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Lean Thinking

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- gambles on product technology are unnecessary as long as the company can quickly match any successful innovation by more daring competitors. Toyota can quickly copy the products others pioneer and win decisively because it continues to pioneer brilliant processes its competitors have taken halting steps to copy.
- may of the most effective change agents succeed in the long term because there is someone behind them putting a rigorous system of lean processes in place, someone who can take over and push improvement continuously ahead when the change agent leaves or moves on to other issues
- for firms with access to a master sensei, invest early in systematically writing down the knowledge of the sensei and inquire about the big picture before too many process kaizen events are lined up. [the sensei has a detailed master plan of how all the parts will eventually fit together to create a complete lean production system, not usually revealed at the outset. Initially the most valuable aspect of the sensei’s exercises is the raised consciousness of the managers involved in the change process and their enthusiasm for tackling other problems using the knowledge they are slowly acquiring.]
Map your Value Stream
- The objective in each case is to write down all of the steps in the process as it currently operates to define what we call the Current State. For each step we urge managers to ask a set of very simple questions. Dows the step create value for the customers? Is the step capable? (Does it produce a good result every time?) Is it available? (Can it produce the desired output, not just the desired quality, every time?) Is it flexible? (Can it be changed over quickly from one product to the next so that items can be produced in small lost or even lots of 1?) Is capacity for the step adequate so the product doesn’t need to wait on the process? Or is there too much capacity (due to designing equipment in large increments of capacity based on demand forecasts that are often wrong?)
- Steps not creating value should be eliminated; steps that are incapable, unavailable, inflexible, inadequate and under or over capacitized should be perfected. The relation between the steps is also important. Does the information coming back from the customer flow smoothly without delays? Does the product moving toward the customer flow at the desire of the customer rather than at the push of the producer? Is demand levelled at each stage so small perturbations are smoothed rather than amplified?
- By writing down all the steps as a team, it’s possible for everyone to see the whole value stream under discussion and to agree on its current level of performance

Scan p317

- the current state summarizes the performance of the steps, shows the inventory currently accumulating between them, compares value creating time (very small) with total throughput time (large), and helps managers envision the initial flow kaizen needed to drastically compress the through put time for the product, eliminate wasted steps, and rectify quality, flexibility, availability, and adequacy problems.
- In this case, the specific steps required are to improve the capability (1st time quality), availability (uptime), and flexibility (changeover time) of the 4 weld and assembly steps and to eliminate inventories impeding flow by turning the 4 steps into a cell. Setup times of the stamping press are greatly reduced to permit the production of much smaller batches, further reducing inventories.
- The Material Requirements Planning (MRP) system previously giving production orders to every step in the process is disconnected, replaced by a simple pull system sending kanban signals from the heijunka box (demand levelling device) at precisely paced intervals.

Scan p319

- It is always possible to make further progress by designating the future state, once achieved, as the new current state and beginning the improvement cycle again.

Scan p 320

- to get the attention of self-absorbed functions, it can be helpful to change reporting arrangements and move personnel under a product line manager or team leader, at least for one product generation.
- More mature lean firms get brilliant results from giving the value stream manager complete responsibility for the value stream and the success of the product but hardly any direct reports or traditional authority.
- Instead the value stream manager develops the vision for the product, determine the current state of the value stream and envisions the future state. He treats the functions as the suppliers of the essential inputs (engineering, operations, purchasing, sales, lean knowledge) needed to reach this state. If the function fails to perform, the value stream manager goes directly to the COO or director of the office of value steam managers to describe the problem, get to the root cause and install a fix
- Product line manager overseeing an entire product may work with a number of value stream managers at lower levels taking responsibility for different courses of the value stream. For example, a chief engineer (toyota’s term for a product line manager overseeing an entire automotive platform) works with a development leader in design, a value stream manager in the assembly plant, and value stream managers in each of the component plants working on major items assembled into the finished product. Each manager is essentially doing the same job but with varying scope – wide at the top and narrow at the bottom.
- With mature lean firms, the value stream manager is the critical player in the org. Once the functional departments are enlightened, it is not needed to change the organizational chart and move people onto product teams for each new product family. Instead, the value stream manager explains to the functions what they need to do as his suppliers to ensure the success of the product. And they do it
- Lean promotion function should be created to house the functional expertise from old fashioned industrial engineering, quality, and maintenance departments. Once differing vocabularies and professional rivalries are stripped away, all these experts are in pursuit of the same goal: the perfect process.
- The challenge is to create a dialogue between all experts so the value stream manger gets consistent, quality advice in a single voice.
- The lean promotion office should be small, except for periods when excess employees from line jobs are being redeployed and put to work on short term kaizen projects. It needs only a few experts who are willing to master all the knowledge and methods needed to create perfect value streams and to teach this knowledge, as necessary, to value stream managers and line employees.
- When you’ve fixed something, fix it again.

