See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/260084439 Improving high variable-low volume operations: An exploration into the lean product development ARTICLE in INTERNATIONAL JOURNAL OF TECHNOLOGY MANAGEMENT · JANUARY 2012 Impact Factor: 0.63 · DOI: 10.1504/IJTM.2012.043951 CITATIONS READS 6 63 3 AUTHORS, INCLUDING: Hassan Qudrat-Ullah Baekseo Seong York University Konkuk University 36 PUBLICATIONS 199 CITATIONS 2 PUBLICATIONS 47 CITATIONS SEE PROFILE All in-text references underlined in blue are linked to publications on ResearchGate, letting you access and read them immediately. SEE PROFILE Available from: Hassan Qudrat-Ullah Retrieved on: 09 April 2016 Int. J. Technology Management, Vol. 57, Nos. 1/2/3, 2012 Improving high variable-low volume operations: an exploration into the lean product development Hassan Qudrat-Ullah* School of Administrative Studies, York University, 4700 Keele Street, Toronto, ON M3J 1P3, Canada E-mail: hassanq@yorku.ca *Corresponding author Baek Seo Seong College of Business Administration, Konkuk University, 1 Hwayang-dong, Gwangjin-gu, Seoul 143-701, Korea E-mail: bsseong@konkuk.ac.kr Brian L. Mills K&L Microwave, 2250 Northwood Dr., Salisbury, MD 21801, USA E-mail: bmills@klmicrowave.com Abstract: This paper draws on extensive theoretical research and literature reviews, from two cases, and presents one case to illustrate practical application. It seeks to define and understand how lean product development integrates with current lean manufacturing strategies, and how the principles of the lean product development process can successfully be applied to improve the operations of a high variable-low volume product mix business. This work aims at delivering a unique conceptual model that demonstrates how businesses can improve their profitability through the utilisation of lean product development concepts. Through our conceptual model, business firms achieve the systemic integration of lean product development concepts with their downstream operations. The case presented of a high variable-low volume business organisation offers useful insights into how to implement this in practice. Keywords: lean product development; high variable operations; low volume operations; process; people; information use; training; technology. Reference to this paper should be made as follows: Qudrat-Ullah, H., Seong, B.S. and Mills, B.L. (2012) ‘Improving high variable-low volume operations: an exploration into the lean product development’, Int. J. Technology Management, Vol. 57, Nos. 1/2/3, pp.49–70. Copyright © 2012 Inderscience Enterprises Ltd. 49 50 H. Qudrat-Ullah et al. Biographical notes: Hassan Qudrat-Ullah is an Associate Professor of Management Science in the School of Administrative Studies at York University, Toronto, Canada. He has over 15 years of teaching, research, industry and consulting experience in the USA, Canada, Singapore, Norway, Korea, China, Saudi Arabia and Pakistan. His research interests include dynamic decision-making, system dynamics modelling, and sustainable energy policies. His research has appeared in Energy Policy, Energy, Simulations & Gaming, International Journal of Global Energy Issues, International Journal of Management and Decision Making, International Journal of Energy Sector Management, Journal of Decision Systems and International Journal of Enterprise Network Management. Baek Seo Seong received his PhD in Management Science (1985) and his Ms in Industrial Engineering (1980) at Korea Advanced Institute of Science and Technology and his Bachelors in Industrial Engineering (1978) from Seoul National University, (Republic of) Korea. Since 1984, he has taught and researched at College of Business Administration, Konkuk University, Korea. From 1994 to 1995, he visited Management Science Division, Department of Commerce, University of British Columbia, Canada, and from 2004 to 2005, Management Division, New Mexico State University, USA. His areas of research interests include service management, TQM, environmental management, and creativity issues in Korean companies. Brian L. Mills is a Licensed Professional Engineer working in the product design and manufacturing industry for the past 15 years. His experience includes research and development, product design and product integration for power generation equipment as well a manufacturing experience in both consumer aluminium containers and telecommunication electronics. He has been involved with continuous improvement application in the industry for the past ten years and has been an active change agent to improve operations using both lean product development and lean manufacturing concepts with a team-based approach. 1 Introduction Faced with intensive global competition, increasing operational costs, and the rapid pace of technological innovations, many business organisations have made tremendous efforts to understand and embrace lean product development concepts (Scherrer-Rathje et al., 2009; Wu, 2003; Doolen and Hacker, 2005; Jorgensen and Emmitt, 2008). Henry Ford and his organisation were the first to implement a notable comprehensive manufacturing system that accounted for all facets of production including people, machines, tooling and products in a synchronised and continuous process at the turn of the industrial revolution in the early 1900s (Hines et al., 2004). As industry changed, Ford’s system for manufacturing did not adjust to meet the advent of worker’s unions, and decreased unemployment. This continued up to the Second World War as the Ford Motor Company lost market share. As Ohno and Shingo began to uncover the shortcomings of US industrial management, they observed that employees could contribute much more than task completion for the benefit of the business and that most of Ford’s success revolved around one product. With the inclusion of the just-in time and elimination of waste philosophies from US industry combined with a high level of employee involvement Improving high variable-low volume operations 51 through quality circles, cellular manufacturing, a process to handle quick changeovers, and product changes in small batch sizes, Ohno and Shingo laid the foundation for the Toyota Production System (Ohno, 1988; Shingo, 1988). In today’s industry, the Toyota Production System has moved beyond the automotive industry and has become the yardstick of comparison for most global manufacturers of all products (McCullen and Towill, 2001; Womack et al., 1990; Hines et al., 2004). While lean manufacturing and the Toyota Production System has been the showcase of modern industrial management and production efficiency, exploration has moved from the production and assembly aspect of Toyota’s operation, and into the design and product development arena (Schrotter, 2000; Scherrer-Rathje et al., 2009). As a result of this evolutionary development, there are several issues with lean product development concepts that call for a systematic resolution, e.g., ‘what lean principles are relevant to lean product development concepts’; ‘to what extent the concepts of lean product development are applicable to non-manufacturing industry’; ‘what is the role of management towards the implementation of lean product development concepts’, and ‘how to apply lean product development concepts to improve the operations of a high variety, low volume business organisation’. The key objective of this paper therefore is to provide a framework that helps us better understand how lean product development operates and how it integrates with downstream operations aimed at improving business performance. Further, this paper will explain some challenges to overcome in US implementation and provides a practical theory to application in a highly variable, low volume business setting. To address the issues raised above, methodologically, this study draws on: 1 the review of ‘research literature’ 2 two case analyses. For the purpose of this paper, the term research literature includes articles in peer-reviewed journals, doctoral theses and research