Lean Manufacturing Cost Cutting Methods


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Overview of Lean Manufacturing - Cost reductions

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Lean Manufacturing Cost Cutting Methods

  1. 1. CNIPMMR Lean Manufacturing Pilot project no. RO/03/B/F/PP-175017 -cost cutting methods-"This project has been funded with support from the European Commission. This publication[communication] reflects the views only of the author, and the Commission cannot be heldresponsible for any use which may be made of the information contained therein." TRAINING MODULE LEAN MANUFACTURING - COST CUTTING METHODS - MODULE DEVELOPED BY: The National Council of Small and Medium Sized Private Enterprises of Romania (CNIPMMR)Contents:• INTRODUCTIONa) Introduction into the topicb) Terms usedc) Scoped) Categories of userse) Details on the organisation who created this module• MODULE CONTENTCHAPTER 1: METHODS FOR GATHERING AND ANALYZING THE DATA NECESSARYTO CUT COSTS 1.1. WASTE 1.2. LEAN ASSESSMENT 1.3. LEAN INDICATORS Example of OEE calculation 1.4. VSM - VALUE STREAM MAPCHAPTER 2: METHODS OF CUTTING COSTS BY REORGANIZING PRODUCTIONPROCESSES 2.1. JUST IN TIME (JIT) PRODUCTION. 2.2. KANBAN SYSTEMS. Example of Kanban calculation model Example of setting the minimum batch level 2.3. JIDOKA
  2. 2. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 2.4. POKA YOKE 2.5. SINGLE MINUTE EXCHANGE OF DIE (SMED). 2.6. STANDARDIZED WORK 2.7. TOTAL PRODUCTIVE MAINTENANCE (TPM) 2.8. 5 S AND VISUAL MANAGEMENTCHAPTER 3. IMPLEMENTATION OF IMPROVEMENTS 3.1. FUTURE VALUE STREAM MAPPING Example of calculation 3.2. SYSTEM OF LEAN INDICATORS 3.3. TRANSITION TO A LEAN ENTERPRISE• CASE STUDIES, EXAMPLES Example of Work Sampling application Example of visual management• BIBLIOGRAPHY INTRODUCTION a) Introduction into the topic As early as the late 1800s, when the manufacturing production of automobiles begandeveloping, characterized by high quality manual production, which was, nonetheless, veryexpensive and of poor productivity, and which was intended for a small share of consumers,it was felt the need to pass onto mass production. Thus, in the 1920’s, Henry Ford launchedmass production of automobiles. Mass production was characterized by assembly lineswhere low-skilled workers made hundreds of identical, low quality products and with pricesaffordable for an average family. As you know, mass production in all fields evolved so much, that early as the 1980sthe consumer’s perception of product value was given by low cost, availability of high qualityproducts and manufacturers’ flexibility to produce according to the market demands. After theyear 2000, the consumer’s perception of product value has been given by the flexibility ofproduction, high quality associated with low costs and availability. To put it otherwise, inorder to survive in a global market, companies must obtain profit, renew contracts and grow.For all these to happen, companies must be the best at ensuring delivery of fine products, atcompetitive prices and earlier than the competition. Lean Manufacturing is currently the most important management method formanufacturing companies. The method is used together with the quality tool referred to as “6sigma”, it is based on Toyota Production System, it was adjusted by Womack and Jones, in1995, to Western companies, and it refers to real basic capabilities. Applying LeanManufacturing leads to exceptional results, with no complex systems required, therefore, it isalso an adequate method for SMEs with limited resources. Lean Manufacturing means flexible assembly lines or cells, more complex tasks,highly-skilled workers, better-made products, wider variety of interchangeable parts,mandatory excellent quality, low costs due to the improvement of the manufacturing process,international markets and world-wide competition. Lean Manufacturing, or production atminimum costs, is a production philosophy that determines a reduction of the duration fromcustomer’s order to delivery of the product by eliminating waste. The implementation of LEAN concepts has become a survival strategy in aproduction environment in which COST cutting is a market reality. If current results of your company do not satisfy you, you can find out answers to many 2/44
  3. 3. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017of your problems by coming into the Lean world. If you want to introduce improved long-termproduction management methods, which will help you identify waste in you organization andincrease productive capacity and simultaneously cutting production costs, by going over thismodule you can familiarize with several Lean Manufacturing concepts which, afterimplementation, shall lead to: Cutting to half the time of the human effort in workshops Cutting to half finished product defects Cutting to one third the production preparation time Cutting to half the production area, obtaining the same results Cutting to one tenth or less the unfinished production. Here are several goals that can be accomplished by applying the Lean Manufacturingmethod: Organizing the production flow and setting the work pace in accordance with the Lean Manufacturing method Establishing a production plan by forecasting market demands Continuously