DEMAND FLOW TECHNOLOGY

Tom R. North

Masters of Engineering Graduate Student

Submitted in Partial Completion of the Requirements of

IEM 5303

Advanced Manufacturing Systems Design

Refer to Reference [7]

This paper was developed by the faculty of the School of Industrial Engineering and Management at Oklahoma State University for use by its students and faculty. No warranty of any kind is expressed or implied. Readers/Users of this document bear

sole responsibility for verification of its contents and assume any/all liability for any/all damage or loss resulting from its use.

Table of Contents

CHAPTER I. Introduction.................................................................................................1

CHAPTER II. Toyota Production System.........................................................................2

II.1 Three Primary Principles of the Toyota Production System.....................................2

II.2 Worksheets and Teamwork.........................................................................................4

II.3 Kanbans........................................................................................................................4

II.4 Goal of Toyota Production System..............................................................................4

CHAPTER III. Demand-Based Flow Manufacturing......................................................6

III.1 Pull Versus Push System of Manufacturing.............................................................6

III.2 Advantages..................................................................................................................7

III.3 Software Applications................................................................................................7

III.4 Goals...........................................................................................................................7

CHAPTER IV. Kanbans.....................................................................................................9

IV.1 Different Types...........................................................................................................9

IV.2 Procedures................................................................................................................10

IV.3 Rules..........................................................................................................................10

IV.4 Leveling Production.................................................................................................11

IV.5 Goals..........................................................................................................................11

CHAPTER V. Cellular Manufacturing...........................................................................12

V.1 Advantages..................................................................................................................12

V.2 Cell Design.................................................................................................................12

V.3 Goals...........................................................................................................................13

CHAPTER VI. Conclusion...............................................................................................14

CHAPTER VII. Bibliography..........................................................................................16

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Demand Flow Technology

Abstract

Demand flow technology (DFT) is rapidly becoming the norm for manufacturing

facilities all over the world because it can reduce lead times by up to 90%. Furthermore,

DFT significantly reduces inventory levels, improves quality, and reduces the costs of the

products. The concept of DFT evolved from the Toyota Production System, in Japan, and

primarily focused on eliminating non-value-adding activities that added costs to the

overall product. However, demand flow technology did more than anyone ever

anticipated. Not only did this process prove superior to the traditional “push” system of

manufacturing that was the dominant means of manufacturing in the United States, it

made Japan one of the major powers of the world in terms of manufacturing. The purpose

of this system was not to produce more in terms of volume, but rather produce products

more efficiently, which in turn meant lower prices for the consumers.

This paper will explain in detail the evolution of demand flow technology from its

inception at Toyota. The individual components of DFT will be examined thoroughly to

show how each step in the DFT process is critical to make it more efficient. The major

components that make up the whole DFT philosophy include Just-In-Time (JIT),

Kanbans, cellular manufacturing, and supply chain. One advantage of DFT is that it does

not require software to implement. However, there are software packages on the market

that were designed with DFT in mind, such as LOGIA.

In the latter half of the twentieth century, demand flow technology has transformed

manufacturing facilities all over the world into more efficient operations that have

reduced their amount of non-valued operations in order to bring the cost of their products

down. If implemented properly, DFT is an excellent solution for reducing the lead-time

from initial customer order to final delivery.

Keywords: Kanbans, cellular manufacturing, supply chain, Just-In-Time, Toyota Production System, group technology

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CHAPTER I. Introduction

“It has been proven that almost anyone can improve efficiencies by increasing

production. It is during low growth periods that superior management and superior

workers can continue to improve.”[1]

This statement describes the fundamental reason why the concept DFT was developed.

The Japanese knew that they could not keep pace with the Americans in the automobile

market as far as sheer quantities were concerned. Each American worker produced about

nine times as much as each Japanese worker. Thus, they had to look for alternative

manufacturing methods in order to keep pace with the American manufacturers.

