Lean-MBA e-book

Lean-MBA
(Lean Management Business Architecture)
A Holistic Approach to Achieving
Business Excellence
A compilation by Vishnu Rayapeddi

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Contents
Chapter Topics
0 Foreword
1 Introduction to Lean Thinking
2 Why do Lean implementations fail?
3 Managing Change – The best practice approach
4 Operational Excellence Strategy
5 Malcolm Baldrige Criteria for Performance Excellence
6 Lean Implementation – Are you ready?
7 Steps involved in achieving Operational Excellence
8 Management Commitment to Constancy of Purpose
9 Establishing Vision and Mission
10 Define your Kano
11 World-class practices awareness
11a. Lean Manufacturing
11b. Six Sigma
11c. Theory of Constraints
11d. Total Quality Management
12 Developing a Lean Culture
13 Respect for People
14 Operational Excellence Assessment
15 Value Stream Mapping
16 Performance Management
16a. Throughput Accounting
16b. The Balanced Scorecard approach
17 Strategy Development and Deployment
18 Value and Waste
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Japanese have accumulated years of experience and have a new production model handy, which
matches the new paradigm: the TOYOTA Production System.
The new paradigm - The new, actual context shows increased demand for customization and specific
customer expectations, in a globally growing offer. Except for few products, mass production is
changed to small batches with shorter life cycle. The challenge for industries is no more to mass
manufacture at low cost, but propose products (and services) which suit the client's taste, at a price he
/ she is ready to pay. Hence more, with the number of competitors (alternative sources for customers),
the clients are no longer ready to wait to get their wishes fulfilled. They rather seek satisfaction
elsewhere. Manufacturers can no longer push merchandises they decide to design, manufacture and
sell towards the market, but have to respond in a economic and quick manner to spot demand,
triggered (pulled) by the market.
In the new paradigm, new ways of linking operations and marketing arise. Lean manufacturing linked
to Toyota's production system and further to what is called "Toyotaism", is already widespread. Tools
and methods made Japanese industries a global success. They deeply impacted the decades 1980 –
1990 in the West. Lean manufacturing spreads from workshops and becomes global, Lean thinking,
Thanks to authors like Goldratt (theory of constraints) and Womack & Jones (Lean thinking). The word
“Lean” was coined by James Womack in the 1980’s.
Lean is a term popularised in the 1980's and 1990's to encompass a number of approaches to
managing manufacturing companies that included an emphasis on systems producing exactly what the
customer wants at the lowest cost and with no waste. Many of the ideas were developed after the
Second World War by Toyota. Their imperative was and remains, increasing profitability in low or no-
growth markets. The focus was on producing cars of the best quality, at the lowest cost and with the
shortest lead time through the systematic elimination of waste. Because Toyota developed so many of
the ideas associated with Lean, the term “Toyota Production System” or TPS is used synonymously.
How Toyota and their suppliers work was studied and popularised in the West by the book “The
Machine that Changed the World, a study of Japanese car makers by Professors James Womack and
Daniel Jones of Massachusetts Institute of Technology (MIT) (Professor Jones is based in the UK and

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change. Companies and organizations employing these Lean tools report significant gains in
productivity and overall effectiveness within their specific entities.
Lean Manufacturing “uses less of everything compared with mass production – less human effort in the
factory, less manufacturing floor space, less investment in tools, less engineering hours to develop a
new product in much less time. Also it requires keeping far less inventory on site (and) results in …
fewer defects …” This is accomplished through: Teamwork, Communication, and Efficient Use of
Resources & Continuous Improvement.
In 2004, Jeffery K Liker, in his book The Toyota Way expands upon the basic principles of Lean
Manufacturing. He seeks to empower companies to achieve results closer to those achieved by
Toyota. Liker extends on Jones and Womack’s five step process to postulate fourteen principles of the
Toyota Way. He attributes Toyota’s success to the pursuit of the following fourteen principles:
Long-term philosophy
1. Base your management decisions on a long-term philosophy, even at the expense of short-term
financial goals.
The right process will produce the right results
2. Create continuous process flow to bring problems to the surface.
3. Use the "pull" system to avoid overproduction.
4. Level out the workload (heijunka). (Work like the tortoise, not the hare).
5. Build a culture of stopping to fix problems, to get quality right from the first.
6. Standardized tasks are the foundation for continuous improvement and employee empowerment.
7. Use visual control so no problems are hidden.
8. Use only reliable, thoroughly tested technology that serves your people and processes.
Add value to the organization by developing your people and partners
9. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.
10. Develop exceptional people and teams who follow your company's philosophy.

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Chapter 2: Why do Lean implementations fail?
In the previous chapter, I covered the origins of Lean and what Lean Thinking is. Many organisations
which start to implement Lean gain hugely in the initial stages and slowly the efforts die off and so the
Lean implementations fail to last. This chapter looks at the reasons and what can be done to avoid such
failures.
Lean works. Lean is right. Lean is good. Lean consistently proves its worth through continuous,
stepwise gains for companies brave enough to take on the challenge of looking within them to correct
deep founded issues with their status quo and historical patterns of behaviours. So, why doesn’t Lean
help every company that implements it?
Recent publication of The Role of Change Leadership in an Operations Excellence Transformation
Model reaffirms that the traditional Lean paradigm results in nearly two-thirds of the implementations
ending in failure while only 16.67% of those implemented have sustained results - though for less than
twelve months.
With all the Lean techniques being utilized, why have so many failed in this vital strategic endeavor?
The answer is the overlooked but critical aspect that Lean requires a completely different set of
expectations, norms, practices; a new approach in day to day and hour to hour behaviors.
It has been over 20 years since the Lean evolution took root in the U.S. Many companies have
implemented some of the principles of Lean like “5S” or “SMED – Single Minute Exchange of Dies” or
“Just in Time Inventory” or “Pull” systems. But according to Jeffery K. Liker, in his 2004 book The Toyota
Way: 14 Management Principles from the World’s Greatest Manufacturer, almost no American business
has realized the potential of following the Lean principles of the Toyota Way. Many have attempted to
replicate Toyota’s success but none have matched the dramatic improvements achieved by Toyota. Why
is it that with so much good writing and so many Lean implementations that so few American companies
have fully realized the benefits of the Lean revolution?

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Many organisations work on the principle “if it ain’t broken, don’t fix it” and that means they are
working in a totally reactive environment which is fully opposite in becoming operationally
excellent, which involves proactive approach to running a business.
3. Lack of commitment and involvement of the senior management
In a number of Lean implementations, there is commitment from the top with respect to
approving the investment and some time commitments, but tend not to get involved in the actual
implementation. This can be seen as the new way of doing things being applicable to only
operational / shop floor staff and not for the top management. The management must lead by
example to make the implementation a success by developing a team culture.
4. Lack of leadership and buy-in from the middle management
It is highly important to get the entire leadership team on board before implementing Lean as this
will have a “make” or “break” impact on the Lean implementation. If the buy-in lacks, the
implementation doesn’t go far enough.
5. Lack of clear understanding of what it takes to achieve Operational Excellence
Achieving Operational Excellence is difficult, but not impossible. It takes a lot of coordinated
effort from all the employees from MD/CEO down to operators. There will a lot of time
commitment initially to achieve certain standard and thereafter sustaining the gains.
6. Treating Lean as a set of tools rather than a business philosophy
As discussed in Chapter 1, Lean thinking is a business philosophy and the tools are only
enablers
7. Creating islands of excellence by deploying best-class practices in certain parts of the
business
Many organisations use Kaizen events to improve their operations. While Kaizen events are
good to improve certain aspects of a business rapidly, they tend to overlook the continuous
improvement culture required for Operational Excellence. Organisations need to use Kaizen
events which offer high-impact results only when necessary rather than running them at monthly
or bi-monthly intervals and nothing in between. Continuous improvement is not a “once a month”
type of activity and should be in built into every employee work routine to identify waste and
improve the products and processes on a continual basis.

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Chapter 3: Managing change
Change is Inevitable!
An old Chinese Proverb states: “You can’t do today’s job with yesterday’s methods and be in business
tomorrow”.
When the circumstances change we need a different model and in our modern world of high-speed
communication and data interchange, shareholder demands, competitive pressures and an increasingly
knowledgeable and value orientated customer, the circumstances are changing all the time.
There are few things that we can be certain about in business or indeed any other environment, but one
of them is that things will change.
“Change is our only certainty”
We should expect to see new products and services, new technology offering radically new solutions,
new customers, new suppliers, new competitors, new channels of distribution; new everything.
We all hate change!
The result of all this change is that the solutions that were the most effective yesterday may not be the
most effective solutions for today and certainly will not be for tomorrow.
Intellectually this makes sense but the reality is that most of us find it difficult to accept the truth. Most of
us want to hang on to cherished views, opinions, attitudes and paradigms. We do not want to replace
favourite products or change well understood techniques. We accept that change is happening in
general but we don’t want to accept the particular consequences.

