Shannon, Fall 2005

Becoming Lean:

The “Adkins Diet” for Companies

Presented By:

Patrick Shannon, Professor

Department of Networking, Operations and Information Systems

College of Business and Economics

Shannon, Fall 2005

Today’s Outline Competitive Challenges Putting Companies on a Lean Diet

The Lean Tools Get on the Scale! – the Need to

Measure Some Examples and Results

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Achieving Operational Excellence

Right Productsand Services

Right Productsand Services

• Customer Focus

• “Make what we sell” not

“Sell what we make”

• Innovation

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Achieving Operational Excellence

Right Productsand Services

Right Productsand Services

High QualityHigh Quality • Customer Satisfaction

• Centered on the Target

• Reduced Variability

• Both Products and Services

• Relentless Pursuit of Improvement

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Achieving Operational Excellence

Right Productsand Services

Right Productsand Services

High QualityHigh Quality

Necessary ButNot Sufficient

Shannon, Fall 2005

Achieving Operational Excellence

Right Productsand Services

Right Productsand Services

High QualityHigh Quality

Necessary ButNot Sufficient

World ClassOperational Execution

World ClassOperational Execution

On-Time DeliveryShort Lead Times

FlexibilityIncreased Reliability

CustomizationLow Cost/Reduce Waste

Based on ContinuousImprovement

&A Lean Manufacturing

Philosophy

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Perceived Value: The Ultimate Measure of a Lean

Company

Perceived Value = What the Customer Receives The Cost

Why Does It Matter?

Because the Company’s Life Expectancy Depends

on it!!!

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Perceived Value: The Ultimate Measure of a Lean

Company

The RightProducts and

Services

High Quality

+ Delivery+

Cost

PV=

In the Eyes of the Customer

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The Motivation for Becoming Lean

The New Economics:

Old Way : Price = Cost + Profit Margin

We set the price to assure the desired profit

Now: Price - Cost = Profit

Price is fixed (or falling) – customers have many options.

How do we make a profit?

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Most Companies Are Too Fat

Need to Reduce Costs

• without decimating our team members

• without skimping on maintenance and quality

• without weakening the company in the long run.

How?

Must eliminate/reduce waste – increase yield

Shannon, Fall 2005

The 8 Sources of Waste “The Bad Carbs”

1. Overproduction2. Excess Inventory3. Defects/Re-Work4. Non Value Added Processing5. Idle (Waiting) Time6. Non Value Added Motions (people and

machines)7. Non Value Added Conveyance of Materials8. Waste of People’s Talents and Time

Shannon, Fall 2005

Putting Companies on a Lean Diet

Lean focuses on eliminating waste in processes Lean is about expanding capacity by reducing

costs and shortening cycle times between order and delivery

Lean is about understanding what is important to the customer

Lean is not about eliminating people

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Toyota Production System – TPS The Beginning of Lean Manufacturing

Tiachi Ohno – Toyota

U.S. Beginning – New United Motor Manufacturing, Inc. NUMMI – Freemont California

http://www.nummi.com/web_tour.html

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e

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More Reasons for Studying Toyota

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The Basic Lean Tools

Quick Changeover

Standardized Work

Batch Reduction

Kaizen

Root Cause

5S/ Visual Control

6-Sigma

Theory of Constraints

VAM

Cellular/Flow

Pull/Kanban TPM

ValueStreamMapping

Continuous Improvement

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Lean Tool: Value Stream Mapping

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Value Stream Mapping

Identify Problems/Issues

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Lean Tool: Root Cause Analysis -

Firefighting!Immediate Containment

Action Implemented

Problem Identified

Immediate Containment

Action Implemented

Defined Root Cause

Analysis Process

Solutions validated with data

Solutions are applied across company and never return!

USUAL APPROACH

PREFERRED APPROACH

Problem Identified

Problem reoccurs

elsewhere!

Find someone to

blame!

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Root Cause Example

Identify Problem

Project Is behind Schedule – Won’t Finish on Time

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Immediate Action

Additional resources applied to help get the project team back on schedule

No new projects started until Root Cause Analysis completed

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Root CauseDidn’t complete project on time

Why?

