www handsongroup com lean manufacturing tool kit part 2

pdfcrowd.comopen in browser PRO version Are you a developer? Try out the HTML to PDF API

Lean Manufacturing Tool Kit (M Z)PLEASE INSTALL THE BREADCRUMB NAV XT PLUGIN!

Lean Manufacturing Tool Kit (M Z)

Note: For Tools in the A L Range, click here.

Made-As-Part-Of (MAPO): A level of the bill of material that is ignored by the MRP systemfor scheduling. The subassembly is, as the name implies, made as a part of the next higherlevel assembly. It is typically an additional part type classification, similar to make orbuy. (See Blow-Through)

Maintenance: Condition-Based: The concept is to enhance your normal scheduledmaintenance with sensory information that provides a heads-up that maintenance maynow be required. It involves the monitoring of equipment to provide an early warning thatsomething is out of the normal operating conditions and that maintenance may be required. This monitoring utilizes vibration sensing, in-line gauging, sound levels, and other suchdevices.

Search for:

Search

Lean Resources


Maintenance Signals: As inventory is reduced, the need to respond quickly to a machinedown situation becomes critical. Flashing lights, horns, pagers, walkie-talkies, cell phones,etc. should be utilized as needed to assure that your maintenance people are immediatelynotified. Make sure that the normal filler work being performed by these key individualsis of a nature that it can be interrupted at a moments notice: e.g. process improvementprojects, PM, etc.

Maintenance Work Area Lighting: Many maintenance operations occur within the darkrecesses of the equipment. Permanent or portable lights can be of great help. Also, makesure that every maintenance person is provided a high quality, lightweight, hands-free headset light.

Recent Posts

Steel Stories: Strange and Innovative ThingsWeve Seen While Transitioning Metals


Maintenance: Modularize & Cascade: In some capital intense industries, extensivescheduled maintenance periods can cause disruptions in flow, mandate large kanban levelsbetween operations, and cause additional complexity (see the article Running Steel Lean). One obvious solution is to reduce the extent of time required per down period, i.e. modularize the maintenance events. Instead of doing one 24 hour down period permonth, the attempt would be to do one six-hour maintenance each week. Making this

Weve Seen While Transitioning MetalsProducers to Lean

Smoothing Customer Demand: LeanManufacturing Topic of the Day

Lean Manufacturing Topic of the Day: FromMake to Stock to Make to Order

Lean Manufacturing Topic of the day: TheRubber Factory

Lean Manufacturing Topic of the Day: TheHigh Cost of Complexity

Lean Manufacturing Topic of the Day: Makingthe Case for Multiple Shifts

Lean Manufacturing Topic of the Day: LeanManufacturing and Government Contracts

Lean Manufacturing Topic of the Day: FacilityConsiderations for Lean Manufacturing

Lean Manufacturing Topic of the Day: TheHidden Costs of Procurement

Lean Manufacturing Topic of the Day: How toOptimize Your Entire Plant

Lean Manufacturing Topic of the Day: How toAttain Near-Perfect On-Time DeliveryPerformance?

Lean Manufacturing Topic of the Day: Its AllAbout Cash Flow!

Lean Manufacturing Topic of the Day: Doesthe concept of Takt Time Apply in YourBusiness?


transition will require overcoming many obstacles, not the least of which is resistance tochange. It will generally also require some capital expenditures. Cascading maintenancemeans to schedule maintenance on machines in the order that product flows. Doing soallows the hole (depletion of inventory between operations) to flow from machine tomachine.

Maintenance Operator as Teacher: Weve had some excellent results by re-defining therole of the maintenance people to include training. Ask your skilled maintenancepersonnel to teach operators to do routine maintenance: oil, grease, clean, inspect, etc. This can free up the skilled maintenance people to focus on the difficult infrequentmaintenance and on equipment upgrades.

Maintenance: Point of Use Tool Storage: For common maintenance, involving relativelyinexpensive tools, locate the tools directly at the point of use. Securing such tools withsimple clips or other quick-release securing devices can significantly improve efficiency. Insome applications the tool can be permanently attached to the machine, i.e. weld theratchet onto the nut, switch to wing nuts, etc. Standardizing hardware can also assist withmaintenance.

Make / Buy Considerations: Too often, companies fail to consider the true full cost ofprocurement. They also tend to undervalue the loss of control that comes from procuredvs. in-house make items.This topic is explained in detail in our post The Hidden Costs of Procurement.

Make to Order: The strategy of making a customers product only after the receipt of anorder. From a lean perspective, this is the ideal. This strategy eliminates the wastes ofcarrying finished goods inventory. Ideally, the product is produced, packed, and loadedimmediately onto a truck / railcar just in time for shipment. No double handling, minimalrisk of obsolescence,

A brief article discussing the benefits and methodology of making the transition to Make toOrder is explained here.

Lean Manufacturing Topic of the Day: WhatDoes Lean Mean to Top Management?

Lean Manufacturing Topic of the Day: HowCan We Leverage Lean in the Marketplace?

Lean Manufacturing Topic of the Day: How toLeverage Americas Competitive Advantage?

Lean Manufacturing Topic of the Day: MakingLean Happen in a Job Shop

Lean Manufacturing Topic of the Day: LeanAerospace

Lean Manufacturing Topic of the Day: LeanManufacturing in Los Angeles

Lean Manufacturing Topic of the Day:Definition of Lean Manufacturing

Archives

Select Month

Recent Comments


Make to Stock: The corporate strategy of carrying finished goods inventory in anticipationof an order. Generally, the intent is to provide quick delivery, i.e. the marketplace will notwait for the necessary lead time to make to order. Problems associated with this strategyinclude the considerable cost of carrying high-dollar, inflexible finished goods inventory.

The concept is more fully explained in our article From Make to Stock to Make to Order.

Management By Walking Around (MBWA): We worked with a client that produced allsorts of labor efficiency / utilization reports for their supervisors. The only problem was thatthe report data was, at best, meaningless, and at worst, outright wrong! It turned out that ifthe supervisors would spend less time poring over reports, and more time on the shop floor,they would know how, and who is performing!

As an organization moves toward Lean, many of the traditional measurement devices failto perform accurately or timely enough. People are cross trained and move back and forthto various jobs. Operators perform minor maintenance. Natural work teams work onimprovement projects. Kanbans will cause short term delays, etc. Measurement oftenmust move from individual performance to team performance. In some progressivecompanies, the teams themselves provide input into the individual reviews. There is,however, no substitute for being out there on the shop floor.

Management Implications: The kinds of results you should expect from your transition tolean are detailed in our article What Does Lean Mean to Top Management?

The implications of making such a transition are far from trivial. A transition to LeanManufacturing can generate a heap of up-front tax-free cash, but adversely affect your shortterm accounting profits, require an overhaul of your measurement and reward systems,change your typical work week, and modify your perspective in regard to make/buy.

The rewards of such a transition, if done correctly, can be huge. As Nike would say, Just Do

Jack on Lean Manufacturing Topic of the Day: Does the concept of Takt Time Apply in YourBusiness?

chris boycks on Lean Manufacturing Topic ofthe Day: Does the concept of Takt TimeApply in Your Business?

Jack on Lean Manufacturing Topic of the Day: Its All About Cash Flow!

Robson macedo on Lean Manufacturing Topicof the Day: Its All About Cash Flow!

Jack on JUST DO IT


The rewards of such a transition, if done correctly, can be huge. As Nike would say, Just DoIt!

Management Questions: It is not sufficient to simply empower your workforce. It iscritical that the efforts of your people be focused on real business issues. Here is a list ofsome standard Lean Management questions that will help guide the efforts of your people. Add your own. Get started today! What Would Keep Us From Doing That TODAY? What Value does that add? How could we cut that inventory / lead time in half? Would you help me help you? Have you tried that? What can I do to help? Why? Why? Why? Why? Why? How could we do that better / faster / cheaper? How could we make it impossible for that defect to re-occur? Is any value being added to that inventory?You will also want to point out that Every solution creates new problems.

Master Production Schedule (MPS): The Master Production Schedule (MPS) is the keydriver of the Material Requirements Planning (MRP) portion of an Enterprise ResourcePlanning (ERP) system. As the name implies, the MPS is your production completionschedule. It identifies the products and quantity to be produced and the time bucket inwhich they are to be completed. The MRP logic then explodes the requirements andschedules them accordingly.