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A change in employee attitude IS possible!
The main components of the change implementation process are:
· An explanation of why we are doing it
· Win hearts and minds
· Sell the benefits
· A summary of the expected results compared to the current results (Focus on the process not the
people)
· Explain how it works - A summary of the new processes and components
· A detailed discussion about how the new process should be used
· An example of each of the tools that will be used
· A training process to teach the new process and skills if necessary
· A measurement and follow up process
· Offer constant support from all levels – maintain the momentum
Explain how Lean works
So the next step is to explain the ‘what’. Once again it’s a matter of how you tell it. No one wants to
hear that another person or another group is smarter. Therefore we do not want to present the Best
Practice model as John’s or Jane’s or head office driven. In fact we want it to belong to everyone
rather than be associated with any one group. And we certainly do not want it to be presented as the
“consultants’ solution”!
If we can present the comparative results between the Best Practice approach and the traditional
approach, it is better not to attribute the results to any one person or team but rather to present them
as ‘the results’. It is generally helpful to convince everyone that the new model offers a superior
approach if possible.

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Assuming that all goes well then following the test phase, the model would be rolled out across the
whole organisation, using the superior results gained from the test.
Change Management Matrix
According to Phil Harding, Head of Sustainable Business, Government Office for the South West,
2004. © Government Office for the South West, change management has 4 phases and 4 levels as
described below.
“Plot in each column where the organisation stands and then try to make progress by moving down the
matrix in a straight horizontal line, targeting the weaker areas first”.
Awareness > Interest > Desire > Action
Level Pressure for
change
Clear shared
vision
Capacity
(resources)
Action (and
performance)
0
No explicit policy
‘Business as usual’,
no forward planning
Lack of consistent
leadership &
responsibility (buck-
passing)
De-motivated staff
kept in the dark
No communication.
General mistrust
No investment.
High stress levels
in over-worked and
under-valued staff
No training &
development
Zero action
(or limited to crisis
management)
1
Board level
“champion”
appointed
Drafting of policy
Key and supportive
staff identified for
assisting in drafting
policy, taking action,
and driving the
process
“Champion”
appointed at middle
management level
(to support the
Board’s
“Champion”).
Training &
development needs
assessment
Commencement of
action at some
levels of the
organisation.
Some ‘no-cost’
measures
implemented
2
Policy agreed and
communicated to all
staff
Representatives from
all levels of
management chain
involved in planning
process and drawing
up action plan(s)
All staff given
opportunity to make
an input
Key staff working
on plans and
projects.
Staffing and
funding needs
identified and
resources
becoming available
Wider engagement
across the
organisation
‘Low-cost’ and
more ‘no-cost’
measures
implemented
3
Policy and action
plan in place
Regular reviews
Active commitment
from top
management
High level of
awareness and
support at all levels
Staff highly motivated
Resources (staff
and funding)
routinely committed
Cost savings re-
invested for further
improvements
Action being taken
and embedded
throughout the
organisation
Monitoring and
reporting of
progress
“Businesses are nothing more or less than organisations of people trying to get to a jointly
defined future” – Professor Howard H Stevenson, Harvard Business School.

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Having the above two pillars (Organisation and People) established, the businesses can move on to the
3
rd
pillar, Process Management, using tools such as Value Chain Management, Total Quality
Management (TQM), Performance Management and others.
Another approach is to use the Process Management pillar to develop people. Let us examine what this
Process Management pillar is all about.
The Process Management deals with the following aspects:
1. Customer First attitude (Customers want the best possible product at the lowest cost and as soon
as possible. If the customer is not satisfied, nothing else matters)
2. Building Quality at Source (There is an increase in Quality when team members learn to identify
and eliminate waste. Eliminating waste consists of preventing defects which will improve quality. It is
important to realize that quality should be “built-in” at each process which is known as Jidoka).
3. Just-in-Time (Getting the right things to the right place, in the right quantities, at the right time)
That leads us to the goal of Operational Excellence, which is …
“Getting the right things to the right place, in the right quantities, at the right time and at the
desired quality, the 1st time, while minimizing waste and being open to embrace change.”
It is very easy to say we need all these. But, how can we achieve it? Some of the popular concepts and
tools which businesses can use are:
· Lean – The core idea is to maximize customer value while minimizing waste. Simply, Lean means
creating more value for customers with fewer resources. A Lean organization understands customer
value and focuses its key processes to continuously increase it. The ultimate goal is to provide
perfect value to the customer through a perfect value creation process that has zero waste.
To accomplish this, Lean thinking changes the focus of management from optimizing separate
technologies, assets, and vertical departments to optimizing the flow of products and services

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Chapter 5: Malcolm Baldrige Criteria for Performance Excellence
Source: Baldrige website, www.baldrige.nist.govt
The Baldrige criteria represent a continuous improvement framework that is focused on the customer,
led by management, based on facts and data, and directed toward results. The framework:
· Defines what constitutes quality and performance excellence.
· Projects clear values.
· Measures both qualitative and quantitative aspects of performance and quality management
systems.
· Is compatible with different approaches and systems.
· Applies to any organization of any size and kind that provides a product or service to a
customer or user.
· Together with the scoring guidelines, forms a diagnostic assessment system comprising three
basic elements
Baldrige Core Values
The Baldrige criteria rest on a foundation of core values and concepts that define how key business
requirements are integrated within a results-oriented framework.
· Customer-driven quality. Quality is defined and judged by the customer, and must therefore
account for all product and service features and characteristics that contribute value to
customers.
· Leadership. Senior leaders set directions and create a customer orientation, clear
stakeholder-driven values, and high expectations.
· Continuous improvement and learning. Performance excellence requires that continuous
improvement and learning be a regular part of daily work, seek to eliminate problems at their
source, and be driven by opportunities to do better.

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Chapter 6: Assessing your readiness to implement Lean
Lean, Six Sigma, the Toyota Production System and other best-class practices, all have tremendous
power and potential to improve a company's operations. They can fix many problems quickly.
Unfortunately because of this many people tend to think of them as “quick-fix” solution. In reality to be
truly effective you have to adopt these concepts as a way of life. It is not just a tool for fixing
manufacturing problems. It’s the way we do business – from the way we manufacture, to the way we
purchase our materials, to the way we handle sales and even to the way we do our back office
operations. It is only when we buy into this at the emotional level will we be able to be relentless in
our use of it. And being relentless is the key.
The following is from the book “Lean Six Sigma That Works” by Bill Carreira and Bill Trudell: “It's not
even about continuous improvement, It is about relentless improvement. To be truly successful in
applying or implementing Lean Six Sigma, you and your organization have to have the mindset of
relentless improvement. This means a never-ending stream of efforts to drive improvement into your
organization, product or service quality, and profitability."
Jon Miller in his blog on Gemba Panta Rei states, "It's not what's in the factory, it's what's in the minds
of people. It's a will to make things better. It's a will to personally make things better. It's a will to make
things better that is absolutely relentless [emphasis added] and determined. It's a will to improve
quality, customer service, safety, the work environment, cost no matter how challenging."
The rest of this chapter is from an article written by By James Cavalluzzi, President of
Consolute, LLC and reproduced here with his permission
“As we are deeply entrenched in the Lean era, most small to medium businesses are of the same
mindset. Just as we saw company after company abandon the ISO certification process or Quality
Circles because it was too time consuming, costly and wasn’t bringing those throngs of customers to
our doorsteps, so too are many companies abandoning, or in many cases, taking only a random or
unsystematic approach to this concept.

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Once you have a complete and concise understanding of what is truly involved you can determine
reasonable time frames, budget resources accordingly, assign the appropriate personnel, and develop
acceptable expectations. Break the processes down into smaller, more manageable tasks that can be
scheduled into reasonable time frames. Commit to addressing these tasks on a regular basis. And
most importantly, understand that it is going to take time.
Take advantage of the projects you’ve identified to groom your employees, set long and short term
goals, involve your entire organization and truly promote that team approach we all claim to practice.
As goals are met, publish your success and reward the participants.
Taking small steps in the early stages has several key advantages. This allows for small successes to
be realized which foster a sense of worth in those involved as it provides a means of gaining
experience and confidence to take you to the next level. Smaller projects take less time, tie up
significantly less capital, and still provide the ability to handle your day to day business. These smaller
projects facilitate two major advantages which are often overlooked. First they generate savings that
can be used to offset current losses in poor productivity and inaccurate estimates which can defer the
costs of overtime, additional equipment and customer dissatisfaction. And secondly, they provide a
means to identify and finance your future projects.
Adaptation
No matter how accomplished you become in the short term, continued long term success can only be
achieved by the realization that the system, complete with all its procedures, documentation and
controls is a living entity and it must be allowed to grow and adapt. If you think you will get it right the
first time, every time, you are destined to fail. As you improve your processes you will inevitably
become aware of opportunities that were previously unseen. Changes in company direction or market
demands will move you into new territories and you will need to adapt quickly. If something doesn’t
work as well as it should, change it. Don’t be afraid to admit your shortcomings. Audit your systems,
evaluate your controls, assess your needs, and when warranted, adapt your system so it serves your
purpose.

