impact of lean production

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  • 2. IMPACT OF LEAN PRODUCTION STRATEGY IN DIFFERENT SECTORS INTRODUCTION: ORIGINS OF LEAN The early phase of the M.I.T. International Motor Vehicle Program (IMVP) saw the first use of the term ―lean manufacturing‖ (or ―lean production‖) to describe a revolutionary approach to manufacturing observed in the study, as contrasted with the mass production tradition. As a concept, ―lean‖ includes several of the popular concepts of management research, such as Total Quality Management (TQM), Continuous Improvement, Integrated Product Development (IPD), and Just-In-Time (JIT) inventory control. Lean manufacturing attempts to unite these niche topics into a unified philosophy for producing products. Indeed, to succeed as an overall business philosophy, lean principles must incorporate areas outside of manufacturing—the entire product development process. Much of the research related to these other areas has been incorporated into the lean paradigm. For example, much of the product development research in the auto industry done by Clark and Fujimoto at Harvard Business School fits into the IMVP work. Concepts of leadership, teamwork, communication, and simultaneous development all became aspects of lean. As the lean paradigm receives wider application, further refinement and elaboration of its tenets becomes necessary. One area currently attempting to apply lean principles to its unique context is the defense aircraft industry. WHAT IS LEAN MANUFACTURING? Lean production is an integrated set of activities designed to achieve production using minimal inventories of raw materials, work in progress, and finished goods. Lean is also based on the logic that nothing will be produced until it is needed. BREAK THROUGH MOMENTS IN LEAN FROM 1500 TO 2007 YEAR 1500 1780 1799 1822 1860 1880 1890 1902 1908 1913-1914 1924 1926 1930 PROCESS Flow production DETAILS Venetian arsenal introduces floating assembly line for boats of standard design. Concept of interchangeable parts French army ordinance introduced it for High-volume flow production Automatic production of simple parts Marc Brunel devises water powered equipment for making rope blocks for ship which reduces labour cost. Automatic production of complex Thomas Blanchard makes gun stock for rifles with no parts manual labour. High-volume interchangeable parts Samuel colt’s Armory in Hartford produces high volume of pistols with completely interchangeable parts. Moving Disassembly line American meat packers used conveyors to steadily move carcasses to remove the bone. Scientific management Frederick Taylor introduces piece-rate bonus system scientifically to spur effort and tying complex production paths together and he also introduced cost accounting to allocate overheads to machine and labour hours. Invention of JIDOKA This machine finds out the broken threads in loom and automatically stops production of defective cloth which was invented by Sakichi Toyoda which reduces multi worker job to single worker. Truly interchangeable parts Hendry ford introduces a modular car with interchangeable parts to reduce waste Moving assembly line with parts Hendry ford’s High land park plant pioneers ―Flow fabrication production‖ by placing fabrication equipment in process sequence and operating whole factory at the rate of the final assembly line. Quick changeovers G-type loom introduced for quick changeover. Mass production Hendry Ford introduced Mass production in 50 final assembly plants around the world Take time Take time is introduced which means that the cycle time for the work at each station must be precisely analyzed to keep it below the take time. German Aircraft introduced follows Mitsubishi and later brings the idea to Toyota Japan. 2
  • 3. 1937 1941-1945 1950 1960 1965 1973 1979 1983 1987 1990 1996 1997 1998 2005 2007 Just in Time Kiichiro Toyoda introduced this concept in Toyota motor company Training within Industry During War U.S dept of War started this method which was further implemented in Toyota to make workers to work in standard manner. Kanban and Supermarkets Taichi Ohno develops practical methods to implement JIT Lean Management Under leadership of Fiji Toyoda Toyota Motor company creates a management system with new approach to problem solving, leadership, production operations, supplier collaboration, product and process development and customer support called lean management. Quality as a key element of a W.Edwards Deming’s PDCA (Plan-Do-Check-Act) management system. introduced. Mass production Management Alfred slogan published a book to describe MANAGE BY METRICS SYSTEM followed in General motors for mass production. First Academic Investigation MIT launches the future of the automobile program to study new methods of designing and producing products in Japan. Direct diffusion Introduced TPS outside Japan by Toyota and General Motors. Lean Introduced John Krafcik a young researcher in the MIT International Motor vehicle program proposes a label for the combination of production, product development, supplier collaboration, customer support, and quality and management methods pioneered by Toyota. In the book The machine that changed Jim Womack, Dan Jones and Daniel Roos provide the world exhaustive evidence of the competitive superiority of the complete system Lean thinking Jim Womack and Dan Jones provide a simple description of lean principles. Lean Enterprise Institute Jim Womack creates a non-profit, education, publishing and research organization