reports. Frequently cited books on lean philosophy and management are also included because of their influential role in the development of the fields. A small number of papers published in conference proceedings were also included in our review because, as justified below, they appeared to be significant to the debate of the lean product development concepts. The classic case study of the Toyota Motor Company was selected to provide the base analysis on the implementation of lean principles and the other case study i.e., Microsoft, served as a venue of analysis of the application of lean product development concepts in the context of a non-manufacturing industry. The following section will provide an overview of the most basic lean principles along with some examples. Section 2 explores the application of these lean principles for the product development business activities and leads to our proposed conceptual model for lean product development. While the Toyota Motor Company is the benchmark of comparison, Section 3 provides an example where the lean product development concepts can be applied in other industries, specifically the software development cycle at Microsoft. Section 4 details how management as an organisation supports the application of these basic lean principles for product development. The next section outlines the unification of lean manufacturing concepts with lean engineering concepts through a similarity and contrast approach. Lastly, Section 6 demonstrates the application of our 52 H. Qudrat-Ullah et al. developed conceptual model of lean product development for a high variety, low volume business organisation. 2 Literature review- towards a conceptual model of lean product development 2.1 Background concepts and definitions While most concepts of lean manufacturing are commonly known, most lean manufacturing fundamentals maintain their Japanese origin with Japanese names, however; many have been Americanised in order to better integrate them into the management structure and culture of US business. Skaggs (2003) outlined the concept of 5S, a system of workplace organisation, the elements of which have Japanese names (Seiri, Seiton, Seiso, Seiketsu and Shitsuke) but have been adopted as sort, set in order, shine, standardise and sustain. Alternatively, some concepts such as muda, or the elimination of waste, are US concepts that have been given Japanese names and the foreign translation has been maintained with its reintroduction to US business (Womack and Jones, 1996). 2.1.1 Value Value is the most basic concept and critical for business success. Value is the transformation of raw materials into a product that causes the exchange of funds by the ultimate customer (Womack and Jones, 1996). Value only holds true meaning for a specific product, which meets the customer’s price at a specific time. Womack and Jones (1996, p.33) stated “Value includes much more than the physical aspects of the product, but also involves the aesthetics, timeliness, ease of use, quality and functionality of the product.” Value involves a concise understanding of the customer’s needs and expectations. For example, through streamlining the ticketing and boarding process at a reduced ticket price, Southwest Airlines has better aligned its operations with the customer’s value expectation. 2.1.2 Value stream The second basic pillar of the lean manufacturing philosophy is the value stream. The value stream is the summary of all operations that are performed in order to develop a product from raw materials (Doolen and Hacker, 2005; Womack and Jones, 1996). Rother and Shook (2003) highlighted that all operations, whether they add value or not that bring the product to the customer represent the value stream. The best tool to visualise the order of operations and activities performed on a product or service is the value stream map (VSM). The ultimate goal is to explore, identify and outline what activities take place and recognise where wasteful actions occur (Neuhaus and Guarraia, 2007). Gregory (2006) fortified this by stating that the principle of VSM is to help management identify non-value added operations. Typically, a VSM represents the sequence of operations pictorially, similar to a flow chart. Improving high variable-low volume operations 53 2.1.3 Flow Even though expressed as independent concepts, the pillars of lean manufacturing are actually a series of events that continuously repeat and refine a business operation. Following this sequential approach, flow is only effective after value and value stream have been ‘completed’. ‘Completed’ is a loose term, as by definition continuous improvement is never finished. Flow describes the dynamic motion of products as they move through the value stream operations to reach the customer (Womack and Jones, 1996). The best tool to visualise the dynamic motion of products, services, and information, through to completion is VSM. Once the non-value activities have been identified, the VSM serves to locate bottlenecks. Activities that have limited capacity or require batch operations, bottlenecks can inhibit flow and are commonly identified by large amounts of work-in-process (WIP). VSM highlights capacity provides a common platform to foster a dialogue that eliminates flow constraints (Neuhaus and Guarraia, 2007). In a mixed-model business environment, flow and VSM become increasingly complex, since it is difficult to track a single product through the entire process. The VSM exercise becomes extensive and may require several teams to produce an accurate map. Without a common roadmap for improvement, a downfall of change management is localised improvements that have not addressed the underlying limitations (Gregory, 2006; Riitta, 1994). 2.1.4 Pull Pull is the trigger that starts at the customer and generates demand for a product or service. Pull acts as the agent that causes resources to fill a need (Schrotter, 2000). From the next higher level, the signal reaches down to the lowest possible raw material requirement and effectively ‘pulls’ the resources up from the lower levels to the driving requirement. Many businesses boast the use of lean manufacturing and being ‘lean’, but most businesses struggle beyond the first three concepts previously outlined. Womack and Jones (1996) wrote that after the first three pillars of lean manufacturing have been vigorously improved; the activities that cause demand and requirement fulfilment must be explored. The overriding fundamental principle of pull is that no activity occurs until there is a request (Womack and Jones, 1996). This implies that activities remain idle until a trigger places a request for action in the form of information or product. While individual organisations have successfully implemented pull as part of a lean product development operation, most activities occur in a push fashion due to a lack of organisation coordination. McManus (2007) wrote that there are three failures when implementing flow: unknown key customers, weak communication, and limited value on internal customers. Hopp and Spearman (2004) suggested several key benefits critical to operations such as less material being put through the process, shorter cycle times, fewer production variations and more efficient operations. With fewer parts in process, WIP is easier to observe directly, reflects the available capacity of an operation, and is controlled by an input rate in comparison to the capacity. A particularly helpful tool for pull systems is the use of a kanban. As the Japanese word for ‘sign-card’, a kanban provides the trigger to initiate some standard work in a finite amount when the customer has a demand. This is commonly used in inventory control. For examples and details on the implementation of a kanban system, Dossenbach (2007) is a useful reference. 