Transcript Lean Ops - Kellogg School of Management

Lean Operations Module

House Building Game
» The transition to Lean Ops

The Paradigm of Lean Operations: The ideal
» Basic philosophy of Lean Ops
» Methods for synchronization & waste reduction
» Managing variety & flexibiltiy

Approaching the ideal : TPS
» Continuous improvement
» Toyota Production System (TPS)
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Paradigm of Lean Operations:
In Search for the Holy Grail

= The ideal Process
Synchronization of all flows
» 1x1
» production on demand
» defect free
At lowest possible cost
 Waste = Gap between ideal and actual
 How do we set up a system to continually reduce
waste ?

1. Improving synchronization
2. Visibility for continuous improvement
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Toyota’s waste elimination in Operations
1. Overproduction
2. Waiting
3. Inessential handling
4. Non-value adding processing
5. Inventory in excess of immediate needs
6. Inessential motion
7. Correction necessitated by defects
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House Game Improvements:
What did your team do?
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Lean Tool #1: Cut Batch Sizes
A Simple Example
A
B
C
D
1 min/job
1 min/job
1 min/job
1 min/job
What is the theoretical flow time of the process?
 What is the capacity of the process?
 What does that imply for the amount of inventory
needed in the process?

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Example:
Synchronize:
Cut Batch Sizes
4
B
C
D
1 min/job
1 min/job
1 min/job
1 min/job
Batch Mfg (Batch size = 4)
Flow Mfg (Batch size = 1)
1 A
B
C
D
2
3
4
5
6
8
12
1
2
3
4
5
C
D
1-4
1
2
3
4
B
A
0
1
2
3
1
2
Elapsed Time
Elapsed Time
0
A
4
5-8
1-4
9-12
5-8
1-4
13-16
9-12
5-8
1-4
17-20
13-16
9-12
5-8
8
12
16
1-4
20
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Lean Tool #2: customer demand pulls
product -- Synchronization with demand
PUSH: Inputs availability triggers execution
Supplier
Process
inputs
Customer
outputs
PULL: Outputs need triggers execution
Supplier
Process
inputs
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Customer
outputs
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Implementation:
Kanban Production Control Systems
Kanban
Job
Processing
center i
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WIP
Processing
center i + 1
8
Synchronize:
Just-In-Time operations
JIT = have exactly what is needed, in the quantity it is
needed, when it is needed, where it is needed.
 Reduce
transfer batches
 Pull rather than push work
 Set up cells
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Lean Tool #3: From
Functional Layout to Cells
Production
Control
Production
Control
Roof
Cut
FA
QC
Roof
Cut
FA
QC
Lin/Operations/Lean Ops
Production
Control
Roof
Cut
FA
QC
Base
Cut
Production
Control
Base
Cut
Base Base
Assy Assy
Base
Cut
Base
Assy
Roof
Cut
Base
Cut
FA
Base
Assy
Production
Control
Production
Control
Roof
Cut
Base
Cut
Roof
Cut
Base
Cut
FA
Base
Assy
FA
Base
Assy
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Managing Flows: the Process View &
product cells
 Recall:
“By rethinking the IBM Austin assembly
plant and introducing cells, distance traveled by a
card was cut from 1.5 miles to 200 yards. Floor space
was reduced to half and production tripled with about
the same number of workers.”

Pro’s of cells:

Con’s of cells:
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Teams in Cells and Lean Ops:
Human Resources issues

Advantages
– Consistent with the moral ideal of “autonomy.”
– Empowers the workforce through participation and autonomy in managing
daily activities
– Gives unprecedented responsibility to workers:
»
»
»
»

Immediate and impartial feedback of problems
Investigation of process improvements
Monitoring quality
They also gain better understanding of the process
Challenges:
– Less WIP means more tight coupling and less autonomy
» Rigid procedures and interdependence of cells
– Team dynamics: incentives, team pressure, …
– From monthly 30-day goals before to 3-minute goals now
» Does not leave much room for variability
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Lean Tool #4:
Quality at the Source
Defects
Found at:
Impact to the
Company
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Own Process
Next Process
End of Line
Final
Inspection
End User’s
Hand
$
$
$
$
$
 Very
Minor
 Minor
Delay
 Rework
 Resched.
of work
 Significant
Rework
 Delay in
Delivery
 Additional
Inspection
 Warranty
costs
 Administra
tive costs
 Reputation
 Loss of
Market
Share
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Quality at the Source
 Fool-proof/Fail-safe

design (Poka-Yoke)
Inspection
– Self
– Automated (Jidoka)


