LEAN MANUFACTURING:THE NEW NORMAL

Leaning for Contract Packaging and Contract Manufacturing

K. DONALD THAM, Ph.D., P.Eng.

Ryerson University, Toronto, CanadaProfessor of IE & Internship Coordinator

Nulogy Corporation, Toronto, CanadaCo-Founder

LEAN & CONTRACT PACKAGERS

• The Storm – Today’s Business Context• Riding Out & Leveraging the Storm

• The Principles for “Leaning”

• Fundamentals of Lean & Kaizen• Measuring Progress

• Get Lean or Get Out, Lean Supply Chain is The New Normal • What’s Next?

• Concluding Case Study

Who & Why

What

How

When

• Customer Focus

THE STORM

Today’s Business Climatehas forced companies to ask…

“Where is the waste?”

Photo by D'Arcy Norman, © 2009.

CPGs ARE FEELING PRESSURE

• Thousands of products line the shelves, and

thousands more are lined up to replace those that

cannot compete! • Brand-owners must quickly bring successful

products to market

Focus on cost & waste cutting, and speed is now ESSENTIAL

• As markets get tighter and more competitive,

eliminating waste is critical to success

LEAN PARTNERS CAN RELIEVE IT

• There is a tremendous growth opportunity for lean

Contract Manufacturers and Packagers

“More and more…are seeking to perform in house only their core functions, while outsourcing the noncore activities. In manufacturing, this means shedding a company’s own plants and turning to domestic and international contract manufacturers.”

Group Conclusion, CSCMP Leaders’ Forum, Chicago, June, 2009

• Lean principles are easy to immediately incorporate,

no matter your personnel or level of sophistication

DON’T RIDE OUT THE STORMLEVERAGE IT!

“Leaning” embodies key principles* to help Ride out and Leverage the Stormin the Potential Growth Market for Contract Packaging and Manufacturing.

*value, value stream, flow, pull, continuous improvement

DON’T RIDE OUT THE STORM

Leaning is the “do” term defining one’s striving towards “customer value creation and waste elimination.”

LEVERAGE IT!

VALUE

WASTE

HAVE A CUSTOMER FOCUS

• Know what your customers want

If it doesn’t ADD VALUE from your customer’s perspective, it’s WASTE.

• Know when they want it• Eliminate waste or non-value activities from

your internal processes for quick, on-time delivery of what your customers want

YOUR CUSTOMER’S HAVE 3 GOALS

1. Lower costs by outsourcing

3. Manage and mitigate risk

2. Increase product velocity across the supply chain

Leverage inexpensive labor and production with a community of diverse partners.

Improve collaboration and product turnover with partnersto lower production costs and increase speed to market.

All partners can continue to thrive and grow by contributing their expertise to the successful, final outcome.

LEANING HELPS MEET THESE GOALS

Contract Packagers and Manufacturers must deliver value to their customers, without waste, through effective and efficient value streams that ensure swift flow of products and services, with diligent efforts toward continuous improvements.

KEY PRINCIPLES OF LEANValue

Defined from the Customer’s perspective

Value StreamProcesses that delivers a product or service to the

customerFlowSmooth progression of products or services

PullEach process step produces product or service

when ordered by the next in-line customer

Continuous ImprovementA process by which activities create value and waste is

eliminated

UNDERSTAND YOUR CUSTOMER

“I don’t see a big difference whether you have1,000 employees or 10 – you still have the same struggles as a corporation –everyone wants the same thing in terms of customer demand…The primary solution to the challenge is getting the thinking right.”

“Sustainable Lean,” Jamie Flinchbaugh & Andy Carlino, Co-Founders, Lean Learning Center, Novi, MI.

LEAN FUNDAMENTALS

7 Wastes “MUDA,” elimination of waste/non-value added activity

5-S System

A place for everything and everything in its place

Poka-yoke Mistake proofing

SMED Single Minute Exchange of Die (change-overs)

Standardize Standardization of Best Practices and Processes

Kanban Pull System / One Piece Flow

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

MUDA & THE 7 WASTESMUDA = Waste

• Anything that does not add value to the produce or

service for the customer.• Any obstruction to smooth flow of an activity.

