Value Stream MappingFor Lean Improvement

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Executive Summary ..........................................................1

Value Stream Mapping .....................................................4

Current State Mapping ...................................................10

Future State Mapping .....................................................17

Future State Questions ...................................................26

Future State Tips ............................................................27

Implementation Plan ......................................................29

About Falcon ..................................................................32

Guided Value Stream Analysis ........................................33

Table of Contents

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Executive Summary

A Value Stream Map (VSM) is an illustration of all activities and flows (material and informational) required to convert raw material into value and deliver that value to the customer. The customer may be the end-consumer or another department.

The purpose of value stream mapping is to identify non-value added activities, delays, rework, bottlenecks, excessive inventories and other forms of waste (Muda) in a process, and highlight areas for improvement. Value Stream Mapping is considered by Jones and Womack (Founders of the Lean Institute) as the starting point for the lean journey.

There are 2 Types of Value Stream Maps:

Current State Map: A representation of the state of the value stream today.

Future State Map: The blueprint for the future state of value stream after eliminating identified waste.

While this guide empowers the total amateur to develop a current state value stream map, designing a future state map requires familiarity with the following concepts which are introduced in this guide:

Function of Inventory: Often one of the two biggest assets on the balance sheet, inventory indicates process imperfections. While inventory is a useful and often necessary buffer against quality and productivity problems, it devours capital and space and increases handling costs.

Takt Time: An invaluable measurement for determining the speed to regularly produce a single sequential unit of client demand. Takt Time = Available Daily Production Time Minutes / Daily Customer Demand.

Continuous Flow: In an ideal world, all flows are continuous (zero stops or delays between sequential production process steps). Thus, continuous flow is the ideal state that lean manufacturers design operations to achieve.

Pull: When continuous flow isn’t possible or practical pull systems are preferred between areas where continuous flow does exist. Pull systems eliminate redundant forecasting and scheduling, displacing inaccurate estimates with actual demand.

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Cellular Manufacturing: A Lean Manufacturing concept where the physical layout of a factory floor is designed around multiple "work cells" responsible for producing a complete or partial product, as opposed to a few isolated functional areas.

Kanban: A simple, highly effective and inexpensive method of inventory and production control, kanban is a formal method of visual communication. Simple and versatile, kanban eliminates stock outs, reduces overhead, and improves quality and service.

Setup Reduction (SMED): Often known as Single Minute Exchange of Die (or SMED), Setup Reduction is an invaluable tool for reducing inventory. When large lots of a product are run, setups on that same product are less frequent. Because setups require practice, the less frequently an operator performs a setup the less well the setup process is learned, which further encourages large lots to be run. SMED allows for lean lot sizing and improves quality.

Lean Lot Sizing: Most manufacturers determine lot size by intuition, tradition or "best" guess. This results in lots that are typically too large and sometimes too small. Lean lots simplify scheduling, reduce inventory, enable work cells, facilitate kanban, aid continuous improvement initiatives, and tend to enhance quality.

Pacemaker Scheduling: The pacemaker determines what parts of your value stream contribute to lead time and directly affects upstream capacity requirements, setting the pace for all upstream processes. Because the pacemaker is the process directly controlled by customer demand there should be no supermarkets or pulls downstream of the pacemaker process.

Because future state maps require a little more experience, it's recommended that unless you have drawn many future state maps, it is best to have a sensei who has experienced the learning curve.

Where to Start

To help decide where to start, manufacturers are strongly advised to look for loops (areas of continuous material or information flow typically identified by the presence of a pull system at one or both ends) where:

• The team understands the process(es).

• Expected cash flow impact is greatest.

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• Speed of savings is fastest.

• Likelihood of success is high.

• Loop improvements will facilitate success elsewhere.

Once you have identified your future state loops, you can list goals and objectives for each loop to be included in your implementation plan.

Implementation

Your Implementation Plan is the plan your team will follow to transition from your current state to your future state. Many future state maps are never translated to the real world because there is simply too much to accomplish at once. Unfortunately, slow, intermittent implementation sabotages momentum and diminishes will power.

A few core elements are essential for an implementation plan to be successful:

Future State Map: The product family's improvement blueprint.

Measurable Goals: Measurable outcome(s) for each value stream loop. e.g. reduce revisions by 50%, reduce lead time to 30 minutes, etc.

Action: Specific improvement activities to be taken to achieve goal(s) (e.g. project, multi-day kaizen event, etc.).

Owner(s): Person(s) responsible for executing action and achieving goals.

Timeline: When actions are to be started and completed, typically listed in months.

Review Schedule: A simple dashboard — red/yellow/green, % complete, etc.