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employees to take on more of a management role than a labourer attitude, to mentor and train your
new recruits, and to apply their experience in finding and minimizing defects in the system.
Nothing will stop a person dead in their tracks and send them packing more quickly than the thought
that their hard work was taken for granted. So make sure the raises you give out are commensurate
with the employees’ worth. Increase your perks and benefits; sick days, flex time, education, team
building activities. Promote from within. Make it a given that when a person embraces the
responsibilities imposed upon them, the experience gained has value and that as the company grows
so will its’ employees. Why would you take a chance hiring an unknown when a perfectly capable
leader is already on the premises? It is important to keep this in mind when setting employee goals
and determining what training you will provide. Make a commitment to grow your employees just as
you have committed to growing your business.
Spend some of that money on improving your equipment. Get that newer, faster, more accurate
equipment on the floor; it will increase throughput and productivity, keep you on the leading edge of
technology, and open new doors to capabilities and customers you didn’t have before. Purchase
software to reduce the documentation burden, improve the look and conditions of your facility, and hire
a higher calibre of employee.
And don’t forget about your customers. Passing a significant amount of your savings on to the
customer will pay back exponentially. By reducing your costs you demonstrate a commitment to
improvement and cost control, you also lend credibility to your organization much more than you might
think. When everyone else is raising prices and tacking on surcharges, if you can hold, or better yet,
reduce prices, who are your customers going to deal with? You’ll not only retain the customers you
already have, but you’ll attract new ones looking to increase their own bottom line. Additionally, when
you inevitably underestimate that one quote, you’ll stand a better chance of having your customer
accept an adjustment. If you can demonstrate time after time that you are reducing your pricing, when
the time comes that you need to raise one, your customers will be much more willing to accept it and
still feel confident that overall, they are still getting the best value out there.

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22. Expand Lean initiatives beyond the shop floor to office processes
23. Introduce a Throughput Accounting system
24. Make performance measures transparent.
25. Right-size your tools, such as production equipment and information systems.
26. Complete the Transformation by extending Lean beyond the 4 walls of your organisation
27. Convince your suppliers and customers to take the steps just described.
28. Convert from top-down leadership to bottom-up initiatives.
Note: The above steps will be covered in the next chapters in detail.

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Constancy of purpose means that quality decisions are not situational. End of month quality is the
same as beginning of month. It means that the long term benefit of the organization is not sacrificed to
hit quarterly targets. It means having your eye on the competition, whether it is in your industry or
coming from elsewhere, with plans to stay ahead. Constancy of purpose doesn't require the threat of a
customer leaving to implement corrective actions based on root cause. It means that while your team
may argue about how best to accomplish it, no one is confused about the commitment to deliver
reliable quality.
Constancy of purpose can only exist when leadership lives it, demonstrates it, and won't accept
anything else. Do your employees, suppliers, and customers see constancy of purpose in you?
Lean Thinking is an interlocking set of three underlying elements: the philosophical underpinnings, the
managerial culture and the technical tools. The philosophical underpinnings include a joint shop-floor,
customer-first focus, an emphasis on people first, a commitment to continuous improvement or kaizen,
and a belief that harmony with the environment is of critical importance. The managerial culture for
Lean is rooted in several factors, including developing and sustaining a sense of trust, a commitment
to involving those affected by first, teamwork, equal and fair treatment for all, and finally, fact-based
decision making and long-term thinking.
Summary:
1. The human dimension is the single most important element for success. Management has no more
critical role than motivating and engaging large numbers of people to work together toward a common
goal. Defining and explaining what that goal is, sharing a path to achieving it, motivating people to take
the journey with them, and assisting them by removing obstacles - these are management's reason for
being.
2. The greatest challenge would be "to lead the organization as if one had no power." In other words,
shape the organization not through the power of will or dictate, but rather through example, through
coaching and through understanding and helping others to achieve their goals. This is the role of
management in a healthy, thriving, work environment.

49
beliefs and whilst values and beliefs are different, they are inextricably linked and their relationship to
each other is worth looking at.
Values are always a consequence of our underlying beliefs. A value can be considered to be a cluster
of beliefs about a specific concept. For example, the value of ‘honesty’ is simply a title or name we give
to a collection of beliefs we hold about the importance or preference we have for being honest; beliefs
such as: ‘it always pays to be honest’ or ‘honesty will set you free’ or ‘people only trust you when
you’re consistently honest.’
Values are constantly at work. Wherever human beings are acting, thinking, evaluating, deciding*,
communicating, planning, serving, counting, or aspiring, values are at work. Values guide behaviour
and thinking and provide focus and a sense of direction. They indicate what is most important to
individuals, groups and organisations, and form the basis of any group or organisational culture. When
a collection of people come together in an organisation the range of values and associated beliefs
operating can vary enormously and lead to an extremely complex social system or culture. The ability
for any culture to function effectively is predetermined by the degree to which there is a consistent and
aligned set of values that form the social and intellectual framework of the group or organisation.
A group’s or organisation’s culture is a result of the values at work within the group or organisation,
enabling values to be seen as the DNA of an organisation’s culture. Just like DNA, values provide
clues to understanding the larger and more tangible aspects of human beings’ social, productive and
creative interaction.
Examples of values:
1. Integrity
2. Honesty
3. Committed
4. Team(s)
5. Flexibility

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1. Rate your satisfaction if the product has this attribute? and
2. Rate your satisfaction if the product did not have this attribute?
Customers should be asked to answer with one of the following responses:
A) Satisfied;
B) Neutral (It’s normally that way);
C) Dissatisfied;
D) Don’t care.
Basic attributes generally receive the “Neutral” response to Question 1 and the “Dissatisfied” response
to Question 2. Exclusion of these attributes in the product has the potential to severely impact the
success of the product in the marketplace.
Eliminate or include performance or excitement attributes that their presence or absence respectively
lead to customer dissatisfaction. This often requires a trade-off analysis against cost. As Customers
frequently rate most attributes or functionality as important, asking the question “How much extra
would you be willing to pay for this attribute or more of this attribute?” will aid in trade-off decisions,
especially for performance attributes. Prioritisation matrices can be useful in determining which
excitement attributes would provide the greatest returns on Customer satisfaction.
Consideration should be given to attributes receiving a “Don’t care” response as they will not increase
customer satisfaction nor motivate the customer to pay an increased price for the product. However,
do not immediately dismiss these attributes if they play a critical role to the product functionality or are
necessary for other reasons than to satisfy the customer.
The information obtained from the Kano Model Analysis, specifically regarding performance and
excitement attributes, provides valuable input for the Quality Function Deployment process.

55
· Value-Stream Mapping
· Continuous Improvement
· Elimination of waste everywhere, including
o Defects
o Over Production
o Waiting
o Transportation
o Inventory
o Motion
o Excessive Processing
Though Lean concepts have come from the automobile industry, they have been applied successfully in
a number of industry sectors including, Aerospace, Military, Healthcare, Job shops, Manufacturing,
Accounting and more recently in Education.
One way of defining Lean is producing value (a product or a service) with less of everything (inventory,
human effort, equipment and tools, plant floor, design and development, total cost etc) to maximize the
profit, while delivering a product of highest quality when the customer needs it in the quantity needed.
The focus then is on seeing and eliminating the waste from all the aspects of the job. It means a
commitment to minimize the total cost (a waste-free operation) while offering a product or service that is
focused on your customer's success.
To achieve the lowest cost you will have to simplify and improve continually all the processes and
relationships in an environment of trust, respect and full employee involvement.
Toyota Production System House

58
(maintenance which is done periodically) and Autonomous Maintenance (uses the operators to do some
basic maintenance activities such as greasing, oiling etc). TPM is a necessary condition to increase the
life expectancy of machines. OEE (Overall Equipment Effectiveness) is a tool used in TPM and is a
factor of availability, performance and quality.
Standardised Work is used as a means of doing work consistently to reduce the variability in the
processes. Standard Operating Procedures and Visual procedures form part of this.
Plant Layout – Having a proper layout of plant and equipment, such as manufacturing cells is a
necessary condition to minimise the 7 deadly wastes on the shop floor.
Load Levelling (or Heijunka, in Japanese) is a methodology used to level the production there by being
able to produce small batches every day or week.
Continuous Improvement (or Kaizen, in Japanese) is methodology used to make small changes over a
long period of time to get maximum advantage from the idea generation. This methodology is used to
improve every aspect of the business. Also, PDCA (Plan-Do-Check-Act) which is also known as
Deming’s Wheel is used extensively as part of the Kaizen approach. Kaizen has 2 parts to it. Kai means
taking it apart and Zen means making it better or seen as a whole, Kaizen means change for the better.
Kaizen approach is fundamental to changing the culture of an organisation.
Just-in-Time (JIT) is a philosophy of producing what’s needed, when it is needed and in the right
quantities. It has four components to it, Takt Time, Flow, Pull and SMED. Takt is a German word,
meaning Target and is used to synchronise the pace of sales with pace of production. Flow is the term
used to denote smooth flow of material between the processes without the build up of inventory or WIP,
and without any bottlenecks. Pull is used as a methodology to produce only what has been consumed
by the downstream activity. Customer requirement signals the need for production and every
downstream activity is treated as a customer of upstream process. The end result is nil or minimal
inventory of both finished goods and work in process. Remember Inventory consumes cash resources
and may not add any value (Waste) and some industries have the issue of materials potentially