54 H. Qudrat-Ullah et al. 2.1.5 Perfection Only after several rounds of activities that improve value, value streams, flow and pull, does management begin to recognise the importance of continuous improvements (Womack and Jones, 1996). This leads to changes in product flows, the order of operations, changes in customer values, or how the customer shows product demand and this generates an endless cycle of improvement (Womack and Jones, 1996). Concisely, the purpose of perfection’s pillar is to continuously seek out and develop improvements to better match the customer’s perspective of value to the business operation. This is commonly known throughout the industry as kaizen (Liker and Morgan, 2006). Wikipedia website development provides a good example of perfection. Wikipedia serves as a central point of all existing electronic knowledge that can be continually improved through the additions of its users. While there is scrutiny regarding the academic validity of the provided information, the continuous improvement by its users will improve the content. 2.2 Lean product development Lean principles may not be a complete business strategy, but they can be a powerful enabler (Baines et al., 2007; Lewis, 2000; Wu, 2003). Lean product development describes a completely different set of underlying principles. These tenets which drive product development are segregated into three major areas, process, people and tools. However, they can all be related through examples back to the basic pillars of lean manufacturing, and the basic philosophy of business operation (Bonavia and Marin, 2006). 2.2.1 Process In a similar approach to lean manufacturing, lean product development implements the basic five pillars of value, value stream, flow, pull and perfection on the product development process. Toyota has been able to develop a standard process, refine it, eliminate waste and continually reduce the lead time, speed to market and cost from project to project. Toyota defines a good process as one that focuses on the set of process principles whereby people create and improve the process according to these principles (Liker and Morgan, 2006). This perception emphasises the interactive and dynamic nature of the link between a process and its stakeholders. 2.2.1.1 Focus on value from the customer’s perspective Just as all manufacturing processes start with value as defined by the ultimate customer, lean product development uses the customer as the starting point for any process. The consideration of the customer’s value is ingrained into the cultural foundation of its employees (Liker and Morgan, 2006). Interestingly, value is commonly a point of conflict in organisations since different departments define value from opposing aspects. Conflict can also be a point of alignment between organisations. As two different organisations provide contrary viewpoints of a design, they each serve to benefit the ultimate customer. In the end, in order to best satisfy the end customer, opinions and positions are resolved to produce the best overall product (Sobek et al., 1998). Improving high variable-low volume operations 55 2.2.1.2 Consider multiple solution possibilities Fundamental to early design exploration is the stressed importance of ‘do it right the first time’. Unlike the US posture to find and develop the most likely solution at the onset, Toyota engineers develop a range of solutions based on standard design practices. Sobek et al. (1999, p.68) highlighted that “the effort is to focus on multiple solutions as engineers develop sets of solutions to design criteria that are then eliminated as other aspects of the design are integrated in the entire product.” It is a common practice at Toyota to investigate hundreds of design alternatives while the product is in the concept stage, thereby eliminating many late engineering changes. For instance, set-based concurrent engineering (SBCE) is a concept that presents solutions to reduce the-time-to-market issue. Information-based teams can consider more market dynamics by delaying critical decisions until absolutely necessary. As a result, the design and development time may be longer, but engineers can quickly move towards a known solution and ultimately shorten the time to production (Holman et al., 2003). Concurrent engineering efforts seek to minimise the number of feedback loops and iterations required to finalise a design solution by involving other engineering functions. Toyota’s SBCE process is significantly different; design conditions that are not feasible for all parties are documented and maintained in engineering checklists. SBCE suggests the exploration of sets of alternatives, but within clearly defined sets of constraints (Ward et al., 1995). As the designs converge at points of integration, the groups of feasible solutions are reduced based on the additional external information. In general, the concept is to provide enough upfront design guidance to consider most of the known design criteria, yet compensate for incremental changes in design due to the design considerations of all interacting design functions (Sobek et al., 1999). The evaluation of solutions in a matrix format that consider strengths and weaknesses provide the basis for design flexibility. 2.2.1.3 Product development flow Holman et al. (2003) identified that a more flexible process that is agile for customers and the marketplace can be developed by focusing on the quality and timing of processes and information. Because of the repeatability in engineering efforts required, Toyota can accurately predict future efforts to finish (Liker and Morgan, 2006). Engineers are assigned design tasks in a levelled way so that as solution requirements narrow, engineering efforts are not wasted early in the process, yet effective as needed during the middle and late design development when critical. 2.2.1.4 Thorough standardisation of design Standardisation in the design process is essential for a smooth and waste-free product development flow. Standardisation can be identified in three categories: 1 design standardisation through common architecture, modularity, reusability and shared components 2 process standardisation by designing products for standard processes and building foot-printed manufacturing facilities based on standard lean practices 56 3 H. Qudrat-Ullah et al. standard skill sets for engineers that provide flexibility in staffing, programme planning, and minimise task variation (Liker and Morgan, 2006). Engineers rotate within their area of functional expertise to gain the experience that encourages standard work, making the outputs of each functional group predictable to other functions (Sobek et al., 1998). The use of standard checklists for each design point allows each part to be designed consistently without stifling creativity. This leads to reduce time in redesigning components from scratch or coordinating with counterparts, and yields firm trust between functions and known output expectations (Sobek et al., 1998). 2.2.2 People One of the greatest lessons learned from US manufacturing industry was to value the people within the organisation. Employee empowerment can perform a greater service to the business beyond completing a task. On the one hand, in the context of the merger between Daimler and Chrysler, Daimler stripped Chrysler of the culture that was built when the leadership was removed (Liker, 2005). On the other hand, Toyota’s people system is built around its employees who are completely supported through Toyota’s unique culture that improves the process continuously. 2.2.2.1 Chief Engineer as the voice of the customer Unlike the US project manager, the Chief Engineer is responsible for the ‘whole product’, its delivery to market, and is proclaimed as ‘president of the vehicle’ (Sobek et al., 1998). Liker and Morgan (2006) explained that the Chief Engineer in Toyota can provide the intimate details of the project, its present status, and leadership to make critical decisions as both a leader and project integrator. Chief Engineers have wide experience, technical depth, system understanding, market exposure, and leadership skills. The proof of expertise is the ability to convert this knowledge into innovative designs. This was fortified by Sobek et al. (1998, p.42) that “only a good designer can evaluate the quality of someone else’s design.” The Chief Engineer’s function is to provide the concept, style, and direction for all others involved in the product development process to follow while providing solutions to technical trade-offs. Sobek et al. (1998) pointed out that the Chief Engineer operates from a high vantage point to see all aspects of the design process. It is the Chief Engineer that serves as the technical voice of the customer throughout the entire process from concept to market release. 