Master Production Schedule (MPS); Using Negative Numbers for What-If Analysis: Some of the older MRP / ERP software is not capable of what if analysis. One low-costway to provide such capability is to allow the MPS (Master Production Schedule) to acceptnegative numbers. A trial run, un-netted, of a change only MPS will show the materialand labor changes caused by the proposed change. E.g. what if we were to add 20 widget


As and make 15 less widget Bs? We would schedule only the delta As and negativedelta Bs in a trial MPS, and explode requirements un-netted. The result would be anetting of any common components and would show the net additional materials and laborneeded, as well as identifying any surplus parts that this change would cause.

Master Schedule: See Master Production Schedule (MPS) .

Material Requirements Planning (MRP): A back scheduling, gross to net logic system thatcalculates material requirements based on the Master Production Schedule, Bill of Materialstructure, on-hand inventory, scheduled receipts, lead times, lot sizing, safety stock rules,etc. (See Enterprise Resource Planning, ERP) (See the article ERP & Lean for a detailedexplanation with illustrations)

Measurement & Reward Systems; Performance Against Standard: The largestproductivity improvements come from methods changes, not from increasing the level ofeffort of the people. Traditional PAS logic calls for a standard change when ever aprocess/procedure changes. Yet, if the standard is changed every time there is a methodimprovement, performance typically will fall! Why, because people are new at the newmethod. They need practice to come down the learning curve.

This is obviously a negative incentive to change the method.

In a lean environment, we are always looking for a better way to do things. Seek aperformance measure that encourages process method improvement. This is bestaccomplished by comparing current actual cost to historical actual cost. If improvement iswhat you seek, it is pretty much irrelevant what it should cost based on some theoreticalstandard. What really matters is is it currently costing me less than last year? Lastmonth? Last week?

Instead of spending time and energy calculating a theoretical standard, you will be muchfurther ahead if you focus on finding a better way, and on providing people timely feedback


as to how well they are performing. If you feel compelled to have a performance againststandard system, at minimum calculate performance vs. both the current standard andagainst a fixed standard. The former measures theoretical level of effort (current standard). The latter measures their impact on profitability and rewards people for innovation(methods changes) as well as effort.

Measurement & Reward Systems; Unit Output Measures: Many traditional organizationshave M&R systems that encourage local optimization, often at the expense of aggregatetotal company well being. These will invariably become an impediment to your leantransition efforts. (See Optimize the Whole)

Unit optimization has another insidious impact. It adds to complexity.

Metal Producers: Transitioning to Lean has some additional complications in capitalintense industries like Steel, aluminum, etc. Equipment is huge and seldom allows themaking of traditional cells. Many batch sizes are large and mandated by the equipment andprocesses and cannot be substantially reduced. Equipment maintenance and change-overcosts, loading the mill to capacity, labor constraints, etc. further complicate the situation.

Weve been working with metal producers since 1989. As a result, a different approach anda few unique techniques have been developed to cope with these issues. The results havebeen dramatic. To date, we have worked with seven different metal producers, worldwide.

Our industry average return on investment exceeds 90 to 1.


Milk Run Running a regular circuit for delivery and/or pickup of material. We have used itvery successfully in conjunction with kanban / min-max signaling devices for requirementsplanning. A large electric motor manufacturing client of ours ran trucks from their wire millto a series of motor assembly plants. The truck driver would radio in the requirements fromeach plant as he dropped off yesterdays requirements. The wire storage racks contained


all of the min-max information necessary.

Milk Runs allow for small, frequent, regular material deliveries / pickups.


Mind Storming: Similar to Brain Storming but considerably more efficient. Instead of aflip chart, ideas are written on 5-9 cards. As people shout out ideas, they also write acouple key reminder words on a card. After the ideas stop flowing, the cards are collectedand then sorted by the group (subjectively) based upon the estimated potential impact oncompany well-being, and on ease of implementation. Any ideas that score high onImpact, and Easy on implementation difficulty, are rapidly pursued. (See Nine Block)

Minimum Modularized Down Time Intervals: This is a technique appropriate for someassembly line type operations, i.e. an environment where a failure of any one piece ofequipment will shut down the entire line.

We worked with a steel pipe mill. Maintenance had been neglected for years, and the linewas regularly shut down as one after another problem occurred. An interim solution was tohave each operation develop a list of 2 hr maintenance / reliability projects. The rule wasestablished: When any piece of equipment breaks down, the entire line will remain shut-down for at least 2 hrs while everyone works on their area projects. Within a few months,total line up-time was significantly improved.

Minimum Specifications: Cull out the critical performance characteristics. Specify these asto the minimum acceptable requirements. Then loosen or eliminate all otherspecifications. This is particularly beneficial during the design phase of a new product. Byspecifying only the critical performance attributes, the design team has considerably moreroom to be creative. Note that this is also true for your suppliers. We have found dozens ofcases where a non-critical parameter was causing a supplier to quote a high price. Oncethese non-critical constraints were relaxed, major cost and quality gains were attained. (See Design for Manufacturability and Designing to Target Costs)

Minimize The Number of Suppliers: The cost of a purchased part includes much more thanits purchase price. Reliability of delivery, lead time, quality, packaging, freight, response tochange requests, delivery location, delivery frequency, etc. are all factors effecting the totalcost of purchase. Find one or two top performing suppliers for each commodity type, andthen concentrate your purchasing volume with these suppliers. Discuss with them your


requirements, annual purchase volume, delivery expectations, etc. Negotiate price basedon annual expected purchase volume. Share information. Ask for capacity reservation sothat lead times remain stable and delivery reliable. (See Capacity Reservation andMinimum Specifications)Over the years, we have developed an extensive supplier evaluation checklist. We hopeyoull find it helpful.

Min-Max Controls: Upper and lower trigger points for inventory control. When the on-hand inventory level reaches a pre-established Minimum, it triggers a replenishment order. The Maximum sets the upper limit that is allowable for this item. As an example, we haveset the min-max for a particular purchased item at min = 1000 and max = 5000. A recentpull of this item from stock has dropped our on-hand inventory to 800. The system(computer or manual) will trigger the buyer to place an order to get our on-hand inventoryback up above the minimum of 1000. He/she is authorized to buy as many as 4200,bringing our projected on-hand balance back up to the max of 5000. (See Two BinSystem)

Mixed Model Production. Simplicity saves money, and the simplest scheduling system isFirst In First Out (FIFO). Strive for the flexibility, both internally and from your suppliers, toproduce your products in the sequence that orders are received. This will requireresponsive suppliers, flexible manufacturing operations, quick changeovers, and flexiblecapacity. (See SMED and Rubber Factory)

Monuments: A slang term for large, extremely difficult to move, pieces of equipment. Anenvironment with monuments will typically require some different lean techniques thanthose used in a standard widget maker factory. (See the article Running Steel Lean)

Modularize Planned Maintenance: In capital intense industries, planned maintenanceoften removes critical pieces of equipment from service for multiple shifts or even multipledays at a time. The disruptive impact of this planned outage can be huge. This isparticularly true when we have reduced the allowable queue between operations, i.e.installed inter-unit kanban controls.


The idea is to re-engineer the maintenance processes to allow them to be done in smallerincrements, modules. Thus, instead of scheduling one 24-hour maintenance period to bedone every month, we would seek to replace this schedule with one 6-hour down period,each week. (See Total Productive maintenance and Cascade Planned Maintenance)

Move Equipment: Plan on a 2nd & 3rd Move: Continuous improvement means continuous

change. Build flexibility into your re-arrangement on the 1st move: e.g. Flexible powerdrops, flexible air connections, light equipment on lockable wheels, equipment on skids,

etc. Encourage and expect a 2nd and 3rd move as your people continually tweak thearrangement.

Move Some Maintenance People to the Off Shifts to Get Time on the Machine. Wewere working with a corrugated box plant client. The production people said that theirbiggest issue was that the equipment was breaking down due to lack of preventativemaintenance, and that equipment upgrades were not getting implemented in a timelymanner. The maintenance crew agreed with the assessment, but complained that theycould never get time on the machine. It turned out that the maintenance staff wasscheduled to work the identical hours that the production people worked (three shifts, 5days / week). They couldnt work on the equipment because the equipment wasscheduled for production. We met with the entire maintenance crew, explained therequirement and logic, and proposed a few alternatives. The team went off alone, and in afew hours came back with an excellent plan. They had prepared a twenty four hour byseven day crewing schedule, that was acceptable to all crew members and that was muchmore cost effective than those that we had recommended.