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All of these are taken into consideration, and then the corrective action that is supposed to bring the
process to within Six Sigma of the target value is implemented, or in other words, the process is
improved. Over time, the process is conducted with the corrective action in place, and the parameter,
once again, is measured.
This measurement is plotted, just as it was prior to the corrective action implementation, and the
corrective action is analyzed for its effectiveness. The team then discusses what actions can be
implemented to ensure the quality improvements are maintained and the progress is not lost by a lack
of control over the corrective action.
The beauty of Six Sigma is that it can be used in any application, in any business, at any time. As
stated before, there are plenty of documented case studies that show how Six Sigma can be
effectively used inside of everything from sales and marketing to very complex manufacturing
procedures. With the proper training and teams in place, the sky is the limit with regards to the amount
of improvement an organization can realize by implementing the Six Sigma infrastructure.
As can be seen in the above Figure, there are five basic steps to completing a Six Sigma project. The
first is “Define”, in which the parameter that will be the focus of the project is identified. Additionally, the
impact to the bottom line of the business is discussed and the potential savings is measured. It is at
this point the organisation will decide whether or not to pursue further action in the improvement of the
parameter, and whether the time and funding spent toward the improvement will pay off in the end.
Next, the parameter is measured in the “Measure” phase. Statistic relevance is taken into
consideration as well as other sources of variation such as gauge error. It is determined how well the
Define Measure Analyze Improve Control

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Chapter 11c: Theory of Constraints
Theory of Constraints (TOC) is an overall management philosophy. Dr. Eliyahu M. Goldratt introduced
the Theory of constraints in his 1984 book titled The Goal. It is based on the application of scientific
principles and logic reasoning to guide human-based organizations. The publicity and leadership
behind these ideas has been dominated by Dr. Goldratt through a series of books, seminars and
workshops.
TOC is geared to help organizations continually achieve their goals. TOC is based on a set of basic
principles (axioms), a few simple processes (Strategic Questions, Focusing Steps, Buy-In processes,
Effect-Cause-Effect), logic tools (The Thinking Processes or TP) and through the logical derivation of
these some applications to specific fields (Operations, Finance, Distribution, Project Management,
People Management, Strategy, Sales and Marketing).
According to TOC, every organization has at any given point in time, at least one constraint which
limits the system's performance relative to its goal. These constraints can be broadly classified as an
internal constraint, policy constraint or a market constraint. In order to manage the performance of the
system, the constraint must be identified and managed correctly (according to the Five Focusing Steps
below). Over time the constraint may change (e.g., because the previous constraint was managed
successfully, or because of a changing environment) and a new analysis starts.
The critical question to ask is: how do constraints affect our performance? A constraint is a bottleneck,
delay or a barrier to our full potential. The more we can reduce the barriers (constraints) to our
performance, the closer we can come to realizing our full potential.
Performance = Full Potential – Constraints
To find the constraints we need to look for the things that are holding us back. This is a lot easier than
it sounds. Ask anyone in production what is holding up the delivery of an order and you will get an

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Example: The system’s conditions change when constraints are broken violating old rules, or policies.
Solution: Review the system’s components again including existing policies. Policy constraints
typically have the greatest effect on limiting system performance.
Note: The TOC concepts can be used in association with Lean.

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TQM organizations use the techniques of process management to develop cost-controlled processes
that are stable and capable of meeting customer expectations.
TQM organizations also understand that exceptional performance today may be unacceptable
performance in the future so they use the concepts of process improvement to achieve both
breakthrough gains and incremental continuous improvement. Process improvement is even applied to
the TQM system itself!
The final element of the TQM model is total participation. TQM organizations understand that all work
is performed through people. This begins with leadership. In TQM organizations, top management
takes personal responsibility for implementing, nurturing, and refining all TQM activities. They make
sure people are properly trained, capable, and actively participate in achieving organizational success.
Management and employees work together to create an empowered environment where people are
valued.
All of the TQM elements work together to achieve the desired results…

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· Start with your own performance rather than someone else’s ineptitude
· Understand problems before debating solutions
· Teach rather than solve problems yourself
· Using brains rather than just using hands
Leaders need to be mindful of their role in creating culture change. Here are seven ways to initiate this
evolution and learn respect and humility, day by day:
1. Really Listen. Look at people when they talk. Give them your undivided attention. Ask follow-
on questions during the conversation.
2. Don't waste time. If you keep employees or customers waiting you are saying to them "your
time is not as important as mine"
3. Go to the Gemba. Go see for yourself at the place the work is done. If you allow a worker to
use a machine that produces defects, you are in effect telling the worker their work does not
matter.
4. Develop people. Encourage learning, teamwork and continuous improvement. Build
knowledge in problem solving thinking and countermeasures.
5. Acknowledge the accomplishments of others. If things go well, give away the credit. If things
go poorly, take the fall. This humble approach will ensure your team rallies behind you.
6. Temper authority. Don't use authority just because you have it. Encourage your people to make
decisions, set their own goals, and take responsibility as often as possible.
7. Promote others often. Grooming talent is good for your organization and for you as a leader.
Promote people around you, giving them opportunities to match or even surpass your success.
Achieving a Lean culture with humility and respect requires constant demonstration over a long period
of time. Remember the shop floor is a reflection of management. You can't listen and learn if you
don't go to the Gemba.

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· Encourage coaching and mentoring of the teams and team members
· Explore the role that attitudes play in promoting respectful workplaces
· Encourage team based self directed improvements requiring cooperation and communication
throughout the organization
· Promote respect for both self and others as a foundational value
· Developing a culture that respects people will provide the necessary foundation and will
accelerate your lean transition.

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You will have the ability to prioritize Lean Manufacturing issues and provide for a plan on which to
base future resource commitment.
You will have a Lean Manufacturing direction upon which to continually reduce costs.
Who Should Conduct the Assessment?
A variety of methods are available for conducting the assessment:
1. An internal team of employees can review work areas and score the assessment in approximately
four hours.
2. The Lean manufacturing champion or plant manager can conduct the assessment and review it with
key stakeholders.
3. An outside Lean Manufacturing improvement consultant can do the assessment and review it with
the appropriate management team or stakeholders.
This method provides the most unbiased score on which to base future resource allocations.
Whichever method is chosen, the person or team must have a thorough knowledge of Lean
Manufacturing practices and processes. If multiple work areas in an organization are conducting an
assessment, involving a Lean Manufacturing champion or plant manager reduces variations in the final
tally and provides a more consistent approach to the scoring. Remember, this assessment can be
completed for an entire facility, a focused factory, or a specific area or value stream within the
organization.

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Chapter 15: Value Stream Mapping
Value Stream Mapping or in short VSM is one of the most important concepts of Lean Manufacturing
which helps businesses in identifying the waste(s) thereby identifying opportunities for improvement
and make plans to improve the flow by eliminating waste and hence reducing total lead time.
So, what is VSM? It consists of mapping all activities or process steps involved in both material flow
and information flow and analysing all steps and identifying the wastes associated. At the bottom of the
VSM, a value adding analysis is done to calculate the % of value added activities. It will be surprising
to see that, most businesses will have a value adding % of below 5. Obviously there are some
exceptions depending on the industry you are in. The challenge is to eliminate or minimise as much of
waste or non-value adding steps so that the % of value addition goes up and this we call as
productivity improvement, as the efforts which were wasted earlier will be used for adding value. This
process can be applied to any process, including manufacturing, supply chain or services.

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Future state:
Now draw a future state map, which will be an ideal state (for now) without the constraints you have
identified and after the improvements have been made.
Once you have drawn the future state VSM, develop an annual implementation plan to fix the issues,
form teams to work on various projects and implement them.

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Productivity (P) = Throughput / Operating expense = T/OE
Investment turns (IT) = Throughput / Investment = T/I
Managers intent on maximizing throughput can employ TOC's five focusing steps which allow them to
move the firm toward the achievement of the goal. The five steps are as follows, which were discussed
in Chapter 11c on pages 65 and 66:
1. Identify the system's constraints.
2. Exploit the system's constraints.
3. Subordinate everything else to the decision made.
4. Elevate the system's constraints.
5. Restart the process if a constraint has been broken.

