Building a lean business system

Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org

BUILDING A LEAN BUILDING A LEAN BUSINESS SYSTEMBUSINESS SYSTEM

Professor Daniel T JonesProfessor Daniel T JonesChairman, Lean Enterprise AcademyChairman, Lean Enterprise Academy


Lean Management SummitLean Management Summit

• Marks a significant turning point for Lean Thinking in Germany – after two false starts in 1991 and 1997

• The establishment of the Lean Management Institutwith RWTH Aachen lays a solid foundation here

• Lean management has spread well beyond the shop floor, across sectors and across the world

• Germany at this point lags behind – although we have always believed that German industry has a significant contribution to make to the future of Lean

• Lean is actually a “job saver” rather than a “job killer”


Toyota Toyota -- the Lean Modelthe Lean Model

• Most people now recognise that Toyota is setting the pace – based on its Lean business system– It leads in efficiency and quality around the world– It also leads in time to market for new products– And in introducing new technologies - like hybrids– It is globalising assembly and localising parts supply– It has overtaken Ford and plans to overtake GM!

• Superficially Toyota’s functional organisation looks not unlike a German firm!

• So what distinguishes the way it operates?


Toyota’s Lean StrategyToyota’s Lean Strategy“Brilliant process management is our strategy.

We get brilliant results from average people managing brilliant processes.

We observe that our competitors often get average (or worse) results from brilliant people

managing broken processes.”

Lean Thinking is Process Thinking

Just think what you could do with brilliant people running brilliant processes!


Lean ThinkingLean Thinking

• The objective is to manage the business backwards from the customer definition of value - not forwards from your organisation and your assets

• To create lean primary processes to design, deliver and support this value - with minimum wasted effort and time – and the necessary lean support processes

• And to build a lean management system to develop, sustain and improve these processes over time

• Be clear about customer Purpose, before designing the Processes and then organising the People


Lean PrinciplesLean Principles

• Specify value from the standpoint of the customer (do they want goods and services or to solve their problem?)

• Identify the value stream for each product and remove wasted activities

• Make value flow towards the customer as quickly as possible

• Only at the pull of the customer• While striving for perfection (in products and

processes)


The Dynamics of LeanThe Dynamics of Lean

To only one pacemaker

process

With just the rightStandard

Inventory of:-Cycle stock

Buffer stock andSafety stock

Uninterrupted flow back to the

customer’s point of use

No warehouses,only Cross-Docksand Mixed-model

Milk Runs

FIFOReflexive

Pull all the way back to raw materials

Every Product Every

Interval capability

Separate capacity planning from production

instructions

Production pulled from

every upstream step

Every step is:-ValuableCapableAvailableFlexible

and Adequate

Combine steps where you can

to flow

Demand signals direct from the

customer’s point of use

No createddemand

amplification

Levelled and released in

small quantities


Low Volume LeanLow Volume Lean

• Lean is as relevant to build-to-order businesses• The starting point may be the engineering,

procurement and quotation process• Then breaking the order down into increments of takt

time to track progress and problems• And modularising the elements to be produced and

synchronising them• But does the customer really need all that

complexity?• Toyota is now developing “Lean and Simple”

equipment for use across the world


Current State Value Stream

ShippingAssembly 2Assembly 1S. Weld 2S. Weld 1Stamping

Production Control

MRP

Weekly Schedule

Daily Ship Schedule

Production Lead Time = 23.5 daysValue Added Time = 184 secs

State StreetAssembly

Forecast

Daily Order

Daily

MichiganSteel

Forecast

Weekly Order

2 x Week

II I I I I

Future State Value Stream

Production Lead Time = 4.5 daysValue Added Time = 166 secs

Shipping

Production Control


Forecast

Daily Order

Daily

Daily Order

Weld and Assembly CellStamping

MichiganSteel

Forecast

Daily Order

Daily

Ask the Ask the key key

questionsquestions

Implementing Implementing LeanLean

Value Stream PlanProduct Value PersonFamily Stream Measurable Monthly Schedule inBusiness Objective Goal ChargeObjective 1 2 3 4 5 6 7 8 9

ImproveProfitabilityIn Steering Brackets

V S Manager JimDate 03/02/2003

Product FamilySteering Brackets

Pacemaker *Continuous flow from

weld to assembly Zero WIP John*Kaizen to 168 secs < 168 s/t Dave*Eliminate weld

changeover < 30 sec c/o Sam*Uptime weld #2 100% Mike*Finished goods pull 2 days FG Sue*Materials handler Pull Schedule James