By having access to the idle equipment on weekends, an excellent PreventativeMaintenance program was implemented, and equipment upgrades were addressed in atimely manner. Within six months of the change, this issue was no longer a problem andproductivity jumped by 20%!

Muda: See Waste


Multiplier Effect: Extensive supply chain inventory has the effect of exaggerating demandswings at the lower end of the chain. This effect is caused by an attempt to adjust dayssupply of inventory at the same time as adjusting for the change in rate of usage. Example:I have an inventory policy of keeping 4 weeks supply of a component (raw material) onhand. My demand has been 100 per week. I now anticipate my demand dropping to 90per week. Instead of ordering 90 per week of this component, I would need to order less,so as to adjust my inventory level. I currently have 400 pieces in inventory (100/week * 4weeks). Now I want a 4 weeks supply (4 weeks * 90/week = 360 pieces on hand). If Ismooth the inventory reduction over a few weeks, I may change my orders to 80 piecesper week.

Net result: Where our company saw a 10% change in demand, our suppliers will see a 20%change in demand! Thus the Multiplier. The same effect happens when demandincreases. And, the further down the supply chain, the greater the swings.


You can readily see that the extent of this multiplier is proportional to the amount ofinventory in the supply chain, and the number of levels in the chain.

What can you do about it? Reduce inventory throughout the supply chain.


Note: your customers will carry inventory of your product in proportion to your lead timeand your delivery reliability. Do these things well, and youll minimize the multiplier. Youll also want to monitor and compare changes in your products demand to changes intop level demand.

Analysis of the recession of the 1970s showed that while the end demand for steelproducts fell ~ 10%, the demand on the steel industry (the bottom of the supply chain) fellby over 40%! Needless to say, a Lean supply chain is essential. Maintaining short leadtimes, and reliable deliveries to your customers is crucial (see Boom Bust Cycle)

Natural Work Teams (NWTs): By reducing the inventory between operations, naturalwork teams will automatically come about. Inventory elimination and a pull philosophyforces a mutual dependence upon operators. Inventory reduction may even allowoperations to be placed physically next to one-another (a manufacturing cell). In such anenvironment, a problem at one operation rapidly impacts both the upstream and thedownstream operations, forcing operators to communicate and begin acting as a team.

Note: We are NOT forming teams for teams sake. We are squeezing out the inventory,which results in the formation of teams whether you want them or not! It is at this time,when people are closely interdependent, that additional teaming skills training will beneeded. Books like Zapp and Heroz can be useful training aids. (See Training: Do aChapter a Week and Problem Idea Charts)

Natural Work Teams; Discretionary Budgets: One way of providing NWTs with a sense ofempowerment is to provide them with a discretionary spending budget. The idea is toallow the teams to buy items that they need to improve their performance, and toencourage the NWTs to try low cost things that may, or may not, work. The budget isgenerally $X per month. No management approval is required for the team to spend theirallotment.


While this discretionary budget can be both an employee motivator and a practical processimprovement aid, this is one area that we would NOT advocate just do it. Spend sometime. Think it through. Establish clearly defined acceptable uses for the spending. Create a straw man procedure as to how the team would make spending decisions. Discuss safety precautions that the teams must consider.Some companies have established team accounts at places like Grangers, and allow theirteams to place orders against these accounts. Others provide debit cards. Remember: It isa whole lot easier to increase the spending limits than it is to decrease. Start slowly, andthen build upon it. And dont second-guess valid attempts that did not work out. Thesebudgets are typically small, and therefore low risk. It is not at all unusual for the teams tospend several hundred dollars on items that had little or no positive effect, before theyeventually hit the project that saved the company tens of thousands of dollars. The idea isto encourage sensible trial and error!

Nesting: Trim losses can be substantial in some industries. Paper, corrugated containers,sheet metal processors (service centers, finishing plants), etc. will generally do some formof nesting.Nesting is the combining of various production requirements (sales orders, replenishmentrequirements, etc.) in such a way so as to minimize the trim losses. There are now somefairly sophisticated software packages that will assist with this function.As always, there are trade-offs between minimizing trim losses and maximizing overallcompany benefit. For example, nesting is more effective when there is a large selection ofitems to be produced (i.e. backlog of orders). Large backlogs tend to extend lead times. Inaddition, when we reach out to run future orders we will likely incur the costs of carryingthe extra inventory until it is due to ship.In dozens of our client plants, TOTAL costs went down, dramatically, even though theamount of scrap due to trim losses increased. This was due to the benefits of shorter leadtimes and reduced lot sizes. Bottom line; nesting is an effective tool, but must be usedprudently! Remember, our objective is to optimize the total, not necessarily eachindividual operation.


Nine Block: A powerful mind Storming idea evaluation technique is generally referred toas a nine block.Mind storming generates a considerable amount of ideas. The Nine Block allows the groupto easily rank these ideas, subjectively, based on two critical criteria: How big an impactwould this idea have if successfully implemented? And, How easy would this idea be to


implement?The ideas that fall in the upper left corner become priorities!


NPI (New Product Introduction): Use a multi-function team to develop and prototypenew products. Engineering, manufacturing, procurement, sales/marketing, etc. Make surethat adequate time is allotted to tweaking after the initial prototypes are produced.

It has been our experience that NPI has an 80/20 law of its own. Twenty percent of the


time and cost will be required to develop a viable concept. The remaining eighty percentwill be required to bring this concept to a saleable product. Note that in almost everyindustry, time to market continues to grow in importance. It IS possible to set deadlines. And it is critical to set a cut-off on design changes (for the introductory model). In todaysenvironment, it is almost always preferable to have good product out first, rather than agreat product out late.

Objectives, Strategies, Tactics (O.S.T.): Top level goals (Objectives) must be supported by

2nd tier Strategies, which are supported by departmental Tactics (goals and measurements). (See Goal Curves)

Old Equipment: In some industries, and some circumstances, old otherwise obsoleteequipment can be cost effectively used if dedicated to a very limited product line. Thesavings come from the lack of any changeover and from a very reliable repeatable process. This situation is typically practical in environments where excess space is not terribly costly,since the equipment is generally idle for long periods of time.

One Up, One Down: A minimum cross training objective in many World Class companies. Itmeans that every supervisor / team leader seeks to have all of their employees able toperform their own primary job, plus the preceding and following jobs, at a proficient level.

On-Time Completions: Many companies maintain a respectable delivery performance bycarrying substantial amounts of finished goods inventory. This is true even in make toorder environments. They accomplish this by scheduling to a padded completion date: We promise shipment for 9/30, but we schedule completion internally for 9/23. Thelogic is that if we happen to have a production hiccup, we can still ship to the customer on-time.

Needless to say, if we are ever to drive out this resulting finished goods inventory andassociated hidden waste, we must measure, set goal curves, and improve performance onon-time completions. Measure the percentage of completions that occur exactly on thedate scheduled. Then set goal curves to dramatically improve this performance. On-time


completions should become a critical gauge of company well-being, and treatedaccordingly. Establish a mantra of on-time, all-the-time

On-Time Delivery: While it is important to measure your shipping performance, thisparameter is of less importance to your customer than on-time delivery. While it cansometimes be difficult to measure and control, it is, however, a critical factor to consider. Insome industries, such as automotive, on-time delivery is THE critical parameter. Missing adelivery can idle a production process costing millions of dollars per hour. If it is not yetcritical in your industry, it will be in the future. Work with your A customers to find ways tomeasure and improve this critical measure of performance. Monitor you carriersperformance to stated lead times. Utilize the tracking systems that most carriers nowprovide. Look into using company-owned vehicles in lieu of common carriers, etc.

On-Time Shipment, to the Original Promise Date: I spoke to the president of a steelservice center the other day. He candidly told me We will not turn down an order. Wepromise what the customer wants to hear, then beg forgiveness. When I asked what hisdelivery performance was, he replied, We ship 95% on time. How do you explain thedisparity? Easy. They kept revising their promise date until they finally shipped the order. Then they measured against their final promise. I still dont know why they werent 100%on time! I guess they just got too lazy to re-promise some orders! Needless to say, theonly credible benchmark is the original promise date, unless, of course, the customerinitiates the change.

