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Book by Lonnie Wilson "How to implement Lean Manufacturing" section regarding the interaction between inventory, variation, and Kanban

Book by Lonnie Wilson "How to implement Lean Manufacturing" section regarding the interaction between inventory, variation, and Kanban

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  • I’m VinnyMonteiro and I’m a Eng. Mgt graduate student and my background is I am a production manager for a $5mil local converting company, much like a job shop and we make gaskets, insulators, assembly, waterjet, laser cut. Quick Background about the book. Written by a Lean consultant that spent his early years at Toyota and that was the foundation for all his work.-70s ppl saw toyota was better. JIT was introducedJIT was assumed to be all about slashing inventories.Inventory was an independent aspect of the business.
  • -Raw materials, operating expenses, material handling, moving materials (forklifts), space requirements, Keep TRACK OF IT (cycle counts), not damaged, ship it before it becomes obsolete-Reason: hold only the inventory you need to protect your sales. More and it’s a waste, less and you undermine your ability to supply your customersCALCULATE – Volume that we shipped or picked up by the customerExternal is demand fluctuationsinternal is production issues.
  • -Cycle: volume needed on hand to take care of normal customer demand. Has to do with -Buffer: to account for external variations. -Safety: to account for internal variations.
  • Enemy to good product quality, rate, rate stability, operating costs and bottom-line profitsReplenishment Time=planning, waiting, production, Delivery(typically delivery variations) Based on historical data.( Not really in control)-Machine failure, stock outs, poor cycle time performance, quality problems. (Under control of the plant)-Work in process inventory. Variation from workstations
  • -Statistical Fluctuations combined with dependent events-Inventory is a necessary response to system variation so rate can be maintained.-Waste, but a necessary waste.So if you want to reduce inventory, REDUCE VariationReduce Wip, you will reduce LT, reduce LT Flexibility in production will improve (responsiveness)-- (LT most descriptive measure of Lean)
  • We need SOMETHING to compensate for this variation if we wannato maintain the production rate- F/G, WIPExcess rate capacity, manpower, machine timeTime buffer in our planning and lead time
  • Most commonly a card, but sometimes a cartOne of the biggest tools in the battle to reduce overproduction.The CARD gives the source, destination, part number and quantity neededParts movement informationProduction ordering informationKanban represents the ENTIRE inventory in the system.
  • Creates pull, provides pick up information. Here is where The Replenishment concept if formed hereProvides production info and prevents overproductionPrevents overproduction and excessive transportationServes as a work orderPrevents defective parts from advancingInventory reduction reduces waste and makes the system more sensitive
  • Very flexibleKanban removed from order and placed in a kanban post heijunka box in front of production line# of Kanban = (replenishment Time x Production Rate)(1+Alpha) / (Container Size)
  • Goal TO Avoid overproduction of both WIP and finished good-easy to be done separately, but simultaneously is the tricky partWhen it comes to triggering production, with the minimum lead planning time, no planning system can come close to Kanban.Creates an absolute limit to total inventory. FIFO inventory management
  • Make-to-stock – has f/g inventoryPull production – production is only triggered by customer consumptionIdeally, a make to stock system would turn into a make-to-order system… if it wasn’t for our enemy!


  • 1. How To Implement Lean Manufacturingby Lonnie Wilson
    Inventory and Variation
    Presented by: VinnyMonteiro
  • 2. Inventory: What’s so bad about it?
    Inventory Costs a lot of Money!
    One of the reasons IEs have jobs
    1. What is the basic purpose of inventory?
    Protect Sales
    3 parameters
    Stock Replenishment Volume
    External Variations
    Internal Variations
  • 3. Different Types of Inventory
    Finished Goods Inventory
    Cycle Stocks
    Planning time
    Waiting Time
    Production Time
    Delivery Time
    Buffer Stocks
    Safety Stocks
  • 4. Our Biggest Enemy
    What IS causing the need for inventory?
    VARIATION  inevitable
    Cycle Stocks
    Buffer Stocks
    Safety Stocks
  • 5. Understanding it
    Variation + Dependent Events
    Causes reduction in production rates
    The need of Inventory
    Variation directly affects inventory
    Little’s Law LT = WIP/TH
  • 6. How to work with it
    T/F - Anytime there is variation we need inventory
  • 7. Kanban
    Means Sign Board
    Facilitates Flow
    Bring about pull
    Limit inventory
    Serves as the communication system
    Continuous Improvement Tool
  • 8. 6 Rules of Kanban
    Later process goes to earlier process and picks up the number of items indicated by the kanban
    Earlier process produces items in a quantity and sequence indicated by the Kanban
    No items are made or transported without a Kanban
    Always attach a kanban to the goods
    Defective products are not sent to the next process
    Reducing the number of kanban increases their sensitivity
  • 9. How does it work?
    Start with the customer
    Order pulled, signals previous process that more parts are needed
    Kanban sent back.
    Order fulfilled, sent w/ KanBan
  • 10. Process Improvements and Kanban
    Achieved by reduction in inventory
    Reducing any of the 4 replenishment times
    Reducing the variation in the production rate
    Reducing the variation in the customer demand
    Goal is to reduce inventory and still supply the customer with high levels of on-time delivery
  • 11. Conclusion
    All systems vary, all systems will need some buffer to maintain rate
    Inventory is a waste, but a necessary waste.
    To minimize inventory, minimize variation.
    Kanban is typically a Lean Manufacturing tool for make-to-stock, pull production system
    Kanban one of the most powerful tools 