Less effort, less equipment, less time, and
less space;
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While coming closer and closer to providing
customers exactly what they want
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
14
The Muda in Batch & Queue Operations
Move
Queue
Lean Thinking: 1- Introduction
Set up
Value
Added
Work
Ardavan Asef-Vaziri
Move
Jul-09
15
SEVEN deadly sources of Muda
Overproduction
 Inventories
 Transportation
 Delays
 Defective products
 Processing
 Motion
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Lean is a growth strategy  uncovering additional capacity 
deployed for further growth  the money that enterprises do not
have to spend now.
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
16
The Muda in Volpens, Ltd.
 Production
Scheduling
 Stores Parts Picking
 Material Handling
 Label Press Changeovers
 Quality Control
 Stores Management
 Materials Management
 MRP Production Order Generation
Lean Thinking: 1- Introduction
Ardavan Asef-Vaziri
Jul-09
17