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Cause and Effect Diagram

Didn’t complete project on time

EquipmentMaterials

PersonnelProceduresLack of worker

knowledge

Poor project mgmt skills

Poor project plan

Inadequate computer programs

Inadequate computer system

Poor documentation

Lack of resources

Shannon, Fall 2005

Cause and Effect

Didn’t complete project on time

EquipmentMaterials

PersonnelProceduresLack of worker

knowledge

Poor project mgmt skills

Poor project plan

Inadequate computer programs

Inadequate computer system

Poor documentation

Lack of resources

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Root CauseDidn’t complete project on time

Resources unavailable when needed

Why?

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Took too long to hire Project Manager

Didn’t complete project on time

Resources unavailable when needed

Why?

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Lack of specifics given to Human Resources Dept

Took too long to hire Project Manager

Didn’t complete project on time

Resources unavailable when needed

Why?

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No formal process for submitting job opening

Lack of specifics given to Human Resources Dept

Took too long to hire Project Manager

Didn’t complete project on time

Resources unavailable when needed

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Corrective Action

Permanent – Hired another project manager to meet needs of next project team

Preventive - Developed checklist form with HR for submitting job openings in the future

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Lean Tool: 5S

Sort Straighten Shine Standardize Sustain

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Why 5S?

• To eliminate the wastes that result from “uncontrolled” processes.

• To gain control on equipment, material & inventory placement and position.

• Apply Control Techniques to Eliminate Erosion of Improvements.

• Standardize Improvements for Maintenance of Critical Process Parameters.

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After 5S

Clear, shiny aisles Color-coded areas Slogans & banners No work in process

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Lean Tool: Poka yoke

Mistake-proofing systems

Does not rely on operators catching mistakes

Inexpensive Point of Origin inspection

Quick feedback 100% of the time

“Be more careful” is not effective

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Everyday Poke yoke Examples

New lawn mowers are required to have a safety bar on the handle that must be pulled back in order to start the engine. If you let goof the safety bar, the mower blade stops in 3 seconds or less.

Fueling area of car has three error-proofing devices: 1. insert keeps leaded-fuel nozzle from being inserted 2. tether does not allow loss of gas cap 3. gas cap has ratchet to signal proper tightness and

prevent overtightening.

3.5 inch diskettes cannot be inserted unless diskette is oriented correctly.

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3 Rules of POKA YOKE

Don’t wait for the perfect POKA YOKE. Do it now!

If your POKA YOKE idea has better than 50% chance to succeed…Do it!

Do it now….improve later!

Shannon, Fall 2005

Lean Tool: Kaizen Events and the Kaizen Blitz

Identify the customer Deming Cycle

Plan – identify what to change and how to do it Current state Future state Implementation plan

Do – execute the improvement Check – ensure the improvement works Act – future and ongoing improvements Repeat

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Kaizen Blitz - Agenda

Day 1: Setting the scene Meet the team, training

Day 2: Observe the current process Flowchart, identify waste, identify root causes

Day 3: Develop the future state process Brainstorm and flowchart (typically the longest

day!) Day 4: Implement the new process

Plan, communicate, implement, modify Day 5: Report and analyze

Performance vs expectations

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Use Visual Story Boards

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Identify the Current State

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Identify VA, NVA-R, and NVA

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Brainstorm and Analyze

Kaizen team brainstorming to develop new process Post improvement ideas on map or by category

Workflow Technology People / Organization Procedures

Develop detailed future state map New workflow Value Add and Non-Value Add Cycle times Identify Kaizen “bursts” (immediate radical change)

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Develop the Future State

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Lean Implementation Examples at Welco Lumber Company

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Potential Kaizen Objectives

Improve Quality

Improve Cycle Time

Reduce Costs

Increase Yield

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Kaizen Methodology at Welco 1 De- Bark

Su rge Inventor y

Move to SortFeed

Cho p Saw

All 14” And Over

Un der 1 4”

HeadRig

Short RigEar to Waste

Scragg

Slab

Cant

Cant

Slab

2

2

3

3

Saw Mill Saw Mill –– FrontFront--EndEnd2

5-Nov-03 Thru 21-Nov-03Baseline

Log # Operator Log SizeLarge/Small

LogCorrect Cut (Yes or No) Error Category Welco Value Potential Value Potential Gain