DFT turned out to be the solution that enabled the Japanese to compete for dominance

in the automobile market. In fact, once the whole DFT process was proven successful in

the manufacturing world, American companies started to see the benefits of a “pull”

system of manufacturing versus the traditional “push” system of manufacturing that was

used in the United States.

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CHAPTER II. Toyota Production System

As World War II ended, the president of Toyota challenged the employees with the

task of catching the Americans within three years; otherwise, Japan’s automobile industry

will not survive. Taiichi Ohno was the vice president of engineering at Toyota and he

started looking at alternate methods for manufacturing automobiles because he knew that

the Americans could easily produce more cars than Japan in a given time period. He

studied the American method of manufacturing and discovered that they relied on huge

inventory levels to maintain their high production rates. The Americans justified

maintaining large inventories because of the long set up times involved for changing the

tooling. Ohno also realized that Japan could not imitate the Americans manufacturing

methods because they did not have the high volume that the American manufacturers had.

Thus, the Toyota Production System was born.

This new way of manufacturing products differentiated Toyota from their

competitors for three reasons. First, reduced lot sizes increased Toyota’s production

flexibility. Second, parts were provided at the desired time and place for a specific task.

Finally, by optimizing the equipment layout based on the order that the product was built

minimized unnecessary travel between cells.

II.1 THREE PRIMARY PRINCIPLES OF THE TOYOTA

PRODUCTION SYSTEM

The fundamental basis behind the Toyota Production System is simply to eliminate

non-value-added work. The three concepts that form the framework for the Toyota

Production System are:

1. Operational flow of parts

Just-In-Time (JIT)

Autonomation

Group technology

2. Method for determining profit margins

3. “Five Whys”

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Ohno realized that the manufacturing layout and quality checks throughout the production

process were key issues that needed to be addressed if this new approach to manufacturing

was going to succeed.

In JIT production, the later process refers back to an earlier process to get the exact

numbers of parts needed for the process as needed. This helps minimize inventory levels

substantially. Inventory is basically considered an unnecessary evil because it represents

money that the company has tied up in investments that are waiting to be sold. Thus, the

lower the inventory the more purchasing power the company has for other things, such as

capital investments. Autonomation is basically quality control checkpoints along the entire

production process from start to finish. The idea being that it costs much more money to

fix a problem after the unit is completely built then it would cost if the problem was fixed

as soon as it was discovered. Group technology refers to the grouping of machines based

on flow of production to minimize travel of the parts. Carrying parts back and forth

between operations is considered a non-value-added activity that increases the unit cost

substantially.

Ohno also looked at the methods used by the American manufacturers for determining

the profit margin. The American manufacturers determined the selling price and calculated

it as the sum of actual cost to build the car and the profit. Thus, in order to increase the

profit margins the manufacturers simply increased the selling price. Ohno determined that

the customers should set the selling price, instead of the manufacturers. Thus, the profit

margin was calculated as the difference between the selling price and actual cost. This

method of determining the profit margin further strengthened the concepts behind the

Toyota Production System because the primary concept behind the Toyota Production

System is the elimination of all non-value-added activities. Thus, reducing the actual cost

to build the product and increasing the profit margins.

Finally, the last principle, is the “five whys”. This process is nothing more than

encountering a problem and asking why five times to get to the root of the problem. This

procedure is very useful to get to the true cause of the problem, even when the solution

appears to be obvious.

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II.2 WORKSHEETS AND TEAMWORK

The work sheets aid the workers in assembly of the product by identifying the sequence

of operations. This is basically a step-by-step procedure, represented by drawings or text,

which tell the workers how to assemble the product. These sheets will also include

information such as cycle time for each sequence and the number of pieces needed in order

for the operation to proceed. Ohno determined that the best source for creating these work

sheets was the workers themselves because they were the closest to the product assembly.

