MMVA ZG537 Lean

Manufacturing

Rajiv Gupta

BITS Pilani

Session 1

Session 1

• Module 1

– Introduction to Dr. Rajiv Gupta, faculty for MMVA ZG537

– Introduction to the course

– Overall course guidelines

• Module 2

– Current global challenges and trends • Competition

• Globalization

• Customer Preferences

• Technology

• Module 3

– Current global challenges and trends • Government Regulations

• Uncertainty

• Environment

– What It Means

2

Session 1

• Module 4 – Evolution of lean manufacturing

• Module 5 – Summary and wrap up

3

Session 1

• Begin Module 1

– Introduction to Dr. Rajiv Gupta, faculty for

MMVA ZG537

– Introduction to the course and guidelines for

the course

4

Session 1

• End of module 1

5

Session 1

• Begin Module 2

– Current global challenges and trends

• Competition

• Globalization

• Customer Preferences

• Technology

6

Current Global Challenges

• Competition

• Globalization

• Customer Preferences

• Technology

• Government Regulations

• Uncertainty

• Environment

7

Competition

• Shrinking market share

• Lower margins

• Shorter product life cycles

• Higher variety

• Smaller volumes to depreciate fixed costs

• Globalization is an imperative

• Competition for customers as well as employees

8

Globalization

• Goes beyond imports and exports

• Global markets and global sources

• Potential for increased markets

• Increased potential for lower costs, but

increased complexity due to international

regulations and other differences

• Greater risk due to currency fluctuations

9

Customer Preferences

• We cannot sell what we manufacture. We

must manufacture what we can sell.

• Need to reduce response and lead times

• Logistics needs to be better integrated

with the entire supply chain

• Need to keep a tight control on costs

• Need to bring new products to the market

faster

10

Technology

• Technology has to be harnessed. Don’t let

it control you

• Don’t be seduced by “sexy” gadgets

• Inefficient utilization of technology is

expensive

• Technology includes approaches such as

TQM, TPS, TPM, Six Sigma etc.

11

Session 1

• End of module 2

12

Session 1

• Begin Module 3

– Current global challenges and trends (contd.)

• Government Regulations

• Uncertainty

• Environment

– What It Means

13

Government Regulations

• Within a country, there may be laws pertaining to inter-state commerce

• Environmental responsibility – green production

• Labor laws

• Customs and other duties

• Tax laws

• Currency exchange rates

• Other

14

Uncertainty

• Growing uncertainty in the global market with greater access to information

• Uncertainty has an impact on production and delivery schedules and on the inventory levels

• Some of the uncertainty is due to increased climatic events, tsunamis, earthquakes, etc.

• There is also a growing threat due to the increased incidence of terrorism and piracy

• Logistics systems need to be able to respond to changing situations and conditions

15

Environmental Concerns

• Extended Producer Responsibility (EPR) is becoming more prevalent

• Reverse logistics is assuming greater importance as part of a company’s logistical activities

• Fuel emissions and spills and leaks in the ocean are receiving more focus

• Companies are assuming a more responsible position in regard to the environment

• Better planning, measurement (emissions), control and use of sustainable technologies will have an impact on logistics

16

What It Means

• Focus on – The customer

– Value and waste

– Doing more with less

– The entire purchasing experience

– Flexibility

– Partnerships

– Longer term thinking

• Move away from – Numbers games

– Fads

– Production focus alone

17

Business Formula

Selling price = Cost of manufacturing + cost

of delivery + profit

Profit = Selling price – cost of manufacturing

– cost of delivery

The critical factor is how we view the

formula

18

Competitive Priorities

• Price – Ability to profit in price competitive markets

• Quality – Ability to offer consistently low defect products

– Ability to provide high performance products

– Ability to provide reliable/durable product

– Ability to anticipate customer preferences

• Delivery – Ability to provide fast deliveries

– Ability to make dependable delivery promises

– Ability to accommodate customer-generated changes 19

Competitive Priorities

• Service

– Make the purchase experience as effortless

as possible for the customer

– Ability to customize the product/service to suit

customer needs

– Ability to provide effective and efficient after-

sales service

20

Session 1

• End of module 3

21

Session 1

• Begin Module 4

– Evolution of lean manufacturing

22

What is Lean?

• A lot of confusion exists about the term

• Term first mentioned in “The Machine That

Changed The World” in the 1980s

• It got further defined in “Lean Thinking” in

1994

• Today it is synonymous with Toyota

Production System

23

Evolution of Lean

• Craft manufacturing

• Mass Manufacturing

• Lean Manufacturing

24

Craft Manufacturing

• Each product unique

• Long lead times

• Inconsistent quality

• Close interaction between producer and

the customer

• High cost

25

Mass Manufacturing

• Advent of the moving conveyor

• Establishment of standardized, interchangeable parts

• Development of standard methods of production

• Increased productivity

• Lower costs

26

Mass Production Without

Variety in the 1920s

Schedule

Suppliers

Stamping Painting Steel

Mill

Foundry Fabrication Sub-assy Fin-assy Dealers

Customers From: “Profit Beyond Measure”, H. Thomas Johnson and

Anders Broms, 2000 27

Mass Producing Variety in

Batches by the 1970s

100s

0f

suppliers

Stamping

Foundry

Power Train

Body & Frame

Painting

Rework

Whse

Final

Assy Dealers

Customers

Plan

Forecast

Orders

From: “Profit Beyond Measure” 28

Mass Production

• Downsides: – Worker alienation

– Higher capital costs leading to batch manufacturing

– Distance from the customer

– Management by numbers as advocated by Alfred

Sloan at General Motors – management

disconnected from the shop floor

– Engineering became specialized – lack of

communication among different specialties and with

manufacturing – longer product development time

29

Mass Production

• Downsides:

– Due to large expensive equipment that had to

be kept busy to justify the high cost,

production was in large batches, whether, or

not, this was required by the customer

– Due to management by numbers, accounting

became a very important discipline. Inventory

was treated as an asset in accounting leading

to high inventories

30

Lean Production

• Evolved as a necessity

– Limited capital

– Limited space

– Need to protect domestic markets

– Focus on people and their capabilities

• Leading to

– The use of general purpose machines to produce a variety

of products in small batches

– Layouts to optimally utilize space

– Focus on quality

– Regular upgradation of people capabilities

31

Lean Production

• People policies

– Due to a major economic depression following the

war, Japan faced labor unrest when president Kiichiro

Toyoda tried to fire workers

– As part of the negotiations, workers who remained

were promised lifetime employment and were

permitted the use of company facilities – still in use

today

– Kiichiro Toyoda took responsibility for the situation

and resigned from the presidency of Toyota

32

TMMK Production 1990s

Stamping

Engine

Build

Seat

Build Plastics

Dealers

Customers

Body weld Paint shop Final assy

Batched

orders Single vehicle

order

From: “Profit Beyond Measure” 33

Session 1

• End of module 4

34

Session 1

• Begin Module 5

– Summary and wrap up

35

Summary

• Current business climate poses pressure

on manufacturers to be responsive and

efficient

• Manufacturers need to be able to meet

varied demand while controlling costs

• Lean grew as a response to meet the

requirements of a demanding customer

• Lean manufacturing evolved from craft

and mass manufacturing 36

Summary

• Craft manufacturing was close to the customer

but with no standardization and at a high cost

• Mass manufacturing brought about

standardization and low product cost, but with

distance from the customer and alienation of the

workers

• Lean manufacturing brings some of the benefits

of craft and mass manufacturing together

37

Session 1

• End Module 5

– Summary and wrap up

38