Lean Thinking p104 - 202

Lean Thinking

P 104 - 202

From Thinking to Action: The Lean Leap

- nicks, scratches, damage, etc from moving machines from department to department during production can be eliminated by doing performing all activities in one place or eliminating inventory (which removes the steps of storing/moving in and out of inventory – which increases the possibility of damage)
- Long lead times encourage the sales force to figure out how to beat the system. One approach is to order on speculation and as a customer is found, alter the options requested (or even the base model) very late in the production process – resulting in more rework or slip the delivery date and build from scratch
- The factory may be pulled in opposite directions by 2 conflicting planning systems – master schedule worked out by the scheduling dept based mostly on sales forecasts and the ever changing demands from the sales group intent on pleasing actual customers
- Latter demands met by team of expediters moving through the plant with a ‘hot list’ – order long overdue for shipment or where the sale would be lost if the product was not reconfigured to the new specification.
- the more inventory you have, the less likely you are to have the one part you actually need
- Standard work: the best way to get the job done in the amount of time available and how to get the job done right the first time, every time. By design, either the whole cell is working or nothing is working. Every step of every job was soon charted by the work team and posted for everyone to see.
- Takt time: the # of orders to be made each day to meet the orders in hand divided into the # of hours in the day.
o Important point about takt time: when order do not require the full utilization of equipment and workers, takt time is increased
- Machinery is slowed down and each of the multi skilled workers in the cell performed several of the jobs in the cell while excess workers were put on other tasks
- when new cells are converted often all kinds of problems long submerged, suddenly emerge. More steps may need to be included into the standard work charts; poor tool maintenance may stop the cell, component supply to the cell may not be dependable. People’s support may diminish at this point.
o Someone may need to step up and let the workforce know they will stay and work to fix all the problems encountered with the new ___, but will not spend 1 second discussing the possibility of going back to the old system.
- 3 attributes are essential for any organization making the lean transition: taking the long view, technical virtuosity, and a passionate will to succeed. These may be possessed by a single individual, or shared by a group of leaders; eventually they must be shared by the whole organization
- promise no one will be let go b/c of the lean conversion. Instead, create a kaizen team from freed up workers, deployed to plan improvement of other activities. Perhaps putting the chief ‘fireman’ at the head of this team.
- After every improvement, the best (not the worst) workers in the revamped process are transferred to the kaizen team, making clear this is a promotion, not a punishment
- The steady growth in output due to the newly competitive firm will mean within a short period these workers will be needed again for production work
- Wages were increased, as workers became highly skilled. This also caused turnover to be reduced.
- **because each machine is now being made with ½ the formerly needed hours of human effort, a 23% wage increase is easily affordable
- for each product to be produced, the cell is given the name of the actual customer & delivery date
Rethink the product development process (one of the final steps)
- it will be necessary to grow the business dramatically in order to keep everyone busy
- expediter: person who slows down all other projects to get his through
- revitalize and expand product range to sell more in an established market you know well
- slash costs even further & dramatically improve quality and flexibility for the customer
- a corporate annual planning process identified the major projects to be developed that year & ranked them. A team of dedicated specialists was designated for the 2 top ranking projects. Other projects in engineering were dropped/deselected
- if all needed skills were available a working prototype for the top ranked project could be put together in a week.
- The major objections to dedicated teams – work flow is uneven, so some team members will be underutilized some of the time and teams will be in conflict for scarce skills needed at specific points in development – were overcome in 2 ways
o It developed that team members actually had much broader skills than they had ever been asked to use; They could quickly develop additional, narrow skills to address specific problems.
o A bit of careful scheduling could identify conflicts from on e team to the other and back
- Investment required: substantially zero
- Tools are moved around and reconfigured, by workers freed up from inefficient production tasks
Work as ‘Flow’
- workers in manufacturing cells move toward seeing the entire work flow from raw materials to completed machine. Takt time, standard work and visual control (including work charts for all tasks) give an immediate sense of how the work is proceeding. Multi-skilling and job rotation make full use of each worker’s skills & the frequent repetition of kaizen events gives an opportunity to participate actively in work design. The constant elimination of waste and the movement of workers out of work cells as more efficient methods are discovered mean the work is a constant challenge. There are few interruptions in the form of line stoppages and sudden demands to shift to a completely different task to deal with a crisis.
- The situation in the office is very similar; visual control in order taking makes it clear to everyone where the firm stands and the new order entry system in which one employee can perform the whole task makes it possible to bet immediate results. The kaizen process in the office melds thinking and doing, planning and acting
- Rethinking development work gives sense of feedback as everyone involved in a project works in the same space and projects move rapidly to completion. Previously, a majority of development activities were never completed because market conditions changed before the cumbersome development process could be concluded. Employees respond positively to gaining new skills and being encouraged to use all the skills they’ve always had. The lack of interruptions and conflict over which task to work on next has come as a great relief.
- **Lantech worked to revitalize itself by banishing batches and their associated waste from the design and production of a product whose sole use is to wrap: batches! Pat Lancaster embarked on a new strategic exercise to think through the nature of packaging his customers will need to in the emerging world of small lot production, single piece flow and right located facilities. He needs to be ready with the right sized, right tasked process machinery likely to be needed in the future in order to provide the desired value for the customer.
Harder Case: Wiremold
- MRP might have a 50% extra margin added to the safety stock calculation
- Reliance on enormous batches and mountainous inventories may mean they can tolerate slow tool changes and skimp on tool maintenance. If a tool is defective, there may be plenty of time to send it out for maintenance and get it back before actually running out of parts; tools may have deteriorated to a shocking extent without the management ever realizing what was happening – which will change once inventory is reduced.
- As a result of the exposure to new thinking, they gave no thought to going back to the old way, but instead set out to find someone who could implement the new way.
- GE – ‘make the month’ mentality where everything was evaluated on the basis of short term financial performance, where some think they may not be allowed to take the more difficult steps in creating a lean organization. In creating continuous flow there is often 1 step backward for every 2 steps forward, and instant result management culture may not be able to deal with it.
- conveyors (which are really moving warehouses)
- If I come to your plant, will you do whatever I tell you to do.
- “Just do it” mindset – how much improvement is possible in a given period of time will be fundamentally and permanently altered
- they were aware of the scene they causing; but on another level, they were prying him people loose from their bureaucratic, departmentalized, batch & queue past (moving machines in minutes, when many hadn’t been moved in years, and executives wouldn’t have dreamed of touching any machinery themselves) – they demonstrated how to create flow and what a few determined individuals can do.
- ‘president’s kaizen’ in which the presidents of all the companies and their operations vice presidents were required to participate hands on every 6 weeks in a 3 day kaizen event in a plant. They moved machines themselves and in many cases learned the realities of the shop floor and the ordering & scheduling system for the 1st time
- most change agents want to run their own show