improving the production flow as often as possible Verifying market demands to control production (it should not be produced more than what the market demands) Transmitting customer orders to a single production process. Distributing production (of distinctive products), by the end of each production process Creating an "initial pull" for delivery of a small production, compatible with the development of the production process, instead of releasing larger batches of products Reducing the time necessary for preparing production, simultaneously increasing flexibility, quality and efficiency and cutting costs. Quantifying waste, analyzing it and the actions to be taken to implement methods to raise the efficiency of the production process Methods to cut waste, establishing the types of waste and measuring it Necessity for an actual performance measurement system Establishing a methodology for planning and implementing the performance measurement system Determining system characteristics by actually measuring performances Action to be taken to develop de process Implementing the "5 S" method Training and involving the entire personnel Standardizing (making uniform) the work procedures. b) Terms usedLean Approach: A 5 step thinking process proposed by James Womack and Dean Jones, authors of the “Lean Thinking” manual, to guide managers in their attempts to introduce the Lean principles into production. The 5 principles are: 1. Setting the value of each product family from final customer’s point of view. 2. Identifying all activities on the value stream of each product family, 3/44
  4. 4. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 eliminating as much as possible those waste-generating activities. 3. Ranking value-adding activities in a sequence (flow) of clearly identified steps, so that the product should reach the final customer through a process which should be as continuous as possible. 4. After the value stream is established and introduced, each internal or external customer/beneficiary can apply the “pull” system to “pull” the product from the production line. 5. After the value is set, the value-adding activities identified and those generating waste eliminated, and the value stream set and introduced, the process can be operationalized and repeated until it reaches the optimal level, of maximum value and no waste.ABC Analysis: Is a tool for dividing items necessary in a production process into groups, according to the demand for those items. Lean specialists use these analyses to select the items for which to create inventories and their sizes. “A” type items are very often necessary in the production process, “B” type items are of medium level necessity and “C” type are less necessary.Andon: In Japan, in the past, Andon worked as a flashlight, a remote signalling sign or even a business sign. Nowadays, in production, the Andon is an audio and visual control device. For example, if an Andon device has three colour areas (red, green and orange), and the orange area sends visual and audio signals, it means that there is a problem requiring special attention or that an operator must replenish a material which was exhausted. Therefore, the Andon is a visual management-specific tool, consisting of placing lights on machineries or on production lines, in order to indicate the process operation status. The most common visual signal codes are: Green: normal operation, Yellow: changeover or scheduled maintenance; Red: abnormal, machine down. These visual signalling codes are usually combined with audible signal codes.Waiting: Waste occurring when people and machineries do not work / add value, waiting for a previous process to be completed or for a material to arrive.Kaizen workshops: Represents the activity of a Kaizen group (which usually lasts 5 days), in which a team identifies and implements an improvement to a process. A classical example is creating continuous flow cells within a week. In order to achieve an improvement, the Kaizen team (including experts, consultants, but also operators and line managers) analyze, implement, test and standardize cell workstations. First, the group members study the continuous flow principles, and then they assess the existing conditions and plan the workstations necessary. Then, they pass onto moving machineries and tools to the new workstations and to testing the newly created flow. After improvement, the process is standardized and the Kaizen team reports the outcomes to the top management.Takt time (time necessary to process a container of items): The time necessary to complete a container of items in a production area. The calculus formula is: takt time = available operating time x quantity of products planned to be processed. For example, if the available operating time (daily working hours divided by the daily customer demand is of 1 minute, and the quantity planned to be processed is of 20 pieces, then the takt time = 1 minute * 20 items = 20 minutes.4Ms: The factors that a production system uses to add value for customers. The first three factors are resources, and the last one represents the value for the customer. In the Lean system the 4 factors refer to: 1. Materials – without defects or shortcomings 4/44