to promote lean principles. Value stream maps Mike Rother and John Shook introduced this to broad audience. Lean solutions Jim Womack and Dan Jones apply the process thinking at the heart of the lean thinking to consumption. Lean global network Organizations around the world promotes lean thinking Lean as No.1 Toyota and General Motors successfully implemented lean and become successful. LEAN GOALS AND STRATEGIES: The espoused goals of lean manufacturing systems differ between various authors. While some maintain an internal focus, e.g. to increase profit for the organization, others claim that improvements should be done for the sake of the customer. Some commonly mentioned goals are: Improve quality: To stay competitive in today's marketplace, a company must understand its customers' wants and needs and design processes to meet their expectations and requirements. Eliminate waste: Waste is any activity that consumes time, resources, or space but does not add any value to the product or service. Reduce time: Reducing the time it takes to finish an activity from start to finish is one of the most effective ways to eliminate waste and lower costs. Reduce total costs: To minimize cost, a company must produce only to customer demand. Overproduction increases a company’s inventory costs because of storage needs. STRATEGIES OF LEAN: Lean as a fixed state or goal (being lean) Lean as a continuous change process (becoming lean) 3
  • 4. Lean as a set of tools or methods (doing lean/toolbox lean) Lean as a philosophy (lean thinking) The following steps should be implemented to create the ideal lean manufacturing system Design a simple manufacturing system Recognize that there is always room for improvement Continuously improve the lean manufacturing system design This is depicted in the figure given below: IMPACT IN DIFFERENT SECTORS: GLOBAL BUSINESS SCENARIO: Global business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations. These transactions take on various forms, which are often interrelated. Primary types of international business are import export trade and foreign direct investment (FDI). The latter is carried out in varied forms, including wholly owned subsidiaries and joint ventures. Additional types of international business are licensing, franchising, and management contracts. As the definition indicates, and as for any kind of domestic business, ―satisfaction‖ remains a key tenet of global business. Beyond this, because transaction environmental factors, to different constraints, and to quite frequent conflicts resulting from different laws, cultures, and societies. The basic principles of business still apply, but their application, complexity, and intensity vary substantially. To compete themselves in the global business all people in different sectors finding many improvement tools to improve their business which is depicted below, 4
  • 5. As depicted above one of the tools is Lean. As we see compared to all the sectors Auto/Auto/AWC, Electronics, consumer goods, Capital goods, power generation sectors are implementing lean for their benefit. It is evident from the above chart that the sectors which implements lean show considerable improvement compared to others in productivity. AUTO INDUSTRY: India's auto industry has made strides, but it can do more to meet its full potential: active and favorable policy interventions, infrastructure building, investments in technology and R&D, and the development of a healthy and sustainable automotive ecosystem. A collaborative approach by OEMs, the government, and other stakeholders will achieve this growth. In order to achieve this growth Lean Principals, first introduced by Taichi Ohno of Toyota Motor Company, have been influencing large and small businesses worldwide by providing a blue print on ways to reduce waste while increasing productivity. Today’s leading companies like Ford, Dell, Southwest Airlines, and FedEx are reworking their business models based on adopting Lean principles and are reaping tremendous benefits that continue to insure their success in their respective markets. It is a natural migration of these Lean principals from Lean Manufacturing, to Lean Maintenance, to Lean Predictive Maintenance, to Lean IR. Concepts that have provided the insurance of the rebirth of the IR program at Ford’s DSP. Fords Rouge Dearborn Stamping Plant (DSP) has been leading the way with adopting these Lean concepts to their IR Program to be able to increases their up time dramatically by the integration of Lean Thinking with their IR program. ―I would like the Rouge again to be the most copied and studied 5
  • 6. industrial complex in the world. My great-grandfather would have thought this was fantastic.