Managerial Commitment: If management isn't on-board and fully committed to the lean journey, your efforts will likely backfire.

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A Value Stream Map (VSM) is a visual representation of a process that illustrates a value stream. Value is defined by the perception of the customer. A value stream is the set of all activities required to convert raw materials into customer perceived value and deliver that value to the customer. Activities include functions such as order-taking, order communication, detailed scheduling, production processes, etc.

There is a key difference between a value stream map and a typical process map. Whereas a process map illustrates a process as it currently is or should be, the purpose of value stream maps is to identify non-value added activities, delays, rework, bottlenecks, excessive inventories and other forms of waste (Muda), and highlight areas for improvement.

Another key difference between a regular process map and a value stream map is that a value stream map represents both material and information flows. Material flow is the movement of physical materials through processing, handling, transport and storage. Information flow includes orders, instructions, schedules, approvals, reports, replenishment cards, discussions, and any other information necessary to produce value. There are two types of information:

Manual: Information that is passed on manually or verbally.

Electronic: Information that is passed on via telephone, fax, email, etc.

Value Stream Mapping, like process mapping, is most valuable when conducted in a group setting. That is because many of the problems VSM often exposes span organizational functions and hierarchies. Accounting for different functions and specialties grants a better shared understanding of a process while optimizing results.

Why Value Stream Mapping?VSM is superior to other process mapping methodologies when you want to:

• Discover continuous improvement opportunities in your core processes.

• Improve a single end-to-end process.

• Know the inventories and delays that exist in your processes.

Value Stream Mapping

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• Know which business systems are used by your processes.

• Improve staff productivity, utilization and load distribution.

• Understand the effectiveness of your customer service approach.

• Understand a complex process, spanning multiple geographical locations.

• Report a process’ health to senior management.

The 2 Types of Value Stream MapsCurrent State Map: A representation of the state of the value stream today. The current state map is studied in order to identify various forms of waste to be eliminated.

Future State Map: The blueprint for the future state of value stream after eliminating identified waste. The value stream’s future state is realized by applying lean principles such as flow, pull and perfection to create a more streamlined production flow.

Where to Begin the Mapping Process?There is no universally accepted standard scope for a value stream map. The value stream of a single assembly process or an entire supply chain can be mapped. A common rule of thumb is to start by mapping a single site (i.e. factory), since this is often where decision makers have the most control and will see the biggest returns.

For simplicity, it isn’t necessary to map the flow of every part or even every product. Instead, mapping the production of a single product or product family can be sufficient. It is important that those products and product families with long lead time and high volumes are given priority. It is also important to look at the amount of raw materials, work in process (WIP), and finished products that are stored at any particular time.

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Product PriorityValue stream maps document both material flow and information flow. Material flow is the flow of products through the value stream, including processing, handling, transport and storage. For simplicity, it isn’t necessary to map the flow of every part or product. Mapping the production of a single product or product family is often sufficient.

When considering which products to map, it is vital to prioritize products with long lead times and high volumes. It is also important to look at the amount of raw materials, work in process (WIP), and finished products that are stored at any time.

For complex product mixes, it can help to create a product/assembly matrix (below) to identify those products which share all or most of their assembly steps with one another (i.e. product family).

ASSEMBLY STEPS

1 2 3 4 5 6

PR

OD

UC

TS

A X X X

B X X X X X

C X X X X X

D X X X X

E X X X X

Table 1. Assembly Matrix; Products B, C, and D comprise of a product family.

Figure 1. Recommended Scope for Initial Value Stream Map

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Value Stream Symbols

Most value stream maps employ a standard set of symbols (page 11) to denote various characteristics of the value stream. These standard symbols are typically preferred to ensure universal understanding by other lean experts. However, more intuitive symbols and icons can also be used, which makes it simpler to develop and understand by diverse groups of stakeholders unfamiliar with value stream mapping. The key takeaway is that while you may employ these symbols or different ones, the concepts that the symbols represent must be accounted for.

Process Box: Process boxes represent a single area of continuous flow where products flow without being stored, queued or delayed and without significant waiting time between steps.

Data Box: Data boxes are used to carry all relevant data related to a specific process box, such as setup, equipment, and staff times. Data boxes can also be used to display data and performance information related to inventory, transportation and important suppliers and customers. "Learning to See" recommends starting with considering the following typical process data. The specific data you need depends on your specific situation and processes. Page 10 lists the five most common data boxes and their data.

What Goes In A Data Box?The right data to include is the relevant data. Often there is too much data to fit in a reasonable size data box. In those cases, the data must be documented separately. Although sometimes necessary, this isn’t ideal. It’s always best to try to include any useful data on the value stream map so long as it does not become confusing and cumbersome.

