Concepts Of Value And Waste. 2 FOR INTERNAL USE ONLY Module Objectives By the end of this module,...

Concepts Of Value And Waste

2FOR INTERNAL USE ONLY

Module Objectives

By the end of this module, the participant should be able to:

Describe the five principles of Lean Understand concept of Value-Added and Non Value-

Added activities Describe the eight types of waste Explain why it is important to make waste visible


Lean Thinking

Simple changes to processes make huge contributions Lean improvements are made by the people that do the work It is easy to understand and implement Reduces workload It makes your organization more competitive, and a better

place to work


Examples of Lean Metrics

Measuring process performance is a key aspect of Lean thinking. Below are a few examples of the types of Metrics used to measure Lean Business Processes: Scrap # Units produced Cycle Times Profit Productivity ROIC Capacity Backorders


The Role Of Lean Thinking

The methods of Lean Thinking provide an efficient way to reduce operational waste, save time, save cost, and extend capacity of existing resources.

...and a lean value stream for the same process:

DesiredOutcomeA typical waste-filled value stream...

Task Waitsin Queue

DeliverableCreated

DesiredOutcome

UnnecessaryTask

ApprovalCycle

Error-CorrectionLoop


Removing Obstacles To Improvement

Poorly defined organizational roles and responsibilities Chaos resulting from firefighting and expediting Habit of managing through a functional organization Lack of well-defined and efficient processes Poor utilization of valuable human and capital resources Lack of metrics focused on customer Value-Added

processes Lack of productivity enhancing work methods Lack of uniform prioritization of work


Categories Of Waste (Or MUDA)

Process Waste–Serial Actions–Correction Loops–Unnecessary Steps–Undefined Paths–Undefined Roles

Cycle Time Waste–Unnecessary Delays–Approval Cycles–Low Value Meetings–Lack of Information–Slow Transactions

Product Waste–Missed Target Costs–Design Errors–Missed Synergies–Poor Producibility–“Point Designs”

Resource Waste–Multitasking–Lack of Prioritization–Misaligned Incentives–Unnecessary Tasks–Firefighting/Expediting


How Lean Do You Think You Are?

The Opportunity? – 20% – 60% Reduction in Process Lead Times– >50% Improvement in Resource Utilization– 10% – 50% Increase in Gross Margins– >30% Gain in Process Capacity– Dramatic Improvement in Schedule Predictability


Lean Thinking

“Waste” describes the elements of “production” that add no value to the service or product required by the customer.

Historically, firms have been organized based on functional silos and poorly defined processes – They are loaded down with Non-Value-Added waste.

Lean Thinking demands an organizational culture that isintolerant of waste in all forms.


Definition Of Value

“Any activity or task that transforms the “deliverables” of a process in such a way that the customer is both aware of it, and willing to pay for it, is Value-Added”

Based on this (strict) definition of value, we can divide the tasks and activities of any process into three categories– Value-Added (essential) tasks– Type 1 Waste – Non-Value-Added (NVA), but currently

necessary– Type 2 Waste – Non-Value-Added (NVA), and not necessary

Our goal is to eliminate Type 2 activities wherever possible, and minimize the waste in Type 1’s through the use of Lean Methods.


Value-added Quiz

In which category should the following activities be placed?

Activity Value-Added Type 1 Type 2

Attending a weekly team coordination meeting

Filtering through your daily e-mail list

Reporting status to upper management

Gaining multiple approvals on documents

Gaining management approval for routine actions

Expediting a document through the approval list

Writing formal policies and procedures

Writing brief work-method instructions

Gaining regulatory or agency approvals

Creating ISO 9000 documentationHunting for needed information to do your job

Building a “best practices” database

Holding a lessons learned meeting

Spending time on process improvements


The Five Principles Of Lean Thinking

Lean Thinking can be summarized in five principles*:

Principle 1 – Specify the value of a process from the standpoint of the end customer

Principle 2 – Identify the value stream for each process

Principle 3 – Allow value to flow without interruptions

Principle 4 – Let the customer pull value from the process team

Principle 5 – Continuously pursue perfection


Principle #1 Specify And Focus On Value

Point of Optimized Output Value

Too Much Information,Unnecessary Features, Etc.