‖ William C. Ford Jr. Chairman & CEO, Ford Motor Company. EXPERIENCE OF SUNDARAM CLAYTON Sundaram Clayton Limited (SCL) is part of the USD4 billion TVS group, one of the largest auto components manufacturing and distribution group in India.SCL is a leading supplier of aluminum die castings to the automotive and non-automotive sectors. The company commenced operations in 1962 in collaboration with the UK based Clayton Dewandre Holdings Limited (now part of WABCO Automotive group). It Manufactures aluminum pressure die castings for heavy commercial vehicles, passenger cars and two wheelers. Its product range includes flywheel housing, gear housing, clutch housing, filter heads, air connectors, lube oil cooler cover assembly, filtration module casting, turbochargers, compressor cover assembly, charge air pipes, intake manifold and cover coolant duct for the truck segment; cylinder head, case transaxle assembly, oil pan, chain case, cylinder head cover, adaptor oil filter, fuel pump housing, fork gear shift, starter housing and A/C compressor housing for passenger cars; and crank case, cylinder head, cylinder barrel and wheel hub for powered two wheelers and brake equipment valve bodies. SCL started its total quality management (TQM) processes in the late1980s.Prior to introducing TQM; the company had a traditional manufacturing layout and hierarchical organizational structure leading to inefficiencies and waste. During that time, the man to machine ratio was 3:1. That meant each machine required three workers – one to load and unload the product, another to switch on the machine and the third to inspect the quality of the product. Similarly, since the plant layout was process-oriented, it resulted in the buildup of inventories. Also, the communication among various peer groups was poor. Moreover, both middle level management and the workers resisted change. After undergoing a thorough diagnosis of these issues, SCL decided to adopt a three-phase implementation of TQM. This involved encouraging the culture of quality control and quality Assurance, which was achieved through intensive staff education and training. The implementation of TQM enabled the company to not only increase its market share, profit and the productivity of workers but it also helped in getting business from overseas players. SCL was awarded the Deming prize for quality in 1998. IMPROVEMENT IN BAJAJ AUTO THROUGH LEAN PRODUCTION: Bajaj Auto is one of the largest automobile companies in India and has been in business for over four decades. The company is ranked as the world's fourth largest two and three- wheeler manufacturer. During the 1980s and 90s, the manufacturing model adopted by the company resulted in inefficiencies, higher fixed costs and a large inventory with hidden quality issues. During the late 1990s and early 2000s, strong competition and growing customer aspirations led the company to move to: Lean manufacturing (on the lines of the Toyota Production System) Total Productivity Management (TPM) Statistical Process Control (SPC) in manufacturing operations The lean manufacturing drive involved reorganization and a fundamental redesigning of Bajaj Auto’s core business processes. The objective was: To create a high performing organization by restructuring, re-staffing and establishing a performance management system Launch new products Restructure channels and build capability to increase retail sales, dealer profits and overall customer satisfaction Implement an integrated ERP system Reduce purchasing costs Cut down conversion costs The main aim was to boost the top line 100 per cent and bottom line 10 per cent. The move towards a lean manufacturing process resulted in significant gains for the company. Bajaj Auto’s workforce productivity raised 10 times. The company was able to reduce the inventory for raw materials from one week to half a shift stock. The inventory for finished goods was cut down from one month to three days. The number of rejected items was reduced from 20,000 parts per million (PPM) to less than 2,000 PPM. 6
  • 7. IT SECTOR WIPRO LTD: When speaking of Lean Production, it usually refers to manufacturing industry such as automobile. However, with its great success, it has been adopted across industries including health care and IT outsourcing. Wipro did a great job of translating ―Lean Principle‖ to IT outsourcing. When the chief global delivery officer at Wipro wanted to deal with rising wage inflation and growing complexity in large outsourcing contracts, McKinsey suggested the Lean Principle. With further investigation at options that included the Malcolm Bald ridge National Quality Award criteria, TRIZ (short for Theory of Inventive Problem Solving in Russian), and Toyota's Lean, Wipro decided to apply the Lean exercises. What Wipro tried to do is more than just reduce their cost, but differentiate itself from its peer competitors based on quality and delivery of its software products as well. Wipro did successfully apply the lean principle into IT outsourcing. Before adoption of TPS, Wipro had implemented Six Sigma quality control system as well. AEROSPACE INDUSTRY: Goodrich, a supplier of products and services to the aerospace industry, began implementing Lean techniques in 1995, adapting tools from the Toyota Production System. Kaizen events serve as the driving force behind a waste elimination-focused culture change with the company conducting over 350 events each. Goodrich has used kaizen events to assess hazardous environmental waste streams, identify and implement pollution prevention and process improvement techniques, and to target environmental, health, and safety (EHS) issues. EHS objectives must be identified for all kaizen events, and efforts must also be made to involve EHS personnel if an event is likely to have important environmental dimensions, risks, or opportunities. Several Goodrich sites have also converted to cellular manufacturing while other facilities have shifted to Lean point of use chemical management systems to eliminate wasted worker movement, which also reduced chemical use PHARMACEUTICAL INDUSTRY: In the pharmaceutical industry, traditional batch manufacturing processes are proving to be too inefficient for today’s world of economic pressures and increased global competition. New moves by regulatory agencies are encouraging the development of new manufacturing