Beware: Some companies delude themselves by saying we talked to the customer, andhe said it was OK. In actuality, all weve really done is reinforced the idea that thecustomer should ask for his product earlier than he really thinks hell need it. Treat on-timedelivery, as measured against the original promise date, as another critical qualityparameter.

On-Time Shipment to the Request Date: An additional measurement that some topperforming companies track is their delivery performance versus the initial customer request


date. Doing so can identify opportunities: Can we charge a premium for less than standardlead time? Can we gain share, or increase prices if we cut our standard lead times to lessthan the competition?

Note: Short lead times are of little value if your delivery performance to your promise is notnear perfect. However, short lead times combined with reliable delivery performance canbe a significant competitive advantage. Caveat: Prove out that you can perform BEFOREyou advertise the capability.

One Perfect Unit Day: A full, or partial day is set aside to focus on perfect quality atevery station: Standardizing procedures, establishing written sequential inspection criteria,identifying and implementing failsafe devices, clarifying quality standards, implementingvisual quality boards, etc.

One Size Does NOT Fit All: Various Lean approaches and techniques are effective forvarious industries and situations. Kanban controls are an excellent example. Kanban is anextremely powerful tool. It is not, however, applicable in some environments (sporadic,infrequent product demand; job shop; engineer to order; etc.). Too many consultants haveone set of tools, and attempt to force their use into inappropriate circumstances. Think ofthis article as your tool kit. You, as the craftsman, must apply the appropriate tool as / whenneeded. If the tool fits, use it. (See Solutions Looking for a Problem and Goal Curves)

Operation Checklists: A pilot goes through his/her pre-flight checklist to make certain thatno important parameter is overlooked. This same logic can and should be applied toequipment start-up procedures, and even between shift hand-offs between crews. Similarchecklists are a basic fundamental of good maintenance procedures. Such checklistsprotect the equipment, and are an important safety procedure.

Opportunity Capacity: It can be a significant profit enhancer to reserve some capacity whenaggregate demand exceeds capacity. It is normal in such situations for industry wide leadtimes to extend, and delivery performance to degrade. The capability to reliably deliver inshort lead time can command significant price premiums. This situation has occurred


repeatedly in the steel industry, and the technique is called opportunity tons.

Opportunity Signals: Visual or auditory signals that identify a need, i.e. more material, or aproblem, i.e. the machine is down.

Optimize the Whole, Not Necessarily the Pieces: A Lean initiatives primary focus shouldbe on optimizing the entire organization. As inventory is squeezed from betweenoperations, all units will tend to be operated at the speed, and in the sequence of eithercustomer demand or in such a maner as to optimize a bottleneck operation. While this willincrease the performance and effectiveness of the entire operation, it will generally have anegative impact on some unit efficiencies.

One of the most difficult obstacles that many companies must overcome is the fact thattheir current measurement and reward systems target unit optimization. The easiest wayto think about this is to picture an automobile assembly line. Every piece of equipment ispaced to the rate of the line, yet most of the equipment could produce considerably morethan that pace. Doing so, however, would require queues of inventory between operations,different crewing schedules, etc. We could indeed increase the effectiveness of theindividual pieces of equipment, but how efficient do you think the total factory would be?

Note: There are techniques that can and should be applied to individual units that havebeen sub-optimized to improve their effectiveness as well. However, the biggest gainscome from the initial phase of optimizing the whole. Take a look at the cost of complexitythat unit optimization brings about.

Order Delivery (O.D.) Cycle: The elapsed time from the receipt of an order to thedelivery of the product is called the O-D cycle. Needless to say, this is an importantparameter in the eyes of most customers. Measure it and set goals to reduce it.Then expand the measurement to include the payables portion, i.e. the order payment(OP) cycle.(See Lead Time: How to Calculate)


Order Entry: Hours of Operation: While many companies already operate 24 x 7 customerservice departments, those that only have humans on duty during business hours need totake a look at their customer-base geography. The idea is to man your phones during thebusiness hours of your customers. An east coast company with a substantial amount ofcustomers on the west coast will appear to be rather customer unfriendly if they close at2:00 PM in the afternoon (Pacific Time)! Staggering the hours of your customer servicepeople can readily remedy this situation.

Order Point (AKA Reorder Point): A predetermined level of inventory, for a repetitivelyused item, that triggers a replenishment order. It is typically calculated as the amount ofinventory that we expect to use during the time required to replenish, plus some amount ofsafety stock. The idea is to refill the bin before it goes empty. EXAMPLE: If we, onaverage, use 10 pieces per week, and we need 3 weeks to replenish the stock, wed want toorder when the on-hand inventory reaches 30 pieces. This level, however, does not allowfor fluctuations in demand, or potential slippage of supply. In our example, we might lookat the historical demand pattern, and the reliability of the replenishment source, andconclude that wed be comfortable with a 10 piece safety stock level. Our order pointwould therefore be 40. Our in-house inventory control systems would be set up toautomatically trigger a replenishment signal when on-hand inventory of this particular SKUhits a level of 40 or less on hand.Note that kanban controls can often fulfill this role more effectively.


Order Promising: It is critical to on-time delivery that order promising be done withconsideration of available material and capacity. The rule is to make reasonable promises,then focus on doing all that is required to execute to that promise. This may mean payingpremium freight for delivery of shortage materials, and working any necessary overtime toaccomplish the schedule.


Establish a corporate mantra of On-Time, All the Time

Organization Chart, Flatten it: A by-product of a lean operation is the elimination for manynon-value adding, typically middle management, tasks. Self-directing teams, minimizedscheduling, simplified accounting, etc. allow the lean organization to eliminate many levelsof the typical management pyramid. Streamlining the organizational structure will reducecost while improving communication and customer service.

Paint: A coat of white or light colored paint on the ceilings, walls, and floors (even cabinetsand equipment) can have a dramatic effect on lighting, as well as employee attitudes andproduct quality. Its difficult to catch a defect if you cant see it! It also makes oil leaksmore readily detectable.

Paper Templates of Equipment used for re-arrangement trials: With small easy to moveequipment, we will typically advocate that only cursory paper layout planning be done. Well come up with a general idea of how & where things should go, then get on the floorand do a lot of trial and error. However, when equipment is big and/or difficult to move, itmakes sense to spend more time planning. While scale drawings are a good start, there isnothing like walking the new layout. This can be achieved by making full sized cardboardcut-outs of the equipment and then letting the entire team play paper dolls until acomfortable mutually agreed upon arrangement has been established. Mark out thelocations on the floor, and then do the real equipment move.

Paretos Law: The 80/20 rule is typically applicable in inventory control. Annual dollarusage, i.e. the quantity of an item used per year, times the unit cost, is ranked in descendingorder. In most companies, the top 20% of the items, or SKUs (stock keeping units), willconstitute about 80% of the total annual spending dollars. In many industries, like electromechanical assembly, the ratio is more likely to be 90/10. (See ABC InventoryClassification)

Pay For Raw Material on Shipment Rather Than Receipt: As the frequency of rawmaterial deliveries increases, the number of receiving transactions also increases. There aremany ways to circumvent this additional transaction cost. One such way is to pay for your


many ways to circumvent this additional transaction cost. One such way is to pay for yourvendors material based on the amount of product your company has shipped. A simpleexample: We manufacture bicycles. I shipped 20 bikes, therefore I must have used 40 tires. Since we have good records of our shipments, and we have complete and accurate bills ofmaterial, the computer can readily calculate raw material usage. Needless to say, such anarrangement requires approval from your vendors, and demands that your inventoryturnover be high. Youll also have to have very low scrap rates and a good way to collectscrap data.

Perpetual Inventory Control: Ive got 20 units of item A on hand. I bring in 10 more units,and use (ship / scrap, etc.) 5 units. Whats my new on-hand balance? (20 + 10 5 = 25units are left on hand)This is an example of what a perpetual inventory system does. The computer processesincoming and outgoing transactions, typically through MRP / ERP type inventory controlsoftware, so as to maintain an on-going, i.e. perpetual, accurate inventory balance at alltimes.