  5. 5. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 2. Machineries – without malfunctions, operation deficiencies or unscheduled stops 3. Manpower – adequate work skills, necessary competencies, punctuality and low absenteeism 4. Methods – standardized processes, maintenance and management.5 S: The 5 S process or simply the 5 S is a program structured to obtain systematically: organization, cleanness and standardization at the workplace. The content of the 5 S is the following: 1. Seiri (Sorting) – The first step of the process refers to the action of removing unwanted and unneeded materials from the workplace. The main idea is to make sure that every material left at the workplace is indispensable for that respective work. 2. Seiton (Straighten) – The second step of the process refers to efficiency. This step consists of storing each element in a preestablished location, in order to be easily accessible and brought back to the same location as quickly as possible. If everyone has quick access to all elements and materials, the workflow shall become more efficient, and therefore the personnel shall become more productive. 3. Seiso (Shine) – is the third step of the process, consisting of cleaning the workplace, making it “shine”. Cleaning should be carried out by all employees, from managers to operators. All areas forming the workplace must be cleaned, without exception. 4. Seiketsu (Standardization) – The forth step of the process consists of defining the standards to which the personnel should relate when measuring and maintaining cleanness. An important ingredient of seiketsu is visual management. A uniform and standardized colour coding of the various elements can be an efficient way to identify abnormalities in a workplace. 5. Shitsuke (Sustain change) – The last step of the process is discipline. It supposes the common will to maintain order and to follow the other 4S as a lifestyle. The Shitsuke foundation is elimination of bad habits and generalization of positive habits.7 wastes: The 7 wastes of production are, according to Taichi Ohno’s classification: 1. Overproduction: producing more than necessary for the downstream / client process. It is the worst kind of waste, as it directly causes the other 6 types of wastes. 2. Waiting: operators interrupt work due to malfunctions of machineries or equipment, delays in delivery of materials / layouts / parts necessary for processing. 3. Transportation: unnecessary conveyance of parts and products, such as from the processing line to the warehouse and from there again to the workshop – to the next processing process, when it is more rational to place the next process in immediate vicinity of the first processing workstation. 4. Processing: carrying out unnecessary or incorrect operations due to poor quality equipment or carelessness. 5. Inventories: storing more than the minimum necessary for the operation of a pull production system . 6. Movement: operators make unnecessary movements – such as looking for parts, equipment, documents, repeated movement of tools, etc. 7. Defects: inspection, reprocessing, scraps. 5/44
  6. 6. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017Cell: A layout of workstations that process a product in a tight sequence, so that parts and/or documents should be processed in an almost continuous flow, unit by unit or in small batches, which should be maintained during the entire sequence of processing operations. The U-shaped cell is widely used because it reduces distance between operations and allows operators to carry out various combinations of labour tasks. In Lean production, the ability to reassign tasks is very important, because it can change the number of workers necessary for one cell, function of the demand of products.Deming Cycle (PDCA – Plan, Do, Check and Act): The PDCA cycle can be used to coordinate the efforts for continuous improvement. The cycle proves and underlines the fact that improvement programs should start with a careful planning, they should focus on actual activities, and they should end with the control of the results obtained, so that the entire cycle should begin all over again. The content of the 4 phases of the cycle are: 1. Plan – aims at improving the operations performed; before starting the planning action, the causes that generate problems should be identified and solutions to eliminate such problems should be set. 2. Do whatever necessary to solve the problems, first at a small, experimental scale. Thus, interruptions in current activity are minimum while testing the functionality of the changes made. 3. Check the results obtained upon implementing those respective experimental changes: whether the expected results are obtained or not. Also, a continuous control defines key activities (regardless whether they are experiments of the solutions proposed), thus facilitating awareness of the quality of the results obtained and identifying new problems that could occur. 