www.mesa.org2008 North American Plant-to-Enterprise ConferenceSeptember 21-23, Orlando, FL
Lean ManufacturingStrategic Initiative
Guidebook
Contributors:- Chad Vincent, Baxter - Charlie Gifford, 21st Century Manufacturing- Conrad Leiva, iBASEt - Ganesh Wadawadigi, SAP- John Dezelme, Independent - John Smith, Ease Inc.- Nancy Glenn, Independent - Robert Quinlan, GE Healthcare- Stephanie Green, Valent Group - Tom Knight, Invistics
Working Group Chair:Ganesh Wadawadigi, Ph. D.
SAP
Definition
Lean Manufacturing principles anchor on customer value and continually seek to identify and eliminate non-value added activities in the production processes. Lean synchronizes and sequences these processes to customer demand by creating a smooth flow of material using pull based replenishment. Further, by creating a visual and standardized work environment, relevant and timely information provided to employees empowers them to rapidly diagnose and resolve issues thus improving their productivity, raising quality standards, and lowering production costs. Business value in increased manufacturing efficiency gained with Lean Manufacturing lies in higher inventory turns, lower lead times and improved customer service levels. Lean is a journey, and use of appropriate technology and business applications is essential to sustain and scale the initiative not only within an enterprise but to extend the benefits to the supplier network.
Lean is a Journey
Three Pillars of Lean
Process: Manufacturing Styles
Satellites Commercial Printing
Heavy Equipment Automotive Sugar
Refinery
Pro ject Jo b Sho p Line Flo w/ Bat ch Assem b ly Line Co nt inuo us
High Mix High Vo lum e
Examples
Source: Integral Logistics Management: Operations and Supply Chain Management in Comprehensive Value-Added Networks, Paul Schönsleben
Process: Comparing High-Volume and High-Mix
ShortLong (2+ years)Time frame for product changes
InconsistentConsistentQuality
UnreliableReliableEquipment
Long, frequentShort, infrequentChangeovers
HighLow (3rd shift free)Utilization
HighLowProduct mix
VariableHighVolume
VariableStableDemand
High MixHigh Volume, Repetitivee.g., ToyotaManufacturing Characteristic
Extending TPS to Address High-Mix
Optimization of lot sizes and/or campaign sizesRules of thumb like EPEILot sizing
Part-generic techniques like CONWIPPart-specific KanbanPull scheduling
Optimization of inventory buffers using operations research
Rules of thumb to slowly lower “water levels”Inventory optimization
Shifting bottlenecks & optimization of capacity buffers
Fixed bottlenecks & rules of thumb to dedicate capacityBottlenecks and capacity planning
Flow path metrics leveraging enterprise software
Visual line of sight metrics like Heijunka boardsPerformance measures
Focused factories aligned to flow pathsDedicated people for each cellOrganization
Flow paths through shared equipmentDedicated cells for similar productsValue streams
High-variety, make-to-order or engineer-to-order processes
Stable, high-volume, make-to-stock processesExtended operations value chain
High MixHigh VolumeLean Techniques
Information: Role of Technology?
• Real-time data collection and actionable insights through visibility
• Internal linkages to adjacent and enterprise business processes
• External linkages to supplier ecosystem• Flexibility to rapidly adapt to changing
business conditions
How can Technology be Leveraged?
Making a Case for ROI
• Focus on shareholder value: – Believable financial metrics– Accurate evidence from Mfg.– Operations metrics to financial metrics
• Top-line metrics expected are:• Return on Investment (ROI)• Payback Period• Net Present Value (NPV)• Internal Rate of Return (IRR)• Modified IRR• Total Cost of Ownership (TCO)
Tie each to the 3 Basic OperationsMetrics using Tangible Benefits…
Aligning to COO’s Goals
1. Increase revenue with Throughput• Tied to top Business Drivers• Time- To-Market & To-Volume
2. Decrease Inventory and Operational expenditures
• Tied to top Business Drivers• Tied to reduced CAPEX• Reduce Labor & Material Expense
3. Reduce Operating Risk• ROI, fines, shutdowns, safety
claims, project failure
Quantifiable Benefits
Direct Materials: Reduce: Rejects and WIP InventoryWaste: Reduce: Waste Disposal CostMfg. Productivity: Increase: Data Collection, Throughput and Root
Cause Analysis CapabilityReduce: Rejects, Rework, Retest and Downtime
Quality Inspections: Reduce: Data Collection and Compliance AuditsFacility Cost: Reduce: Safety Stock, Energy, Space CostAdmin Productivity: Reduce: Return Processing, Handling, Write-offs,
Warranty Claims & Contract ConcessionsRevenue: Increase: Market Share, Price Premium, Capacity
Accelerate: NPI Maintenance: Reduce: Planned and Unplanned Downtime
Benefit Calculations Based on Resource Optimization & Reduction:Labor, Material, Equipment, Space, Energy
Next Steps – Taking the Guidebook to Completion
• Provide feedback• Become a contributing member of the
Working Group• Additional case studies that exemplify
benefits and showcase lessons learned in your Lean journey