2.2.2.2 Balance the matrix organisation Toyota as an organisation has found great success using a matrix format for its product development team. While Chief Engineers provide indirect authority relative to the ‘whole product’ development, functional managers provide the direct authority and leadership for component and system development. Functional managers act as mentoring supervisors and are an instrumental facet of the product development process. Sobek et al. (1998) observed that management is closely involved with the engineering design operations. This aspect is so strong that any ‘young engineer’, those with less than ten years of experience, must usually get approval from their functional supervisors for each step of the design process (Sobek et al., 1998). It is the primary function of Improving high variable-low volume operations 57 supervisors to develop the deep functional expertise in each design engineer. Further, functional leaders teach report writing, how to prepare for meetings and reinforce the culture at Toyota. The on-going challenge is to develop strong horizontal relationships with functional expertise, cross-functional teams, sometimes referred to module development teams. 2.2.2.3 Deep technical competence While most US automakers prefer their engineers to broaden rather than deepen their experience (Liker and Morgan, 2006), Toyota stresses the importance of deep technical expertise. Sobek et al. (1998) detailed that instead of focusing the engineering organisation around the function, US firms have employed a variety of organisational structures such as temporary teams or product-based focus. Cross-functional coordination has improved, but at the cost of depth of knowledge within functions, since engineers spend less time within their functions and more time in meetings and cross-functional interaction (Sobek et al., 1998). Further, organisational learning across projects has dropped as people rotate quickly through projects. Most critical, however; the combination structure between functions and projects causes an internal struggle of authority for engineers (Sobek et al., 1998). Conversely, as part of the Toyota culture, technical excellence is revered (Sobek et al., 1998). Morgan (2002) pointed that management places an intense effort on training employees for a specific skill set that supports the product development process. As a new hire, an engineer is given a career path that specifies and emphasises deep technical skill acquisition within a specific discipline (Liker and Morgan, 2006). This is combined with functional managers who are also technical experts. US companies emphasised the use formal institutions to provide basic training and job skills; Toyota provides both formal and on-the-job training from within the organisation. Morgan (2002) compared that US automakers seek to develop engineers with a broad range of skills and a variety of experience combined with formal classroom training. Engineers at Toyota receive most of their training through mentoring and intensive interaction with direct supervision and leadership (Sobek et al., 1998). Beyond developing excellent engineers, this close relationship and direct leadership reinforces the company’s set of values and culture. Lastly, design engineers are firmly grounded in functional areas. It is through this type of organisational positioning that Toyota develops specialised technical knowledge. 2.2.2.4 Appropriate supplier involvement As most of the components integrated into the manufacture of an automobile are purchased, there is a significant need to integrate supplier activities as a fundamental part of the product development process (Liker and Morgan, 2006; Wu, 2003). Suppliers are organised based on technical expertise similar to engineers and a small subset of vendors have an intimate working relationship in order to engage in the first stages of design. Some suppliers provide guest engineers that work directly with Toyota design engineers to provide direct and daily input to the design. Toyota maintains valuable commodity knowledge internally and never relinquishes vehicle system responsibility (Kamath and Liker, 1994). Toyota develops long-lasting relationships with suppliers. Kamath and Liker (1994) resolved that an incorrect position with a supplier may lead to a relationship that holds no market advantage. 58 H. Qudrat-Ullah et al. Part of the supplier integration process includes developing a mutual understanding of the lean product development philosophy. With intense supplier management, it is interesting that Japanese suppliers can describe in detail the product development cycles on a single sheet of paper showing the high-level view of the process and milestones (Kamath and Liker, 1994). Vendors understand the importance of the schedule and the timing of events (Kamath and Liker, 1994). Though a highly structured supplier management system, suppliers understand their role with the customer as well as the appropriate time to suggest innovation without impact to the product development process. 2.2.2.5 Relentless strides towards learning Each engineer is supported by technical experts as managers provide the leadership necessary to deepen his/her technical expertise. “Learning events, called hansei or reflection, are built into each development program to create opportunities to learn from every program for application on the next program,” explained Liker and Morgan (2006, p.15). Hansei is performed at all levels of the organisation, from Chief Engineers through component design engineers. 2.2.2.6 Support continuous improvement Just as lean manufacturing follows the basic pillar of perfection, lean product development embraces this philosophy as well; set in the core beliefs at all levels of the organisation is a compelling desire to work together towards common goals. Career paths are well defined at hire, with more emphasis placed on product advancement. Ultimately, the career path seeks development to better meet the customer’s expectations (Liker and Morgan, 2006). 2.2.3 Tools/technology Tools and technology use for the lean product development process serve a strict role. It is common to observe CAD systems, machine technology, digital manufacturing, testing equipment as well as those tools for problem solving, standardising best practices or learning programmes in daily operation. Tools serve to improve the process through adding value, improving the value stream or allowing for a smoother flow of process operations (Zylstra, 2007). 2.2.3.1 Tailor technology to the process Toyota spends a lot of effort on the people and the process involved in product development, adding a technology that is flawed or does not integrate well with the existing process only hampers progress. Typically, technology offers the smallest market advantage and can be easily copied (Liker and Morgan, 2006). It is more important to tailor the technology such that it enhances and further optimises the disciplined process. Most critical to the lean product development process is a sound people and process system that can be leveraged through technical tools. Improving high variable-low volume operations 59 2.2.3.2 Simple visual communication As expansive report generation and presentation adds little value to the customer, Toyota uses a single page development plan as a management tool for policy deployment, known as hoshin kanri, or more commonly as a hoshin plan (Liker and Morgan, 2006). Each page breaks down a corporate goal into meaningful objectives that an organisation can accomplish. Beyond policy deployment and corporate goals, the same method is used for product development, outlining product release goals as milestones for completion. Another use of simplistic communication is the A3 report. A3 represents the European paper size (approximately 11 × 17 inches) that provides communication for four different subjects: proposals, problem solving, and competitive analysis (Liker and Morgan, 2006). 