technologies by building quality into the process and using a science-based quantified risk approach, by starting to lay the groundwork for continuous manufacturing with several initiatives, and with regulatory frameworks such as process analytical technology (PAT) and quality by design (QbD). Both the chemical and food processing industries have been improving their productivity by successfully integrating continuous manufacturing into their plants. It is clear that regulatory hurdles and conservative thinking by the pharmaceutical industry can no longer be used as an excuse to avoid taking pharmaceutical manufacturing into the 21st century. MANUFACTURING SECTOR: In a plant operated by the Spicer Axle Division of Dana Corp., manufacturing engineers set out to use the six-sigma DMAIC (Design, Measure, Analyze, Improve, Control) methodology—in conjunction with lean manufacturing—to meet customer requirements related to the production of tubes used to manufacture axles. Those requirements were related to both quality and production. The objective of the lean effort devoted to the tube line was to reduce quality defects It's important to note that after lean 7
  • 8. manufacturing principles were implemented, the tube line was also used as a pilot cell for other layout designs throughout the plant. The Problems identified like, Line’s unbalanced nature, Long runs of Work in progress are rectified using New tube lay out there was a considerable change in the production process which results in, WIP decreased by 97%, Production increased 72%, Scrap was reduced by 43%, Machine utilization increased by 50%, Labor utilization increased by 25%, Labor costs were reduced by 33%, and Sigma level increased from 2.6 to 2.8, In summary, the production group wanted to develop a process to decrease product cost while achieving improved quality level, decreased defects, increased production throughput, and improved production capacity, while providing a design that would not impose a limit on the number of operators. This project yielded reduced labor and scraps costs, and allowed the organization to do a better job of making deliveries on time, while allowing a smaller finished-goods inventory. Daily production numbers and single-part cycle time served as a benchmark for monitoring progress towards the realization of the goal. Although the sigma level increase was not immense, the 43% reduction in defects, 97% reduction in WIP, and production increase of 72% contributed to the project objective. LEAN IN SERVICES SECTOR: Services Organize problem solving groups Upgrade House Keeping Upgrade Quality Clarify process flows Revise equipment and process technologies Level the facility load Eliminate unnecessary activities Corporate Used First Bank/Dallas Standard Meat Company Miller Brewing company British Airways Mc Donald’s Disney Land Speedi-Lube Mc Donald’s Federal Express Corporation Speedi-Lube Mc Donald’s Retail stores Speedi-Lube Reorganize physical configuration Speedi-Lube Introduce demand pull scheduling Wendy’s restaurants. Benefits enjoyed  To improve services  To implement new service practices     Service processes work better Continuous improvement easier to develop Customer satisfaction Provides better services and produces quality products and services consistently  By changing the process it achieved first place in air Freight.  To perform a wider range of operations without reducing the operation room availability  Synchronies production with demand and gained customer satisfaction  Reengineering to improve the process consistency  To reduce the time to perform the tasks Through which they increased their goodwill.  They organize micro clinics inside the hospitals so that they need not route patients all over the hospitals for various tests.  Cooks will put hamburger onto the grill, when the car is entered into the restaurant so that it will be ready in their table even before ordering. This gained many customers to the restaurants. 8
  • 9. CONCLUSION: RISKS IN LEAN PRODUCTION: High cost of implementation Lack of acceptance by employees Heavy investment needed at initial stage As we discussed earlier for a best system to be implemented for a long run corporate should face some initial risks. After overcoming such risks through lean production strategy corporate can enjoy lots of benefits not only to the manufacturing sector but also to the service sectors. It is evident from the above case studies that many companies have enjoyed improvement. In order to enjoy continuous improvement like the initial improvement after implementation managers should have complete understanding about lean approach. This understanding will lead their corporate in their way of success as Toyota Motors ltd achieved. BIBLIOGRAPHY: BOOKS AND MAGAZINES: 1. Richard B.Chase, Ravi Shankar, F.Robert Jacobs, Nicholus J.Aquilano. Operations & Supply Management, Tata McGraw Hill Education Private Limited, New Delhi, 2010. 2. Czinkota, Michael R., Ilkka A. Ronkainen and Michael H. Moffett. Fundamentals of International Business. Mason: South-Western, 2004. 3. Wood J. L. (2012) Disadvantages of Lean Manufacturing. Retrieved March 8, 2012, from 4. Kropf, P. (2008). What is Lean Manufacturing. Retrieved March 1, 2012, from 5. Kelly, M. (2012). Advantages & Disadvantages of Lean Production. Retrieved March 5, 2012, from 6. Womack, James P. and Jones, Daniel T. Lean Thinking: Banish Waste and Create Wealth in YourCorporation. Simon & Schuster, 1996. WEBSITES: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 9