7 Wastes

Activity = Work + MudaExpenditure = Cost + Muda

Cost• For each activity there is work, and for any work

there is a cost. • Any expenditure on the “Muda” is a waste!Less Muda = More Happy

Clients• Muda negatively impacts quality, cost and delivery.

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

MUDA & THE 7 WASTESInventory

Any supply in excess of Customer Requirement

Over-ProductionProducing more or faster than required

CorrectionNecessary inspections and repairs

WaitingIdle time resulting from non-synchronization

Material MovementAny movement that does not support synchronized

flowMotionAny movement of people or machines that does not

add valueProcessingAny effort that does not add value to the product or

service

7 Wastes

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

“A Place for everything and everything in its

place.”5 Ss

5-S SYSTEM

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

5-S SYSTEM

5 Ss

Five dimensions of workplace optimization for quality, safety, organization & consistency:

SortSort contents of an area and remove unnecessary

itemsSet in Order/Stabilize

Arrange necessary items for easy & efficient access Keep it that way

ShineClean everything, keep it clean

Use cleaning to ensure area and equipment is properly maintained

StandardizeCreate accessible guidelines to keep areas organized,

orderly, and cleanSustainEducation & communication to ensure everyone follows 5-

Ss

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

ERROR-PROOFING OR “POKA-YOKE”

Poka-yoke

• Identify and eliminate errors• Develop processes and methods that help

operators avoid mistakes in their work• Incorporate “poka-yoke” into SOPs

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

SINGLE MINUTE EXCHANGE DIE

• Convert internal set-ups to external

operations which can be performed

while the machine is running

SMED

• Identify and separate internal and

external set-up operations

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

How long does it take to change a tire?

SMED

SINGLE MINUTE EXCHANGE DIE

Photo by Kurt Nordstrom ©2004

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

SMED

How long does it take to change a tire?

SINGLE MINUTE EXCHANGE DIE

Photo by Mohd Nor Azmil Abdul Rahman ©2008

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

STANDARDIZATION

Standardize

• One “Best Practice” work method• A Standard Operating Procedure

(SOP) that delivers desired outputs

for customer• Why would you entertain the alternative:

Less than Best Practice?

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

KANBAN PULL SYSTEM/ONE-PIECE FLOW

Kanban

• Provide the customer with product or service right the

first time, when required

• Continuous flow in one direction• Immediate visual aids/feedback help control movement

of materials between work stations

Pull parts from one production stage into the next, as needed

The Kanban system helps minimize lead times, work-in-progress and production costs

7 Wastes

5 S

Poka-yoke

SMED

Standardize

Kanban

KANBAN PULL SYSTEM/ONE-PIECE FLOW

Kanban

Immediate visual aids/feedback help control movement

of materials between work stations:

Total Process is 90 min.

KANBAN PULL SYSTEM/ONE-PIECE FLOW

7 Wastes

5 S

Poka-yoke

SMED

Standardize

KanbanKanban

30 min.30 min.30 min.

Work Order Batch ProcessingThe old, longer process.

Step One Step Two Step Three

Total Process is 50 min.

KANBAN PULL SYSTEM/ONE-PIECE FLOW

7 Wastes

5 S

Poka-yoke

SMED

Standardize

KanbanKanban

30 min.

30 min.

30 min.

Flow (Kanban) ProcessingStep One

Step Two

Step Three

KAIZEN

KAI = ChangeZEN = Good (For the Better)

KAIZEN = Continual Improvement

KAIZEN’S CRITICAL EYE

To Lean, we must understand what we commonly see• Crammed warehouses, product lines, work-in-progress, storage racksDevelop a “Lean Eye”

• Learn to see one’s plant and department in greater detail and

understand how the different elements affect each other.

• “Genchi Gembutsu” or “go see for yourself”

Approach what you see with a QUESTIONING

ATTITUDE…

A QUESTIONING ATTITUDE

What, How, Who, Where, When? Why?• What is being done? Why is it being done?

• How is it being done? Why is it being done that way?

• Who is doing it? Why is that person doing it?

• Where is it being done? Why is it being done there?

• When is it being done? Why is it being done then?