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Balanced Metrics
FINANCIAL CUSTOMER
1. Net Profit (NP) = Throughput - Operating
Expense = T-OE
2. Return on Investment (ROI) = Net profit /
Investment = NP/I
3. Productivity (P) = Throughput / Operating
expense = T/OE
4. Investment turns (IT) = Throughput /
Investment = T/I
5. Cost of Quality
6. % Sales from New Products
7. % Sales from Proprietary Products
8. % Earnings Growth
1. Customer Retention
2. Customer Value Perception
3. Customer Satisfaction
4. Customer Complaints
5. % Market Share
6. Brand Recognition
7. Brand Management
8. Flawless Execution Index
BUSINESS PROCESSES LEARNING & GROWTH
1. First Pass Yield
2. Waste / Scrap
3. Rework / Returns
4. Delivery On Time
5. Inventory Turns
5. $ in Sales per Employee
6. $ in Profit per Employee
7. New Product Introduction v. Competitors
8. Time to Develop Next-Gen Products
1. Employee Satisfaction
2. Employee Retention
3. Employee Productivity
4. Published Successful Suggestions
5. Benefits Achieved Through Suggestions
6. Safety (lost Time due to Accidents)
7. Openness of Communication
8. Training Hours per Employee

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Chapter 18: Value and Waste
(Waste Elimination is the Central Theme of Lean)
Are you aware that 95% of all the activities undertaken by traditional manufacturing businesses do not
add any value OR in other words a waste??? Waste elimination is the central theme of Lean
manufacturing. So, what is waste? Waste is defined as anything that does NOT add value from a
customer perspective or the customer is not prepared to pay for.
If we carefully analyse all the activities of a business, we can categorise them in to 3 types, Value-
Adding activities (VA), i.e., which directly add value to a product or service, Non-Value Adding but
Required (NVA-R), i.e., the activities do not directly contribute towards a product or service, but have
to be undertaken for legal requirements or to comply with certain regulatory bodies etc and those
which do not add any value at all, or Non-Value Adding activities (NVA) or in other words, “muda”,
the Japanese term for Waste.
Taiichi Ohno was the Toyota executive largely responsible for structuring and implementing the system
over four decades after World War II, known today as the Toyota Production System and it was
Taiicho Ohno who proposed the 7 deadly wastes in production. The eighth waste, Non-Effective use of
Staff Talents was added later.

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Storage. Examples include, looking/searching for tools and information, bending, reaching, double
handling, walking etc.
Motion leads to improper utilisation of productive time, health & safety issues thereby operators
becoming the victim.
Solutions: Introduction of work-cells, shadow boards etc.
8. Excessive Processing - Doing more than required which doesn’t add value from a customer
perspective. Examples include more steps than required, Excessive paper work, Lack of clear
communication, Lack of Standard Operating Procedures, Lack of understanding of what customer
needs are etc.
Excessive Processing leads to Unnecessary $$$, Discourages operator ownership, Leads to
running machine as often as possible rather than only when needed, Encourages general purpose
machines that may not be ideal for the need at hand, Poor layout (extra transportation, poor
communication), Inevitable defects because machines and processes are not quality capable.
Examples include, Variation between operators, Variation from standard, Having to use a “fast”
machine shared between several lines
Solutions: Think “small is beautiful”. Smaller machines avoid bottlenecks, improve flow, can be
maintained at different times, and may improve cash flow and keep up with technology. Also
challenge every step, activity and process to ascertain the need to have it and if everyone agrees
that, it is superfluous eliminate it without compromising quality.
Summary – It is hard to see these wastes for staff who have been working in
organisations for a number of years. Therefore it is essential that, every employee of the business
undergoes formal training in these eight wastes, so that everyone keeps an eye out for the wastes in
whatever they do. The easiest way to remember the 8 wastes is to join the first letters to get
DOWNTIME, which represents unproductive time. The trick lies in learning to see the waste(s) so
that these can be eliminated.

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understand why it is important to exercise discipline over your own actions for the long term and
sociological benefit to yourself and others.
An organization has to be consistent and persistent in the application of 5S or it will not work because
the employees develop the attitude that it is just another fade that will go away. However, when done
properly 5S becomes the bases for the implementation of all the other “Lean” tools.
b) Visual Displays communicate important information but does not control what people or machines
do. Displays help avoid confusion, mix-ups and speeds up activity; for example,
1. Coloured lights or what are known as Andon lights at each machine/process indicate status: material
shortage, running, breakdown, etc
2. Every part always stored in the same identified location
3. Separate locations for good parts and defective parts
4. Machines, cells, departments marked with painted lines and identified
5. Every control, adjustment, displayed labelled
6. Attendance and Skill Versatility Chart
c) Visual Controls communicate information so that activities are performed according to standards
and help monitor and control. Some of the examples of visual controls are:
1. Standard Operating Procedures
2. Statistical Control Charts
3. Process Control Specifications
4. Workmanship Standards
5. Control Plans
True Visual Management shares real-time information about the status of the factory:
• What are our goals?
• What are our key measures?
• How is the factory / work area performing in relation to those goals?
• What is preventing us from reaching our goals?
• Most importantly, how does my individual effort contribute toward success?

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prevention and Maintainability Improvement gave birth to Productive maintenance. The aim of
productive maintenance was to maximize plant and equipment effectiveness.
By then Nippon Denso had made quality circles, involving the employees participation. Thus all
employees took part in implementing Productive maintenance. Based on these developments
Nippondenso was awarded the distinguished plant prize for developing and implementing TPM, by the
Japanese Institute of Plant Engineers (JIPE). Thus Nippondenso of the Toyota group became the first
company to obtain the TPM certification.
Why TPM?
TPM was introduced to achieve the following objectives:
• Avoid wastage in a quickly changing economic environment.
• Producing goods without reducing product quality.
• Reduce cost.
• Produce a small batch quantity at the earliest possible time.
• Goods sent to the customers must be non-defective.
Similarities and differences between TQM and TPM:
The TPM program closely resembles the popular Total Quality Management (TQM) program.
Many of the tools such as employee empowerment, benchmarking, documentation, etc. used in
TQM are used to implement and optimize TPM. Following are the similarities between the two.
Total commitment to the program by upper level management is required in both
Employees must be empowered to initiate corrective action, and
A long-range outlook must be accepted as TPM may take a year or more to implement and is an on-
going process. Changes in employee mind-set toward their job responsibilities must take place
as well.

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3. Rate of quality output (Defects and rework)
Thus OEE = A x P x Q
A - Availability of the machine. Availability is proportion of time machine is actually available out of
time it should be available.
Availability = (Planned production time - unscheduled downtime)
Planned production time
Production time = Planned production time - Downtime
Gross available hours for production include 365 days per year, 24 hours per day, 7 days per week.
However this is an ideal condition. Planned downtime includes vacation, holidays, and not enough
loads.
Availability losses include equipment failures and changeovers indicating situations when the
line is not running although it is expected to run.
P - Performance Efficiency. The second category of OEE is performance. The formula can be
expressed in this way:
P = Performance (Speed) = (Cycle time x Number of products processed)
Production time
Net production time is the time during which the products are actually produced. Speed losses, small
stops, idling, and empty positions in the line indicate that the line is running, but it is not providing the
quantity it should.
Q - Quality rate, Which is percentage of good parts out of total produced. Sometimes called
"yield". Quality losses refer to the situation when the line is producing, but there are quality losses due
to in-progress production and warm up rejects. We can express a formula for quality like this:
Q = Quality (Yield) = (Number of products processed - Number of products rejected)
(Number of products processed)

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If we aim to produce 20 Pcs a day we have no need to produce an item in every 24th minute. In this
case system may not run smoothly. For an example it might produce 12Pcs in first 7 hours and the
remaining 8Pcs in the last hour (of cause if they have enough capacity). This is not the aim of a Lean
manufacturing system. So you can understand that not only the work, but also the way the work is
carried out is important in Lean manufacturing context.
If we produce a piece of that particular product in 20 minutes what will be the end result. You will either
produce quantities greater than required or you might have an idle time. Over production and waiting
are wastes in Lean manufacturing. Both will lead to higher WIP accumulation and related problems.
The greatest problem of implementing this kind of manufacturing concept is the mentality of the
people. If you tell your finance guys “I worked on takt principle and I produced a part in every 24th
minute, although I could have produced a piece in 20 minutes” I am sure that guy will go mad. Only
very few people understand that we should only produce to the customer demand not extra.
So what are the advantages of sticking to the takt time?
1. It will give you the rhythm in which the system should operate
2. Production is smoothly planned and operations will be carried out without interruptions
3. The system is in synchronization with customer requirement
4. Pull scheduling is enabled
5. No over production
6. No rush hours in work
7. WIP reduced and problems in the system will be revealed
Takt time principle will work very well in cases where the demand can be traced easily. In a system
where there is a fluctuating demand the takt will change continuously on the customer demand.

