introduction to lean. the rational person adapts themselves to the world the irrational person tries...

Introduction To Lean

The rational person adapts themselves to the world

The irrational person tries to adapt the world to themselves

Therefore all progress depends on the irrational person

Copyright ©2006 Lean Advisors Inc.

Cost Profit Selling Price+ =

Selling Price Profit=Cost-


Cost Profit Selling Price+ =

Selling Price Cost- Profit=

What’s Included in Cost?


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Reality - The Cost Squeeze

1st Qtr 2000 – 2nd Qtr 2002:

Selling Prices -2.5%

Wage Rates +8.2%

Raw Materials +12.4%

Payroll Taxes & Benefits +13.5%

Electricity +18.5%

Industrial Fuel +34.5%


Macro Focus vs. Isolation

Cisco inventory - $1.2 billion on July 29, 2000. “ “ - $2 “ on Oct. 31, 2000. “ “ - $2.5 “ early Feb., 2001.Macro Level – Contracted SuppliersSolectron - $1.8 billion Feb. 2000 to $4.5 billion at year

end. (Sept. 02 reported loss of >2 B$ for 1st Q)Flextronics - $450 million Jan. 2000 to $1.73 billion at

year end.Note- Sales increased 25% over same period

Fortune, March 5, 2001


A Simple Can of Pop

MineReduction

millSmelter Hot roller

Coldroller

Canmaker

Canware-house

Bottler Bottlerware-house

Tescoware-house

Home

Recyclecenter

Remelter

Tescostore


Simple Value Stream:A Can of Pop

• Eight firms

• Fourteen storage points

• Picked up & put down 30 times

• 24% of raw material scrapped

• 319 days to do 3 hours work


What’s The Answer?1. Wait it out2. Ignore it3. Borrow money 4. Fire people5. Sell parts of the business6. Reduce margin – go for volume7. Pray – wait for a miracle8. Give upOr do something about it that transforms your company

into the leader in your industry.


Challenge

“No company can earn above-average profits in the absence of unique

competitive advantage – something that creates value for customers (or

lowers the cost of providing that value) and is difficult for competitors to

imitate.” Michael Porter, Harvard Business School (20 Years ago)

Some Terms Inventory Turns: The amount of time to fully use

your inventory before having to replenish it.

Takt Time: The pace you need to produce at to meet your customers demand.

Lead time: The time from a request for material until the customer purchases that material.



Lean Results

• Lead Time• Cost• Labor Required• Space• Inventory• Defects

• Customer Responsiveness• Capacity• Employee Satisfaction• Flexibility – Demand Flux

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Three Types of Leaders

“There are three kinds of people;those who make it happenthose who watch it happenand those who wonder what happened”

--William Levinson


Lean Results: Actual

Metric BASELINE New Change Process Time 164.28 secs 86.5 secs 77.78 secs 47%

Lead Time 19.32 days 7.13 days 12.19 days 63%

WIP US $26,934 US $17,542 US $9,397 34%

Distance Traveled 314.11 feet 173.2 feet 140.91 feet 45%

Floor Space 2000 sq. ft. 1200 sq. ft. 800 sq. ft. 40%

Process steps 13 9 4 30%

Labor savings US $732,108 US $622,108 US $110,000 31%



Metric Feb ‘03 Nov ‘03 Dec ’04 Actual Process Time 1444 hrs 1255 hrs (13%) 378 hrs (74 %) Lead Time 340 days 160 days (53%) 40 days (88%)

WIP (units) 946 units 432 units (54%) 242 units (74%) WIP ($) est. $6,480,352 $2,958,413 (54%) $1,656,745 (75%)

Dist Traveled 4571 ft 2797 ft (39%) 1997 ft (56%)

Sq. Ft Used 9244 sq. ft 7696 sq. ft. (17%) 7496 sq. ft. (19%)


Metric Sept ‘02 Oct ‘03 Dec ’04 Actual Process Time 69.4 hrs 57.9 hrs (16%) 48.6 hrs (30 %)

Lead Time 23 days 11 days (52%) 9 days (60%)

WIP (units) 261 units 130 units (50%) 65 units (75%)

Unit Labor (hours) 6.6 h 4.0 h (39%) 3.6 (45%)

Dist Traveled 3045 ft 1547 ft (49%) 1066 ft (65%) Defects/Mo. 455 Defects 150 Defects (67%) 114 Defects (75%)




Metric Feb ’04 Baseline Dec ’04 Actual % Change Avg Cycle Time (days) 51.4 31.7 -38.3%

WIP (serialized assets) 4393 2117 -51.8%

Pnp Changeover 240 min 9 min -96.3%

Monthly Runs 30 98 +69.4%

Overtime/Mo. 290 hrs 130 hrs -55.2%

Hrs per Assy 5.07 2.82 -44.4%


Defining Lean Lean is a simple strategy that focuses on the

elimination of waste, variation, and work imbalance.