Peter Principle: A common business expression meaning the elevating of a person inresponsibility until they reach their level of incompetency. The term was coined by Dr. Laurence Peter and Raymond Hull in their 1969 book The Peter Principle.

The typical example is the taking of an excellent technical person (engineer, softwareprogrammer, etc.) and promoting them into a management position that requires an entirelydifferent set of skills. The problem is exasperated by the unwillingness, in manyorganizations, to correct the situation when an individual is clearly struggling.

Many innovative companies now provide a corresponding technical path that similarlyrewards key individual contributors. This allows them to continue doing the things thatthey are equipped to do well, while achieving the financial and status rewards similar to theprogression available through the management ranks.

Physical Inventory: As opposed to a perpetual inventory, a physical inventory (PI) is a go


out and count them process. In most companies, day to day inventory balances aremaintained via perpetual inventory control. A physical is generally done as an event for aspecific purpose; e.g. accounting audit, due diligence process, etc. (See Cycle Counting)

Physical Inventory: Thumbnail: When you find yourself in an inventory accuracyemergency this technique can be an effective band-aid. The idea is to do a thumbnailphysical inventory by checking the appearance of the on-hand physical supply vs. theinventory record. That looks like about 100 and the records say 120. Close enough. Move on to the next idem. The idea is to quickly catch the gotchas that will bite you.Then, go back and do a good physical inventory, and implement all the necessaryprocedures to maintain on-going accuracy.

Physically kitting to find shortages CREATES shortages: Weve all seen it. The rawmaterial inventory balances in the system are not accurate, so someone comes up with theidea to pull the parts early to identify the shortages. Sounds reasonable. It isnt! Parts,available on one kit, are short on another. Pulling parts early significantly decreases theodds of being able to make ANYTHING complete! The only viable option is to fix yourinventory accuracy, and put systems in place to keep it that way. (see Trial Kitting)

Planning Percentage Bills of Material: Forecasting is generally easier, and moreaccurate, when done at the product family level. However, in order to utilize the planningdata for material requirements purposes, the forecast must explode down to the specificpart level. One easy way to accomplish this is through the use of a planning BOM. Theplanning BOM contains parts and labor requirements that represent the entire family ofproducts, by proportions. The easiest way to create this bill of material is through the use ofpercentages. For example: Our product family Adult Mens Bicycle is anticipated to sell22% Flyer model, 47% Clipper model, and 31% Off-Road model. We would create apercentage planning BOM with these three products as components. The quantity per foreach would be the forecast % of the family sales for each product, i.e. .22 Flyer, .47 Clipper,and .31 Off-Road. Thus, when we load the forecast into MRP and explode requirements,the resulting component parts and labor forecast will accurately represent this product mix.


Plant / Process Tours for All Employees: An operator had been doing a manual operation;scraping tape residue off a transformer core; for eight years. His thumb was all buggeredup. We asked where the part went next. He had no idea. So, with approval of hissupervisor, we walked the process. You guessed it! The section that hed been manuallyscrapping for all these years, was, at the next operation, cut off and thrown away!


We are continually amazed at the number of employees that have no idea what is beingdone in the other areas of the factory. Take the time to provide a tour for your operators. You may be surprised at how it increases there caring and awareness of opportunities forimprovement. Note: This same concept has produced huge benefits when extended tocustomer and supplier sites.

Point of Use Stock and Supplies: Do you see any non-value adding activities in this familiarprocess? Parts are received, the count is verified, a sample is inspected for quality, atransaction is processed, they are moved to another location, another transaction isprocessed, some of the parts are then withdrawn, and another transaction is done, and theparts are finally moved to the assembly area.

Wouldnt it make more sense to put the parts immediately where they can be used forproduction? Now, I understand that lots of groundwork must be done to accomplish thislogical step. Just like the Frito Lay delivery guy, lets get the supplier, where ever practical,to deliver quality parts (weve pre-qualified his process), in reasonable batch sizes (weveshown him how to cut his set-up times), directly to the point of use. Transaction costs canbe minimized through backflush.

Point of Use Tool Storage: Store any low-cost tools where they are needed. Put clips onthe equipment to hold the screwdriver, wrench, ratchet, etc. within reach of themaintenance person. At one plant, we watched the maintenance person spend 20 minutessearching all over the plant to find a set of vernier calipers. Investing a few hundred dollarsin additional tools, combined with clearly defined locations for their storage, savedthousands of dollars, annually, in lost productivity.

Note: Many tool supply companies will now furnish vending machines that are placedthroughout the shop floor and are stocked with commonly used tools and supplies,generally on consignment. Operators/supervisors are provided with credit-card type keysthat record when, what, and by whom, each part has been used.


Poka Yoke: See Failsafe

Pre-Agreement: Get agreement in advance. If , Then e.g. If we can show that isthe case, then do you agree that we can? We had a go-around with a quality engineer. We had him verify that not one test failure had ever occurred after the initial hour of testing(shake & bake). Yet, he refused to reduce the test time (8 hours). It took us months toconvene all the right players to override this guy! (See Let the Data Decide)

Pre-Meeting Coaching Sessions with the CEO: Our Rapid Impact process requires that TopManagement monitor our lean transition progress via regular TMAC (Top ManagementAdvisory Council) meetings. One trick that we utilized with great success is to hold a shortpre-meeting get-together with the CEO prior to the TMAC. This provides us an opportunityto coach him/her as to where we anticipate resistance. E.g. We are going to suggest Jim is going to want to study it. Wed encourage you to suggest that we just give it a try

Preventative Maintenance: (See Total Productive Maintenance, TPM)

Price Changes: In some industries it is standard practice to pre-announce price increases. Doing so has several consequences, all bad! As mentioned elsewhere in this website, weare constantly seeking ways to smooth demand . Pre-announcing a price increase has justthe opposite effect. Orders spike as customers attempt to beat the deadline, and slumpafterward. Customers attempt to guess what theyll need, and then are forced to call inchange orders. All of these actions adversely affect the company. Our suggestion: Announce, right now, that the companys new policy is to no longer pre-announce priceincreases. Then enforce the policy.

Problem / Idea charts: This can be a powerful tool in some environments. Natural workteams are provided simple flip charts in their work areas. The chart has a column drawnwith the heading: Problem/Idea. This is used for employees to post any issue. Twoadditional columns: Responsibility, and Promise Date provide a way for the team, and itssupport people, to keep track of commitments made to resolve such problems. Everyproblem is an opportunity. Make sure that they are posted, and then seek a solution. This


is additionally powerful when combined with Management by Walking Around, and unit /area / kanban goal curves.


Product focused layouts: Many traditional industries are arranged in process focusedlayouts, i.e. all lathes are in one area, all presses in another, etc. As we attempt to squeezeout interdepartmental inventory, it soon becomes apparent that a product focus makesmore sense. E.g. to arrange the various kinds and quantities of equipment together so as tocost effectively produce a specific product or family of products. (See CellularManufacturing)

Product Structure Types: Most companies / product lines fall into one of the classicalproduct configurations: The Pyramid, The Inverted Pyramid, or The Hourglass.The Inverted Pyramid is most often found in raw material processing type industries, likesteel making, injection molding, etc. Here, a small number of raw materials (e.g. iron ore,plastic resins) can be used to make a wide variety of products.


The pyramid is typical of electronic assemblies where a large number of component partsare used to make up a few products.


The Hourglass configuration is found where a large number of component parts make up alimited number of subassemblies. These subassemblies can be configured into a widevariety of finished products (flavors).


Profit Impact of Driving Down Inventory. Inventory reduction generates cash andimproves operating performance. However, due to labor variance, and/or under absorptionof overhead, accounting profits can actually go down, temporarily, during these periods ofrapid inventory reduction. Also, a significant reduction of inventory can expose LIFO / FIFO


layers in the inventory accounting system. The impact of this may cause accountingprofitability to go in either direction. It is important that the CFO be tasked to provide aproforma of the impact on accounting profits that will occur if the targeted inventoryreductions take place. Once this has been done, get approval from the board to go ahead. (See the article Transitioning to Lean)

Program Du Jour: A slang term for the syndrome of some companies to constantly changethe corporate focus. It is often the fad of the moment: A new book comes out on workteams, so that becomes the drive, then another comes out on six sigma, and the emphasischanges. The only consistency is that little or nothing seems to get accomplished.