With the added responsibility of creating the worksheets, the workers felt like they were

making a contribution for the company. This helped create more of a team-oriented

atmosphere, which was also, one of Ohno’s objectives in the Toyota Production System.

His analogy was to the track relay where a baton is passed between two runners. The same

concept holds true for manufacturing because as one worker finishes their part of the

assembly they hand it to the next person down the line. Furthermore, Ohno believed that

machines could be idle; however, people should never be idle. Thus, if any worker on a

production line is having trouble with their part of the assembly, they can receive

assistance from someone else on the line that is momentarily free. This further strengthens

the teamwork concept.

II.3 KANBANS

Kanbans are used to control the JIT processing method by communicating to a

worker the number of parts to transfer from point A to point B, the number of parts to pick

up, and which parts to assemble. Kanbans are basically nothing more than a piece of paper

that contains the required information. This falls in line with the pull system because

Kanbans start at the end of the production line and pulls the parts as needed. Thus,

Kanbans prevent overproduction, which results in excessive inventories and in periods of

low growth, can lead to layoffs.

II.4 GOAL OF TOYOTA PRODUCTION SYSTEM

The Toyota Production System demonstrated that pulling the inventory through to final

production was a much more efficient way to manufacture products than to push the

inventory through. The advantages to this method were higher quality, lower inventory

levels, and minimized non-value-added activities. As a result, this led to lower prices for Page 4

the consumers. Furthermore, this system only makes the necessary quantities; thus, freeing

up more manpower to perform other activities. The pull system says that it is acceptable

for machines to be idle because they only need to produce enough parts based on customer

demand; however, it is unacceptable for people to be idle because that may disrupt the

continuous flow of parts moving down a production line.

The overall goal of this system is to reduce the timeline from initial customer order

to collecting the money. This is accomplished by several different procedures all working

together, in order to be more responsive to the customer. Some of these tools include

Kanbans, JIT, and cellular manufacturing and will be discussed in more detail in the

following sections.

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CHAPTER III. Demand-Based Flow Manufacturing

Over the years, the Toyota Production System has been recognized by other names

such as the theory of constraints, synchronous manufacturing, demand flow technology,

and supply chain management just to name a few. Even though the names have changed

the output is still the same, “mass customization”. However, most manufacturers recognize

the Toyota Production System of manufacturing as demand based flow manufacturing or

demand flow technology (DFT).

DFT is a supply chain management concept, where inventory is pulled through the

production process as needed to satisfy customer requirements. Focusing on the customer

is the main purpose of DFT. This is accomplished by filling out the orders in a timely

fashion and with accuracy. You can not have one without the other. Furthermore, DFT can

be used in environments that are extremely complex in nature and for mixed modeling

situations or made to order.

III.1 PULL VERSUS PUSH SYSTEM OF MANUFACTURING

In the traditional push system of manufacturing, products are built and then companies

look for buyers. Due to the nature of this system, lot runs are usually large to minimize on

tooling set-up times. This results in long lead times to the customer. The Master

Production Schedule (MPS) is adjusted only at the beginning of the planning horizon based

on the Material Requirements Planning (MRP). However, due to changes in demand these

material requirements fluctuate and by the time the units are in production, the material

requirements will not truly reflect the necessary demand resulting in product shortages or

inventory. There is no feedback through the system because the MRP and MPS do not

reflect the changes in demand. Thus, the push system can not adjust for sudden changes in

customer demands resulting in inventory and longer cycle times.

In the pull system, instead of the production schedule depending on the MPS, the

MPS serves only as a guideline to allocate the necessary resource requirements to meet the

demand. The MPS is not used to determine the production rate at each work center. As in

the push system, the flow of materials is in the same direction. However, the information

moves in the opposite direction in the form of Kanbans. The major difference between the

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push system and the pull system is in the short-term scheduling and production control,

whereas both long-term and midterm planning are essentially the same for both systems.