2.2.3.3 A3 report details One type of the A3 report is a problem solving detail used in place of face-to-face meetings. Instead of using a meeting to collaborate a solution, the engineer provides a diagnosis of the problem, key information and possible recommendations (Sobek et al., 1998). This document is then distributed to all stakeholders. Sobek et al. (1998) explained that Toyota relies heavily on written communication and the receiver is expected to provide feedback as necessary. Once all iterations of the report have been finalised, the engineer is expected to write a final version of the report. The final report provides two benefits: 1 it documents and summarises the analysis and decision-making into a concise report for the remainder of the organisation 2 it forces engineers in every function to gather opinions and consider the impact of changes to other functions. 2.2.3.4 Standard tools for learning and continuous improvement Kaizen, or continuous improvement, is the foundation applied to both lean manufacturing and lean product development. Imbedded at all levels and points in the organisation are tools of kaizen that standardise the learning process. The most critical aspect is that these tools are simple to use, involve technical experts pertinent to the task, and seek to improve the knowledge of the individuals as well as improve the product. Just as important, these tools are flexible in use, as well as owned and maintained by the people who use them (Liker and Morgan, 2006). 2.2.3.5 Design standards improvement As an example of the tools for standardisation, Toyota design standards are dynamic documents. Unlike US automaker engineers who argue that design standards are largely ignored, the lean product development process maintains books of engineering checklists to guide design work (Sobek et al., 1998). Once in place, design standards add predictability across vehicle subsystems. Sobek et al. (1998) concluded that in order to best transfer knowledge from one project to the next, the final report drives updates to the design checklists and standards. Driven in part by the use of ISO9000, US design standards are typically composed by a central organisation; however, it is the design staff 60 H. Qudrat-Ullah et al. that maintains the functional knowledge for lean product development. Frequent updates of the checklists provide effective application of current body of knowledge for each new project. Since Toyota releases product designs more frequently than US automakers, the design standards are updated on more consistent basis and are less likely to be outdated. 2.3 The conceptual model of lean product development The synthesis of the literature reviewed in the previous sections (i.e., Sections 2.1 and 2.2) has lead us to the construction of the conceptual model, depicted in Figure 1 below, of the lean product development aimed at improving the operations of the business organisations. Figure 1 Lean product development and high variable-low volume business PROCESS • Customer value • Multiple solutions • Development flow • Standardised design PEOPLE • Leadership of Chief Engineer • Matrix organisation • Deep technical knowledge • Supplier involvement • Stride to learning • Continuous improvement LEAN PRODUCT DEVELOPMENT Improved Business Operation TOOLS • Tailored technology • Visual communication • Written reports • Standard tools • Design standard improvements This model embodies the three critical factors (i.e., process, people, and tools). The interactive relationships among these factors describe the roles, activities, supporting tools for the lean product development. The lean product development, by integrating the downstream operations, is hypothesised to improve the business performance of the organisation. Later, in Section 6 of this paper, we will demonstrate the applicability of this model to improve the business operations of a high variety-low volume enterprise. 3 Implementation beyond Toyota: the case of Microsoft Microsoft’s product development process for software generation uses a ‘synch-andstabilise’ approach (Cusumano, 1997), which is very similar in its fundamentals to the SBCE approach implemented at Toyota. In this, functional teams working in parallel publish their contribution on a routine basis, thereby synchronising the individual or team efforts with the development of the overall product. This is analogous to the short and numerous milestone decision points of SBCE. Further, as pieces of the team’s Improving high variable-low volume operations 61 contribution become solid, the evolving product definition becomes stabilised as a basis for other teams’ contributions (Cusumano, 1997). Again, similar to SBCE, as the feasibility region is reduced, alternative solutions are eliminated. People within Microsoft termed these milestones as ‘daily build’, or ‘nightly build’ (Cusumano, 1997). This component of the product development process addresses the problem of how to deal with the growing size of product development teams. Large teams that attempt to tackle large problems struggle with components or features that must interrelate to other teams’ projects. Similar to the design checklists that update the design feasibility and evaluate the trade-offs of design, the ‘synch-and-stabilise’ approach provided incremental communication of product development and feasibility for software development. Likewise, Toyota’s Chief Engineers and functional managers define the milestones for decision-making, Microsoft structures and coordinates what individual engineers and teams do while allowing people enough flexibility to be creative and evolve a product’s details in stages (Cusumano, 1997). According to Cusumano (1997), Microsoft provided an avenue for creativity by allowing features to evolve over time while necessary resources are applied for stability. In a high technology company, while it is important to have creative people, it is often more important to direct their creativity. By limiting resources: either time, manpower or funding, Microsoft’s managers can better focus on product features that the customer is willing to pay for, very similar to the value fundamental pillar of lean manufacturing. Cusumano (1997) warned that without a system of balance, the creativity of engineers would never allow a product to reach the marketplace. Microsoft begins a project with a vision statement that defines the goals, priorities, and user activities that must be supported by product features. These are then converted into functional specifications by functional managers. Project managers divide the specifications into tangible objectives with a timeline and milestones. Similar to the use of simple methods of communication (hoshin kanri), Microsoft’s documentation outlines how to administratively manage without impacting the engineering aspect. Just as Toyota defines feasibility commitment through the SBCE process, Microsoft’s developers solidify and correct errors that have been detected at the end of milestone subprojects. The error corrections further stabilise the product and highlight for the team portions that need progress. In the same way that Toyota delays decisions to less critical aspects of the product design, Microsoft prioritises features at each milestone, as to build the most important features first (Cusumano, 1997). Lastly, Cusumano (1997) described how Microsoft recognises the limited sight and vision of software design and therefore project teams generate short vision statements, yet