Prune the Customer Base (All Customers are NOT Equal): It is a useful exercise toevaluate your customers for margins, volumes, and a somewhat less tangible hassle factor. Most companies find that a normal curve exists. A few customers are quite profitable. The majority of customers are moderately profitable. And a few customers are just notworth continuing to do business with. Raise their prices to the point that you are nowwilling to keep them as a customer, or just get rid of them. (See Activity Based Costing)

Pull vs. Push: In a Pull philosophy, the next operation is considered a customer. As such,it is reasonable to ship a product to a customer only when it is requested, i.e. only when it isneeded. In a Push environment, product is delivered to the next operation based onschedule, or simply availability, whether the next operation needs it or not. A pullphilosophy is seen as superior for a number of reasons. Pull minimizes WIP inventory buildup and thereby keeps congestion down and assures short lead times.

Push systems have a tendency to constipate the system, adding to WIP and necessitatingexpediting. (See Kanban Controls)

Pull Systems: Utilize the Pull Philosophy. This is generally accomplished via kanbancontrols. The same pull philosophy can be extended as far up and down stream as yoursuppliers and customers allow. Visualize a chain of events triggered by the end user. He/she removes a product from the retail shelf, which causes the supplier to generate a


replacement, which initiates demand for one more set of component parts, etc. (See thearticle Taking the Mystique out of Kanban Systems)

Purchase Price Variance, PPV: A measurement tool often used to evaluate buyers. Theidea is to reward purchasing people for procuring material at favorable prices (compared tostandards or historical purchase prices).

While the idea of PPV is quite appealing, it has a major shortcoming. It ignores all of theother costs associated with a purchased item: Transaction costs, Freight, De-trashing(getting rid of packaging material), Receiving, Incoming inspection, Stocking, Recordkeeping, Pulling the material from stock, Shrinkage etc.

A higher priced product that is vendor managed, delivers directly and frequently to the pointof use, just in time, with perfect quality, and re-usable packaging, etc. may be a far betterbargain.

In most cases, we suggest replacing PPV with a measurement that includes the Total Costof Purchase.

Put Time Limits on Discrepant Material Resolution: Discrepant material is in limbo. Youcant count on it, yet if you order replacement and then the discrepant material is releasedas OK, youll have excess inventory. And, un-dispositioned held material adds tocomplexity.

Establish turn-around targets for time to disposition. Measure it. Push to assure that allfunctions required to make such disposition are available as close to 24 7 as feasible. Youcant have your operations waiting on material that may, or may not, be available forproduction.

One effective technique is to require that all discrepant material remains within the kanbanallotment, i.e. if you are allowed 20 pieces between operations, and 5 are on hold


(discrepant), then only 15 good pieces are allowed in the kanban. This will add operatingpressure for quick discrepancy resolution.

Quantity Discount: See Column Pricing

Quick Changeover Tooling: There is a large complement of tooling and equipment nowavailable that has been designed to simplify and speed up typical set-up operations. Quickclamping devices, slotted holes, turn bolts, hydraulic systems, etc. Pickup cataloguesand/or search the web. There is no sense in re-inventing the wheel!

Raw & In-Process (RIP) Inventory: Traditional manufacturing accounting separatesinventory into three groupings: Raw Material, Work in Process (WIP), and Finished Goods. Work orders generate kits with pick lists. The kits are picked and the entire job is releasedto Work In Process. This transaction relieves the raw material parts from raw and puts thejob in WIP. When the job is finished, the job is closed and the inventory value is transferred,eventually, into Finished Goods. As lead times and lot sizes are reduced, and raw materialis stored at or near the point of use, WIP becomes small enough to eliminate it as a separatecategory of inventory. Products are back-flushed upon completion, thereby relieving theraw material inventory. The accounting categories are thus RIP and Finished Goods. Manyof the non-value activities of processing pick lists and issuing transactions are therebyeliminated.

Receive at Night: There are several advantages to receiving incoming material at night. Itoften makes it easier for the shipping companies (traffic is lighter) and very often truckdrivers must wait overnight before being able to unload. It also allows the receivedmaterial to be entered in the system so all material shows for planning purposes duringnormal business hours.

Red, Yellow, Green: In many batch environments, there are certain high-use productswhere it is more economical to process the entire batch rather than process just the quantityrequired for the order. An example is the blanking of sheet metal parts from a coil of steel. If the product/s being blanked are high volume runners, completing the entire coil may


make good economic sense (in many circumstances, there are very real capital limitations toSMED). On the other end of the spectrum, there are low-usage products that should NOTbe processed ahead. This scenario is particularly true in the steel service center business.

A cursory study of each products historical demand, cost of processing, and cost of carryingthe additional inventory can lead to simple decision rules. The various products are coded. Green: Cut up the entire coil. Red: Cut only what is needed, then put the unused portionof the coil back into stock. Yellow: Use your discretion.

Reduce Set-up / Change-over costs to allow further lot size reduction. The basic rule isMake just what the customer wants, just when he wants it. Any additional production iswaste and adds to inventory. The ideal is lot size of one. Historically we determined thelot size based on the change-over costs. A better direction is to determine the right lot sizebased on customer demand, then drive down your change-over costs, where possible, toallow such.

Also see SMED: Single Minute Exchange of Dies

Remove doors wherever theyre not essential: We want product to flow, ideally, withoutinterruption, through the entire process. Walls, doors, fences, separate buildings, etc.inhibit this flow. I toured a plant recently, where many of the departments were in separaterooms. Unless separate rooms are needed for process constraints, e.g. environmental

controls, or security, a good 1st step to improve flow and communication is to remove thedoors. The next obvious step is to remove all unnecessary walls as well.

Rent Space at Your Customers Site: I visited a blow-mold bottle maker a few years ago. Their process was highly automated, with minimal WIP. Palletized bottles were shrink-wrapped to protect them from dirt and dust. They had a large warehouse full of palletizedbottles and a tremendous amount of shipping, with trucks continually departing. Whenasked for my recommendations, I said, You are storing and transporting AIR!


I suggested that they rent some space at their primary customers site (this customer used80+% of their volume), cut a hole in the wall, and deliver bottles directly to the bottlingline.The result: No pallets. No shrink-wrap. No storage. No transportation. And a customerfor life.

Reorder Point: See Order Point.

Replenishment System: A mechanism to simply and reliably re-order and obtain parts orservices when needed. Replenishment system is a general term for specific mechanismssuch as the two-bin system, kanban controls, min-max, etc. As the name implies, the ideais extremely simple: replenish what gets used. Note that such systems have limitedapplicability in job shop, one-of-a-kind environments. Kanban systems are explained indetail here.

Reserve Capacity for A Customers: Your critical few top customers should expect, andreceive, short fixed lead times and reliable delivery, no matter what your backlog positionmay be. In times of super heated demand, this can still be accomplished by closelyworking with your A customers to reserve adequate capacity to handle their actual(realistic) demand. Lead times for B and C customers may float in and out. Not so withyour A customers. Provide them with short fixed lead times, even in a hot market, andyoull have a customer for life.

Note: while lead times may float for the Bs & Cs, reliability cannot. Credibility isparamount. Say what youll do, then do what you say.

Reserve Capacity for Pillage & Plunder: In times of scarce supply and excessivedemand, it may make sense to reserve additional capacity beyond that required for your Acustomers. In such markets there is often an ability to attain a significant price premium forquick delivery. Note: if the hot order does not come in, simply pull some of the backlogahead, i.e. capacity is not lost.


Resource Restriction: can be used to force innovation and process improvement. Takeaway a person. Challenge the team to make the schedule without them. Squeeze thespace. Challenge engineering to find a suitable substitute for expensive supplies /materials. Necessity is the mother of invention.

Results, or Lack Thereof: Weve been funding a Lean Transition effort for over threeyears. Weve generated lots of activity and trained the heck out of people, but the resultsjust arent there. said the division president of a large corporation. He wasnt alone. It is atheme we hear repeated over and over.

What SHOULD you expect from a lean transition? Large, tangible corporate-wide results.If you are dissatisfied with your lean progress, give us a call. It wont cost you a dime, and Iguarantee that you will find the discussion Value Adding.

