by Daniel T Jones of Lean Enterprise Academy show at the Lean Management summit in Aachen, Germany on 11th November 2004

1. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
BUILDING A LEANBUILDING A LEAN
BUSINESS SYSTEMBUSINESS SYSTEM
Professor Daniel T JonesProfessor Daniel T Jones
Chairman, Lean Enterprise AcademyChairman, Lean Enterprise Academy

2. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Lean Management SummitLean Management Summit
• Marks a significant turning point for Lean Thinking in
Germany – after two false starts in 1991 and 1997
• The establishment of the Lean Management Institut
with RWTH Aachen lays a solid foundation here
• Lean management has spread well beyond the shop
floor, across sectors and across the world
• Germany at this point lags behind – although we
have always believed that German industry has a
significant contribution to make to the future of Lean
• Lean is actually a “job saver” rather than a “job killer”

3. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
ToyotaToyota -- the Lean Modelthe Lean Model
• Most people now recognise that Toyota is setting
the pace – based on its Lean business system
– It leads in efficiency and quality around the world
– It also leads in time to market for new products
– And in introducing new technologies - like hybrids
– It is globalising assembly and localising parts supply
– It has overtaken Ford and plans to overtake GM!
• Superficially Toyota’s functional organisation looks
not unlike a German firm!
• So what distinguishes the way it operates?

4. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Toyota’s Lean StrategyToyota’s Lean Strategy
“Brilliant process management is our strategy.
We get brilliant results from average people
managing brilliant processes.
We observe that our competitors often get
average (or worse) results from brilliant people
managing broken processes.”
Lean Thinking is Process Thinking
Just think what you could do with brilliant people
running brilliant processes!

5. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Lean ThinkingLean Thinking
• The objective is to manage the business backwards
from the customer definition of value - not forwards
from your organisation and your assets
• To create lean primary processes to design, deliver
and support this value - with minimum wasted effort
and time – and the necessary lean support processes
• And to build a lean management system to develop,
sustain and improve these processes over time
• Be clear about customer Purpose, before designing
the Processes and then organising the People

6. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Lean PrinciplesLean Principles
• Specify value from the standpoint of the customer
(do they want goods and services or to solve their
problem?)
• Identify the value stream for each product and
remove wasted activities
• Make value flow towards the customer as quickly as
possible
• Only at the pull of the customer
• While striving for perfection (in products and
processes)

7. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
The Dynamics of LeanThe Dynamics of Lean
To only one
pacemaker
process
With just the right
Standard
Inventory of:-
Cycle stock
Buffer stock and
Safety stock
Uninterrupted
flow back to the
customer’s
point of use
No warehouses,
only Cross-Docks
and Mixed-model
Milk Runs
FIFO
Reflexive
Pull all the
way back to
raw materials
Every
Product
Every
Interval
capability
Separate
capacity planning
from production
instructions
Production
pulled from
every
upstream step
Every step is:-
Valuable
Capable
Available
Flexible
and Adequate
Combine steps
where you can
to flow
Demand signals
direct from the
customer’s
point of use
No created
demand
amplification
Levelled and
released in
small quantities

8. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Low Volume LeanLow Volume Lean
• Lean is as relevant to build-to-order businesses
• The starting point may be the engineering,
procurement and quotation process
• Then breaking the order down into increments of takt
time to track progress and problems
• And modularising the elements to be produced and
synchronising them
• But does the customer really need all that
complexity?
• Toyota is now developing “Lean and Simple”
equipment for use across the world

9. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Current State Value Stream
ShippingAssembly 2Assembly 1S. Weld 2S. Weld 1Stamping
Production
Control
MRP
Weekly Schedule
Daily Ship
Schedule
Production
Lead Time
= 23.5 days
Value
Added Time
= 184 secs
State Street
Assembly
Forecast
Daily Order
Daily
Michigan
Steel
Forecast
Weekly Order
2 x Week
II I I I I
Future State Value Stream
Production
Lead Time
= 4.5 days
Value
Added Time
= 166 secs
Shipping
Production
Control
State Street
Assembly
Forecast
Daily Order
Daily
Daily Order
Weld and
Assembly CellStamping
Michigan
Steel
Forecast
Daily Order
Daily
Ask theAsk the
keykey
questionsquestions
ImplementingImplementing
LeanLean
Value Stream Plan
Product Value Person
Family Stream Measurable Monthly Schedule in
Business Objective Goal Charge
Objective 1 2 3 4 5 6 7 8 9
Improve
Profitability
In Steering
Brackets
V S Manager Jim
Date 03/02/2003
Product Family
Steering Brackets
Pacemaker
*Continuous flow from
weld to assembly Zero WIP John
*Kaizen to 168 secs < 168 s/t Dave
*Eliminate weld
changeover < 30 sec c/o Sam
*Uptime weld #2 100% Mike
*Finished goods pull 2 days FG Sue
*Materials handler Pull Schedule James
routes
Stamping
*Stamping Pull 1 day inventory Fred
+ pull schedule
*Stamping changeover batch size Tim
300/160 pieces
c/o < 10 min
Supplier
*Pull coils with daily delivery Graham
daily deliveryr < 1.5 days of
coils at press
CheckCheck
progressprogress
and stabiliseand stabilise

10. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Current State
44d
55m
73
8
Steps
Time
Steel
DELTA
STEEL
Stamping
GAMMA
STAMPING
Warehouse Cross Dock
Wipers
BETA WIPERS
Assembly
Dist. Centre
Cross Dock
ALPHA MOTORS
Amplification
F E D C B A
%
40
30
20
10
0
F E D C B A
Quality & Delivery
ppm
2000
1500
1000
500
0
F E C A
%
10
5
0
AssemblyWipersStamping
Steel
Dist. Centre
16d
55m
39
8
Steps
Time
Amplification
F E D C B A
%
40
30
20
10
0
Quality & Delivery
ppm
2000
1500
1000
500
0
F E C A
%
10
5
0
F E D C B A
DELTA
STEEL
GAMMA
STAMPING BETA WIPERS ALPHA MOTORS
Future State 2
Flow and Pull between Plants
TimeTime
reducedreduced
from 44 tofrom 44 to
24 days24 days
Ideal State
Value Stream Compression
Dist. Centre
3d
55m
30
8
Steps
Time
Amplification
F E D C B A
%
40
30
20
10
0
Quality & Delivery
ppm
2000
1500
1000
500
0
F E C A
%
10
5
0
F E D C B A
Steel
EPSILON
STEEL
Assembly
ALPHA MOTORSSUPPLIER PARK
Wiper
Cell
Stamping
Cell
Time reducedTime reduced
from 24 to 3from 24 to 3
daysdays
Across theAcross the
Value StreamValue Stream

11. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Using a Common LanguageUsing a Common Language
Lean Enterprise Academy www.leanuk.org
Acme Stamping Steering Bracket Value Stream Improvement
Background
Acme supplies stamped steel steering brackets (LH & RH) to State
Street Assembly. The product goes through 5 manufacturing processes &
shipping.
The customer uses 18,400 pcs/month & requires daily shipments in
pallets of 10 trays of 20 brackets. A pallet is either all RH or LH.
Current Situation
Lead time for steering bracket from coil steel to shipment = 23.6 days
Of 23.6 days, only 188 seconds are spent making a bracket.
Large inventories of material between each process.
Long changeover times, downtime in welding.
State Street
Assembly
Michigan
Steel Co.
1x daily
I
Production
Control
Daily
Ord
er
Weekly
Fax
6 Week
Forecas
t
90/60/3
0 Day
Forecas
t
Weekly Schedule
Ship
Sche
dule
Analysis
Each process operates as isolated islands, disconnected from the
customer.
Push system, material builds up between each process.
Each process builds according to its own operating constraints
(changeover, downtime etc.)
Plans based on 90 & 30 day forecasts from customer. Weekly
schedule for each department. System is frequently overridden to make
delivery
Goals
Improve profitability of steering bracket value stream.
Reduce lead time - 23.6 days to 4.5 days.
Reduce inventories:
Stamping 7.6 days to 1 day.
Welding 6.5 days to 0 days.
Shipping 4.5 days to 2 days.
Recommendations
Create continuous flow through weld & assembly
Establish TAKT time . Base the pace of work through weld & assembly
on customer demand.
Set new weld - assembly cell as pacemaker for entire value stream.
Establish EPE_ build schedule for stamping based on actual use of
pacemaker cell & pull steel coils from supplier based on actual usage by
stamping.
Improve uptime in weld.
Establish material handling routes for frequent withdrawal & delivery.
Establish new production instruction system with Levelling Box.
Follow Up
Reviews & involvement of related departments TBD.
Other functions: Production Control Material Handling, Purchasing,
Maintenance, Human Resources, Finance.
Production
Control Daily
Ord
er
Daily
Order
6
Week
Foreca
st
90/60/3
0 Day
Forecas
t
State Street
Assembly
Michigan
Steel Co.
Daily
Order
20
OXO
X
Current State Map
Future State Map
Deliverables Responsible Review
CCF at pacemaker
Kaizen each CT to >TT
Weld uptime to 100%
CO reduction to < TT
Pull at pacemaker
FG = 2 days
KB
Matl handling
Levelling Box
Pull from Stamping
WIP = 1 day
CO < 10 min
Pull from supplier
Info flow
Daily delivery
RM = 1.5 days
Action Plan
For
Problem
Solving,
Managing
Projects
and
Planning

12. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Managing LeanManaging Lean
• It is not an extension of continuous improvement or a
tool box – but a system redesign for each value stream
• Involving design & production – as well as logistics,
production control, maintenance, purchasing etc.
• It is not about what works theoretically or automation –
but a robust system tolerating day to day disturbances
• It will not happen unless someone is responsible for
each Value Stream Plan – and unless they get the
necessary support and resources from functional
departments (which also means lean in every office!)

13. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Challenges for ManagementChallenges for Management
• To reconcile the Chief Engineer’s plans for each
product family with the resources required in each
function and the overall needs of the business
• To move away from centralised, cognitive
production control systems to stable levelled
processes triggered by reflexive pull
• To spread lean across office support activities
despite the resistance to standardisation – lean
frees up time for creativity and problem solving

14. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Lean Product DevelopmentLean Product Development
• Strong leadership from the Chief Engineer, drawing
on resources from functional departments
• More time is spent pursuing sets of alternatives –
so that fewer engineering changes are needed later
• Once agreed detailed engineering proceeds very
rapidly, using standardised processes and checklists
and pull communication to trigger work – a fully
industrialised design process across every project
• Manufacturing and key suppliers are involved
throughout to ensure quality and low cost – based on
long term joint product and process analysis

15. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
Future LeanFuture Lean
• The biggest gains come from rethinking the product
and the process based on the lean experience of
trying to improve today’s design, equipment and
locations
• Toyota is targeting every new product to deliver
increased functionality at 30% lower costs – forcing
step changes rather than incremental improvements
• They are also designing “Lean and Simple”
equipment for use across the world – which is a
challenge for future engineers

16. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
An Agenda for ActionAn Agenda for Action
• We will continue to write down the lean knowledge
and to push the frontiers of lean implementation
• You need to build a much greater pool of lean
experience in Germany – to compensate for the fact
there is no Toyota plant here!
• We need to build examples of successful lean
implementation that enable to others to see why this
counterintuitive thinking works better
• The biggest challenge is to provide a new direction
for tomorrow’s engineers – designing lean for
tomorrow’s global realities

17. Lean Management Summit - Aachen, Germany 11 November 2004 www.leanuk.org
BUILDING A LEANBUILDING A LEAN
BUSINESS SYSTEMBUSINESS SYSTEM
Professor Daniel T JonesProfessor Daniel T Jones
www.leanuk.orgwww.leanuk.org