design standards though checklists are strictly maintained. A second key strategy used by Microsoft is to perform development tasks in parallel with frequent synchronisations. Much like the controls placed on the product development flow at Toyota, the Microsoft strategy provides a means for a stable and predictable process flow without driving excessive detail into the product development plan. With a few simple rules in hand, Microsoft allows for developer freedom while ensuring that an overriding structure and mode of operation is in place (Cusumano, 1997). Some examples include: checking in pieces of code at the same time during a given day, if the code ‘breaks the build’ by preventing it from completing the recompilation, developers must fix the defect immediately. Additionally, developers work at a single site; use a common development language, common coding styles, and 62 H. Qudrat-Ullah et al. standardised development tools (Cusumano, 1997). These key aspects of the lean product development process resonate with the product development process used by Microsoft. From the basic pillar of value, to using frequent and scheduled milestones, the Microsoft product development process uses many of the guidelines used in the lean product development process. 4 Management and organisational structure supporting lean principles There are many similarities identified between the lean manufacturing and lean product development principles and there are examples, such as Microsoft of its application beyond the automotive industry. An organisational structure must support and blend each of these concepts together into a harmonious and synchronous system to maintain long-term success. Typically, US businesses direct lean activities while Japanese firms focus on the underlying philosophy and culture (Baines et al., 2006). Management as an organisational body can employ an approach that helps foster and facilitate lean activities. For instance, management can use lean concepts as a springboard for strategic planning. This has been helpful in true strategic improvement and identifying waste through organisations (Shinkle, 2005). A successful method that provides a visual tool for management to identify opportunities and the framework for problem solution is management systems diagramming (MSD). Similar to VSM used in lean manufacturing, MSD diagrams the ‘what, when and how’ of the current management system by providing a list of responsibilities, major tasks, timeline of requirements, meetings, milestones, control processes, communication methods and organisational linkages (Shinkle, 2005). The end result of the MSD is a diorama that represents the current state of the different levels of the management organisation and provides a common platform for review and reflection. Just as lean manufacturing uses the VSM to identify areas for improvement, such as bottlenecking, excessive WIP, long process cycle-times, and wasteful activities, the MSD baseline can identify issues in value, value stream, flow, pull and perfection relative to management. For instance, a future-state MSD could describe the ideal management organisation where decisions are only made at the time when needed, approvals are granted with short cycle times, redundant communication is eliminated and error checking is not required (Shinkle, 2005). With a fresh approach and consideration of the basic lean concepts, management can describe in detail and seek to improve operations to the most efficient and effective state possible. The value, value stream and flow analysis can best be accomplished through a coordinated effort between workers and supervisors. Adler (1999) suggested that both engineers and supervisors should together provide the guiding documents for standard work processes. In lieu of industrial engineers timing work operations covertly, workers should be empowered to develop their own time based study, and conduct their own analysis of the work process. Through incentives, based more around pride and success among peers than material and monetary contributions, workers can identify and propose improvements in methods of routine work processes (Adler, 1999). In an effort to develop a philosophy of collaborative learning, continuous improvement, and world-class quality, the created document describes the actual operation performed and becomes a baseline standard for future improvements. Improving high variable-low volume operations 63 Alternatively, in organisations where the primary function is non-routine innovation, such as product development or research and design, the structured and codified organisation typified by lean manufacturing principles can accommodate the mechanical, routine portions, however; it is ill equipped to manage the creative aspects. In an enabling environment, the organisation’s system of controls needs to create boundaries and define the extent of feasibility, yet provide a usable construct for creativity and innovation (Adler, 1999). Primarily, those performing the operations are highly involved in the design process. By involving employees to ensure they support the real work tasks, the organisation encourages individual buy-in from the employee and creates a sense of personal alignment. Once this strength is transferred to other departments, the entire company begins to prosper. Similarly, to ensure the enabling quality of organisational systems, those performing design functions are invited to review their work with the management staff (Adler, 1999). Through kaizen, the organisation as a system can improve in a structured process. Policies and procedures that resemble a user’s manual invite creativity and design exploration to develop more effective and innovative designs (Adler, 1999). Some critical features of this type of organisational structure include a focus on best practices methods, allowing customisation and improvisation of standards, and a method to manage individual’s work individually. The engineering function must improve the value to the customer, unlike manufacturing that drives out waste activities (Haque an James-Moore, 2004). Overall, the organisation’s processes provide guidance for flexibility and dealing with unforeseen contingencies rather than imposing limiting constraints 5 Integration − lean manufacturing and lean product development concepts Fundamentally, many of the lean product development principles can be reduced to the pillars of lean manufacturing. When inventory buffers decrease, there is a greater dependence on work standardisation, which leads to a reduced employee discretion (Mehta and Shah, 2005). This leads to consistent processes and supervision for an equitable balance in production. Lean production encourages flexibility by rotating personnel through a variety of production performances and continuous improvement efforts (Mehta and Shah, 2005). However, it is common for Toyota’s design engineers to spend enormous amounts of time developing skills to perform a single function. Lastly, while the lean production feedback process provides prompt response to any deviation, the lean product development describes varying design deviations and improvements through the A3 reports (Mehta and Shah, 2005). This suggests that management recognises the value of lean as a business tool. 5.1 Value While lean manufacturing uses value to ensure that all operations perform some function that increases the perceived worth to the end customer by eliminating wasteful actions, lean product development value focuses on the customer’s requirements and expectations by establishing customer value early in the product development process. Extensive time 64 H. Qudrat-Ullah et al. is placed in marketing and strategic planning with a strong focus in the concept stage to best understand the customer. Further, the Chief Engineer is the chief architect and systems integrator and acts as the voice of the customer providing direction and decisions of value. Similarly, lean manufacturing uses continuous improvement champions as the voice of the customer. Lastly, the importance of value is extended to key suppliers, through early integration in the development process. 