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Lean - What Executives Should Know

time:2017-5-2 read:1350
Executive Summary
Lean can provide substantial benefits – but executives can be confused by the  replica rolex jargon and the benefits and potential issues. Executives can lead appropriately once they understand what benefits to expect, what experts to respect, and what cautions and red flags to inter replica handbags cept and deflect. A simple test can help determine whether Lean, Six Sigma, or Design for Six Sigma will be the most beneficial in addressing the organization’s constraint. Lean is the most beneficial if manufacturing cycle time, inventory, or other wastes are holdin louis vuitton bags on sale g the organization back. A few cautions are introduced, along with some lean terminology – must of it derived from Japanese terms used in Toyota.  Some key Lean tools and best practices either associated with or venturing to advanced industrial engineering methods that extend beyond Lean methods are briefly introducted.

Lean, Six Sigma, Lean Six Sigma, Lean Sigma, Design for Six Sigma, Design for Lean Sigma, DMAIC, DMADV, DMADOV…when a leader wants to drive his or her organization to the next level and beyond, the terminology is often confusing. Some experts almost seem to be exploiting the confusion to sell you the approach that, coincidentally, is what they specialize in.

Let’s look behind the foggy curtain and clearly – and simply - define the terminology, provide a simple test to decide what is most appropriate for your organization as it stands today – and use that understanding to plot a course that will succeed in meeting the expectations you’ve set.

A Simple Test
Looking at the business that includes your manufacturing line, what is holding you back? What is holding back your financial results now, and restraining you from achieving your vision for the future?  With these simple questions, you and your leadership team are applying Eliyahu Goldratt’s Theory of Constraints from an enterprise perspective.
Once the executive team has identified the constraint – perhaps with a good deal of analysis from the financial accountants – that constraint can lead to selecting an appropriate approach to overcome the constraint:
-  If the constraint is in manufacturing or the broader supply chain, then the Lean methods can provide substantial benefits. Symptoms of this type of constraint include having more demand than you can satisfy, reducing your market share primarily because you are too slow to fulfill orders and/or have insufficient capacity to handle the demand.
The factory is running near capacity, but things are getting clogged up, cycle times are high and rising, and you are searching for space – for space to store ever-increasing work-in-process inventory.
-  If the constraint is in yield or defects (or quality or reliability) on existing products, then the Six Sigma / DMAIC (Define – Measure – Analyze – Improve – Control) methods can help teams focus on finding and clearly defining the issues, and then improving the situation by reducing variability or reducing defects, and sustain the improvements. The issue will often show up in Cost of Quality metrics, but also in rework loops and low yields.
-  If the constraint is in marketing or product development, then the DFSS approach may prove valuable. In this situation, your manufacturing is running at lower utilizations or percent of capacity than you would hope, because customers are not rushing to buy your products and perhaps see your products as “me too” compared to your competitors’ products.

Later articles will clarify what is meant by Six Sigma (DMAIC) and Design for Six Sigma (DFSS);  this first article will focus on Lean.

The term “Lean” almost sells itself. After all, who doesn’t want their business to be Lean.. Lean and Mean! …a Lean Mean Profit Machine?
Lean originated as the Toyota Production System. It was a set of methods and a thought process that was very successful at Toyota, and often provides similar benefits to manufacturing (and non-manufacturing areas). The term “Lean” was coined and rapidly adopted in the USA.

While the term “Lean” might imply that cost reduction is the primary focus for these methods – Lean is actually focused on reducing waste, and thereby improving manufacturing cycle time or lead time.

Lean identifies several types of wastes (see Table 1), but a key focus is on inventory reduction – because a reduction in Work-In-Process (WIP) inventory leads directly to a reduction in Cycle Time…as described by Little’s Law:
Cycle Time = WIP / Throughput

Table 1 –  Seven Types of Waste (“Muda” in Japanese)

Inventory (all components, work in process and finished product not being processed
Transport (moving products that are not actually required to perform the processing)
Motion (people or equipment moving or walking more than is required to perform the processing)
Waiting (waiting for the next production step)
Overproduction (production ahead of demand)
Over Processing (resulting from poor tool or product design creating activity)
Defects (the effort involved in inspecting for and fixing defects)

Caution 1:  In many standard Cost Accounting systems, Inventory appears on the Asset side of the ledger.  Just when the team implementing Lean on their first pilot effort and are happily celebrating their brilliant first success in reducing WIP inventory  - and you are celebrating their success… the accountants may be point out that the reduction in inventory has been reflected in unfavorable financial results -  due to a sudden drop in assets.
Caution 2: Several Lean methods are focused on “low hanging fruit”. They provide short term, often dramatic gains…but, eventually, the team may have picked the fruit and begin wondering “what comes next”.