• Keep Looking with a Questioning Attitude

A QUESTIONING ATTITUDE:

Surprising Results• Many Muda (waste) elements emerge• Take Action to eliminate the waste & cost• Congratulations! You have covered

valuable ground in the journey toward leanAs potential process improvements come to the fore-front, you are into Kaizen!

KAIZEN BLITZ TEAM

Individuals who have Learned to See and Walk the Talk, follow this process:1. Go to the workplace, where value is added2. Check the “Gembutsu” (equipment & items)3. Take temporary measures on the spot4. Find & kill the root cause of waste5. Standardize the process to prevent recurrent

waste

MEASURE YOUR LEANING

How well are you progressing?

Process Excellence / Sigma Six for KPI metrics

• You cannot manage if you cannot measure

• Statistical measure of process (effective & efficient) capability

• Enables tracking of Leaning or “Kaizening” efforts

• Gives measure of the quality of your business’ products

and services• E.g. Six Sigma level of ~3 defects per million represents

highest quality: virtually all products and business processes

are defect-free

VALUE STREAM MAPPING

• In Lean thinking, processes are “Value Streams”• Lead Time reduction & the flow of Value Streams are major areas of focus

• Value-stream mapping helps teams understand the flow of material and information as the product is processed through the organization

• This mapping creates a vision of the entire system

BE BOTH EFFECTIVE & EFFICIENT

Effective:Doing the right thing

Efficiency:Doing things right

Processes may be efficient, but they may not necessarily be effective!• A process may seem efficient as it always ensures things

are done right• If the things done right are not the right things, we may have an efficient process that is not effective

Leaning with Kaizen, the right things done right every time!

My conclusions from 2009 surveys by SME, Aberdeen, AME, CSCMP

GET LEAN OR GET OUT

Pressures to Implement Lean, order of importance:

1. Operational Costs2. Customer mandates3. Global or horizontal supply chains4. Corporate Revenue Goals5. High volatility in demands6. Inventory obsolescence

“We’ve historically been monitoring the business impact of Lean initiatives but offline in Excel spreadsheets. We want to move to full integration by using our … platform in tandem with the business intelligence tool instead of offline reporting to eliminate room for error. If it’s in an online system you can almost guarantee accuracy.”

Ross Martin, Business Transformation ProgramDirector, National Foods (Australia) for Manufacturing Sector Insight: “The Impact of Lean on Consumer Product Manufacturers”,

Aberdeen, 2007

WHAT’S NEXT?Exemplifying the Pursuit of Excellence

WHAT’S NEXT?

“What is needed is a new generation of BI tools and applications that are capable of integrating cross- and inter-enterprise processes and information. The resulting intelligence would enable CPG companies to make better operating decisions, increase company transparency, change business processes, and drive overall performance. Those enterprises that learn to effectively harness the vast quantities of information generated by their IT systems— both within and outside the corporation—will enjoy a substantial competitive advantage ”

Don Tapscott, “BI for Consumer Packaged Goods: Actionable Insights for Business Decision Makers”, 2008

Leaning with Business Intelligence

CASE STUDY: SONOCO

• Minimal tools outside of simple problem solving and

voice of customer • Any recommendations where taking 9 months,

sometimes more more than a year, to implement

Consumer packaging, rigid packaging, tubes and cores/paper, wire and cable reels, molded and extruded plastics

Company

Problem In mid-1990s: projects returned less than average results

Aberdeen discussions with Jeff Slater, Operating Excellence Leader, Sonoco, 2009.

CASE STUDY: SONOCO

Between 1997-2006: mentored 874 trainees and 580 Global leaders in Lean

Solution

Each business unit has had to pave their own path to Operational Excellence and achieving true Customer Satisfaction

Aberdeen discussions with Jeff Slater, Operating Excellence Leader, Sonoco, 2009.

CASE STUDY: SONOCO

• Lean Six Sigma Outcomes

• Apply strategies and tools with “pull system”

• Support and recognition of work accomplished

on fact based and measureable results

• Continues to improve and develop customer involvement

• Better Leadership involvementLeadership Waste and Standard Work for

Leaders, sharing with leaders how to “walk the talk”

• Greater understanding of value

Aberdeen discussions with Jeff Slater, Operating Excellence Leader, Sonoco, 2009.