5.2 Value stream The value stream strives to place sequential operations in the correct order to ensure that product moves to the customer. Processes are physically relocated next to each other and operations tailored to provide continuity. Similarly, alternate solutions provided through SBCE ensure a range of robust design results that minimise the number of missteps and backtracking (Baines et al., 2006). Just as continuous improvement efforts use cross-functional teams of those who perform the task, lean product development strikes a balance between functional expertise and cross-functional integration to ensure that the work performed is insightful and effective. Lastly, while a system of workplace organisation provides visual cues to find materials and equipment without micromanaging, lean product development uses simple tools such as the hoshin kanri. Both systems ensure that the process is working on the right tasks at the right time. 5.3 Flow Lean manufacturing flow is the smooth transition from one task in the value stream to the next sequential task. Flow moves the group of manufacturing operations from a static process into a dynamic and reactive system. The management philosophy to ‘make each decision in its own time’ is the lean product development equivalent. Engineering reacts to the changes in design requirements as needed and adjusts the flow of the development process accordingly. As design standards create predictability in the development process, the flow timeline becomes more salient. Similarly, lean manufacturing uses visual cues to identify flow deviations. 5.4 Pull Pull is challenging to identify within the lean product development process, however; there are two key principles of importance. First, the Chief Engineer pulls completed designs from functional departments through the detailed hoshin kanri. As the systems integrator, she/he determines when systems and components must be prepared for final production and creates the demand for design engineers to begin the design process. Just as a purchase triggers the supply chain to replenish a purchased item in a lean manufacturing operation, the hoshin plan provides the schedule when engineering milestones must be completed. Secondly, through deep technical expertise and standard design criteria, functional managers can pull additional resources in order to complete tasks or choose when to begin a task based on the development time required. Improving high variable-low volume operations 65 5.5 Perfection Lastly, perfection is the motif most identifiable within Toyota’s management philosophy. Lean product development emphasises continuous improvement of the deep technical expertise. Through a close working relationship with technical supervisors, it is both a message and the culture to seek out methods to improve. While lean manufacturing relies on its production workers to improve their process with process engineers, lean product development depends on design engineers to revise the design standards and checklists through coordination of the A3 reports in pursuit of perfection. Finally, management of both lean manufacturing and lean product development drive a culture to support excellence through clearly defined career paths. 6 Application to a high variable-low volume business environment Typically, a new product development process follows three basic tenets. First, provide an improved product that matches the customer’s expectations. Secondly, minimise the speed to market and last, maintain the budgetary confinements. The lean product development process fulfils each of these objectives succinctly, as shown in Figure 2. Coordinated by the Chief Engineer, Toyota deeply explores the customer’s requirements to quantify the requirements. The SBCE practice provide a system that delays product decisions until appropriate yet ensures robust designs through parallel engineering efforts. Lastly, by focusing on the cost to develop products instead of targeting product cost, Toyota can effectively control product development costs. Figure 2 Lean product development and high variable-low volume business PROCESS • Customer value • Multiple solutions • Development flow • Standardised design PEOPLE • Leadership of Chief Engineer • Matrix organisation • Deep technical knowledge • Supplier involvement • Stride to learning • Continuous improvement TOOLS • Tailored technology • Visual communication • Written reports • Standard tools • Design standard improvements LEAN PRODUCT DEVELOPMENT • Design in value • Seamless value stream • Manufacturing capability innovations Improved Business Operation • Customer intimacy • Short delivery lead-times • Range of product characteristics capability Because design standards are codified, shared across the engineering organisation at all levels, and maintained to reflect current practices, each functional department clearly understands. This fundamental trust is the common string that ensures success of SBCE 66 H. Qudrat-Ullah et al. practices. The Chief Engineer is the project champion assigned to each new development. As such, he/she is the source of information. As all suppliers receive a clear understanding of expectations, Toyota manages the level of intimacy appropriately to develop long-term relationships. Management provides a long-term career path for engineers. With a strategy for deep technical expertise that must be learned through a close mentorship relationship with supervisors, Toyota provides a culture for long-term employment. The mentorship relationship also reduces the status difference between levels within the organisation. Lastly, information is widely shared throughout the lean product development organisation in a clear fashion in order to minimise the effort to obtain information, yet provide an effective impact. However, there is little information regarding business operations that produce a large number of distinctly different part numbers in limited quantities. There are numerous businesses that thrive as the industry niche and can further advance market share and improve market position through the application of lean concepts. Unlike the automotive or aerospace industries, where the engineering efforts are very intense and the manufacturing processes are clearly defined, in a small volume, high variety business there is little time allotted to engineering and the entire time to market becomes very short. Also, there is a more intimate relationship between customer and supplier as the customer expects to procure a custom product per their request. As each product must complete an engineering design process, there is little time for delay. This business dynamic presents difficulties when applying lean product development concepts. In order to implement lean product development, the key element is engineering for business-wide transformation (McManus et al., 2005). First, the definition of value must be clearly defined. With a short time-to-market and delivery expectation, value from the customer’s perspective must have enough definition at the order entry to provide the necessary guidance for design engineering to begin the design process. Secondly, the value stream between the order entry and engineering release to production must be very succinct. While the optimum configuration would eliminate queues and waiting, since there is a limited engineering capacity and a stringent prototyping process before completion, it is common for each engineer to manage several customer orders simultaneously that are in different stages of the process. Since customer requirements vary so dramatically in a high mix-low volume business to meet a range of applications, there may be a variety in the order of operations employed. Management must provide with clarity the flow of information and materials. Unlike the common US trend, where engineers are co-located in a cross-functional team, a