1 Sid 15 Large No Excessive Log Breakdown $59.00 $65.97 $6.972 Sid 17 Large No Excessive Log Breakdown $79.27 $85.33 $6.063 Sid 11 Small Yes No Error $35.40 $35.40 $0.004 Sid 11 Small No Off Center Cant $31.61 $35.40 $3.795 Sid 14 Large No Reduced Value Cut $47.67 $58.86 $11.196 Sid 17 Large Yes No Error $85.33 $85.33 $0.007 Sid 8 Small Yes No Error $16.22 $16.22 $0.008 Sid 11 Small Yes No Error $35.40 $35.40 $0.009 Sid 9 Small Yes No Error $21.54 $21.54 $0.00

Head Rig Log Study

Analyze OperationIdentify Opportunity

Collect Baseline Data

Brainstorm Changes/Improvements

Make Changes

Collect Follow-Up Data/ Analyze Improvement

Results

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Horizontal In-feed Project Overview

Purpose: The purpose of the Baker snipe test is to reduce the annual cost associated with board snipe. Two tests will be conducted to gain information necessary to estimate the snipe cost:

1. Harp Test 2. Snipe Volume Test

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Baseline Results

# of boards % Of Boards

Test Total Boards With Snipe With Snipe1 469 62 13.22%2 558 75 13.44%3 322 48 14.91%4 261 38 14.56%5 459 76 16.56%

2069 299 14.45%

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Proposed Change to Horizontal In-feed Process

Run Slabs 1 at a time rather than side-by-side

Process Change Only

No New Equipment

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Horizontal In-feed Results

30-Min Snipe Test # 2 - B

Test # Total Boards

Number Of Boards With

Snipe % Mis-Manufactured1 416 18 4.33%2 397 17 4.28%3 284 13 4.58%4 412 18 4.37%5 294 17 5.78%

Total - 1803 83 4.60%

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Dollar Cost Savings

Snipe Test #2-B

Ave. # Boards Ave. # Snipe Boards After Change Before ChangeHour 721 Hour 33 105Day 5,770 Day 266 837Year 1,442,400 Year 66,400 209,148

Estimated $16,507.04.00 Potential Gain Per Year Per Shift

Snipe Test # 2 - B was conducted with the baker operator instructed to run one slab at a time.

Estimated Annual Savings = $86,000 - $120,000

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Holding the Gain

DAYSHIFT SNIPE P CHART

0

0.02

0.04

0.06

0.08

0.1

0.12

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101

106

111

116

121

126

131

136

141

146

151

156

161

166

171

176

181

186

191

196

201

206

211

216

221

226

231

236

241

SAMPLE #

PP

RO

PO

RT

ION

OF

SN

IPE

Average Snipe Rate = 2 %

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Head Rig Project

Objective: Increasing Recovery/Value

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Baseline Data Collection

3 Operators 6 Hours Video 362 logs (all

diameters)

View the Head Rig Saw

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Baseline Data

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Beck Group Log Breakdown Rules

Based on Optimizing Log Recovery and

Value of Finished Product

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Potential For Improvement

Welco Log Breakdown Decisions Based on Past Training

Versus

The Beck Group Optimal Breakdown Rules

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Improvement OpportunitiesBaseline Data

Potential Value % Optimal Cut Welco Realized Value Potential Gain Mean Gain Per Log Cut Mean Gain Per Hour2

6 inch $15.80 50% $13.13 $2.67 $1.34 $0.45

97 inch $100.17 33% $91.89 $8.28 $0.92 $1.38

498 inch $810.74 49% $768.74 $42.00 $0.86 $7.00

629 inch $1,335.48 47% $1,249.02 $88.46 $1.40 $14.74

7310 inch $2,107.38 56% $2,007.24 $100.14 $1.37 $16.69

65362 Logs 11 inch $2,301.00 66% $2,210.20 $90.80 $1.40 $15.13

4012 inch $1,672.02 50% $1,594.60 $77.42 $1.94 $12.90

2613 inch $1,262.04 31% $1,115.81 $146.23 $5.62 $24.37

1414 inch $824.04 21% $720.63 $103.41 $7.39 $17.24

22>14 inch $1,804.68 41% $1,726.95 $77.73 $3.53 $12.96

Total = $12,233.35 50% $11,498.21 $735.14 $2.03 $122.52

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Improvement Opportunities

Head Rig AnalysisTotal Logs

Hours Per Shift 8 560 Per ShiftShifts Per Week 10 5600 Per WeekWeeks Per Year 52 291200 Per YearLogs Per Hour 70