Shortly before this point of diminishing returns seem often to be the precise moment where the expensive consultant will present the bill, smile a dazzling smile,  and hurry off to the next manufacturing company replete with a virtual cornucopia of fruit strewed over the field of clovers.
Caution 3: Lean experts tend to adopt Japanese terminology, which seems to convey a sense of mystical knowledge. Terms like “Muda”, “Kanban”, “Gemba”, “Hoshin Kanri”, “Poka Yoke”, and “Kaizen Events” begin to weave their way into the otherwise cheery brogue of normal conversations.

Lean Terminology - from Japan
Here is a quick translator for each of these terms:
· Muda – Waste (see the table of 7 types of waste above)
· Kanban – One method of implementing a “Pull System”, whereby material requisitioned from a prior step using a system of cards reflecting the need to pull material from the prior operation.

Noteworthy insight:  The book, Factory Physics, documents studies that have shown that the benefits of a “Pull  System” can be achieved without the complex system of cards, but by simply setting an appropriate maximum level for the WIP. The authors refer to this simpler approach as “CONWIP” for “Constant WIP” or Constant Work-in Process.
· Gemba (or Genba) – this word translates to “the real place”; this commonly refers to visiting the manufacturing floor to see what’s really happening and to gather information.
· Hoshin Kanri – a Japanese term that corresponds to strategic planning or strategic deployment.
· Poka Yoke – the original term apparently was “Baka Yoke”, which translates to “Idiot-proofing”.  There is a story where Shigeo Shingo, the inventor of many methods in the Toyota Production System, used the term “Baka Yoke” when he was in a manufacturing area, and one of the workers became upset, taking it as if the great Shigeo Shingo had called her an idiot. The term was rapidly replaced with the more diplomatic term, “Poka Yoke”, which means mistake proofing – or, more precisely, preventing inadvertent mistakes. The goal of Poka Yoke is to develop simple, inexpensive methods for a step in the manufacturing process such that it is either impossible, or very difficult to make a mistake in the first place…and/or if a mistake starts to occur, it will be detected immediately and rectified.
· Kaizen Events – the term “Kaizen” translates as “change for the good”. A Kaizen Event or Kaizen Blitz is not an unfortunate juxtaposition of terms from former axis powers in World War II, but rather a description of a structured meeting of people involved in a manufacturing process with a focus on process improvement. Often times, many of the most effective cost reductions come out of a Kaizen Event.

Best Practices
While many of the tools in the Lean toolkit are derived from the Toyota Manufacturing System, some have roots from the assembly line concepts developed at Ford Motor Company in the early 20th Century, and others from general Industrial Engineering best practices.
The latter includes the concept of Standard Work, while the former includes concepts now adopted as “TAKT time” to synchronize manufacturing steps to the demand rate.
Tools related to factory layout include:
-  Spaghetti Diagram, in which the team measures the actual distance material travels from start to finish ….often a surprisingly long distance. The team then considers alter, na, te layouts for the factory floor which reduce the total distance traveled by the material.

-  Value Stream Mapping (VSM), a rather useful process map that shows important information like where Inventory is held, and translates the quantity of material to the time the material must waits in inventory before being processes. The sums of value-added time and non-value added time, and total manufacturing time are summarized, and the opportunities , to shorten total manufacturing time are often clearly explosed through this step.
Some Lean experts claim that Value Stream Mapping was a relatively minor tool for the Toyota Production Systems, but it has been found remarkably useful for many manufacturing and non-manufacturing processes.

-  5S – which stands for 5 Japanese terms that have an S-like initial sound. These 5 Japanese terms translate into a sequence of steps that help make the factory floor more….clean.  Yes, 5S is basically a step-by-step formula for cleaning up the factory floor, and putting everything into its appropriate place, and removing things that don’t belong on the factory floor.
Some companies have extended the Lean concepts to more advanced methods from Industrial Engineering – such as concepts from the book, Factory Physics, which include equations and graphs that allow a company to quickly assess how well the factory is performing on key metrics compared to the Best Possible Case, Worst Case, and Practical Worst Case. Sophisticated methods such as discrete event simulation (using Simul8, for example) allow the team to explore alternative methods on a simulator before embarking on the rather expensive and often somewhat problematic steps of trying ideas out on the factory floor.
Some of these more advanced methods will be explored in future articles.

Brief Conclusion
Armed with some insight into the methods, terminology, benefits and pitfalls of Lean manufacturing approaches, executives can cut through the jargon and confusion to explore the value of Lean to their business.

James Womack, Daniel Jones, Daniel Roos, The Machine That Changed the World : The Story of Lean Production, Harper Perrenial, 1991.
Wallace Hopp and Mark Spearman , Factory Physics, Waveland Press,  2011.
Eric Maass and Patricia McNair, Applying Design for Six Sigma to Software and Hardware Systems, Prentice-Hall, 2009.
Eliyahu Goldratt, Haystack Syndrome, North River Press, 1990.