Policy Deployment
- forces you to make decisions about what is really most important for the organization and what is truly achievable. It also exposes the contradictions between the plans of every unit of the organization as these affect the other units.
- It can only be led by the senior executive
- The actual plans emerging from policy deployment exercises have been found to be good for about 3 months only. Remember a principle: a value creation system must be flexible and responsible because forecasts are always wrong.
- Planning is invaluable but plans are worthless.
- Going through the process forces everyone in the organization to understand the needs and constraints of everyone else and greatly heightens consciousness about the most promising future path even if the specific course of action chosen during the process needs frequent modification.

Scan p328, 330, 331, 332

- locate engineers next to the point of production to gain the many benefits of co-location

Lean Math

Think about the location for producers currently in high cost areas.

- start with the piece part cost of making your product near your current customers in high wage countries
- compare this # with the piece part cost of making the same item at the global point of lowest factor costs, probably dominated by wage costs. (the low factor cost location will almost always offer a much lower piece part cost)
- add the cost of slow freight to get the product to your customer.

This completes the math many purchasing departments seem to perform a.k.a. mass production math.
For lean math add some additional costs to piece part plus slow freight costs to make the calculations more realistic:

- the overhead costs allocated to production in the high wage location, which usually don’t disappear when production is transferred. Instead, they are reallocated to remaining products, raising their apparent cost.
- The cost of the additional inventory of goods in transit over long distances from the low wage location to the customer.
- The cost of additional safety stocks to ensure uninterrupted supply.
- The cost of expensive expedited shipments (you’ll need to be careful here because the plan for the item in question will typically assume that there aren’t any expediting costs, when a bit of casual empiricism will show there almost always are)
- The cost of warranty claims if the new facility or supplier has a long learning curve.
- The cost of engineer visits, or resident engineers at the supplier, to get the process right so the product is made to the correct specification with acceptable quality.
- The cost of senior executive visits to set up the operation or to straighten out relationships with managers and suppliers operating in a different business environment. (this may include all manner or payments and considerations, depending on local business practices)
- The cost of out of stocks and lost sales caused by long lead time to obtain the correct specification of the part if demand changes
- The cost of remaindered goods or of scrapped stocks, ordered to a long range forecast and never actually needed.
- The potential cost, if you are using a contract manufacturer in the low cost location, of your supplier soon becoming your competitor

These additional costs are hardly ever visible to senior executives and purchasing managers who relocate production of an item to a low wage location based simply on piece part price plus slow freight.

3 more costs to complete lean math, which are hard to calculate but sometimes very large:

- currency risks, which can strike quite suddenly when the currency of either the supplying or receiving country shifts
- country risks, which can also emerge very suddenly when the shipping country encounters political instabilities or when there is a political reaction in the receiving country as trade deficits and unemployment emerge as political issues
- connectivity costs of many sorts in managing product handoffs and information flows in highly complex supply chains across long distances in countries with different business practices.

Lean Math typically says products fit into 1 of 3 categories:

- for products where rapid customer response can substantially raise sales and selling prices (probably including the higher end shoes produced by the firm just mentioned), work hard to conduct every step of the production process as near the customer as possible. In many cases, the full application of lean techniques to production steps that are located immediately adjacent – a process we call value steam compression – can produce an acceptable combination of higher revenues and lower costs in a high labour-cost location

- for products that are more price sensitive but where rapid customer response is stell important, to co-locate all steps in the design and production process – that is, complress the value stram including engineering –at a low labour cost site within the region of sale. For US & Canada – Mexico, Western Europe – Eastern Europe. By using trucks, which are fast and cheap, rathe than boats, which are cheap but slow and often require fast but expensive airfreight backup to deal with inaccurate forecasts, it is steill possible to replenish products in 2 or 3 days as they are sold or consumed rather than waiting weeks or maintaining large just in case stocks near the customer.

- Finally, for commoditized products that have a fairly high value to weight ratio and where demand can actually be forecast due to stable sales point, even outside the region of sale. (The best approach is to compress the value stream to conduct as many steps as possible, including engineering, at the low cost point, requiring only a single transport link to move the finished item from the point of design and manufacture to the market of sale.)

- Still bearing in mind currency risks (rapid), country risks (of trade protection in the receiving country and political chaos in the shipping country), and connectivity costs (ranging from air freight expediting to unplanned engineer visits to the other side of the world to deal with quality issues) that are inherent in managing decompressed value streams. When all factors are weighed, the 3rd category is much smaller than most managers currently think.