Log Diameter Percentage Mean Potential Gain Per Log Gain Per Hour Gain Per Shift Gain Per Week Gain Per Year6 inch 0.7 $1.34 $0.65 $5 $52 $2,7217 inch 2 $0.69 $0.97 $8 $77 $4,0198 inch 12 $0.68 $5.73 $46 $459 $23,8499 inch 15 $1.24 $13.07 $105 $1,045 $54,360

10 inch 20 $1.21 $16.89 $135 $1,352 $70,28011 inch 20 $1.40 $19.63 $157 $1,570 $81,66512 inch 13 $1.72 $15.64 $125 $1,251 $65,06913 inch 7 $4.57 $22.39 $179 $1,791 $93,14414 inch 5 $7.17 $25.10 $201 $2,008 $104,406

>14 inch 5.3 $3.91 $14.51 $116 $1,160 $60,345

Total -All Logs $1.93 $134.58 $1,077 $10,767 $559,859

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How to Achieve The Gains?

Know the Beck Group Rules Operator Training Use the Beck Group Rules Laser Lights Other ???

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Analyze Changes

Video Data Collection and Analysis Assess Progress Hold the Gains

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Results After Kaizen Project

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Project Cost: The projected gains from this head rig project were the result of the process improvement efforts of a team of people at Welco of Idaho including, the head rig operators, relief operator, maintenance staff, supervisors the management team. In addition to the time spent by the team, the capital costs associated with the improvements have been:

Two laser lights $1,600 One Mirror $ 70

Thus, on an annual basis, Welco stands to gain between $300,000 and $500,000 in profit based on a total capital expenditure of less that $2,000!

Final Section of Kaizen Report to Welco

Management

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Traditional Approach

Lean Tool: Quick Changeover at Boise Cascade Corporation

Set Up Order Run

1000 units

Produce to Order

1000

Set Up Order Run

3000 units 3000

Problem: Up-time rate too low - throughput down - setup times too long

Their answer to Improve Efficiency

Set Up Order Run

10,000

9,000to inventory

Set Up Order Run

10,000

to inventory

7,000

Shannon, Fall 2005

The Lean Paradigm

TIME FOR A NASCAR PIT CREW TO CHANGE 4 TIRES AND ADD 22

GALLONS OF GAS

1950 1960 1970 1980 1990 2000 2004

250

200

150

100

50

0

Time in Seconds240

4935 30 22

Source:NASCAR, USA Today

Adopt this approach towardreducing setup times

14 12

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Lean Tool: Quick Changeover Methodology

Identify internal and external steps Convert internal steps to external Improve all aspects of the setup operation Abolish setup

Shannon, Fall 2005

Boise Cascade - Becoming LeanReduce Setup Times

Set Up Run

Produce to Order (After Lean Implementation)

1000

Set Up Run

3000

Set Up Run

500

Set Up Order Run

1000 units 1000

Set Up Order Run

3000 units 3000

(Before Lean)

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Quick Changeover Results

Company Machine Before improvement

After improvement

Red’n

T Manufacturing1 80t single shot press

4 hours 0 mins 4 mins 18 sec 98%

S Metals1 100t single shot press

40 mins 2 mins 26 sec 94%

H Press1 30t single shot press

50 mins 48 sec 98%

TT Industries1 50 oz injection moulding m/c

1 hour 10 mins 7 mins 36 sec 89%

Expanded Metal Co.

4’6” lath press 4 hours 30 mins 11 mins (note: NOT SMED)

96%

S Engineering Machining Centre 139 minutes 59 mins 29 secs

57% *

AM Bottlers Bottling plant 32 mins 43 secs 23 mins 33 secs

28% *

E Finishing Paint Plant 56 mins 26 secs 23 mins 12 secs

59% *

Ref 1: Modern Approaches to manufacturing improvement – the Shingo System, Shigeo Shingo, ISBN: 091529964x

* After one SMED exercise

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Lean Tool: Reduce Non-Value Adding Time

Value-Adding Activities –

Activities that accomplish something the customer is

willing to pay for.