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The 5 Most Common Data Boxes and Their DataCustomer Box

• Customer demand (items/day)

• Shipping frequency

• Packaging size requirement

• Actual lead time

• Required lead time

• Error rate

• Order adjustments

• Customer shift pattern

• Number of customers

• Product mix

Supplier Box• Demand rate (items/day)

• Shipping frequency

• Packaging size

• Actual lead time

• Required lead time

• Error rate

• Order adjustments

• Supplier shift pattern

• Number of suppliers

• Different types of materials

Process Box• Cycle time (CT)

• Changeover time (CO)

• Value-added time (VAT)

• Net available working time (NAT)

• Production rate (i.e. units/day)

• Scrap rate / % defects

• Machine uptime %

• Processing time

• Maximum capacity

• Product flow (push or pull)

• Overall equipment effectiveness

• Number of operators

• Number of product variations

• Setup time

• Batch size

• Rework rate

Transportation Box• Lot size

• Transportation time

• Number of product types

• Distance traveled

• Transportation frequency

Inventory Box• Amount of Inventory

• Queue or Delay time

• Number of Product Types

• Inventory Type

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Common Value Stream Symbols

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Current State Mapping Steps

Step 1: Acquire your materials: Pencils, erasers, and A3 (11x17) sheet of paper or a roll of butcher paper.

Step 2: Draw the customer icon in the upper right-hand corner of the map. Below that, draw and fill the customer data box. If the customer orders in infrequent batches, note the frequency and batch size.

Step 3: For each area of material flow, draw a process box and corresponding data box. For example, an assembly process consisting of multiple work stations, with little or negligible WIP between each, should be drawn as a single process and data box pair. When workstations in a process are disconnected with stagnant accumulating inventory between each, then multiple pairs would be drawn. See “What Goes In A Data Box?” on page 9 and “What to The 5 Most Common Data Boxes and Their Data” on page 10 for an idea of the possible data to include).

Figure 2. Current State Mapping Steps 2 and 3.

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Step 4: Draw inventory icons for all distinct amounts and locations of inventory identified while walking the value stream. Note the inventory type, units and days. This is vital because inventory typically reveals where continuous flow stops.

Step 5: Draw a broad arrow between your shipping process box and customer icon. Over the arrow, draw either a truck (or air or rail freight) icon, notating the number of daily shipments.

Step 6: For each of only one or two main raw materials, draw a supplier icon in the top left corner of the paper. Below your supplier icon, write the supplier's pack size (minimum delivery quantity). Draw a broad arrow from your supplier icon to your inventory. Over the arrow, draw a freight icon (truck, air, rail) noting which weekdays you receive shipments.

Step 7: Add material icons representing push, pull or FIFO between processes, where appropriate.

Step 8: In the upper center of your map, draw a process box for production control.

Figure 3. Current State Mapping Steps 4, 5, and 6.

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Step 9: Add communication arrows and note methods and frequencies. This may require considerable investigation (Figure 5). Illustrate information flow from right to left, starting with information sent by the customer to production control. Be sure to note the correct method and frequency for each communication.

Step 10: Draw a timeline beneath the process boxes and inventory triangles.

Step 11: Calculate valued added (VA) and non-value added (NVA) lead times and notate on the timeline. For processes, the lead time is the process cycle time. For transports, it is the time for transport. For inventory, it is the average amount of time a single WIP unit spends between processes.

Step 12: Calculate VA and NVA time totals and note totals at the far right of the timeline.

Figure 4. Current State Mapping Steps 7 and 8.

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Figure 5. Current State Mapping Step 9.

Figure 6. Current State Mapping Steps 10, 11, and 12.

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Curr

ent S

tate

Map

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Key Points When Value Stream Mapping

• Don’t try to fix anything during a value stream walk. Document ideas for improvement, but don’t lose focus on observation.

• Map what happens 80% of the time. Don’t be concerned with sporadic variation in the process.

• Start with a brisk walk-through of the value stream to gain a sense for processes and sequences.

• It's often easier to understand the value stream when you walk the value stream backwards. Start at the end (i.e. shipping) and step back through the process towards receiving.

• Make sure customer data is taken from the customer or those who receive customer orders.

• A value stream consists of all activities needed to deliver value to an external customer. A support value stream is all activities required to deliver value to an internal customer.

• Time each activity yourself. Do not rely on standard times or other information that you do not personally obtain while actually observing processes. As Mike Rother and John Shook note in Learning to See, possible exceptions include uptime, changeover times, scrap and rework rates.

• Do not allow different parts of the value stream to be mapped by different people. The goal is to understand the whole, not merely parts. One person or group of people should be involved in mapping each process in a value stream.