routesStamping*Stamping Pull 1 day inventory Fred

+ pull schedule*Stamping changeover batch size Tim

300/160 piecesc/o < 10 min

Supplier*Pull coils with daily delivery Graham

daily deliveryr < 1.5 days ofcoils at press

Check Check progress progress

and stabiliseand stabilise


Current State

44d55m

738

Steps

Time

Steel

DELTA STEEL

Stamping

GAMMA STAMPING

Warehouse Cross Dock

Wipers

BETA WIPERS

Assembly

Dist. Centre

Cross Dock

ALPHA MOTORS

Amplification

F E D C B A

%

40

30

20

10

0

F E D C B A

Quality & Deliveryppm

2000

1500

1000

500

0

F E C A

%

10

5

0

AssemblyWipersStamping

SteelDist. Centre

16d55m

398

Steps

Time

Amplification

F E D C B A

%

40

30

20

10

0


2000

1500

1000

500

0

F E C A

%

10

5

0

F E D C B A

DELTA STEEL

GAMMA STAMPING BETA WIPERS ALPHA MOTORS

Future State 2Flow and Pull between Plants

Time Time reduced reduced

from 44 to from 44 to 24 days24 days

Ideal StateValue Stream Compression

Dist. Centre

3d55m

308

Steps

Time

Amplification

F E D C B A

%

40

30

20

10

0


2000

1500

1000

500

0

F E C A

%

10

5

0

F E D C B A

Steel

EPSILON STEEL

Assembly

ALPHA MOTORSSUPPLIER PARK

WiperCell

StampingCell

Time reduced Time reduced from 24 to 3 from 24 to 3

daysdays

Across the Across the Value StreamValue Stream


Using a Common LanguageUsing a Common Language

Lean Enterprise Academy www.leanuk.org

Acme Stamping Steering Bracket Value Stream ImprovementBackground

Acme supplies stamped steel steering brackets (LH & RH) to State Street Assembly. The product goes through 5 manufacturing processes & shipping.

The customer uses 18,400 pcs/month & requires daily shipments in pallets of 10 trays of 20 brackets. A pallet is either all RH or LH.

Current SituationLead time for steering bracket from coil steel to shipment = 23.6 daysOf 23.6 days, only 188 seconds are spent making a bracket.Large inventories of material between each process.Long changeover times, downtime in welding.


Michigan Steel Co.

1x dai ly

I

ProductionControl

DailyOrder

WeeklyFax

6 WeekForecas

t

90/60/30 Day

Forecast

Weekly ScheduleShipSchedule

AnalysisEach process operates as isolated islands, disconnected from the

customer.Push system, material builds up between each process.Each process builds according to its own operating constraints

(changeover, downtime etc.)Plans based on 90 & 30 day forecasts from customer. Weekly

schedule for each department. System is frequently overridden to make delivery

GoalsImprove profitability of steering bracket value stream.Reduce lead time - 23.6 days to 4.5 days.Reduce inventories:

Stamping 7.6 days to 1 day.Welding 6.5 days to 0 days.Shipping 4.5 days to 2 days.

RecommendationsCreate continuous flow through weld & assemblyEstablish TAKT time . Base the pace of work through weld & assembly

on customer demand.Set new weld - assembly cell as pacemaker for entire value stream.Establish EPE_ build schedule for stamping based on actual use of

pacemaker cell & pull steel coils from supplier based on actual usage by stamping.

Improve uptime in weld.Establish material handling routes for frequent withdrawal & delivery.Establish new production instruction system with Levelling Box.

Follow UpReviews & involvement of related departments TBD.

Other functions: Production Control Material Handling, Purchasing, Maintenance, Human Resources, Finance.

ProductionControl Daily

Order

DailyOrder

6 WeekForeca

st

90/60/30 Day

Forecast


Michigan Steel Co.

Daily Order

20OXOX

Current State MapFuture State Map

Deliverables Responsible ReviewCCF at pacemakerKaizen each CT to >TTWeld uptime to 100%CO reduction to < TT

Pull at pacemakerFG = 2 daysKBMatl handlingLevelling Box

Pull from StampingWIP = 1 dayCO < 10 min

Pull from supplierInfo flowDaily deliveryRM = 1.5 days

Action Plan

For Problem Solving, Managing Projectsand Planning


Managing LeanManaging Lean

• It is not an extension of continuous improvement or a tool box – but a system redesign for each value stream

• Involving design & production – as well as logistics, production control, maintenance, purchasing etc.

• It is not about what works theoretically or automation –but a robust system tolerating day to day disturbances

• It will not happen unless someone is responsible for each Value Stream Plan – and unless they get the necessary support and resources from functional departments (which also means lean in every office!)


Challenges for ManagementChallenges for Management

• To reconcile the Chief Engineer’s plans for each product family with the resources required in each function and the overall needs of the business

• To move away from centralised, cognitiveproduction control systems to stable levelled processes triggered by reflexive pull

• To spread lean across office support activities despite the resistance to standardisation – lean frees up time for creativity and problem solving


Lean Product DevelopmentLean Product Development

• Strong leadership from the Chief Engineer, drawing on resources from functional departments

• More time is spent pursuing sets of alternatives –so that fewer engineering changes are needed later

• Once agreed detailed engineering proceeds very rapidly, using standardised processes and checklists and pull communication to trigger work – a fully industrialised design process across every project

• Manufacturing and key suppliers are involved throughout to ensure quality and low cost – based on long term joint product and process analysis


Future LeanFuture Lean

• The biggest gains come from rethinking the product and the process based on the lean experience of trying to improve today’s design, equipment and locations

• Toyota is targeting every new product to deliver increased functionality at 30% lower costs – forcing step changes rather than incremental improvements

• They are also designing “Lean and Simple”equipment for use across the world – which is a challenge for future engineers


An Agenda for ActionAn Agenda for Action

• We will continue to write down the lean knowledgeand to push the frontiers of lean implementation

• You need to build a much greater pool of leanexperience in Germany – to compensate for the fact there is no Toyota plant here!

• We need to build examples of successful lean implementation that enable to others to see why this counterintuitive thinking works better

• The biggest challenge is to provide a new directionfor tomorrow’s engineers – designing lean for tomorrow’s global realities


BUILDING A LEAN BUILDING A LEAN BUSINESS SYSTEMBUSINESS SYSTEM

Professor Daniel T JonesProfessor Daniel T Jones

www.leanuk.orgwww.leanuk.org

Building a lean business system

Business

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