Missed ValueOpportunities

Val

ue

of

Pro

cess

Ou

tpu

t

Cost of Process Output


Principle #2Identify The “As Is” Value Stream

Example – Creation of a Request for Quotation (RFQ)

Gather StrawmanRequirements

Assign Buyer

C/T = 3 daysW/T = 4 hoursVA/T = ~ 0

VerifyCustomerRequirements

C/T = 14 daysW/T = 5 daysVA/T = 3 days

Consult WithManufacturingEngineer

C/T = 5 daysW/T = 2 daysVA/T = 4 hours

C/T = 14 daysW/T = 5 daysVA/T = 1 day

Customer Meetings


Create PreliminaryRFQ


Review andApproval Cycle

C/T = 5 daysW/T = 1 dayVA/T = ~ 0

Create Final RFQ


Review andApproval Cycle

C/T = 5 daysW/T = 1 dayVA/T = ~0

Release RFQ

C/T = 2 daysW/T = 1 dayVA/T = 2 hours

The Value Stream is the ideal sequence of value-creating steps that lead from a triggering event to a final deliverable without waste.

C/T = Calendar TimeW/T = Work TimeVA/T = Value-Added Time


Work Time vs. Value-Added Time

“Calendar Time”

“Lead” Time

“Work” Time

“Value-Added” Time

1. Calendar Time – The actual duration of a task from start to finish (the Lead time).

2. Work Time – The shortest time currently possible for a task.

3. Value-Added Time – The amount of the work time that is actually Value-Added…the rest is waste!

1.

2.

3.


Principle #3 Eliminate Obstacles To The Flow Of Value

Value

There can be many obstaclesto the flow of value!

Customer

Functional Departments

Inadequate Resources

Multiple Approvals

Unnecessary Documents

Unnecessary Queues andWait Times


Principle #4 Let The Customer Pull Value

If…• Every activity within a process has a “deliverable,” and...• Every “deliverable” must be received by some “customer”

Then…• The best way to ensure a satisfied “customer” is to have

them DEFINE THETIMING, FORMAT AND CONTENT OF THEIR DELIVERABLES

• Only “produce” what customer needs • “Customer” Defined Deliverables• Linked Tasks• Timely Information Flow

Remember:“Customers” can be both internal and external


Principle #5 Continuously Pursue Perfection

It takes about a week forTHIS to look like THIS!

Waste constantly invades every work process.

Disorder tends to naturally increase.

Constant vigilance is essential to maintain lean production and lean business processes!


Waste

Eight types of waste:–Overproduction–Inventory–Waiting–Transportation–Motion–Making defects–Over processing–Human Intellect

Three contributors to waste:–Unevenness–Overburden–Current methods and processes


Waste Of Overproduction (Type 1)

Producing more than needed (beyond customer demand)

Producing faster or sooner than needed Visible as stored material Result of producing to speculative demand (forecast)


Waste Of Inventory (Type 2)

Excessive in-process or finished goods inventory caused by large lot production or processes with long cycle times

Inventory should exist for two reasons:– Buffer required to maintain throughput in an

environment where variation is present– Satisfy customer demand

Reducing variation enables inventory reduction


Inventory Hides Problems

Long setup times will be tolerable if high levels of inventory exist Equipment does not have to be carefully maintained if lots of

inventory is on hand Quality does not need to be at Six Sigma if inventory is high

Inventory is like a river, when water level is lowered, boulders have to be dealt with

Scrap

Long set ups

Machine downtime

Lack of teamwork

Machine downtime

Imbalanced lines

Quality problems

not capable

Processes

Maintenance issues

Productivity Problems

Suppliers’ issues

Inventory Level


Waste Of Waiting (Type 3)