4. Act – generalization / large scale implementation of changes, if the experiment was successful.Efficiency: Satisfying all customer necessities with minimum of resources. Apparent efficiency vs. Real efficiency: Taichi Ohno distinguishes between apparent and real efficiency by giving the example of some workers who produce 100 products a day. If after improving the process, they produce 120 products a day, then it results an increase in efficiency with 20%. This thing is real if, and only if the demand increases with 20%. If the demand remains stable at 100 products, the only manner to increase the efficiency of the process is to determine a way in which the same number of products can be obtained with less effort and capital.Product family: A set of products and variants of the same product, which can be obtained through a sequence of similar processing processes, on similar machineries. The significance of product families for Lean specialists is the fact that they represent the starting point for value stream mapping. It must be noted that product families can be defined from every customer’s perspective (next customer or external customer) within an enlarged value stream, departing from the final customer to intermediary customer, along the production process.Each Part, Every Interval (EPEI): The rate at which various (batches of) parts are manufactured in a production system or process. If a machine passes to another type of production according to a previously established sequence so that the planned number of parts of a certain type should be produced every 3 days than the EPEI is of three days. As a general rule, it is advisable for EPEI to be as short as possible, in order to produce items in smaller batches and to minimize inventories of unfinished products. The EPEI of a machine depends on the production changeover time and of the number of items scheduled to be processed by that respective machine. A machine that requires longer 6/44
  7. 7. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 production changeover time and which produces products in large batches shall automatically have longer EPEI.Continuous flow production: It can defined as production and transfer of one item (or of a small and uniform batch of items) at a time, from one process to the next, along the entire production line, as continuously as possible, each supplying operation producing just as much as required for the following operation (client operation). The continuous flow can be achieved in several ways – from the automatic assembly line to the manual workstations placed in cells.Materials flow: Movement of the physical elements through the entire value stream.Value stream: Includes the activities that makeup a process, necessary to bring up a product, from concept to launch and from order to delivery. The stream value comprises activities that process product manufacturing information, as well as the actual activities in which materials are processed until they reach the physical form of that product.Value Stream Map (VSM): A chart which includes all steps necessary for a continuous flow of information and materials, from reception of an order to the delivery of the product. Value Stream Mapping can be a repetitive process, as a requirement for improving the production process. The value stream map of the current state includes the steps that a product currently takes from order to delivery, in order to determine the existing conditions for obtaining that respective product. The future value stream map can capitalize the improvement opportunities identified in the current map, in order to achieve a superior performance level. In some cases, it is advisable to make an ideal map, which should highlight the improvement opportunities generated by the introduction of all Lean-specific methods.Heijunka: Levelling the type and production quantity for a certain period of time. Through this action, the production obtained shall satisfy efficiently customer demands, simultaneously determining results such as minimization of inventories, of the cost of capital, labour and lead time throughout the entire value stream. As far as the levelling of the production quantity is concerned, let’s assume that a manufacturer receives orders for 500 products a week, but broken-down distinctively on days, as it follows: an order for 200 products on Monday, 100 on Tuesday, 50 on Wednesday, 100 on Thursday and 50 on Friday. In order to level production, the manufacturer can create a buffer stock ready for delivery, so that to meet the demand for products on Monday, and then level the manufactured volume at 100 pieces a day, throughout the entire week.Jidoka: Entails stopping a production line automatically when an error (incompliance) is detected. It consists of providing machineries and operators with the ability to detect abnormalities occurred in the system, so that the process could be immediately discontinued. This method requires that all processes carried out have an adequate quality and it also makes possible to organize labour (manpower and machineries) more efficiently. Jidoka is one of the two fundamental concepts of the Toyota Production System, next to JIT. Jidoka is focused on the causes that determine the problems affecting the system. This leads to an improvement of processes, respectively assuring product quality by eliminating problem-generating causes.Just In Time (JIT): A production system that produces and delivers only as much as it is needed, only when it is needed and only in the quantity requested by the customer. JIT and Jidoka are the two fundamental concepts of the Toyota Production System. JIT is based on the Heijunka concept (production levelling) and includes the following three elements: the pull production system, total available operating time and continuous flow. The purpose of JIT is to eliminate wastes entirely, to achieve the best quality possible, the lowest costs 7/44