Returnable / Reusable Packaging: In some industries, packaging and the cost of de-trashing i.e. getting rid of the packaging, can be a major expense item for you and yourcustomer. Work with your A customer/s to find ways to reduce or eliminate theexpendables: Use standardized, nesting, returnable shipping containers, pallets, fold-flatreturnable plastic containers, etc. Also look for dual function packaging, e.g. packagingthat can be used as part or all of the end-item packaging, e.g. use the same box to ship thepicture tube that the customer (assembly plant) will use to ship the finished TV; Or thepackaging becomes a part of the final product, etc.

RIP: See Raw & In Process Inventory.

Roaming Around Other Departments / Functions: A very astute boss of mine advised that Iallocate a certain percentage of time, each week, to roaming around the company. Theawareness of the big picture that doing so provided, was invaluable. Take the time tounderstand what the other organizations do within the company. Get a good overview ofhow the various pieces fit together. Doing so will pay for itself many times over, both interms of providing more value to the company, and in advancing your career.


Rocks & Water Analogy: Consider your company as a ship sailing across a pond. Underthe water are dangerous rocks. However, as long as the water is high enough, there is noneed to worry about these rocks. In this analogy, the rocks represent problems that cost thecompany in terms of productivity, customer service, and quality.The water represents inventory.As in this analogy, corporations can continue to operate while hiding a myriad of problemsbeneath a blanket of inventory.

If we begin to drain some of the water from our pond, some of these rocks will be exposed. We will then have to remove them so that our ship can continue to sail. The same occursin our factories as we begin to reduce the inventory. Lot size / set-up time, vendorreliability, lack of flexibility, un-reliable processes, etc. will slowly be exposed as theinventory is reduced. Fixing these rocks reduces cost and improves quality and customerservice.

Note: A company-wide inventory reduction process serves to optimize the Whole plant.

See the analogy below.


Root Cause Analysis: The process of researching a problem / defect to discover the realunderlying cause. The real Root Cause is easiest to uncover when the defect / problem isdiscovered and research immediately after it occurs. Time is the enemy of identification: the trail rapidly gets cold. (see Five Whys and the article Total Quality Lean ).


Rope Off Customer-Required F/Gs to Prove That They Are Not Necessary: Somecompanies are contractually required by their customer to maintain a certain level offinished goods on hand. This safety stock is meant to protect the customer in situationswhere the supplier misses a production schedule. Once lead times are reduced and on-time completion performance improved, these safety stocks my no longer be required. Atone client site, we invited the customer to witness the inventory being held in his account. We recorder the lot numbers, and then taped off the entire inventory (several pallets) withthe bright yellow police tape. We asked for agreement that if we could continue to ship at100% performance, without breaking into this buffer, we be allowed to eliminate the bufferrequirement. A compromise was reached that allowed our client (the supplier) to cut thesafety stock requirement in half with each month of successful on-tine delivery. Therequirement was eventually eliminated.

Rope Off Freed-Up Space: or it will refill. Space, freed up via the lean transition process, isa valuable asset that upper management can use for new products, acquisitions, sub-lease,plant consolidation, distribution warehouse. etc. Do not let this asset slip away. We havegone so far as to use yellow Police tape to cordon off the area. Post large notes statingthat written approval from the plant manager is required to store anything in the area.

Nature abhors a vacuum. Take aggressive steps to preserve the empty space or it willrapidly refill!

Rough Cut Capacity Requirements Planning, e.g. Rough Cut CRP: A detailed CapacityRequirements Plan (CRP) uses all detailed production schedules generated from MRP, i.e. the build schedules for all levels of the bills of material.

Rough Cut CRP uses the Master Production Schedule (MPS) to calculate labor requirements. The typical rough cut CRP algorithm uses the MRP / ERP system master schedule plus arolled-up bill of labor to calculate future labor requirements.


As an example, the MPS calls for us to build 20 mens 26 bicycles in period four. The laborrequirements for period four would be 20 times the rolled up bill of labor (which wouldinclude all fabrication, subassembly, final assembly, test, and pack labor requirements for amens 26 bike.)

To be reasonably accurate, Rough Cut CRP requires flat bills of material, short lead times,small lot sizes, and little or no safety stock requirements, and works best in make to orderenvironments. It is generally adequately accurate in a lean organization. (See CapacityRequirements Planning, CRP). !

Rubber Factory: Build flexibility into your capacity. Use part-timers, overtime, crosstraining, move people between departments, etc. While it a very worthwhile effort toattempt to smooth production , quick response will, at times, demand some level offlexible capacity.

Our article, The Rubber Factory, details this powerful technique. (See Counter CyclicProducts)

Rule or Exceptions? In most discussions as to why a lean initiative cant be done, it isthe exception that is used to justify things. Look at frequency and percentages as well asthe facts given; e.g. Weve got long lead time items from China (on 1% of the parts!). One of the nice things about the Lean techniques is that they do not need to be useduniversally. Select the appropriate techniques and then use them only where appropriate. (See Figures Dont Lie, But Liars Figure)

Safety bag: For small component users, a very simple form of replenishment signal is toplace a quantity of components (sufficient to cover on-going operations during thereplenishment cycle) in a separate bag that includes a replenishment kanban card. Theinstructions on the card advises to use these parts last and to order more once the bag ofparts has been opened. The card can even contain the necessary reorder information. Thecard is provided to procurement, or the supplier, for order placement. (See Faxban)


Safety Stock: Be Cautious. In many MRP programs, Safety Stock is treated like a priorityitem, triggering expedite messages. Doing so can cause credibility issues with the systemsrecommendations and lead to second guessing, or worse. (See the article ERP & Lean)

Salary Increase Matrix: This is a powerful tool that can be used to help your companymake rational and reasonably consistent salary adjustments. The logic is straight forward. The intent is to rapidly move your excellent performers to the appropriate range of pay fortheir current job description.

A salary Increase Matrix is easy to explain to your employees and is generally seen as fair.


The management team agrees on the matrix parameters, i.e. how to pay your people basedupon their job performance and their current level of pay. Then the emphasis changes toaccurately and consistently evaluating the performance of your people.


As an example, Slim is an outstanding employee (A performer) and is currently being paid inthe first quartile of his salary range. The matrix suggests that Slim receive a substantialincrease (10-15%) in his pay. The logic is that an outstanding performer should be paid inthe upper part of the salary range.

Similarly, Mark is an average performer (C rating) but is being paid in the top quartile of hisjob pay range. The matrix suggests that he is currently being overpaid for his contribution,and his salary should be adjusted accordingly.

Same As Except Method of Estimating: This is an excellent way to quickly, and oftenmore accurately, estimate the cost for a new product. When faced with the need for aquick cost estimate, begin with a similar existing item with a known cost. Then add &subtract for estimated differences. This method is almost always faster than a bottoms-upestimate, and often more accurate.

Schedule Accountability, By Shift: Delivery performance demands that the schedule beaccomplished in all areas of the organization. Start with schedule completion each day. This will then lead you to measure & improve on-time schedule accomplishment by shift.

You will soon, however, run into a problem. The typical multi-shift operation has shifts thatare back to back, i.e. one shift ends at the same time that the next shift begins. If yourprocess allows, it can be a significant benefit to stagger the shifts, thereby leaving a gapbetween shifts for recovery, repairs, and preventative maintenance; e.g. 1st shift runs 7:00

AM 3:30 PM, 2nd shift runs 7:00 PM 3:30 AM (3.5 hr gap). Each shift can then be heldaccountable to make the schedule, exactly, before going home. Instill a discipline: Theshift ends when the schedule is done. (See On-Time Completions)

Schedule Adherence; Order Entry: In most manufacturing companies, the majority oforders come into the company during day shift. Yet, to ensure a short lead-time, wed like

to be able to produce these orders on 2nd and 3rd shifts. This requirement results in a


philosophy of The day ends when all orders have been entered into the system and areavailable for production. Stagger the hours of your order entry people. Get agreementthat the last person on duty will stay until every order is in the system (same day). As youcontinue to shorten your response times, making this change will become more important. (See Order Entry: Hours of Operation)

Schedule Randomizer: In some industries, it is still accepted practice to promise shipmentweek of. Obviously, this is NOT a world class practice! Be that as it may, until schedulingpractices change, weekly schedules can cause a problem with the MRP back-schedulingalgorithms when lead times are dramatically reduced. A case in point: We worked with asteel company that scheduled all of their shipments for Friday of the promise week. Theoperations planning department had no good scheduling tools to provide credible day ofthe week completions. As we reduced the lead time, and began holding operationsaccountable for on-time schedule completions at the individual operation level, unrealisticschedules began to appear. Since many products had similar routings, and everything wasscheduled to complete on Friday, workload lumps appeared at various operations.