Dealing up front with Extra People and Anchor Draggers
- excess people problem – offer early retirement package (generous), knowing once production development system working right, sales growth would absorb remaining excess people
- production people accepted offer but not enough office staff
- de-layering conducted, classifying every job in management as either
o value creating (defined as the ability of Wiremold to pass the costs of the job along to the customer)
o non-value creating (from the standpoint of the customer) but currently necessary to run the business (ex. The environmental expert helping the company meet government regulations, Type 1 waste)
o non-value creating and unnecessary (Type 2 waste)
- then classified each manager as either
o able to create value
o able to create value with some development of skills,
o unable to create value , even with development (usually due to unwillingness to change their attitudes about the organization of work)
- about 10% of existing management will not embrace the new system; some people don’t make the adjustment to eroding the hierarchy. It’s essential these anchor draggers find some other place to work or the campaign will fail.
- People in the 1st two categories were matched up with jobs in the 1st two categories to create a new organization structure with a new roster of players. Others were given a generous severance and within 30 days the new structure was in place. 1 outsider was recruited.
- He was determined to be generous with people while making it clear that in the future everyone must create value by working together in a different way.
- Then he called a meeting of the entire workforce to announce no one would lose their job as a result of the improvement activities that would start immediately. He was giving job guarantees to his union workforce without asking anything in return except that they be open minded to change.
- **Taking away the fear of job loss is at the heart of lean conversion.
- If you lay someone off after an improvement project, no one will be helping to complete another.