Non Value-Adding Activities –

Everything Else (such as…

• Inspection

• Re-work

• Material Movement

Shannon, Fall 2005

Value Added Analysis

Non Value-Adding ValueAdding

95% 5%

Total Cycle Time

Traditional Response:Focus on value-Adding Steps

Non Value-Adding ValueAdding

98%2%

Value-Adding Response:Focus on Non-value Adding Steps

NonValue

Adding

ValueAdding

50% 50%

Lead Time ReducedNon Value-Adding Time Reduced

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Naval Air Depot – Jacksonville, FL

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Get the Company On the Scale

Impediment to Success;Measuring the Wrong Things

“People do how they are measured.”

Dave Packard -- HP

Right

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Implement Appropriate Measures

CustomerFocused

On-Time DeliveryDefectsCustomer Satisfaction

Production Focused

ThroughputWIPFGIRework/Product Waste

Process Focused

Cycle TimeValue Added RatioChangeover Times

Driversof

CompetitiveOperations

Driversof

CompetitiveOperations

Shannon, Fall 2005

Implementing Lean

Gain Top Management “Buy In” and Support Perform overall company assessment tied to

company strategic, operational, and marketing plans

Develop strategic lean deployment plan Integrate customized training with lean to improve sp

ecific skill sets, leverage training resources

Shannon, Fall 2005

Team Building, Communications, Problem Solving, Change Management, Lean Manufacturing Tools

Conduct “Kaizen blitz” high impact events

5S, Manufacturing Cell, Set-Up Reductions, Inventory Reductions, Work Standardization

Use an enterprise wide approach to help “Transform” a Company’s culture and the way they do business.

More Implementation Steps

Shannon, Fall 2005

Some Lean Results

Oregon Cutting Systems Output Per Hour Up 55%

Lead Time from 21 days to 1 day

Iomega - Utah Bernoulli Drives 1987 21.4 days

Zip Drives 1999 .75 daysSurface Mount Process cycle time from 2.5 weeks to 1 hour

Lockheed Defect Rate Reduced 80% Rework Down

91% Lead Time Down by

95%

Motorola Pager Lead Time from 16 weeks to 28 minutes

Shannon, Fall 2005

More Results

Company Product Order-to-FinishOld New

General Electric Circuit Breakers 3 wks 3 days

Hewlett-Packard Elect. Test Equip. 4 wks 5 days

Brunswick Fishing Reels 3 wks 1 wk

Matsushita Washing Machines 360 hrs 2 hrs

Harley-Davidson Motorcycles 1 yr 3 days

Shannon, Fall 2005

Lean vs. Traditional Manufacturing

Half the hours of engineering effort Half the product development time Half the investment in machinery, tools and equipment Half the hours of human effort in the factory Half the defects in the finished product Half the factory space for the same output A tenth or less of in-process inventories

Source: The Machine that Changed the World, Womack, Jones, and Roos, 1990.

Shannon, Fall 2005

Barriers to Lean

Implementing Lean Can Be Difficult Because it is Counterintuitive from a Traditional Paradigm:

Buying multiple small machines rather than one big machine that offers economies of scale.

Shutting down equipment when maximum inventory levels are reached rather than running flat out.

Using standards to continuously improve.

There is no step-by-step cook book There are some basic steps but the how-to varies from

organization to organization Requires an assessment of the company in order to map out the

strategy

Company culture plays a big part in the how-to

Shannon, Fall 2005

Lean Is A Journey

The Journey never ends Toyota estimates it is only 50% waste-free

There is much room for Improvement It is time to begin.

Shannon, Fall 2005

A Few References

Lean Thinking By James Womack and Daniel Jones, Simon and Schuster, 1996

The Toyota Way, Jeffrey Liker, McGraw-Hill, 2004

Fast Track To Waste-Free Manufacturing by John Davis, Productivity Press, 1999

Toyota Production System, by Taiichi Ohno, Productivity Press, 1988

Lean Production Simplified, By Pascal Dennis, Productivity Press, 2002

The Lean Enterprise Memory Jogger, Goal/QPC, 2002

Becoming Lean, By Jeffery Liker, Productivity Press, 1998

The Goal, By Eliyahu Goldratt and Jeff Cox, North River Press, 1986

It’s Not Luck, By Eliyahu Goldratt, North River Press, 1994

The Machine That Changed The World, By James Womack, Daniel Jones, and Daniel Roos

Goldratt’s Theory of Constraints, By H. William Detmer