• Always draw your value stream map by hand with a pencil and large eraser. There are many reasons for this, but the most important is that it empowers anyone to map a value stream while focusing on what matters: understanding the value stream, not producing a map.

• Value stream mapping is a strategic endeavor — not a tactical one. As a result, it’s vital that the members of the team must be leaders with the authority to execute significant changes within the value stream.

• Either an executive sponsor or high-level leader must be involved to ensure success.

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• Done properly, value stream mapping improves communication, breaks down barriers between functional silos, and creates alignment within the leadership team.

• It’s vital to define all value stream parameters clearly (starting point, ending point, specific conditions, etc.) before you begin mapping. Don’t be afraid to narrow the scope. The majority of improvements you’ll want to make will apply to other conditions.

• A value stream map must illustrate information flow, material flow, and time.

• Be clear and focused about the problem to solve and the improvement you’re hoping for.

• Creating and communicating the charter with all affected parties (the participants, as well as the front-line staff working in the value stream) usually takes 1-3 weeks.

• Don’t take shortcuts! Be sure that everyone signs off on the specifics before you begin.

• All days dedicated to value stream mapping exercise must be consecutive. Spreading a three day value mapping exercise over a week or more is a recipe for lost momentum and a waste of time.

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A team with limited knowledge of lean manufacturing principles can competently develop a current state value stream map. Unfortunately, the same is not true for the development of a future state map. While an adequate understanding of how to develop a future state map cannot be covered in this publication, there are a few principles, tools and techniques that anyone developing a future state map should be familiar with:

• The Function of Inventory

• Takt Time

• Continuous Flow

• Pull

• Cellular Manufacturing

• Kanban

• Setup Reduction (SMED)

• Lean Lot Sizing

• Schedule at the Pacemaker

The Function of InventoryMany Lean Manufacturing experts claim inventory is “evil”. While that may be an exaggeration, inventory is a problem. After all, inventory is often one of the two biggest assets on the balance sheet. Inventory is a critical factor in determining many vital financial performance measures such as Return On Assets (ROA). Inventory devours capital—capital possibly needed for growth. Carrying costs typically range from 20% to 40% of the average inventory value per year. It consumes valuable floor space and increases material handling costs. Large stocks of inventory often require massive warehouses and large computer systems for tracking and control.

It’s important to understand that inventory is not really a problem in itself; it’s a symptom. Inventory serves many purposes. It facilitates continuous delivery, allowing manufacturing to

Future State Mapping

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focus efforts on long runs. It prevents the intermittent maintenance and quality issues from sabotaging schedules and it accommodates short-run demand variation.

Is Inventory Really Evil?Excessive inventory is not a problem nor is it evil in itself; it is only an effect. Just as obesity and fat are not problems but only symptoms of poor diet and exercise. The root causes of high inventory, like the root causes of obesity, lie deeper.

How Much Inventory?A common practice is to measure inventory turns: Annual Cost of Goods Sold (COGS) divided by average value on hand. This ratio facilitates the comparison of different size firms. It accounts for changes in annual sales volume and seasonal fluctuation.

Lean manufacturers often show turns of 100% to 900% of the industry average. In addition, firms that excel in inventory performance typically excel in other areas such as customer service, delivery, productivity, and profitability.

Takt Time (TT)Takt is a German word referring to the beat of music. It can be used to also mean repetition time, cycle, or rhythm. Takt Time is the desired average time between distinct units of production, synchronized to customer demand. One of the fundamental tools of Lean Manufacturing, Tact Time is used to understand, design and stabilize production processes.

Takt Time = Available daily Production Time (Minutes) / Daily Customer Demand

There are two core concepts behind Takt Time: (1) The output of an ideal production process should be continuous and smooth rather than in intermittent large or odd-sized batches. (2) Production output should always match average customer demand.

While deceptively simple, designing production processes around Takt Time often results in many significant benefits such as optimized work cell output, improved planning, and reduced or eliminated overproduction and inventory build-up.

Keep in mind, that while Takt Time is extremely useful for evaluating simple work cells, it sometimes has little applicability to low-volume, high variety processes.

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Continuous FlowContinuous flow simply refers to the production scenario: The production of one unit at a time without delay or other wastes generated between the current process and the next sequential process in the value stream. The value stream mapping symbol used to represent continuous flow is the process box. Thus, when future state mapping, process boxes should only represent areas of continuous flow. That means, adding more continuous flow to a future state reduces the number of process boxes since adding continuous flow combines processes.