functional engineering organisation can provide some cohesive and well-grounded engineering applications. Since there are numerous part numbers in stages of engineering development, engineers with available time can help prepare and test products for engineering release, thereby minimising risk and queue. Further, at each stage of the lean product development process, from initial concept, design detailing through to prototyping, the process must pull customer orders to fill capacity. Lastly, the lean product development operation must seek opportunities to reflect and critique the daily, fast-paced operation to seek out sources of waste, and decrease the timeline to production release. To accommodate the range of customer requirements that impact a custom design, low volume-high mix business model, the lean product development process must follow a single approach to accommodate a known range of product variations as defined by the customer. Whether the customer requires a minor variation on a standard platform, or a Improving high variable-low volume operations 67 product that is both unique and highly unusual in application, the engineering development process must be prepared to decipher the customer’s expectations and provide a unique definition of value. Unlike the high-volume lean engineering development operations, the lean product development process for a high mix-low volume operation must perform in reverse. As described by mapping the design space, the range of engineering design characteristics must be clearly described. The manufacturing processes must be able to process the range of products required by the customers’ unique requirements. Since there is little time to develop new fixtures, processes or capabilities in order to meet the delivery timetable, engineering must design products within the limitations of manufacturing. In order for engineering to include a broader range of characteristics, manufacturing must first develop the capability to accommodate the customer’s requirements. Lastly, with a clear definition of the manufacturing capabilities, deviations are easily identified and addressed early in the customer order development and engineering design process. This concept has clear resonance with establishing feasibility before commitment. By clearly defining the map of the design space, the range of feasibility is known at the customer order point. With deviations based on customer value, the ability to establish commitment can occur as early as possible through discussion. Deep technical competence is best accomplished through collaboration with the manufacturing community to best understand the manufacturing operating procedures, range of process limitations and capabilities. The variations are endless and engineers can continue to advance and expand the combinations. Next, to make relentless strides towards learning, engineering must collaborate with manufacturing engineering to match the changing requirements and market conditions with advanced manufacturing processes and capabilities. With each new process or capability improvement, engineering is provided with a design space expansion and an opportunity to deepen technical prowess. Finally, the designated ‘president of the product’ applies well to a product development process that requires considerable coordination and an extended time table riddled with many milestones and subcomponent design stages. However, with a short product delivery timeframe, assigning a Chief Engineer to each customer order would be consuming and very cost-prohibitive. Alternatively, in the high mix-low volume business, the product line manager must assume the project management role to ensure each customer order receives the necessary attention. 7 Conclusions In an effort to explore the basic foundation of the lean product development model, the five most basic pillars of lean manufacturing have been identified and discussed. Combined with an organisation that sets limitations and boundaries of feasibility, the principles of lean product development work in harmony, support the process, and provide a successful environment to couple innovation with a well defined structure. By focusing on waste reduction in manufacturing and value creation in engineering, magnitudes of improvement can be realised (Lewis, 2000; Mascitelli, 2005). The primary contribution of this paper was to develop a systematic conceptual model of lean product development and demonstrate its practical application. The resulting 68 H. Qudrat-Ullah et al. conceptual model a manufacturing capability innovations and value-creating networks of roles, activities, and processes aimed at improving the operations of the organisation. When considering the highly variable business condition of a market where a range of products are designed and tailored to the customer’s specific requirements, this research suggest that the lean principles still apply, however; a different perspective and methodology must be employed. With a more intimate relationship with its customers, which provides a deeper understanding of the value concept, these businesses must develop a robust process to clearly communicate the variety of requirements to the downstream engineering organisation. Since these markets demand short delivery lead-times, the value stream of design, development and prototyping must be smooth and seamless. Lastly, the paradigm must move from batch operations to continuous flow. This is possible as a multitude of customer orders are in process simultaneously in different stages of development, yet all progressing through the value stream in an efficient manner. Unlike the traditional engineering organisation that thrives on groundbreaking innovation and product design advancement, the high mix-low volume business must instead focus on manufacturing capability innovations and improvements that are then incorporated into the known and constrained design space. Finally, while the short lead-time and range of product characteristics justify the intense process vigour and urgency, time must be allocated for time-bound planning, reflection, and improvement on a periodic basis. This study has also identified some important implications for managerial practice. For example, by developing holistic solutions, designing standardised systems, combined with highly efficient platform designs that consider modularity and scalability coupled with a consideration to reduce indirect costs, management can set the stage for an effective and long-term lean product development organisation (Mascitelli, 2005; Wu, 2003). Management must be willing to ‘invest’ in the improvement of its employees and remain committed to continuous improvement through incremental change, as a system of product development of this nature cannot be forged overnight. The basic foundation of management used by Toyota and explored by other industry leaders can be effective when guided appropriately to yield long-term industry innovation, strong core competencies, and high employee engagements. Although our paper draws on extensive theoretical research and literature reviews, it presents only one example − high variety-low volume business setting, to illustrate the practical application of our proposed conceptual model of lean product development. Future empirical research will be required to gain a more solid understanding of how the lean product development concepts can contribute and enhance a firm’s flexibility and performance in innovation and operational capability. Only this future empirical research can help to further generalise the findings of this research. Acknowledgements The corresponding author would like to acknowledge and thank King Fahd University of Petroleum & Minerals, Dhahran, Saudi Arabia for the support provided to complete this work. Improving high variable-low volume operations 69 References Adler, P.S. (1999) ‘Building better bureaucracies’, Academy of Management Executive, Vol. 13 No. 4, pp.36–47. 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