Idle time that results when two dependent activities are not fully synchronized

Examples:– Waiting for a machine – Unutilized resources waiting for information – Slow or unavailable computer resources


Waste Of Transportation (Type 4)

Any movement or handling Transportation does not add value and should be

minimized or eliminated


Waste Of Motion (Type 5)

Any movement of people or machines which does not contribute added value to the product or service– Programming delay times– Excessive walking distance between operations– Ergonomic/safe motion


Waste Of Making Defects (Type 6)

Repair of a product or service to fulfill customer requirements

Scrap Warranty Customer returns


Waste Of Over-processing (Type 7)

Effort which adds no value to a product or service Enhancements which are “invisible” to the customer Work which could be combined with another process


Three Contributors To Waste

Unevenness Overburden Current methods


Unevenness

Unevenness is unwanted fluctuations in production planning and production quantity.

Unevenness can be observed in:– The overall production quantity– The amount of work done by workers– The flow of parts – The use of machines and equipment


Overburden

Overburden occurs when a machine or person is pushed beyond safe and comfortable capacity limits.


Current Methods

Current Methods are the use of processes, methods or layout, without improvement, because they currently exist.• Inflexible processes • Same old problems• Guiding principle: “Don’t be limited by the status quo”


Why Make Waste Visible?

Identify bad strategies and practices lead to waste

Must understand process to improve Define opportunities to improve You can only fix or improve what you can see


What Tools Exist To Make Waste Visible?

Workplace organization– 5S– Visual workplace

Spaghetti Chart Process Flow Diagram Pareto Chart Cause and Effect Diagram

– Five Whys Process Reports and Assessments

We will discuss in detail with a module on this topic.


Techniques Used To Implement Lean

Workplace organization/5S Visual management Floor layouts Small lot “production” Quick setup Total productive maintenance Standardized work Continuous improvement activities

We will learn some of these this week and in future training.

Level scheduling Machine and process capability Variation reduction Error proofing Pull systems Supplier rationalization Supplier development Transportation

Appendix


Lean Concepts

The Five Principles of Lean 1. Precisely specify the value of a

specific process2. Identify the Value Stream for each process3. Allow value to flow without interruptions;

eliminate obstacles4. Let the customer pull value from the

process5. Continuously pursue perfection

Value Stream Mapping6. Mapping the process allows us to

understand process to improve7. Value Stream is all actions required to bring

a specific product/service through threecritical tasks:• Problem solving • Information management• Physical transformation

8. Identify value added activities9. Define opportunities to remove

Non-Value-Added steps10. Value Stream Map of the ideal process

(future state)

Key ConceptsValue “An activity that transforms the

“deliverables” of a process the first time in such a way that the customer is both aware of it, and willing to pay for it, is Value-Added.”

Value Stream Mapping Questions Who was involved in the creation of the

Value Stream Maps? Was it a cross-functional team?

What was your method for measuring process time observations (cycle time, lead time, work or touch time, calendar time, etc.)?

Did you walk the process to validate the Value Stream Map?

How did you create the future state ValueStream Map?

Can we remove those process steps that do not add value?

What are the baseline metrics (RTY, Takt Time, failure rates, defect types, etc)?


Concept Of Waste

The Eight Types of Waste1. Overproduction2. Inventory3. Waiting4. Transportation5. Motion6. Making Defects7. Overprocessing8. Human IntellectContributors to Waste9. Unevenness10.Overburden11.Current Methods

and ProcessesKey ConceptsWaste Identify types and contributors of waste

in operations Lean demands an organizational culture

that is intolerant of waste in all forms

Tools to Make Waste Visible1. Workplace Organization

• 5S• Visual Workplace

2. Spaghetti Chart3. Process Flow Diagram4. Pareto Chart5. Cause and Effect Diagram

• Five Whys6. Process Reports and Assessments

Key ConceptsTakt Time

Demand Profile Establishment (“Takt" Time) a German term that refers to the tempo set by the conductor of an orchestra, it is a calculation that sets the rate of production equal to the average customer demand.

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