Line-stopping empowerment (Andon)
Human infrastructure
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How to run Lean Operations:
Managing Variety

Monthly Production Requirement:
Model
Sedan
Station
Wagon
Quantity
10,000
10,000
 How should production be scheduled for the month?
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Synchronize: Heijunka
Mixed Level/Balanced Production
Batch Production Schedule
(AAAABBBB..)
Product
Apr/12.................15...........................30
Mixed Production Schedule
(ABAB...)
Apr/12....................15.......................30
A
B
FGI
FGI
time
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time
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Reducing Waste:
Reduced Setup Times
 What
happens if we have long setup/changeover
times?

How do synchronized production with variety
(product mix)?
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Synchronize: Heijunka
Uniform Plant Loading

This does not mean building a single product.

Rather:
– maintain a stable mix of products,
– and firm frozen schedules based on actual orders

Benefits:

Costs:
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Must reduce scale economies
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Reducing Waste:
Mixed-Load Pickup and Delivery
Part A Plant
Part B Plant
Assembly
Line
Individual
Pickup
Part C Plant
Part A Plant
Part B Plant
Assembly
Line
Mixed-Load
Pickup
Part C Plant
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THE DICE GAME
INPUT
Buffer
OUTPUT
Buffer
Unfair Dice which rolls
into either 3 or 4
6 Face Fair Dice
Average Capacity of
Each Step =
Average Capacity of
Each Stage =
Average Process Capacity
Average Capacity of The Process =
=
Play The Game
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The impact of inventory and variability:
Output of Match Game
195
2-face die
(s=0.7)
Output after 50 Runs
185
175
Series1
Series2
Series3
6-face die
(s=1.9)
165
Series4
Series5
Average
155
145
135
0
5
10
15
20
25
Starting Inventory in each Buffer
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Reducing waste: Increase Problem Visibility
Lower the Water to Expose the Rocks
Inventory
Missed Due Dates
Late
Deliveries
Too much paperwork
Engineering
Change Orders
Scrap &
Rework
Poor
Quality
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Too Much
Space
100% inspection
Long queues
Machine
Downtime
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Time plays the role of Inventory in Lean
Service Operations
TIME
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Toyota Motor Manufacturing, USA
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Toyota financial performance
Fig 1: The Economist, 2005. Fig 2: Barron’s 2004.
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Impact of Toyota Name on Resale Value
2002 Model
Year MSRP
2005 Resale
Value w/45K miles
Resale/
MSRP
Corolla
CE
$
12,568
$
10,050
80%
S
$
12,793
$
10,800
84%
LE
$
13,383
$
10,500
78%
Base
$
14,330
$
8,725
61%
Lsi
$
16,395
$
9,580
58%
Prizm
Resale values taken from Cars.com for average condition January, 2005.
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The Changing Cost of Warranty
Management
Warranty Problems per Vehicle vs. Warranty Costs
Warranty Cost Comparison
170
160
150
140
130
120
110
100
Warranty Cost per Vehicle
Problems per 100 Vehicles
Warranty Problems YR2001
Toyota
Honda
Nissan
GM
DC
Ford
(*)
(*)JD Power 1QS, May 2001
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700
600
500
400
300
200
100
0
Toyota
GM
Ford
(**)
(**) Business Week Article, June 25, 2001.
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Continuous Improvement: Kaizen
 Increase
visibility of waste
 Targeted improvements
– Active worker involvement
– Time for experimentation
– Supplier involvement


Exploratory stress
Human infrastructure
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Lean Operations:
Best Implementation is TPS
 TPS
is a production management system that aims for
the “ideal” through continuous improvement
 Includes, but goes way beyond JIT. Pillars:
– Synchronization
– Quality at Source
– Continuous Improvement (Kaizen): through visibility &
empowerment
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Learning Objectives
Lean Operations

Paradigm of Lean Operations:
Strive for the ideal by eliminating waste

Flow Synchronization
– Reduced batch sizes
» Level Mixed Production: Heijunka
– Pull production control systems (vs. push)
» Implementation: Kanban
– Layout: Cellular operations
– Quality at the source

Continuous Improvement
– Increase problem visibility (river analogy)
– Kaizen
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