As Mike Rother and John Shook note in Learning to See, sometimes it makes sense to purposely limit the extent of continuous flow during future state mapping since a result of merging processes is merging downtime and lead times. Sometimes a better approach is to begin with pull/FIFO and then only once changeover times have been reduced to near zero and after reliability has been improved, attempting to merge processes.

PullFrequently, areas exist within the value stream where continuous flow is simply impossible or impractical. In these cases, batching is a necessity. This could be due to any number or combination of reasons. Examples of process constraints include extremely fast or slow cycle times, the physical distance of a process (such as those performed by a third party), and processes with highly volatile lead times.

The reason for implementing any type of pull system between two processes is to eliminate separate forecasting and scheduling activities which only offer estimates of what will actually be needed. This is possible because pull systems accurately transmit demand signals upstream. Best practice is to never schedule pull processes. Instead, it's recommended that you schedule downstream processes closer to the end customer. The idea is to allow downstream processes to dictate to upstream processes how much to produce and when to produce it.

2 Common Pull SystemsSupermarket: The most common type of pull system is a supermarket. A supermarket is a store of Work in Process (WIP) inventory between two processes where continuous flow is not possible. The difference between a supermarket and a random pile of WIP is that a supermarket is an inventory buffer designed to continuously communicate accurate downstream demand to upstream processes so that nothing is slated for production until it is needed (i.e. used).

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Supermarkets are not always the best pull system suited for the job. For example, it isn't always practical to keep inventory of all possible WIP variations. When supermarkets aren't possible other pull systems are required.

FIFO Lane: First In, First Out (FIFO) lanes are stores of WIP inventory, designed to facilitate flow and limited to the max production capacity in terms of WIP of the downstream process. For example, if a downstream welding process can only process a maximum of 100 pieces daily, then the FIFO lane is set to only allow maximum of 100 pieces. Once the FIFO lane reaches 100 pieces, no more kanban are released to the upstream process so that it stops producing pieces requiring welding.

Cellular ManufacturingCellular Manufacturing is a Lean Manufacturing concept where the physical layout of a factory floor is designed around multiple “work cells” responsible for producing a complete product, as opposed to a few functional areas. That is, a work cell is a production area larger than an individual machine, yet smaller than a functional area or department. The ideal work cell is completely self-contained with the required resources to manufacture a limited range of very similar products.

Theoretically simple, Cellular Manufacturing is manufacturing designed around subtle interactions of people and equipment. Each element of production must fully integrate with the others in a smooth, self-regulating and self-improving process.

The many benefits of Cellular Manufacturing include increased productivity, improved quality, streamlined material flow, reduced material handling, easier management and simplified accounting.

While work cell concept is extremely simple, it is important to appreciate that proper work cell design involves rigorous planning, attention to detail, extensive functional expertise, and deep knowledge of best-practices in lean manufacturing. With that in mind, the work cell development can be broken down to 3 steps: (1) Product Selection, (2) Process Design, and (3) Layout Design.

Figure 7. Work cell with 4 people.

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Setup Reduction (SMED)Setup Reduction (often known as Single Minute Exchange of Die or SMED) is widely considered one of the more mundane aspects of Lean Manufacturing. Unfortunately, it is often ignored, resulting in several vicious cycles in the manufacturing.

When large lots of a product are run, setups on that same product are less frequent. Because setups require practice, the less frequently an operator performs a setup, the less well the setup process is learned. The perception is that setups are high-risk endeavors because they are unpredictable in terms of time and quality. Because people are risk-averse, they prefer to run large lots, which reduces setups and their associated risk.

Large lots amortize setup cost over a large number of units, appearing to reduce the unit cost. Unfortunately, large inventories produce offsetting costs that are often buried in overhead. This further encourages large lots or runs.

The consequence is high inventory and complex scheduling, which gives rise to additional costs. Most of the costs are simply absorbed by overhead. Other consequences such as erratic deliveries are far removed, often difficult to link directly to their cause.

If we can make setups fast, easy and predictable, we encourage smaller lots. Smaller lots mean more setups which improves setup skill and confidence. This reduces inventory and facilitates simplified scheduling. The flow of costs into the overhead black hole slows as people spend less time expediting, searching and chasing. Smaller lot sizes also accommodate the use of kanban and other simple scheduling methods.

Setup Reduction (SMED) Steps1. Maintenance, Organization and Housekeeping: It often happens that setup problems are related to poor maintenance such as worn parts, worn tooling, dirt, or damaged threads. Disorganization and poor housekeeping are also contributors to setup problems. These are easy to fix and should be a first step.

2. Internal Elements to External: Internal elements occur when the machine is down. Examine each internal element and see if it cannot be done externally. For example, the pre-heating of an injection-molding die could be done before it goes into the machine.