Each step must create value for the Customer! It is a way of life.


Lean is Fundamentally Different

Insight #1

See from Customer perspective

Insight #2

See from part / product or service perspective

Insight #3

See from an end to end perspective


Types of Activities Value Added Work

Any activity transforming the part, product or service that a Customer is willing to pay for.


Types of Activities Incidental Work

Any activity that does not add value but it is currently necessary.

WasteWaste

Elements of work adding no value to the Customer.

Adds cost and time.

Things to remember about waste:

Symptom – not Root Cause At System and Process level Eliminate Root Cause


Types of Activities Pure Waste

Any activity that does not add value and is not

necessary to meet the needs of the Customer.

Typical Company

Pure Waste

Value

Incidental Work


Waste: Overproduction Causes

Producing faster than the next step

Batching work or moves for economic reasons

Unbalanced resources Producing extra

Effects Queues Intermediate stocks Finished inventory


Waste: Inventory Causes

Takes too long to make or get product

Economic order quantity

Effects Cash tied up Space to store Obsolescence and time

expiries Handling cost

(receiving, counting, issuing)

Finished Product to Customer

Raw Material

Sea of Inventory

PoorScheduling Quality

Problems

Machine Breakdown

Long Transportation

LongSet-upTime

Vendor Delivery

LineImbalance

Absenteeism

Lack ofHousekeeping

Communication Problems

Inventory Hides WasteInventory Hides Waste


Waste: Waiting Causes

Responding or producing slower than needed

Unavailable resources Waiting for answers

Effects People wait Machines wait Material wait


Waste: Transportation Causes

Long distances between work area

Work areas set up by similarities rather than product flow

Distance to customers and suppliers

Effects Inventories Batching High cost


Waste: Motion Causes

Poor organization Lack of visual controls Lack of standard methods Can’t readily find things

Effects Searching Back and forth movement Waiting


Waste: Motion Typical Office or Factory Movement


Waste: Defects Causes

Lack of skill or knowledge Poor design Damage while waiting Rushing

Effects Extra resources for

inspection and rework Delays Warranty claims Unhappy customers


Waste: Over Processing Causes

Lack of knowledge No standard work Failure to know what

the customer wants

Effects Added time Added costs Variability


1

11

10

2

3

45

9

8

7

6

14

1312

15

17

16

$36,000


Waste: Reprioritization Causes

Too much work in progress

Poor planning Overproduction

Effects Lost time Customer/employee

frustrations Cost


Waste: People’s Skills Causes

No time No mechanism Belief they don’t know

enough Don’t have the big

picture knowledge

Effects Lost opportunities Lowers morale Builds barriers


Types of Waste: Shop Floor

Over Production

Inventory

Waiting

Transportation

Motion

Over Processing

Quality Defects

Reprioritization

People’s Skills


Waste Waste - Simple Part …

Being Able to See IT!

Real Challenge … Knowing How to Remove IT Properly!

Pure Waste

Value

Incidental Work

Point EfficiencyPoint EfficiencyPoint efficiency happens when a company makes changes to the value stream without knowing what the end to end impact is.

Point efficiency can be an individual process, a department in manufacturing or the Office.

What if we change one rower?

Which one should we change?


Caution - Point Improvement

The average speed of traffic in London, England 100 years ago was 12 mph.

The average speed today is 12 mph!!

E-Check in is similar – speed up the boarding pass process but the traditional processes of dropping off the luggage remains the same.

MOVING FAST IS NOT THE SAME AS GOING SOMEWHERE


The Lean Solution Lean will fundamentally change the way a

business operates!

Yet surprisingly, it is based on 5 simple principles


Principle 1: Value What is Value?

Value is simply defined as any work or activity that the customer would knowingly

pay for.


Principle 2: Map the Flow of Value

Process A Process B Process CCustomerOrder

CustomerFinished Product

Value Stream

Value Stream: Is set of all activities both value add and non value add required to bring product from Raw material to Customer.


Principle 3: Make Value Flow

How long to make a pack of 10 units?

Batch Processing Each step makes a batch of 10 60 second cycle time (Each coloured circle represents 1 minute of time)


Principle 3: Make Value Flow

Continuous Flow Make 1 Move 1

How long to make a pack of 10 units?


Takt Time Synchronizes pace of production to

pace of sales. Rate of assembly based on customer demand

Takt Time = Effective working time per shiftClient demand per shift

= 460 minutes920 pieces = 30 sec

QUESTION : If my area worked one 8 hour shift and had 2 X 10 minute paid breaks with a requirement to produce 920 results, then what would my TAKT time be?


Principle 4: Pull from the Customer

Okay! One more please!

CustomerSupplier

Principle 5: Seek Perfection

There is always more waste Involve employees in the process,

training them as you proceed. Use root cause analysis to solve

problems promptly and permanently. Make objectives visible.

introduction to lean. the rational person adapts themselves to the world the irrational person tries...

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