scan p133

- The single most effective action in converting an organization to lean practices is for the CEO to lead the initial improvement activities himself. If they are not willing to do this for whatever reason (fear of working hands on), they never really learn anything about change at the level where value is really created
- They have to get out of their old ‘by the numbers’ manner; big changes require leaps of faith in which the CEO must say ‘just do it,’ even when it seems contrary to common sense.
- If the CEO spends time in real operations learning just how bad things really are and begins to see the vast potential for improvements, he will make the right decision more often.
- conducted 2 day sessions on lean principles for 150 employees followed immediately by 3 day kaizen exercises so employees could use the skills they had just learned.
- Then take managers and union heads together and a walk through the plant and through engineering & sales departments. There will be waste everywhere and they will now be able to see it. Tell them they will convert every process into continuous flow and we will learn about pull.
- Results can be achieved very quickly – if you can’t get a major improvement in 3 days, you are doing something wrong.
- Once this mentality is reinforced by results, and employees begin to believe management’s guarantee that no job will ever be lost due to improvement activities – improvement can become self sustaining.
- Smash departmental barriers to focus everyone’s efforts on the value stream by creating dedicated production teams for each product family. Individual departments are eliminated (purchasing, manufacturing, scheduling (MRP) groups, engineering departments, stamping, rolling, molding, painting, assembly, etc.), and personnel are reassigned to product teams provided with all of the resources needed to produce a specific product family.
- The team leader, product planners, buyers, factory engineers, production supervisors, production associates, etc are all co-located on the factory floor immediately adjacent to the realigned machinery producing in single piece flow cells
- The group is given everything it needs to be self sufficient, eliminating dependency upon a department or the departments need to follow the master schedule, eliminating excuses due to equipment needs
- Due to the shock white collar workers may experience if they think themselves to hoity-toity to be around factory workers, it may be beneficial to implement a casual dress code. ‘neckties cut off circulation to the brain and inhibit teamwork’
- Office workers may somehow feel their appearance rather than their skills and contributions made them feel special –
- Reassignment to product teams may also be a shock to the process specialists like machinist department who may have traditionally hoarded their tricks of the trade
- But everyone soon comes to like the new process as they can actually see the value flowing
- traditional standard cost “absorption” accounting allocated costs by labour and machine hours in accordance with mass production thinking. Production managers know they have to “absorb” allocated overhead by spreading it over as many machine and labor hours as possible, giving an incentive to keep every worker and every machine busy – to make numbers – by producing inventory, even if the inventory consisted of items which would go unpurchased.
- Acitivity Based Costing is based on cost drivers, which is really just a different way of allocating overhead. There is still too much allocation of aggregated costs downward, when things should be working from the bottom up
- Better thinking is to organize production by product families, then let each product team do its won purchasing and buy all its own tools. A simple system can be devised to assign real costs to each product line. Product specific cost analysis. Only a small fraction of cost is an allocation outside the control of the team, specifically occupancy costs for whatever space the team is using in a plant. Even in this case, the team is charged only fo rhte space it actually uses, so costs can be reduced by using less
- Wiremolds new ‘scoreboard’
o Productivity of the product team (sales per employee)
o Customer service (% of products delivered on time)
o Inventory turns
o Quality (# of mistakes made by the team)
- These things are prominently posted for all to see at all times. To improve, smooth flow of products through the system, with no backflows for reworking quality problems, no scrap, no in process inventories. Productivity is measured as end market sales per employee
- Expectations
o Reduce defects, as shown in the quality indicator, by 50% every year
o Improve productivity, expressed as sales per employee in constant dollars, by 20% every year
o Deliver 100% of the product exactly on time
o Increase inventory turns to a min of 20/yr
o Increase profit sharing to 20% of straight wages
- Variance analysis is performed (but not based on standard costs); when trend line diverges from performance targets, team collectively searches for the root cause of the variance rather than manoeuvring to make the numbers.

- teach every employee the principles of lean thinking (identifying the value stream, flow, pull and the endless pursuit of perfection, plus lean techniques (standard work, takt time, visual control, pull scheduling, single piece flow)
- and periodically re-teach them
- Middle mgmt may feel threatened by the transition and the removal of all safety nets. When in doubt they will take you right back to making batches and building inventories unless you reinforce the message through continued teaching, coupled with continuous hands on improvement exercises
- Union rules – restricting stampers to stamping etc, make it impossible to introduce flow &improve every activity, so he went to the union after initial retirement offers accepted and offered job guarantees for the remaining workers in return for their cooperation in working in a new way
- People may be wary of ironclad job guarantees; they may say what if your sales fall off? 5 lines of defence before showing people the door
o Reduce overtime
o Put the extra people on kaizens (to get future payback
o In source some components from marginal suppliers we plan to drop anyway (remembering that our equipment is now highly flexible
o Cut the workweek across the board
o Most powerful: develop new product lines to grow the business
- The employees are all now highly skilled and you don’t fire skilled people due to short term business fluctuations
- every manager in an org must understand the basic activities of that org, notably product dvlpmt, production operations, and sales/scheduling, and the only way to learn was intense exposure to systematic principles
- Ask – what business are we really in? Review ongoing dvlpmt programs and deselect those which do not support a specific business
- Remaining are placed in a product plan, showing their target dates for introduction
- A 3 person team (marketer, designer/product engineer, and production/tool engineer) is sent to talk directly with prospective customers in the building design and construction community to come up with a broad definition of the product through an initial QFD process
- A multifunctional team is formed to develop a detailed product specification in engineering language, co-located in a dedicated space and included the team leader from the appropriate product family, the production planner, the production/tool engineer (from original team) and a buyer. They are told to achieve a target cost determined by estimating the market price and subtracting an acceptable margin.
- Thinking about manufacturability has been present from the beginning.
- No distinction between this ‘business process’ – order taking, scheduling, delivery - And the firms’s physical production
- The shipper withdrew parts fromt eh rack and pushed empty parts containers down a return chute, the only signal for the product team to make of a given part
- Reward workers for good results through a profit sharing plan funded with 15 % of pretax profits, paid quarterly by check, and was committed to increasing this to 20%
- Reduce the # of suppliers; take time with each remaining supplier to improve its performance; start with the most critical suppliers
- After improving suppliers, expect something in return for your trouble, like negotiating a range of special services
o Such as absorption of materials cost increases for extended periods and extra short runs for certain low volume applications