III.2 ADVANTAGES

DFT focuses on flexibility and throughput to reduce total cycle time from initial

customer order to delivery time. This is a result of massive organizational changes to the

current way of doing business, but if done properly will benefit both the customer and the

company at the same time. DFT reduces costs as a result of unbalanced production

schedules (MPS). Tool set-up times are reduced, which yields a better flow and balance of

material through the entire assembly process. Advanced ERP systems or any software for

that matter are not required to implement/execute DFT. However, there are software

packages on the market that were designed with DFT in mind, such as LOGIA, that

minimize the amount of human intervention, which in turn, minimizes everyday errors.

III.3 SOFTWARE APPLICATIONS

As noted above, software is not needed to implement DFT. However, there is

software out on the market that will make the DFT more user-friendly. LOGIA is a

configurator that streamlines the core business processes to meet customer demand cycle

times. LOGIA was designed with demand flow technology in mind. The software was

based on a pull system of manufacturing that can broadcast information to the actual

manufacturing cells, sequencing of processes is based on attributes of parts, and supports

nesting of parts. Furthermore, engineering changes are reflected immediately from

engineering to the shop floor.

III.4 GOALS

Several reasons for implementing DFT include improving revenue, growth of

company, competition, and eventually increase the marketshare. This can be accomplished

by first minimizing the actual cost of the units by reducing non-value-added activities,

which has a twofold impact. First, the product will be less expensive to produce and

second the lead-time to the customer will be much shorter. Furthermore, in order to meet

customer demands in a timely fashion, information and material must be high quality and

flowing at a high velocity. Thus, the ultimate goal for DFT will be mixed-modeling, which

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implies quicker customer response time. Mixed-modeling is equivalent to a lot or batch of

one unit. Instead of the traditional lot runs of, say 50 units of the same model number;

different model numbers can be processed down the same line in batches of one if

necessary.

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CHAPTER IV. Kanbans

DFT is the actual production method, while Kanbans are used to manage the flow

processes in DFT. Thus, JIT and autonomation are linked together via Kanbans. As

mentioned above autonomation and JIT are two of the fundamental concepts of DFT.

Kanbans are nothing more than pieces of paper that contain the required information to

control the production, quantities to produce, and the sequencing that the products must go

through to be built. Typically, a card that is inserted into a rectangular vinyl envelope

represents the Kanban. There are different kinds of Kanbans used for different reasons,

which are based on procedures and rules. Kanbans provide different functions as follows:

Pick-up and delivery information

Production information

Work order

Prevents defective products

Maintains inventory control

IV.1 DIFFERENT TYPES

The first type of Kanban is known as a withdrawal Kanban. The main purpose is to

authorize the movement of parts from the preceding work center to the subsequent work

center. Once the parts have been moved to a work center, the Kanban remains at the work

center until all parts have been consumed then the Kanban travels back to the preceding

work center. The information in the withdrawal Kanban should contain part number,

routing, lot size, part name, name and location of subsequent process, name and location of

preceding process, container type, and container capacity.

The next type of Kanban is a production Kanban. The main purpose is to authorize

the release to a preceding process to build the specified number of parts listed on the

Kanban. The information on this Kanban should contain information on the materials and

parts needed as inputs for the preceding process, plus the information on the withdrawal

Kanban.

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IV.2 PROCEDURES [2]

The process of Kanban flow should follow eight steps.

1. The carrier of the subsequent process goes to the store of the preceding process

with the withdrawal Kanbans kept in his withdrawal Kanban post on a forklift or

jeep. He does this at regular predetermined times.

2. When the subsequent process carrier withdraws the parts at store A, he detaches the

production-ordering Kanbans which were attached to the physical units in the

pallets and places these Kanbans in the Kanban receiving post. He also leaves the

empty pallets at the place designated by the preceding process people.

3. For each production-ordering Kanban that he detached, he attaches in its place one

of his withdrawal Kanbans. When exchanging the two types of Kanbans, he

carefully compares the withdrawal Kanban with the production-ordering Kanban

for consistency.

