Lean Management: Dump the Waste by Allan Ung, Operational Excellence Consulting

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Lean Management - This article explains the various types of waste in manufacturing and service industries and the approaches which can be taken to eliminate the waste (non-value adding activities).

Lean Management - This article explains the various types of waste in manufacturing and service industries and the approaches which can be taken to eliminate the waste (non-value adding activities).

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  • 1. Dump the WasteDump the WasteSharpen your competitive edge by eliminating wastes in yourorganizationBy Allan UngRecession or boom, companies need to sharpen their competitive edge by applying LeanManagement principles to cost reduction - that is, the elimination of non-value-added activitiesor waste from the value stream processes.Be LeanIn the Lean Management philosophy, all activities in an organization are grouped into twocategories:  value-added (VA) activities, and  non-value-added (NVA) activities.In the context of Lean Management, VA and NVA activities are viewed from the customerperspective.VA activities are those that bring higher value to products and services. Examples areanswering customer queries, entering orders, ordering materials, laying foundation, creatingcodes, assembling parts, shipping of goods to customers, etc.Customers are willing to pay for these improvements which can change the form, fit or functionof a product or service.On the other hand, NVA activities are tasks that do not increase market form or function.Examples are filing, copying, recording, waiting, counting, checking, inspecting, testing,reviewing and obtaining approvals. These activities should be eliminated, simplified or reducedas much as possible.By tackling waste from an end-to-end business process, not only can your company improve thevalue of its products and services, you can also achieve significant cost reduction, strengthencash flow and emerge from the downturn with a stronger and more competitive profile. 1© 2009-2011 Operational Excellence Consulting. All Rights Reserved.
  • 2. Dump the WasteSeven Types of WasteThere are seven types of waste in a manufacturing environment.Studies have shown that in a typical organization, some 90% or more of all activities fall into theNVA bucket.Although the explanations and examples provided below may be more relevant formanufacturing industries, the concepts can be universally applied to service industries as well.The seven types of waste are:1. Waiting – This is the idle time resulting from waiting for materials and information, emailqueues from customers, delayed shipments, lot processing delays, capacity bottlenecks,unbalanced workload, long setup times, equipment or system downtime and so on.2. Over-Processing – This results from unnecessary procedures due to undefined customerrequirements, lack of effective communication, product changes without process changes,redundant approvals, making extra copies and excessive reporting. Transportation Excess Motion Waiting Over- Processing Defects Over- Excess Production Inventory Identify and eliminate organizational wastes to create customer value and reduce costs. 2© 2009-2011 Operational Excellence Consulting. All Rights Reserved.
  • 3. Dump the Waste3. Defects – These are errors, mistakes, scrap, rework, replacements, re-inspection and re-testing. The causes are incorrect data entries, poor quality, weak process control, inadequatetraining, deficient planned maintenance and customer needs that were not understood.4. Excess Motion – Refers to any movement of people or machine that does not add value tothe product or service. Common causes are poor plant or office layout, double handling,inconsistent work methods and poor workplace organization.5. Transportation – This refers to the transporting of parts, materials and files or documentsaround the plant or office. The causes are poor plant or office layout, widely spaced equipmentand workstations and poor understanding of the process flow.6. Over-Production – This happens when you make too much, too early and faster than isrequired by the next process. The causes include unclear goals, excessive lead times, andoutdated forecasts. Tip: You should reduce your batch size to match the rate of demand.Produce exactly to customer demand, not more.7. Excess Inventory – This happens when you have more inventory than is needed for a job. Itis important to tackle excess inventory as it has a huge impact on cash flow. Tip: Review yourmaterials purchasing strategy – where can you buy them at a cheaper price, in smaller amountsand can be delivered to you more frequently?Eliminate the WasteThe ability to find waste in your organization is the first step towards their elimination.The next step is to set up problem solving teams and enable them to reduce or eliminate thewaste. A common problem solving technique is the PDCA (Plan-Do-Check-Act) approach.Involve your employees in problem solving or process improvement. If they know that they arean active part of the solution, they can identify sources of waste or savings that you might not beaware of.Do note that not all waste is of equal importance. You will need to identify the “right waste”–those that have the greatest impact on the business case or bottom line.Continuous ProcessFor waste elimination to be successful and sustainable, an organization’s senior executivesneed to adopt a mindset that cutting waste to cut costs is an on-going journey of continuousimprovement. 3© 2009-2011 Operational Excellence Consulting. All Rights Reserved.
  • 4. Dump the WasteIt has to be a collaborative effort between management and employees.A common mistake for senior executives to avoid is to treat waste elimination as another one-off“tool” or quick fix.It is essential to manage waste elimination as a strategic change initiative that is aligned to theorganization’s purpose, encompassing both people and process transformations.About the AuthorAllan Ung is Managing Consultant of Operational Excellence Consulting, a Singapore-basedmanagement consultancy firm that assists organizations in improving business performanceand effectiveness. He has more than 20 years experience in Lean Management, Total QualityManagement and Change Management spanning across government, manufacturing andservice-based organizations. Mr Ung holds a Bachelor Degree in Mechanical Engineering fromthe National University of Singapore. He is a Certified Management Consultant (Japan), LeanSigma Black Belt, TPM Instructor (JIPM) and ISO9000 Lead Auditor. To contact Allan, pleaseemail: info@oeconsulting.com.sgAbout Operational Excellence ConsultingOperational Excellence Consulting (OEC) is a Singapore-based management training andconsultancy firm that assists organizations in improving business performance andeffectiveness through methodologies such as Lean Management and Six Sigma Quality. Thefirm’s mission is to create business value for organizations through innovative operationalexcellence management training and consulting solutions. OEC takes a unique “beyond thetools” approach to enable clients develop internal capabilities and cultural transformation toachieve world-class excellence and competitive advantage. For more information, please visitwww.oeconsulting.com.sg 4© 2009-2011 Operational Excellence Consulting. All Rights Reserved.