A quick and easy fix was to apply a simple randomizer to the internal completion date. Thissmoothed the completions over the promise week, and provided producible schedules. The customer continued to receive a week of promise date, but internally the operatingand scheduling people were measured to the completion day. Needless to say, the nextobvious step is to begin providing daily ship date promises to the customer. So far,however, we havent been able to win that battle!

Scheduling Function: Hours of Operation: We were working with a large corrugated boxproducer. They had customers clambering for next day delivery. We had streamlined theproduction operations to allow for extremely rapid turnaround. However, orders werereceived until 5:00 PM, yet the scheduler for the corrugator went home at 3:30. With somework-shift schedule changes, and some cross training, the problem was overcome. It was

necessary to overlap the scheduling function beyond the end of 1st shift so that all oftodays orders could be entered into the schedule and be available for production TODAY.


A similar problem arose at a steel finishing plant. Standard practice was for productionscheduling to be done on weekdays, day shift only. However, production operations ran 24x 7. Needless to say, as the internal lead times were reduced, it became unrealistic toattempt to schedule production that far in advance. The schedulers agreed on new workschedules. Schedulers were also provided with PCs and the ability to access thescheduling software at home. This allowed for critical schedule changes to be madeelectronically from the schedulers home, if needed, 24 x 7.

Additional scheduling pattern options are discussed in our article Alternate CrewingSchedules, and our blog re. multiple shifts.

Scheduling: Upstream & Downstream From a Bottleneck: In many industries, there existtrue bottleneck operations. If the upstream and/or downstream operations are NOT truebottlenecks, i.e. have excess capacity, then the objective is to use only one schedule; thatwhich optimizes the bottleneck; for ALL operations. The same scheduling sequence (alsocalled a line up) used for the bottleneck, is applied to as many up & down streamoperations as feasible. The end result is a Lean environment while still optimizing thebottleneck operation.

Sequential Inspection: Have each operator check the product for quality beforeproceeding with their own operations.

Heres an easy first step in establishing sequential inspection. Have every operator writedown the items that they could possibly mess up. Pass this list to the next operator ashis/her checklist. Run for a week or two, adding to and correcting the list. Then formalize(print up, add color photos, etc.) and post at each work-station.

Sequential Pull: Many kanban systems are product specific, i.e. the kanban tells youwhat to make, when to make it, and how many to make. However, a more streamlinedform of kanban, applicable in many industries, is sequential pull. In this system, thekanban signal is generic; it tells you when to move or make a part, but does not tell you


what to make. A schedule, or line up tells you the specific item to move or make.

The automobile assembly line and associated feeder lines are set up in this fashion. Bypulling the correct parts in the correct sequence, a complete final assembly is producedwith minimal WIP inventory, just in time. Note, that while this is by far the most efficientform of pull system, it requires a considerable amount of pre-work. Quality and reliabilityof all processes must be truly world class, as any defect or line disruption can throw off thesequencing. (See Kanban)

Set-Up Person; New Role as Teacher: Some companies have high skill set-up operatorsthat are on-call to perform change-overs on the production equipment. This often causesdelays, while production operators wait for the change-over expert to get to their operation. Weve had some huge successes by re-framing the set-up persons job to includesimplifying the change-over, and training operators to do their own change-overs, or at leastaid in the change-over. Transition your set-up people into trainers and SMED experts(simplify the change-overs, document the procedures). Teach operators how to do theirown change over. Then elevate the responsibilities of the set-up person to include processimprovement.

Shadow Boards: Help people put things back where they go by creating a shadow board. By putting the outline of the tool on a board, or in a drawer, where the tool is supposed tobe located, the location for a tool becomes obvious. Combining the outline with color-coding can be even more effective.

(See 5S / Area Organization)

Sharing Equipment / Work Stations: We visited a transformer plant and noticed that morethan of the arbor winding equipment was un-manned. When we asked why, we were

told that the 2nd shift operators all had their own equipment, and that no operator couldcontinue the work of another. Winding was considered art, not science. The addition ofstandard methods, checklists, and a 5 minute shift overlap, allowed space, equipment, and


WIP inventory to be cut in half.

Shop Floor Control: This term is generally used to denote software & hardware systemsthat are used to track, reschedule, and prioritize products that are currently in production. Many companies have spent a considerable amount of time & money installing shop floorcontrol systems, and, in some industries they are an absolute necessity. Too often,however, they simply mask a host of underlying problems: If schedules are credible, andon-time completion rates are high, there is little need to track, reschedule, or prioritizeitems in WIP.

However, when lead times are excessive; lot sizes are too large; schedules are un-realistic(poor capacity planning and/or shop loading discipline); and accountability is lacking, SFCsystems will be seen as a necessary solution. NOTE: They will NOT solve the problem.

In most industries, if Lean is done correctly, the need for SFC is greatly reduced oreliminated, and, in the few industries that truly do require SFC systems, their credibility willbe greatly enhanced by a lean initiative. The cost of complexity caused by theseunderlying drivers can be substantial.

Shorten Lead Times by Adding Shifts: Heres a quiz: Our product requires four operationsto be performed, in sequence. Weve got four operators, each performing a differentoperation. Each operation takes 8 hrs to perform. There is only one shift. Whats theminimum lead-time? Right: 4 days. On day 1, operation 1 is completed. On day 2operation 2 is completed, etc.

What happens to WIP inventory levels and lead times if we were to move 2 of our operatorsto the 2nd shift? Operation 1 is done on day one, 1st shift. However, operation 2 now canalso be performed on day one, on the 2nd shift. Same with operations 3 & 4. The lead-time and WIP inventory levels are cut in half.

Note: we did NOT increase capacity. Four operators still produce 1 completed unit each


day. However, by manning more of the available hours, we are able to keep the productflowing, thereby cutting inventory, space requirements, and lead times accordingly. Weused 8 hour operations for illustration purposes. Moving a portion of your capacity to the offshifts will have the same impact regardless of the work content.

For more information on this powerful technique, check out Making the Case for MultipleShifts.

Show Me: We were working in a traditional assembly plant and were about to re-arrangesome equipment. I asked that the wiring be left flexible so that future minor equipmentmoves could readily be accomplished. However, the maintenance man assured me thatthis was not allowable per the code. I politely asked him to please show me where thecode said this. I waited a few hours, then sought him out. As I had expected, he could notfind any such prohibition in the code.

Many constraints are perceived, habit, or hear say. Require the letter of the law be shown. Dont be afraid to challenge convention. All too often, its being done that way becauseits always been done that way!

Side-Loading Trucks: The problem with the typical rear opening truck is that only a smallamount of product can be reached at any time, and that the product flow is LIFO: Last InFirst Out. A lean environment requires frequent deliveries of material to the point of use. Thus, a side loading truck, combined with modified receiving capabilities along the entireperiphery of the plant, provides a more fitting arrangement. Material can be accessed alongthe entire length of the truck, allowing material to be stored and unloaded where and whenneeded.

Silence is Acceptance: A culture of continuous improvement demands on-going change. It is difficult to make rapid progress if approvals are required for every action taken. Institutea procedure that encourages teams to notify people of actions they intend to take. Theonus is then on those notified to raise a flag of concern. Speak now, or forever hold your


peace! (See Just Do It!)

Similar To BOMs (Bills Of Material): If you do not have a final design, load the BOM for asimilar product into your MRP. Then evolve it as product definition firms up. The similarto item is treated like the same as, except item discussed elsewhere. Schedule theanticipated demand in your master schedule, and then use the system to warn you of longlead item requirements, reserve capacity, project cash flow, etc. (See Same as, Except)

Single Handle: Once an item is in the hands of an operator, try to do as many value-addingoperations as make sense. Much time is wasted picking up, putting

www handsongroup com lean manufacturing tool kit part 2

Documents

daylean manufacturing

orderlean manufacturing

leanmanufacturing topic

maintenance operations

hour maintenance

maintenance person

maintenance maynow

maintenance events