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A pull system is exactly what it sounds like. The production of a product or system is varied depending
strictly on the demand from the customer or the market, not from forecasts or previous performance.
While most businesses strive to use a pull business model from end user to shop floor, it is rare for this
to happen, as there are usually some aspects of the supply chain that are push systems.
A pull system is one in which the supply chain sends a product through the supply chain because there
is a specific demand for that one product, as opposed to creating inventory and “pushing” the product
out to distributors, wholesalers, vendors, or customers so they have to keep inventory, or worse, the
production company has to keep inventory. A “push” supply chain is the exact opposite: they consist of
many warehouses, retail stores, or other outlets in which large amounts of inventory are kept to satisfy
customer demand on the spot.
As previously mentioned, it is very rare to see a system that is completely run on pull versus push
methodologies. For example, one supply chain may be run on pull methodologies from the distributor
to the customer. When the customer orders a product from the distributor, the distributor turns that
order around immediately and orders that product from the manufacturer. The product is never sitting
on the distributor’s shelves, and the supply chain from the distributor to the customer is strictly a pull
system.

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Kanban is known as the nervous system of Lean production because it manages production just as
our brains and nerves manage our bodies. The primary benefit of the Kanban system is to reduce
overproduction; and its aim is to produce only what is ordered, when it is ordered, and in the quantities
ordered.
Functions of Kanban Rules for use
1. Provides pick-up or transport information Later process picks up the number of items indicated by
the Kanban at the earlier process
2. Provides production information Earlier process produces items in the quantity and
sequence indicated by the Kanban
3. Prevents overproduction and excessive
transport
No items are made or transported without a Kanban
4. Serves as a work order attached to
goods
Always attach a Kanban to the goods
5. Prevents defective products by identifying
the process making the defectives
Defective products are not sent on to the subsequent
process. The result is 100% defect-free goods
6. Reveals existing problems and maintains
inventory control
Reducing the number of Kanban increases their
sensitivity
Kanban and Reordering Point Method:
The Kanban system is based on an inventory management system called reordering point method.
This is a statistical method that allows factories to reorder the same amount of parts / products each
time. When inventory drops to certain level (the reorder point), a new order is made to replace the
used inventory.
Both Kanban system and Reorder Point Methods require that the market demand is stable.
Both are unsuitable for products that have large and unpredictable ups and downs. Even Kanban
cannot prevent shortages or gluts in such cases. Instead the Kanban system minimises waste by using
level production, which averages out the product models and volumes to be produced, and eliminates

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factories using Kanban use the coloured board system (Heijunka Box or Load Levelling Box). This
consists of a board created especially for holding the Kanban cards.
Chapter 21e: Load Levelling
“The slower but consistent tortoise causes less waste and is much more desirable than the speedy
hare that races ahead and then stops occasionally to doze. The Toyota Production System can be
realized only when all the workers become tortoises.
- Taiichi Ohno, 1988
Many companies today are working towards the ultimate Lean goal of continuous or one-piece flow.
They want to be able to make just what the customer wants when they want it. Instead, what we often
see is a “hurry up, then slow down” build-to-order approach. Customers’ orders vary from month to
month, creating uneven production scheduling. Build-to-order companies will be building huge
quantities, paying overtime, and stressing their people and equipment one week, but then sending
them home the next due to light orders. This environment can also create large amounts of inventory,
hidden problems, and poorer quality. What many organizations fail to do is the difficult process of
creating a true balanced Lean workflow. This is the Toyota concept of heijunka, levelling out the work
schedule.
Heijunka is the levelling of production by both volume and product mix. This system does not build
products according to the actual flow of customer orders. Heijunka takes the total volume of orders in a
period and levels them out so the same amount and mix are being made each day. In a true build-to-
order system you build products A and B in the production sequence of customer orders (e.g., A, A, B,
A, B, B, B, A …). This causes you to build product irregularly. If your orders are twice as much on
Monday compared to Tuesday, you end up paying overtime on Monday and sending employees home
on Tuesday. The answer is to build a level schedule everyday by taking the actual customer demand,
determine the pattern of volume and mix, and building your level schedule. If you know you are making

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unloading of tooling and fixtures, getting new tooling, getting tools, loading fixtures, getting materials,
getting paperwork and inspection of the first part. In many cases, this entire process can take place in
less than 10 minutes
Single Minute Exchange of Die = Exchange dies in less than 10 minutes.
SMED is a theory and techniques for performing setup operations in fewer than ten minutes, i.e., in a
number of minutes expressed in a single digit. The SMED method was revolutionized by Mr. Shingo
since 1950 in Japan. The concepts and techniques became available to other countries around 1974
in West Germany and Switzerland and in 1976 in Europe and United States. However, not until 1980s,
the SMED technique got acceptance in companies outside of Japan. Shingo's 1985 book "A
Revolution In Manufacturing: The SMED System" describes the theory and practice of the SMED
system in detail.
SMED was the result of a project that Toyota assigned Shingo to. Toyota realized that they needed to
make more than one model car to succeed. They also realized that multiple car models meant multiple
changeovers of stamping presses. Under this strategy, they could no longer live with 10-12 hour press
changeovers.
Shingo used standard industrial engineering techniques to analyze the changeover. His major
breakthrough was in realizing that the key to reducing changeover time was externalization of as many
tasks as possible. That is, perform as much of changeover as possible with the press still running.
Some examples included:
· Bringing the dies to the press ahead of time
· Assuring that the dies were complete including all fasteners
· Modifying all dies to the same physical size, eliminating setup adjustments
These and other techniques allowed Shingo to reduce the typical press changeover from 10-12 hours
to under 10 minutes.

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Chapter 22: Total Quality Management (TQM)
In chapter 11d we learnt about TQM. Having a Quality Policy, management commitment to quality and
a strategic plan to achieve quality in all aspects is important.
In this chapter we will learn the Lean way of achieving and managing quality. One of the Pillars of
Toyota Production System is Jidoka, meaning “Building Quality at Source”.
Jidoka is a process or technique of detecting and correcting production defects, that always
incorporates the following devices:
· a mechanism to detect abnormalities or defects, and
· a mechanism to stop the line or machine when abnormalities or defects occur
By involving the human mind in jidoka, there are two ways to stop a line. One method involves the
judgment of the line worker and the other is the machine shutting off with its automatic devices.
The first method requires line workers to be empowered to shut down production to address problems.
The tool most commonly used to shut down the line by a line worker is called "andon". An andon
system stops the line and signals to the rest of the shop floor that something is wrong and needs to be
addressed, with the problem then usually being addressed by a team of individuals.
A tool used for shutting machines down as part of the jidoka system is "poka yoke". Poka yoke, or
mistake-proofing, is a practice of ensuring that defects can not occur. Examples of poka yoke can
include things like automatic switches, lasers, jigs, etc. Whenever a defect is detected or whenever the
specified amount of product is produced, a signal is sent to the machine to shut down. This practice
frees up front line staff to be able to manage more than one machine at a time.
An example of jidoka in practice can be found in Toyota. Between processes is a mat like those that
trigger a door to open at a supermarket. The assembly line is moving at a constant rate. If a worker

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requirements, but are seen as having little value to the company. FMEAs are a means to achieving
better quality product and that's why they are now required by OEMs and industry standards in diverse
industries such as automotive, medical device manufacturing, aerospace, electronics and chemical
processing.
Once we know what the failure modes are, we can use problem solving tools & root cause analysis to
find out the root cause of the problem.
Chapter 22b: Problem Solving:
Pareto Chart
In 1906 an Italian economist Vilfredo Pareto simplified the world for us with his 80/20 rule, or what is
known as the Pareto principle. This is most often expressed in a Pareto chart.
Identify the vital few that will give you the biggest impact towards closing the gap between current
condition and target condition, and when that's done, move onto the next tallest bar in the Pareto.
To focus on addressing the root causes of the top 20% factors that are keeping you from hitting the
target, the next step is to dig deeper into the root causes using the Ishikawa Diagram.

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assistance in determining whether the “why” they submit is a true, actual “why” and not a surface level
quick fix.
Example of 5 Why and 1 How approach:
Q1. Why mop the floor every day?
A1. Because oil collects on the floor
Q2. Why does oil collect on the floor every day?
A2. Because there is a leak from the drill press machine.
Q3. Why is there a leak from the drill press machine?
A3. Because oil is leaking from a valve.
Q4. Why is oil leaking from a valve?
A4. Because it’s broken.
Q5. Why hasn’t the valve been replaced?
A5. Because we didn’t notice it was broken.
Q6. How can we coordinate getting the valve fixed?
A6. The maintenance team will order the part and the operator will replace it.
The 5 why technique is a great tool when used in conjunction with other tools, in finding the root cause
of a problem. Like any other tool, it should be wielded by someone who understands how to thoroughly
investigate problems and conduct a solid root cause analysis.
Once you have identified the root causes of your problem, you are ready to implement
countermeasures. For that, you'll need an action plan.
Gantt Chart
Henry Gantt was a management consultant who popularized the project management tool known as
the Gantt Chart some time around 1910.

