OPSM 501: Operations Management

Week 9:

Littlefield reflections

Lean Thinking

Koç University Graduate School of BusinessMBA Program

Zeynep Aksinzaksin@ku.edu.tr

Toyota Production System:Why did TPS develop?

Economic conditions in Japan after WWII:- low income- low labour productivity- low economies of scale compared to US

But car buyers wanted to be offered variety,quality, timeliness and a reasonable price.

Toyota was challenged to cut cost dramatically

TPS - aimed at cost reduction by thoroughly eliminating waste.

Zero non-value added activities (muda)

Zero defects, zero breakdowns, zero inventory, zero set-up

Production flow synchronized with demand (JIT) One-unit-at-a-time flow Mixed model production (heijunka) Piece-by-piece transfer (ikko-nagashi) Match production demand based on Takt time Pull instead of push Supermarket / Kanban Make-to-order

Quality methods to reduce defects Fool-proofing (poka-yoke) and visual feed-back Detect-stop-alert (Jidoka) Defects at machines (original Jidoka) Defects in assembly (Andon cord) Build-in-quality (tsukurikomi)

Flexibility

Standardization of work

Worker involvementQuality circles (Kaizen)Fishbone diagrams (Ishikawa)Skill development / X-training

Reduction of VariabilityQuartile AnalysisStandard operating procedures

Adjustment of capacity to meet takt-timeMulti-task assignment (takotei-mochi)

Reduce inventory to expose defects

.

.

The Shingo System: Fail-Safe DesignThe Shingo System: Fail-Safe Design

Shingo’s argument:– Defects arise when people make errors– Defects can be prevented by providing employees with feedback

on errors and putting controls in the process

Poka-Yoke includes: – Checklists– Special tooling that prevents employees from making errors– (Poka-Yoke: Japanese slang for “avoiding inadvertent errors” )

Which dial turns on the burner?

Stove A

Stove B

Pareto Analysis

Frequency Percentage-100%

-0%

-50%

A B C D E F

Pareto Law (80/20 Rule):

“80 percent of the problems are due to 20 percent of the causes”

Also known as cause-and-effect diagram, or Ishikawa diagram

Pareto analysis is used to identify key problems or symptoms,

Fish-Bone diagram is used to sort causes of the problems

Brain storming sessions of groups of workers needed

It is a very valuable educational tool

Fish-Bone Diagram

Used to find problem sources/solutions Other names

– Fish-bone diagram, Ishikawa diagram

Steps– Identify problem to correct– Draw main causes for problem as ‘bones’– Ask ‘What could have caused problems in these

areas?’ Repeat for each sub-area.

Fish-Bone Diagram

Cause-and-Effect Diagram(Fishbone Diagram)

Zero InventoriesZero DefectsFlexibility / Zero set-upsZero breakdownsZero handling / non value added

Just-in-time Production• Kanban• Classical Push• “Real” Just-in-timeMixed ProductionSet-up reduction

AutonomationCompetence and TrainingContinuous ImprovementQuality at the source

Organization MethodsPrinciples

The System of Lean Production (Toyota, Citroen, …)

• Avoid unnecessary inventory• To be seen more as an ideal• Two types of (bad) inventory: a. resulting from defects / rework b. absence of a smooth process flow• Remember the other costs of inventory (capital, flow time)

Pictures: Citroen

Inve

ntor

y in

pro

cess

Buffer argument:“Increase inventory”

Toyota argument:“Decrease inventory”

Principles of Lean Production: Zero Inventory and Zero Defects

• Flexible machines with short set-ups• Allows production in small lots• Real time with demand• Large variety

• Maximize uptime• Without inventory, any breakdown will put production to an end• preventive maintenance

Avoid Non-value-added activities,specifically rework and set-ups

Principles of Lean Production: Zero Set-ups, Zero NVA and Zero

Breakdowns

Push: make to forecast Pull: Synchronized production

Pull: Kanban

• Visual way to implement a pull system• Amount of WIP is determined by number of cards

• Kanban = Sign board • Work needs to be authorized by demand

• Classical MRP way• Based on forecasts• Push, not pull• Still applicable for low cost parts

• Part produced for specific order (at supplier)• shipped right to assembly• real-time synchronization• for large parts (seat)• inspected at source