3. Improve Elements: Here we examine every element to see how we can eliminate it, simplify it, reduce the time required or improve it in some other way. Improving

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elements and eliminating adjustments will require more imagination, time and cost. Even here, the improvements are sometimes astonishingly simple and easy.

4. Eliminate Adjustments: Adjustments are often the most time consuming, frustrating and error-prone parts of a setup. There are many ways to eliminate them entirely and this is the ultimate goal. SMED has varying effects on Make-To-Order (MTO) and Make-To-Stock (MTS) environments:

KanbanKanban is one of the most common pull tools. Kanban is a simple, highly effective and inexpensive method of inventory and production control. From micro-electronics to heavy steel, kanban has been proven to reduce inventory, eliminate stock outs, slash overhead, and improve quality and service. The power of Kanban production control lies in its simplicity and versatility.

Kanban System DesignWhile not always the best fit, Kanban is often ignored in those scenarios it is best suited for because it is poorly understood. Kanban scheduling often evokes strong emotional responses and triggers cross-functional push back.

Kanban introduces operational factors that reinforce lot-size reduction. Kanban nicely complements work cells. Work cells are most effective with smaller lots. Kanban makes work cells more feasible and improves work cell performance.

The process of designing a kanban scheduling system can involve extensive formal analyses. It can also be relatively informal, with fine-tuning done on the production floor. We recommend the following steps:

SMED - Make-To-Stock Benefits• Reduced Optimum Lot Size

• Broader Range of Lot Sizes

• Lower Total Cost Curve

• Fewer Stock outs

• Reduced Inventory

SMED - Make-to-Order Benefits• Lower Minimum Order Sizes

• Higher Margins on Larger Orders

• Faster Deliveries

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1. Analyze Product Volume For Upstream Work Center

2. Analyze Downstream Order Patterns

3. Identify Kanban Products

4. Identify Appropriate Lot Sizes

5. Identify Containers

6. Identify Signal Mechanism

7. Specify Stockpoint(s)

8. Specify Initial Kanban Quantities

9. Develop Upstream Scheduling Algorithm

10. Operate Fine tune

Lean Lot SizingSmall lot production is a vital element of many Lean Manufacturing strategies. Small lots tend to reduce variability in the system and smooth production. While lot size directly affects inventory and scheduling, other effects are less obvious but just as important. Beyond simplifying scheduling and reducing inventory, small lots also enable work cells, tend to enhance quality, facilitate kanban and aid continuous improvement. While the effects of small lots do vary somewhat between Make To Order (MTO) and Make To Stock (MTS) situations, they are powerful in both environments.

Lean Lot Sizing GuidelinesMost manufacturers have never done an Economic Lot Size (ELS) analysis. Instead, lot sizes are determined by intuition, tradition or "best" guess. The results are that batches are occasionally too small, but often far too large. While an initial ELS analysis often offers a range of lot sizes, it can sometimes be a very wide range. Following are some guidelines to help further narrow the possible options for appropriate lot size:

Smaller Lots are Better: Generally, smaller lot sizes are ideal because they reduce capital requirements, smooth production and allow for scheduling flexibility. Therefore, lot

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sizes on the lower end of the ELS range are preferred. Remember ELS fails to capture intangible lot costs such as quality and flexibility. Also, many accounting systems tend to underestimate carrying costs.

Overfeed Bottlenecks: Bottleneck production equipment should operate at maximum capacity. To ensure that they do, it's important that they never wait to be fed. For that reason, lot sizes on the upper end of the ELS range are preferred for bottlenecks because they ensure more time for production and less time for setups.

For non-bottleneck equipment that must be staffed and maintained even when idle, it is best practice to set the lot sizes at or below the ELS range. Doing so reduces inventory but does not increase setup cost.

Round Lot Sizes: Set lot sizes to a convenient unit such as “1-day of production,” “two containers” or some round number.

Schedule at the PacemakerBy using supermarket pull systems, you will typically need to schedule only one process in your value stream. The pacemaker determines what parts of your value stream contribute to lead time and directly affects upstream capacity requirements, setting the pace for all upstream processes.

Because the pacemaker is the process directly controlled by customer demand, the pacemaker process should be as far downstream as possible. Ideally, this would make your pacemaker the final process before the customer. Of course, this isn't always achievable. For example, in the case of job shops or highly customized products, scheduling often must occur further upstream. Also, it is important that material transfers should flow downstream from the pacemaker. There should be no supermarkets or pulls downstream of the pacemaker process.

Level Production MixThe majority of production departments operate with the mindset that changeovers should be avoided at all costs. They tend to prefer and even advocate for long runs in order to avoid costly changeovers. While the benefits of this "no-brainer" approach seems intuitive, there are serious drawbacks both downstream and upstream that are often overlooked.