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term was Baka-Yoke, which means fool proofing. In 1963, a worker at Arakawa Body Company
refused to use baka-yoke mechanisms in her work area, because of the term's dishonourable and
offensive connotation. Hence, the term was changed to Poka-Yoke, which means Error Proofing or
Mistake-Proofing.
Today, we use Shingo's idea in two ways: Mistake-proofing is the term applied to prevent mistakes
from occurring in the manufacturing process, to eliminate the error from further processing, to warn
that the error has occurred etc. We use error-proofing in design to prevent assembly errors. Examples
include adding design features upside-down; backwards or reversed assembly; using snap-together
features to eliminate fasteners (thus eliminating missing fasteners or incorrect, high/low torque etc.).
However, most people use the terms mistake-proofing and error-proofing interchangeably.
In a modern Lean production system, Poka-Yoke is a process improvement designed to prevent a
specific defect from occurring. It prevents personal injury, promotes job safety, eliminates faulty
products, and prevents machine damage.
Poka-Yoke mechanisms mistake-proof an entire process. Ideally, Poka-Yoke will ensure that proper
conditions exist before actually executing a process step, and so prevent defects from occurring in the
first place. Where this is not possible, Poka-Yoke performs a detective function, eliminating defects in
the process as early as possible.
Many people think of Poka-Yoke techniques as the application of limit switches, optical inspection
systems, guide pins, or automatic shutoffs that should be implemented by the engineering department.
This is a very narrow view of Poka-Yoke. Poka-Yoke mechanisms can be electrical, mechanical,
procedural, visual, human, or any other form that prevents incorrect execution of a process step. Poka-
Yoke can also be implemented in areas other than production, such as sales, order entry, purchasing,
or product development, where the cost of mistakes is actually much higher than the cost of mistakes
that occur on the shop floor. The reality is that defect prevention, or defect detection and removal, has
widespread application in most organizations.

136
The two requirements for working in a truly Lean enterprise are 1) follow standard work, and 2) find a
better way. There must be more to it than that, I hear you say, and you are right. For most of us who
lack Standard Work, there certainly is more. First we need to establish the standards. Then we need to
train people to these standards. Then we need to audit and verify that these standards are being
followed.

139
Training Within Industry: The J-Programs
Three training programs, frequently called "J" programs (J stands for "jobs"), comprise Training Within
Industry (TWI), along with a fourth program called Program Development. The three J programs are:
Job Instruction (JI) - JI training teaches supervisors how to instruct the people doing the jobs. This
training includes explaining to workers why their jobs are important; breaking down the job into logical
steps and key points, and teaching the correct method of performing the task; confirming that the
workers can do the task on their own; and following up to confirm that standard work is enforced. John
Shook, senior advisor for the Lean Enterprise Institute, says Toyota still teaches job instruction in this
fashion with little modification to the program.
Job Methods (JM) - The Job Methods program was developed to provide management with a tool
whereby supervisors could acquire skills in improving methods, according to the original training
materials. JM can be described as the kaizen and continuous improvement component, says Patrick
Graupp, senior master trainer at the TWI Institute and author of The TWI Workbook: Essential Skills for
Supervisors. Key to the JM training is teaching supervisors how to make the best use of the people,
technology and resources available right now.
Job Relations (JR) - Original training materials describe job relations as a tool to help supervisors
acquire leadership skills. This tool recognizes that job relationships are an important component of a
supervisor's job and provides instruction about how to address "people" problems, such as morale
issues or grievances. While personnel issues may prove an uncomfortable part of a supervisor's
duties, Graupp notes that "without the cooperation of the people, not much is going to get done." The
original JR manual outlines a four-step process for meeting job relations situations that says: 1) get the
complete facts about a situation; 2) weigh and evaluate the facts; 3) take action; and then 4) check the
results of those actions.
Excerpts taken from an article by Jill Jusko and published by Industry week

142
As you can see, the process can be practiced by anyone in the workplace, not just CEO’s or Lean
managers. In fact, when Kaizen is internalized by a company, it will only become effective if every
single member of the company jumps on board with the changes. Because of the small change nature
of the practice, if this is not internalized by all, the company may only see small changes in their
bottom line.
If practiced correctly, a business that employs Kaizen thinking will always have an improving bottom
line. They will be constantly thinking of ways on the worker level to improve their own jobs, even if it is
slightly and borderline immeasurable. After a short period of time, however, many small changes turn
into big changes (for the better) to the bottom line.
Given below is another example of Kaizen and how the concept can be used to improve the flow within
a business.
Improving the Process flow
Before Kaizen: In order to prepare your meal, a cook has to prepare meat, then move to prepare
vegetables, then move back to prepare potatoes, cheese etc. Sometimes poor cook forget to add
cheese or vegetables as cooking process has a complicated flow.

145
adopted this strategy and have determined it to be a critical component in transforming the culture and
elevating performance. The walk is conducted on a daily basis, and at times accompanied by another
manager or a team member from the production floor. A central theme is predetermined, derived from
the tactical attributes that the team is engaged in to drive improvement and elevate performance. By
selecting different themes for every walk, all the core concepts of the organization would eventually be
covered. The intention of the “gemba walk” is to verify purpose and value of the various concepts that
drive the vision both from the perspective of the company and also of the team. The themes vary from
quality, safety, cost savings, continuous improvement, 5S, people development, eliminating waste,
culture and awareness, morale, communication etc. Throughout the walk, a series of questions are
asked of the team leaders and team members. Questions are asked to gain clarity as to how the team
use the concepts, what improvement suggestions they have, how often do they use the tools/charts
etc. The greatest value is in listening to the responses, the sharing of ideas and encouraging the team
to understand the importance of their work. In conducting these “gemba walks”, several things can be
accomplished: the creativity of the team unleashed, a sense of contribution and purpose established,
an engaged team created, and most importantly, a link to the overall goals and vision demonstrated
along with a common purpose and vocabulary.
In conclusion, when a leader takes an active interest in a given subject matter, the team in turn is
interested in supporting the leader. The opposite is also true and if the leader shows no interest in an
item, the team will generally think it is not important as well. Leaders set the tempo and set the
example for the rest of the organization to follow. Walking the talk is the critical leadership link that
enables organizations to achieve operational excellence and cultural transformation.
The above article has been taken from an article “WALKING THE TALK” by Domenic Paolucci
published on http://domenicpaolucci.com/

148
Issues Generation and
Analysis
A way of eliciting many issues
connected with a problem or
opportunity. Team members write
down their issues on post-it notes
and they are displayed on the wall
under appropriate categories or
groupings. e.g. Requirements,
Constraints, Problems,
Opportunities, Assumptions,
Uncertainties, Risks
Voting of the top 10 important issues
follows. Actions to address issued
then explored.
Value Stream Mapping
Uses material and information flow
to review steps in processes
Identifies processes in a
diagrammatic format in a step by
step manner. Often used in
manufacturing of system type
processes. Used to identify value
added steps and waste.
Risk Analysis
A structured approach to
identifying risks that could affect
project, product, process or service
success. Risks are identified,
evaluated (in terms of cost, time,
and other impact) and robust
action planning applied.
Often used in parallel with Value
Management as there are genuine
links. Assists decision making or
option selection.
SWOT Analysis
Identifies strengths, weaknesses,
opportunities and threats. A tool
used in many organisations to
assist in focussing activities where
required and minimise those items
that can impact negatively.
Assists in understanding strengths,
weaknesses, opportunities and
threats that can impact on an
organisation, individual, product or
process.

151
Actively disengaged employees erode an organization's bottom line while breaking the spirits of
colleagues in the process. Within the U.S. workforce, Gallup estimates this cost to be more than $300
billion in lost productivity alone. In stark contrast, world-class organizations with an engagement ratio
near 8:1 have built a sustainable model. As organizations move toward this benchmark, they greatly
reduce the negative impact of actively disengaged employees while unleashing the organization's
potential for rapid growth.
Linking Employee Engagement to Critical Business Outcomes - Gallup's latest meta-analysis (an
analysis of data from more than 125 organizations) shows dramatic differences between top- and
bottom-quartile workgroups on key business outcomes. Beyond the significant differences engaged
workgroups show in productivity, profitability, safety incidents, and absenteeism versus disengaged
workgroups, it is proven that engaged organizations have 2.6 times the earnings per share (EPS)
growth rate compared to organizations with lower engagement in their same industry.
Proven Return on Investment - Increasing employee engagement correlates directly with a positive
impact on key business metrics.
Productivity - In a study of professional service firms, the Hay Group found that offices with engaged
employees were up to 43% more productive. The most striking finding is the almost 52% gaps in
operating incomes between companies with highly engaged employees and companies whose
employees have low-engagement scores. High-engagement companies improved 19.2% while low-
engagement companies declined 32.7% in operating income during the study period example, New
Century Financial Corporation, a U.S. specialty mortgage banking company, found that account
executives in the wholesale division who were actively disengaged produced 28% less revenue than
their colleagues who were engaged. Furthermore, those not engaged generated 23% less revenue
than their engaged counterparts. Engaged employees also outperformed the not engaged and actively
disengaged employees in other divisions. It comes as no surprise, then, that engaged employees have
been statistically linked with innovation events and better problem solving. (Source: Wikipedia)
The 12 questions which Gallop uses for their surveys can be found here -
http://www.workforce.com/section/09/article/23/53/40.html