Growth Strategies
- Regarding supplying needs in-house: ask yourself, ‘What physical activities can we incorporate directly into a single piece flow production process?’ Doing this also reduces the # of suppliers, making improvement of the remaining suppliers easier.
- Growth strategy: buy up small firms with allied product lines (and who use batch & queue methods) in order to increase the scope of your product offerings.
- Look for companies who’s family management can no longer run them successfully and want out, then consolidate them into your operations (where you’ve freed up room on the floor).
- Rapid introduction of new products, utilizing the new product development system
- Your fundamental strategy is the rapid introduction of lean techniques into production, order taking and product development
- during tough times, companies may dip into their inventories of parts to repair rather than ordering new
- consider setting up a company within a company, borrowing from owners and using underutilized plant space and tools
- attract the most experienced engineers in the industry
- raw material is received through the front of the shop and flows through the various manufacturing departments to the shipping area at the rear
- Traditional manufacturing: in the event no problems were found, it was shipped – this final safety net created an ‘assemble it, then tinker until we get it right’ mentality
o They do what comes naturally in engineering cultures far removed from the customer by endlessly reengineering designs in search of novelty and a better solution, no matter how slight the performance gain. Often this results in quite different production methods for practically identical parts, making their manufacture with the same tools in a common flow cell & business unit impossible.
o Solution – if any engineer wished to adopt a new design approach differing from the norm, it was his responsibility to convince the relevant team it is superior, reducing the # of schemes proposed. & saving costs
- Our lean sensei’s central contribution was to change permanently our sense of what was possible and in what time frame.
- Second change agent brought in, Krapek, one he knew would steamroller any obstacle to get the job done. He is the most relentless executive at following up in the world today.
- It’s impossible to introduce lean, flow concepts piecemeal and in an organization where the senior management doesn’t understand them and where the very structure of the organization doesn’t support them.
- determine by evaluation which physical activities should be performed
- Product Centers – one for each category of parts plus an eighth perhaps for final assembly
- Most employees reassigned to the product centers
- All of the production work involved in making a (rotor) could be conducted in nearly continuous flow in one large room\
- Unions must accept the notions of multi-skilling, job rotation, multi-machine operation, and continuous movement of jobs and work between plants to accommodate a changing value stream.
o And the hourly headcount would be reduced permanently, flexible working and active participation in job design and the development of standard work would be the new norm, and the state would help with retraining any of the displaced workers.
- Managers who earnestly try should be retained, even if it requires moving them to other jobs within the company
- To make a lean transformation happen in an extraordinarily in grown org, it may be necessary to replace a much higher fraction of the mgmt
- A lean room can be surveyed entirely from the front door
- assessed the headcount and determined he would never need more than 60% of the workers. Surveyed the line management and found a substantial fraction would never be able to work in the environment he planned. A onetime headcount reduction and rapid mgmt changes quickly produced a personnel level he know he could defend and a mgmt team he could lead
- value stream map, reconfigure business units so they precisely channelled the flow of value for each product family, and reconfigure every machine so it could be moved easily at any time by the workforce.
- Then move machines into cells laid out in the same sequence as processing steps so single piece flow occurred in as many cases as possible.
- Monument: any machine which is too big to be moved and whose scale requires operating in a batch mode (ex. Hub airport, centralized computer, centralized engineering department)
- Planners often believe extremely long runs of parts would be possible, permitting completely automated mass production – but in practice they need to make small #’s of a wide variety
- Example of obsolete thinking: The twin objectives of speeding up the actual (grinding) – what you might think of as a ‘point velocity’ within a lengthy process – and the desire to remove all hourly workers because of their ‘high’ cost per hour both miss the fundamental point. What counts is the average velocity (plus the length of the value stream) and how much value each employee creates in a typical hour
- Make only what is needed when it is needed.
- Cut headcount at the outset to a level which can be sustained for the long term, replace managers who can’t adjust to the new system, standardize work, and deal with quality problems so work can flow continuously. Then introduce continuous flow.
- Quality Assurance can become the classic corporate superego or nagging nanny, checking up on production employees to make sure they hadn’t taken shortcuts on quality in order to meet production targets; creating a negative, reactive reputation for quality assurance.