First, large production batches result in large consumption batches. Because fabricated

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components are now consumed in large batches, this further results in all upstream inventories needing to be larger. In fact, the effect tends to amplify the further upstream you travel.

Leveling production mix means producing more types of products in smaller batches and more often. So, rather than producing all of "Product A" during the morning and all of "Product B" in the afternoon, leveling would mean more frequently alternating between producing many smaller batches of each product. The power in this seemingly contrarian approach lies in the correlation between increased leveling and increased ability to respond to variations in demand while reducing lead time, inventory and other waste throughout the value stream. Leveling is illustrated using the load leveling icon (page 11).

Produce to PitchRelated to, yet distinct from product mix is product volume. In addition to problems related to poor product mix management, there are additional problems that result from large, inconsistent batch sizes. Problems include:

• No shared pull and pace of production for the entire value stream to respond to.

• Excessive surges in unplanned extra strain on people and machines.

• Increased lead times and expedited orders due to inability to effectively monitor pace variance.

• Difficulty in efficiently responding to changes in customer requirements.

Pitch is a consistent increment of work, typically calculated based on the total number of finished goods units a packaging container holds, or a fraction of that number. For example, if your Takt Time is 40 seconds and your pack size is 30 units, then your pitch would be 20 minutes (40 seconds x 30 units = 1,200 seconds). This means that every 20 minutes (1,200 seconds) you should instruct the pacemaker to produce one pitch (30 units).

The value of knowing pitch is that it becomes the basic unit of each product family's production schedule. That is, you begin scheduling and monitoring production every pitch. Because you now have near real-time feedback of your actual performance to customer demand, you can more quickly respond to production problems while also maintaining Takt Time. The key point here is that we want to avoid large material transfers as well as information transfers.

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Future State Questions

It is vital to never lose sight of the purpose of future state mapping to identify sources of waste and develop a plan to meaningfully reduce them in a short time frame.

In Learning to See, Mike Rother and John Shook suggest that the following list of questions are the most useful to answer while designing a future state map:

• What is the Takt Time?

• Will you produce to a finished-goods supermarket from which the customer pulls or will you produce directly to shipping?

• Where is it possible to use continuous flow processing?

• Where will you need to use supermarket pull systems?

• What is your pacemaker process? (At what single point will you schedule production?)

• How will you level production mix at the pacemaker?

• What is your pitch? (What work increment will you consistently release to the pacemaker?)

• What process improvements will be necessary for you to achieve your future state? Process improvements are notated on your future state map with the lightening burst icon (page 30).

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• While anyone with very little training can reliably draw a current state map, future state maps require a little more experience. Unless you have drawn many future state maps, it is best to have a sensei who has experienced the learning curve.

• Start only after the current state map is understood and agreed upon.

• Invite the people who are involved in the process to actively participate in developing the future state map.

• Look for steps in the process that can be simplified, combined or eliminated.

• Look for:

• Buildups of inventory.

• Stock shortages.

• High scrap and rework rates.

• Long travel distances.

• Bottlenecks.

• Significant variations in cycle times or demand levels.

• Different time basis compared with key customers.

• Lengthy checking or approval periods.

• Too few or too many staff in key areas.

• 6S and safety issues.

• Develop continuous flow wherever possible (from batch production to single piece flow).

• Use pull and Kanban systems where continuous flow is not possible to enable flow.

• Produce to Takt time.

• Send customer schedule to only one production process (the pacemaker process).

• Distribute the production of different products evenly (level the production mix).

Future State Mapping Tips

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Once your future state map has been completed, an implementation plan must be developed. This is the project plan your team will follow to transition from your current state to your future state, considering the gaps between the two states. Many future state maps are never translated to the real world because there is simply too much to accomplish at once. As a result, implementation requires planning, which requires prioritization, which can be intimidating. Unfortunately, slow, intermittent implementation sabotages momentum and diminishes will power. It is very important to not to let overwhelm to get the best of you.

Overcoming Overwhelm by Looking to Loops

Rather than thinking of your future state as a series of distinct steps Mike Rother and John Shook recommend visualizing your future state as multiple loops (page 30), as described below:

Pacemaker Loop: The pacemaker loop is the furthest downstream flow in your facility. It consists of the flow of material and information between the customer and the pacemaker process. As such, it impacts all upstream processes.

Intermediate Loops: Upstream from the pacemaker loop exists any number of additional loops. The end of one loop and the beginning of another loop is typically identified by the presence of a pull system. This is because loops correspond with pockets of continuous flow. Pull systems (i.e. supermarkets) correspond with the lack of continuous flow. Feel free to give each loop a distinct and self-explanatory name (e.g. Drilling Loop, Supplier Loop, etc.).