4. When work begins in the subsequent process, the withdrawal Kanban must be put

in the withdrawal Kanban post.

5. In the preceding process, the production-ordering Kanban should be collected from

the Kanban receiving post at a certain point in time or when a certain number of

units have been produced and must be placed in the production-ordering Kanban

post in the same sequence in which it had been detached at store A.

6. Produce the parts according to the ordinal sequence of the production ordering

Kanbans in the post.

7. The physical units and the Kanban must move as a pair when processed.

8. When the physical units are completed in this process, they and the production-

ordering Kanban are placed in store A, so that the carrier from the subsequent

process can withdraw them at any time.

IV.3 RULES [2]

In order to realize the Just-in-time purpose of Kanban, the following rules must be

followed:

Rule 1. The subsequent process should withdraw the necessary products from the

preceding process in the necessary quantities at the necessary point in time.Page 10

Rule 2. The preceding process should produce its products in the quantities

withdrawn by the subsequent process.

Rule 3. Defective products should never be conveyed to the subsequent process.

Rule 4. The number of Kanbans should be minimized.

Rule 5. Kanban should be used to adapt to small fluctuations in demand (fine-

tuning of production by Kanban).

IV.4 LEVELING PRODUCTION

Production leveling is a process used to aid in determining the monthly production

schedule. Leveling depends on small lot sizes or batches and small set up times in order to

realize zero fluctuation at the final assembly. Timing and volume are critical to production

leveling.

IV.5 GOALS

The word Kanban can be broken down into two words, Kan meaning card and Ban

meaning signal. Kanbans are nothing more than an efficient way of moving parts through

the assembly process. Thus, parts are only supplied when needed to minimize on

inventory. There are two main features for Kanbans. One feature is that they can be used

repeatedly and the number of Kanbans used is restricted. By reducing the number of

Kanbans, the flow of production is limited, which minimizes waste and inventory.

There are several advantages for using Kanbans. Kanbans are simple, provide

precise information, minimal cost for transferring information, minimizes waste, and

prevents overproduction. Thus, all of this improves the quality of the product, which in

turn improves the relationship between the customer and the company.

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CHAPTER V. Cellular Manufacturing

To facilitate the flow of materials throughout the factory, the amount of travel

between work centers must be reduced. The biggest area of non-value-adding costs lies

within the travel that is involved for parts to travel between cells. Thus, the objective of

cellular manufacturing is to group machines according to parts with similar features. This

will reduce the amount of intercell and intracell travel for the materials.

V.1 ADVANTAGES

There are some important advantages to cellular manufacturing. By grouping

machines based on similar part features, setup times are reduced due to similar tools and

part sequencing. Other advantages include reduced in-process inventories, reduction in

flow times as well as WIP, improved product quality, and reduced tool requirements. All

of these advantages works towards a common goal, shorter customer response time.

Furthermore, cellular manufacturing creates more of a conducive environment that results

in teamwork. Teamwork is one of the fundamental goals of the original Toyota Production

System.

V.2 CELL DESIGN

To optimize the individual cells throughout the manufacturing facility takes a great

amount of time and effort. However, if done properly, the benefits will be noticed almost

immediately. The cell design is a function that involves both system structure and

operation.

Structural issues are based on certain criteria, such as:

Part families and the grouping of part families

Identifying the proper machines and group them accordingly

Identifying the right combination of tools, fixtures, and pallets

Identify the material handling equipment and layout of the equipment

Procedural issues are based on the following criteria:

The particular details of the design

Support personnel that will operate the equipment

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Maintenance and inspection policies

Methods for production planning, control, scheduling

Acquisition of hardware and software, such as CNC machines

There are a number of mathematical simulations for optimizing cell configurations. Some

of these include Production Flow Analysis, Rank Order Clustering Algorithm, Single-

Linkage Cluster Analysis, etc. For more details on these methods, the interested reader is

referred to reference [5].