154
customer request. Businesses often find that they are
using a number of shippers unnecessarily when they
could be reducing their shipping options and reduce
overall costs.
Lean Customers –
Lean customers understand their business needs and therefore can specify meaningful
requirements. They value speed and flexibility and expect high levels of delivery
performance and quality. Lean customers are interested in establishing effective
partnerships—they are always seeking methods of continuous improvement in the total
supply chain to reduce costs. Lean customers expect value from the products they
purchase and provide value to the consumers who they interact with.
Lean supply chain management requires businesses to examine every process in their supply chain
and identify areas that are using unnecessary resources, which can be measured in dollars, time or
raw materials. This will improve the company’s competitiveness as well as improve the company’s
overall profitability.
Excerpts taken from an article by Bruce Tompkins, Principal, Tompkins Associates
Chapter 28b: Achieving Lean Distribution
Lean manufacturing is helping producers throughout the world reduce inventories, lower labour costs,
and increase their overall efficiencies. The same concepts embraced by Lean manufacturing
practitioners can help distributors achieve the goal of effective inventory management:

157
· Products were arranged by product line, in the vendor's item-number sequence. The vendor
assigned part numbers based on characteristics such as size, style, and colour. The sales or
usage of each item was not a factor. And each vendor supplied some fast-moving products, some
items with moderate sales, and some that were really "dogs" with little or no sales. As a result,
popular products were scattered throughout the warehouse. Order pickers often walked the length
of the warehouse when filling orders. The warehouse manager maintained this was a good way to
find things – "After all, most large retail stores place similar items next to each other." I pointed out
that product placement in retail stores cannot be compared to material organization in
warehouses. In a warehouse, employees fill orders; in a retail store customers normally shop for
themselves. When customers fill their own orders, they must be able to find material without the
benefit of pick tickets or Radio Frequency devices that designate bin location codes and picking
sequence numbers. There is also little incentive for a retailer to speed the customer through the
order picking process – the longer he or she is in the store, the more they probably will buy.
· Products were stored wherever there was adequate space. Best-practice distributors carefully
choose their storage systems and, within each storage medium (shelves, pallet racks, cantilever
trees, etc.) reserve the most accessible locations for the products with the most hits. ("Hits"
represent the number of times an item appears on an order to be filled, regardless of the quantity
ordered.) They also consider locating products that regularly appear on the same order near each
other. Finally, most best-practice distributors effectively utilize bulk storage. The most accessible
storage locations in a warehouse are often referred to as the "gold zone." You want to store as
many frequent-sale products as possible in this area. So it is probably a good idea to limit the
amount of space allocated to each item in this primary pick zone to a one- to two-day supply (for
warehouses with a high volume of orders) to a one-to two-week supply (for warehouses that have
a moderate order volume). The balance of the stock of these products should be maintained in a
bulk-storage location. It is far more efficient to restock the primary pick locations once a day or
once a week than to have employees constantly walking through your warehouse as they fill each
individual order.

160
Chapter 29: Lean Office and Administration
The 21
st
century has businesses competing like never before in a race to be the best. This ‘competition’
for Operational Excellence demands more streamlined processes and Companies must become
efficient in their business practices and procedures.
Customer and stakeholder satisfaction can be won or lost as a result of the administrative processes
that are provided, and the extent to which their needs are met or neglected.
Consider the time and effort involved in completing the following type of business transactions:
· Clarifying lost or incorrect data
· Waiting for information
· Work duplication and double entry of data
· Customer complaint handling
· Tracking the progress of a customer
request, and
· Meetings to try and improve business
performance
Who is disadvantaged by this waste?
Lean Office has an impact across the whole of business. It is the driver for a new way of conducting
business and the results are immediate. When the ‘Lean Office Tools’ are applied by teams they will:
· Identify and eliminate administration waste quickly and efficiently in any office environment,
· Increase participation and communication at all levels of the organisation,
· Standardize ‘best practice processes’ as the basis for improvement, and

163
· Pull vehicle into parking lot and give already waiting attendant your information.
· Pull into service area and leave vehicle with keys.
· Wait in lobby for service associate (average 1 - 4 minutes)
· Meet with a service associate to discuss the service and sign paperwork.
The new process takes less than 15 minutes from start to finish. This very simple example shows that
delays can be eliminated by re-balancing work, eliminating steps, re-locating people and processes,
and applying other Lean concepts.

166
will be easier to identify oversized equipment that could be replaced by smaller, more energy-efficient
alternatives.
In many cases, we tend to over-engineer our plant assets and, therefore, spend more than we should
to operate and maintain the system or asset over the life cycle period.
Sustainable Life Cycle Management – From conceptual design of new assets to the disposal of
depleted assets, all functions of your business must be integrated to efficiently manage plant assets
over the entire life cycle period. Life cycle asset management, with regards to environmental
performance, requires that your organization be capable of determining the environmental impact
associated with components and materials installed in the manufacturing system, be that energy
consumption or the generation of harmful by-products and waste.
Sustaining businesses have demonstrated an ability to control cost and curb environmental impact
through life cycle thinking and, therefore, have created additional value within their products which can
be recognized by their customers. Efficient asset management is implemented via systems and
structures to capture data for the purpose of decision-making in eight aspects of the asset life cycle:
a) Design – conceptual design of new assets or modification of existing assets
b) Procurement – purchasing new assets or re-engineered components in order to support
configuration changes in the manufacturing process
c) Storage – holding new assets or components in stores until they are installed in the manufacturing
process
d) Installation – installing new assets or components in the manufacturing process
e) Commission – initial start-up of new assets or components
f) Operate – daily operational standards of practice
g) Maintain – routine maintenance standards of practice and maintenance strategies
h) Decommission – shutdown and disposal of manufacturing assets, or shutdown and handling of
components which are uninstalled for reconditioning

169
Incentives to “Go Green”
As we’ve seen thus far, applying lean manufacturing principles toward environmental performance
improvement has the ability to dramatically reduce the overall impact of manufacturing on the
environment, but there might be other incentives for your business to focus efforts on going green.
Besides federal government programs, such as the EPA’s “Lean Manufacturing and the Environment”,
there are several state and local government incentives designed to encourage manufacturers to
further help conserve national resources through Renewable Energy Certificates (REC).
In most states, RECs can be applied toward investments in alternative energy sources, utility loans
and rate discounts, environmental grants, and even tax credits and exemptions, all of which help to
further reduce the operational costs associated with manufacturing, as well as improve the image of
your business.
This is taken from the article “Use lean manufacturing principles to deliver green results”
written by Darrin Wikoff and published on www.reliableplanet.com.

172
Bibliography
1. The Machine that Changed the World - by Womack, James P., Daniel T. Jones, and Daniel Roos
1990
2. Lean Thinking, Second Edition by Womack, James P. and Daniel T. Jones 2003
3. Lean Solutions by Womack, James P. and Daniel T. Jones 2005
4. Toyota Production System – Beyond Large-Scale Production by Taiichi Ohno 1988
5. Kanban Just-in-Time at Toyota by Japan Management Association 1989
6. Quick Die Change 2
nd
Edition by David Smith 2005
7. Keeping Score by Mark Graham Brown 1996
8. Hoshin Kanri Policy Deployment for successful TQM by Yoji Akao 1991
9. Using Lean for Faster Six Sigma Results – A synchronised approach by Mark A Nash, Sheila R.
Poling and Sophronia Ward 2006
10. Quick Changeover Simplified The Manager’s Guide to Improving Profits with SMED by Fletcher
Birmingham and Jim Jelinek 2007
11. Getting the Right Things Done – A Leader’s Guide to Planning & Execution by Pascal Dennis 2006
12. The Gold Mine – a novel of Lean turnaround by Freddy Balle & Michael Balle 2005
13. Six Sigma Fundamentals – A Complete Guide to the System, Methods and Tools by D.H. Stamatis
2004
14. Lean Production Simplified 2
nd
edition by Pascal Dennis 2007
15. Value Stream Management by Don Tapping, Tom Luyster and Tom Shunker 2002
16. Pull Production for the Shop Floor – Productivity Press Shop Floor Series 2002
17. Standard Work for the Shop Floor – Productivity Press Shop Floor Series 2002
18. Mistake Proofing for Operators: The ZQC System - Productivity Press Shop Floor Series 1997
19. TPM for Supervisors - Productivity Press Shop Floor Series 1996
20. Hoshin Kanri for the Lean Enterprise by Thomas L. Jackson 2006
21. The Lean Company – Making the Right Choices by James A. Jordan, Jr. and Frederick J. Michel
2001
22. The Goal by Eliyahu M. Goldratt and Jeff Cox 2004

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