o If also meant production managers refer any alleged quality problem to a series of material review boards, which decided long after the problem was first noticed whether parts rejected by quality assurance were acceptable to ship
- Only 150 employees were retained for this function, the rest being assigned to business units on the plant floor to directly resolve quality issues as they arose.
- …if Otis couldn’t compete with Japanese firms in Japan, we would eventually lose to them elsewhere
- It is necessary for senior executives to realize they will need to take steps backward along with steps forward and the trick is to hold an absolutely steady course.
Scan p 186 chart
- it will be necessary to eliminate the waves of sales, followed by droughts, which make it impossible to run (Pratt) on a level schedule even though end user demand (airline passenger miles) is very stable.
- As costs fall, freeing up resources for new initiatives, it is much easier to see what to do next, including up-skilling your workforce; fundamentally different cost structure for existing operations will often suggest a very different strategy from what would have been pursued if the old cost structure had been taken as a given
- Even when this is done, strategic issues will remain of whether the aircraft engine business itself is viable and how the company will need to deploy its activities around the world to better correspond with its markets of sale. One promising path is to rethink whether (Pratt) is in a product or service business, and the dramatic reduction in costs plus lean thinking may make it possible for (Pratt) to take the engine overhaul and maintenance business away from independent repair firms and from the hard pressed airlines as well. For example, can flow thinking make it possible to perform a complete engine overhaul overnight at a (Pratt) facility so that planes never need to be out of service and airlines do not need to keep large stocks of space parts plus a considerable number of spare engines.
German firms – intense focus on the product itself, its superior performance being the firm’s most important concern.
American firms – typically run by executives with a financial background who were comfortable dealing with public equity markets.
Japanese – senior executives tended to have had experiences in a variety of functional areas within their firms.
Porsche – brilliant product engineers who believed strongly that the firm with the best product, designed by the best engineers, would win in long term competition.
- Porsche carried a second business as an engineering consultancy. Auto companies & parts makers often wanted help on narrow technical problems. The knowledge base to address these problems. The knowledge base to address these problems required deep depositories if know how in each department, ready for sale to outside organizations.
- Porsche was primarily interested in the contribution of purchased parts to the performance of the car, not in their cost, the frequency and reliability of deliveries, or the % of defective parts. (plus performing 100% inspection on incoming goods in a vast warehouse b/c lack of skills to help suppliers improve production operations).
- The ability of the workforce to rectify technical problems was probably unmatched anywhere in the world due to the high skill level of workers
- Designs were high on performance and low on manufacturability. Far from protesting, the skilled workers resolutely shouldered the burden of making unmakable designs, often by means of lengthy adjustments and fitting of parts.
- The operating was to quickly put all of the parts on the car, then test highly skilled troubleshooting and rework process which eventually produced a product with a world class low level of defects as reported by customers.
- After having everyone read The Machine.. and arranging for a study tour of Japan, he remembers the 1st shock was the Japanese car companies they visited were willing to show them everything – no one in the Japanese auto industry considered us serious competition and so they were very open. This was a major affront to our self image, terribly discouraging.
- Following trips to Japan (4+) included managers and shop floor workers, and members of the union).
- Kaizen Institute
- A defect detection and reporting system was instituted so everyone in every area of production could see immediately where mistakes were occurring and what was being done about them.
- Suggestion system where work team members were rewarded for submitting suggestions for improving both quality and productivity.
- Group leader reviewed suggestions immediately and took responsibility for implementing them quickly. Suggestions per employees rose from 0.06/year to 12.
- Set measurable targets, monthly and annual, for each cost center and for each work team along 4 dimensions:
o Cost, measured by reductions in hours of fabrication and assembly effort, and reductions in the amount of rework, scrap, and breakdown time for machinery.
o Quality, measured as the # of 1st time through defects per component or per vehicle and defects discovered in the final road test of each vehicle.
o Logistics, measured by on time delivery to dealers, on time delivery of parts to the next manufacturing operation, and reduction sin inventory levels
o Motivation, measured by suggestions per employee, housekeeping , absenteeism, accidents, and PVP workshops and training hours per team
- A drastic improvement activity must be conducted in (engine assembly) along with many other places and that these must start immediately, indeed that day.