- depending on the problem, auto mechanics are independent extensions of the failed quality assurance teams (of auto manufacturers)

- use the same method to separate workers, to separate suppliers

- 3 types of attitudes towards lean: All about lean, I’ll wait and see, I won’t change


Chaku-Chaku – load – load
- operator proceeds from machine to machine taking a part from the previous operation and loading it in the next machine, then taking the part just removed from that machine and loading it in the following machine, etcetera
Five S
- Seiri – organization - separate - tools, parts, instruction from unneeded materials and remove the latter
- Seiton – tidiness - sort – neatly arrange and identify parts and tools for ease of use.
- Seiso – purity - conduct a clean up campaign
- Seiketsu – cleanliness - means to conduct the last 3 frequently intervals to maintain a workplace in perfect condition.
- Shitsuke – discipline - form the habit of always following the 1st four S’s

Five Why’s
- asking why 5 times whenever a problem is encountered, to identify the root cause of the problem so effective counter measures can be developed and implemented

Heijunka – production smoothing

Hoshin Kanri – policy deployment – a strategic decision making tools for a firm’s executive team that focuses resources on the critical initiatives necessary to accomplish the business objectives of the firm. By using visual matrix diagrams similar to those employed for quality function deployment, 3 to 5 key objectives are selected while all others are clearly deselected. The selected objectives are translated into specific projects and deployed down to the implementation level in the firm. Hochin kanri unifies and aligns resources and establishes clearly measurable targets against which progress toward the key objectives is measured on a regular basis

Jidoka – autonomation – transferring human intelligence to automated machinery so machines are able to detect the production of a single defective part and immediately stop themselves while asking for help, allowing one operator to over see many machines. With proper use jidoka employees could be performing preventive maintenance and routine housekeeping or tending to logistics.

Kaikaku – radical movement to remove muda

Kaizen – continuous, incremental improvement
Kanban – card regulating pull
Keiretsu – group of firms
Poka-yoke – mistake proofing device/procedure

Seven muda
- overproduction ahead of demand
- waiting for the next processing step
- unnecessary transport of materials
- overprocessing of parts due to poor tool and product design
- inventories more than the absolute minimum
- unnecessary movement by employees during the course of their work (looking for parts, tools, prints, help, etc.)
- production of defective parts.


Ohno’s defect list
- defects (in products)
- overproduction of goods not needed
- inventories of goods awaiting further processing or consumption
- unnecessary processing
- unnecessary movement (of people)
- unnecessary transport (of goods)
- waiting (by employees for process equipment to finish its work or on an upstream activity).

Transparency is used as an alternative to visual control to indicate the need to everyone to see all of the activities occurring along a value stream flowing through many departments, functions, and firms. Visual control carries the connotation of top down control of employees and facilities, which is the antithesis of lean thinking.

Cycle Time – the actual amount of time needed to complete a given task and move it along to the next step in production. All tasks must share the same cycle time to achieve flow. For takt time of 60 seconds, all tasks must be completed in 60 seconds or less.

MRP hides the parameters of batch sizes, throughput times, and capacity managers should be seeking to improve on every day. The internal logic of the production algorithms is so complex it is impossible to tell intuitively and visually that production was off track until a crisis emerged.

Eliminating waste and creating value requires a systematic approach and endless attention to detail.

To make the system itself incapable of crating peaks and troughs in orders unrelated to end customer demand, Toyota has installed a series of filters into each level of the ordering system that allow only those orders to be passed on that correspond to the normal ordering pattern for that dealer or PDC. Orders outside these limits must be explicitly authorized by head quarters before they are accepted, to eliminate both clerical mistakes and panic orders based, for example, on rumours of shortages or of imminent price increases. (a poka-yoke device in the ordering system to filter out noise)

Deploying air and electrical lines from the ceiling every few feet sot that any machine could be moved anywhere on the floor and hooked up immediately.

In a desperate but largely successful effort to sustain buyer interest until new models could be introduced, Porsche began to launch a variant of the 911 every 6 months. This kept Porsche’s name in the auto enthusiast magazines because journalists seemed incapable of resisting the offer to test drive “the new Porsche” even if the newness consisted only of minor modifications such as a Targa top or refined transmission.

Technical descriptions of how to evaluate jobs for fatigue and stress can be found in “On the Development of TVAL (Toyota Verification of Assembly Line) and Its Applications.” Toyota City: Toyota Motor Corporation, 1994
“Development of Assembly Line Verification” Society of Automotive Engineers Technical Paper 940890, 1994.
Both by Yoshinori Eri, Atsushi Nimi
- papers recommended to anyone implementing lean techniques, particularly in factory settings.

Learning to See. Rother & Shook. 1998
How the world has changed since the machine that changed to world. Womack. 2000.
Both Brookline Mass.

The Toyota Production System. Operatons Managemetn Consulting Division and International Public Affairs Division, 1995

Mihaly Csikzentmihaly. Flow: The Psychology of Optimal Experience. 1990.
The Evolving Self: A Psychology for the Third Millennium. 1993. both New York HarperPerennial