V.3 GOALS

Cellular manufacturing is the final piece of the puzzle to insure success in

implementing DFT. However, there are a number of factors that must be accounted for to

insure success. Some of these include reduced batch sizes, organized work stations,

Kanbans and inventory control, group technology, preventative maintenance, and

employees willing to take initiative. The last item is the most important because this whole

method of manufacturing focuses on employee interaction and their involvement in the

processes. Since the employees are involved with the production on a daily basis, their

input is extremely important for DFT to succeed.

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CHAPTER VI. Conclusion

Demand Flow Technology is a method of production that is 100% centered on the

elimination of wastes in the flow of production. Wasteful activities arise in the form of

overproduction, delays, transporting, processing, inventory, and wasted motion. In other

words, as the production system tends to be more of a continuous flow, the amount of

wasteful activities will naturally decrease. Thus, operational efficiency will increase.

Furthermore, since it is the purpose of DFT to build only what is needed, excess manpower

can be utilized in other areas. This prevents excessive hiring during high demands and

massive layoffs during low growth periods.

This paper described the characteristics and the advantages of demand flow

technology and how it evolved from the Toyota Production System. However, there are

some negative aspects that must be considered before implementing DFT. The first

concern is the geographical locations of the parts suppliers with respect to the major

corporation. The closer the proximity of the suppliers helps minimize transportation costs

and lead-times as a result of geographical location. Another concern is that there are

limited applications with smaller firms because they generally operate on a small scale

with limited products. The smaller companies simply do not supply enough business to

warrant the suppliers to deliver products multiple times on a daily business. This is very

cost prohibitive from the supplier’s point-of-view. Another concern is that cultural

differences may affect the implementation of DFT. People for the most part are

uncomfortable with change. Finally, a sure way to fail with implementing DFT is imitating

the actual process. The organization must have upper management’s complete support to

implement DFT in order for it to be a success.

There are several areas that one might investigate to improve upon the whole DFT

process. One area is to optimize between flexibility, quality, and cost. Just like any phase

of a design project compromises must be made to satisfy the customer requirements to

their fullest. Another area of future research is looking at the reliability of machine and

cutting tools. This has implications in minimizing the number of setups due to tooling

breakdowns. A third area of interest is artificial intelligence. The impact of this is to

minimize the number of routine human errors that might be a result tedious tasks. Thus,

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there are many areas to improve upon in order to insure a successful implementation of

DFT.

DFT is still not the absolute cure-all for continuous flow. It will require much work

on the part of the organization to insure that everything is working properly upon

implementation. It took Toyota over 10 years to really justify switching to DFT. Even after

that they are still trying to improve upon the system.

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CHAPTER VII. Bibliography

1. Ohno, Taiichi, “Toyota Production System: Beyond Large-Scale Production”,

http://www.acq-ref.navy.mil/wcp/tps_ono.pdf, 1978.

2. Chen, Chun, "Toyota Production System",

http://www.ite.poly.edu/mg/mg737/15049982/15049982chun737.html, spring 1998.

3. "Demand-based Flow Manufacturing: Keeping the Customers Satisfied",

http://www.lionhrtpub.com/IM/IMsubs/IM-10-97/CoverStory.html, October 1997.

4. Shingo, Shigeo, “A Study of the Toyota Production System: From an Industrial

Engineering Viewpoint”, http://www.acq-ref.navy.mil/wcp/tps_study.pdf, 1989.

5. Singh, Nanua, Systems Approach to Computer-Integrated Design and

Manufacturing, John Wiley & Sons, Inc., New York, 1996.

6. "Kanban-an Integrated JIT System",

http://www.geocities.com/TimesSquare/1848/japan21.html.

7. "Flow Manufacturing in the Supply

Chain",http://www.manufacturingsystems.com/archives/1999/Apr99/0499arc3_1.htm.

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