Once you have identified your future state loops, you can list goals and objectives for each loop.

Picking Priorities

A common question is, "Where to start?" Fortunately, there are a few pointers to help your team resolve this. In general, it is good to look for loops where:

• The process is well-understood by your team.

• Expected cash flow impact is greatest.

• Speed of savings is fastest.

Implementation Plan

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• Loop improvements are prerequisites for success elsewhere.

• There is high likelihood of success.

It's important to understand the common denominator among the above points: Sustainable Momentum. It is vital to stamina that the team feels confident, sees positive objective results early, and is able to carry that winning momentum on to the next improvement area.

Every Implementation plan should contain the following:Future State Map: The product family's improvement blueprint.

Measurable Goals: Measurable outcome(s) for each value stream loop (e.g. reduce revisions by 50%, reduce lead time to 30 minutes, etc.).

Action: Specific improvement activities to be taken to achieve goal(s) (e.g. project, multi-day kaizen event, etc.).

Owner(s): Person(s) responsible for executing action and achieving goals.

Timeline: When actions are to be started and completed, typically listed in months.

Review Schedule: A simple dashboard — red/yellow/green, % complete, etc.

Managerial Commitment: If management isn't on-board and fully committed to the lean journey, your efforts will likely backfire.

Implementation Plan Key Points• It's often helpful to identify the type of improvement activity (project, multi-day kaizen

event, etc.), particularly when dealing with multiple activities of varying complexity.

• Involve the front-line staff in the development of the plan. They'll be doing much of the work and will be more engaged and supportive if they know what’s being done and why.

• The improvement plan should include a review schedule to ensure visibility to senior leadership and encourage accountability.

• The future state map should always be included in the implementation plan. It's your improvement blueprint.

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About Falcon

Falcon is a full-service provider of lean, data-driven inventory and supply chain solutions for fasteners and other production components. Our cross-disciplinary team of engineers, six-sigma experts, lean specialists, and inventory technicians enables us to contractually guarantee to all clients continuous cost savings from day one.

THE FALCON TEAM HELPS MANUFACTURERS AROUND THE WORLD TO:

• Slash time purchasing class C production components and spend more time on high value activities.

• Eliminate the stress in validating fastening/joining methods.

• Spend more time designing products.

• Reduce inventory levels and the number of suppliers through lean supply solutions.

• Lean-out production, increase cash flow and boost profitability.

Discover more about Falcon by visiting FalconFastening.com or speaking with a Strategic Coordinator by calling 1-800-438-0332.

THE FALCON PROMISE: GUARANTEED CLIENT SAVINGS

Our promise is Guaranteed Uptime and Client Savings. We apply best practice, technology and experience in inventory and supply chain management while utilizing our relationships with key suppliers in order to reduce each client’s total cost of ownership without sacrificing productivity.

Our guarantee is a documented commitment that is reviewed and agreed upon by you prior to Falcon becoming a partner. We review our documented performance to this commitment quarterly, and if the savings commitment is not reached, your company is issued an immediate credit for the difference. No questions asked. If our commitment is exceeded, you realize even greater savings. Our clients never incur lost productivity on Falcon goods and services.

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In line with Falcon's mission is to help U.S. original equipment manufacturers (OEMs) become more productive, profitable, and competitive in the global marketplace, Falcon offers Guided Hands-On Value Stream Consulting and Training Packages.

Call 800-438-0332 to Learn More.

Guided Value Stream Analysis

Each Guided Hands-On Value Stream Analysis Includes...

• Project Consult and Charter

• Guided Step-by-Step Value Stream Walk

• Hands-On Implementation

• Digitized Current State Map

• Value Stream Analysis

• Total Cost of Value Stream

• Continuous Improvement Rapid Results Recommendations

• Digitized Future State Map

Your Team Will Learn How To...• Know the difference between value

stream improvement and process improvement.

• Identify major lean methodologies.

• Understand and explain to others the benefits of value stream mapping.

• Draw a current state map.

• Design a lean flow.

• Identify potential continuous improvement projects.

• Establish a direction for the company’s improvement efforts – maps become the blueprints for lean transformation.

• Visualize improvements to the overall production flow instead of spot improvements to single processes.

• Draw a future state map.

• Develop an effective lean implementation plan.

• Learn how to drive the continuous improvement process.

• Identify true customer value and what it means to your business.

• Understand how cross-functional teams can collaboratively improve overall performance.

• Share a common, cross-functional framework for continuous improvement.