Methods of Lean Production: Just-in-time

CycleInventory InventoryCycleInventory InventoryCycleInventory InventoryCycleInventory

Production with large batches

End ofMonth

Beginning ofMonth

Cycle

Production with large batches

End ofMonth

Beginning ofMonth

Cycle

Production with large batches

End ofMonth

Beginning ofMonth

Cycle

Production with large batches

End ofMonth

Beginning ofMonth

Inventory

End ofMonth

Beginning ofMonth

Produce Sedan

Produce Station wagon

End ofMonth

Beginning ofMonth

Produce Sedan

Produce Station wagon

End ofMonth

Beginning ofMonth

Produce Sedan

Produce Station wagon

End ofMonth

Beginning ofMonth

Production with small batches

Produce Sedan

Produce Station wagon

Methods of Lean Production: Mixed Production and Set-up reduction

• Create local decision making rather than pure focus on execution• Use machines / tools, but avoid the lights-off factory

• Automation with a human touch

• Cross training of workers• Develop problem solving skills

Organization of Lean Production: Autonomation and Training

10-15

• Solve the problems where they occur - this is where the knowledge is - this is the cheapest place

• Traditional: inspect and rework at the end of the process

• Once problem is detected, send alarm and potentially stop the production

Own Process Next Process End of Line FinalInspection

End User

$ $ $ $ $

• Rework• Reschedule

• very minor • minor delay

• Significant Rework• Delayed delivery• Overhead

• Warranty cost• recalls• reputation• overhead

Defect found

Defect fixed

Organization of Lean Production: Continuous Improvement and Quality-at-the-

source

10-16

Continuous Improvement

Represents continual improvement of process & customer satisfaction

Involves all operations & work units

Other names– Kaizen (Japanese)– Zero-defects– Six sigma

Process Improvement

Measurement– External and Internal

Analysis– Analyze Variation

Control– Adjust Process

Improvement– Reduce Variation

Innovation– Redesign Product/Process

D

AC

P

D

AC

P

Control

Improve

Innovate

Improve

The River Analogy

DefectsDefective Materials Machine Breakdowns Long Set ups

Long Lead times Unsuitable Equipment Uneven Schedules

Unreliable Suppliers Inefficient Layouts AbsenteeismRigid Work Rules

Ongoing objectives

Improve process flows– Efficient plant layout– Fast and accurate flow of material and information

Increase process flexibility– Reduce changeover times– Cross-training

Decrease process variability– Flow rates– Processing times– Quality

Minimize processing costs– Eliminate transportation, inspection, rework

How?

Improve process flows– Cellular layouts– Demand pull mechanisms

Increase process flexibility– Fast changeovers– Smaller lotsizes, level production

Decrease process variability– Standardize– Improve supplier reliability and capacity– Safety capacity, preventive maintenance– Fast feedback and correction

Minimize processing costs– Improve quality, eliminate non-value-adding activities

Beyond production: Shouldice as a lean enterprise

Shouldice General Hospital

Focus on low risk cases No focus, multiple goals

Clear single value prop. Confusion of value prop.

Predictable process Unpredictable process

Strive for perfection Strive for threshold perf.

Eliminate waste Tolerate some excess

Manage patient flows View patients as functional tasks

Pull patients into process Push patients through process

Womack and Jones (2000) From Lean Production to Lean Enterprise, HBR March-April 1994

Beyond production: Zara as a lean enterprise

Zara M&S

Clear focus on one customer type and one process

No focus, multiple and simultaneous goals

Unique and clear value prop. Confusion of implicit value proposition

Predictable process Unpredictable and fuzzy process

Strive for perfection Satisfied with threshold performance

Eliminate waste Tolerate some excess

Manage customer flows View customers as a sequence of tasks

Pull customers into process Pushes customers through the system

Some Japanese

Poka-Yoke Kaizen Muda Jidoka Heijunka Kanban

Class next week

Topic (newsvendor) not included in midterm However there is an in-class activity Please bring your laptop to class, will use some

Excel files to do an in-class exercise Will do it in pairs; one laptop per two is enough

but make sure you coordinate with each other

Midterm exam next week

Study from the notes and book Solve some problems from the book: practicing

by solving problems is essential for success Go over cases and in-class exercises, games,

etc.