  8. 8. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 possible and the shortest production and delivery terms possible. Although a simple principle, the JIT system requires a sustained discipline and endeavours to analyze and synthesize production process-related data, for an efficient implementation. The idea for the JIT system belongs to Kiichiro Toyota, the founder of Toyota Motor Corporation, in the 1930s.Kanban: A method to control the quantity of products on the line (by organizing a system of cards, signals, buffer stocks, …). Kanban is the Japanese word for a label- like document, attached to a product on the production line. Nowadays, Kanban means any signalling device that gives authorization and instructions for production and/or conveyance of items in a pull system. Kanban cards are the best known and the most popular examples for transmitting signals throughout the production flow. Kanban cards have usually the form of a cardboard note, possibly with a plastic cover (for protection), containing data such as: item name / code, number of product items, the internal or external supplier process, quantity scheduled to be obtained, “address” of the storage area / location, “address” of the client process. Kanban cards have two major functions in the production process: the first consists of signalling from the downstream workstation to the upstream workstation to start producing the items necessary and the second consists of warning workers to move items to the following processing workstation, so that they should reach destination just before the moment they can be processed. The first function is called Production Kanban, and the second is called Conveyance Kanban).Lean Manufacturing: Production philosophy that determines a reduction of the duration from customer’s order to delivery of the product by eliminating waste.Large batches and Production line: An approach specific to the “push” mass production, in which a large batch of items is entirely processed and then moved to the following process, regardless whether items are necessary at that time, where they usually wait in line until they can be processed.Product Family Matrix: A chart built to identify product families and similar processes / machinery necessary.Total Productive Maintenance (TPM): A series of methods, originally designed to ensure a continuous operation of machineries involved in production processes, so that production should never be interrupted. TPC includes the following maintenance policies: 1. Corrective – when a machine breaks down, the situation is remedied as quickly as possible. 2. Preventive – regular maintenance, which prevents occurrence of possible malfunctions. 3. Predictive – instead of periodical inspections carried out at regular intervals, the “vital signs” of equipment are examined, and the evolution and best moments for preventive interventions are determined accordingly. 4. Detective – applies to all types of devices that work only in certain situations and do no include the devices that signal the interruption of operation (such as: fire alarms or smoke detectors). Such devices require periodical inspection, in order to see whether they are still operational.Muda: Waste (in Japanese). Any activity that consumes resources without adding value for the customer; within this general category, it is useful to distinguish between two types of muda, respectively: type 1, consists of activities that cannot eliminated immediately type 2, respectively activities that can be quickly eliminated through Kaizen actions. 8/44
  9. 9. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017Standardized work: Establishing precise procedures for each individual operator who is involved in a production flow, based on the following three elements: 1. Available operating time – is the rate at which products must be made in a process so that to satisfy customer demands. 2. Precise sequence of processes that the operator carries out during the available operating time 3. Standard stock necessary for the production process to be carried out adequately and without interruption.Production levelling: Refers to levelling the type and quantity of production over a certain period of time. This allows obtaining a production volume that satisfies customer demands more efficiently, simultaneously minimizing inventories, cost of capital, labour and total lead time throughout the entire value stream.Multi-machine handling: A work practice in which a worker operates several machines in a production process carried out in a unitary space (production cell). Requires the separation of the human labour from machine work and it is facilitated by the application of the Jidoka method.Automation: Ensures the interruption of the production process when a problem or a malfunction occurs. In case of an automatic line, the automatic shut-down supposes installation of sensors and switches to stop the production line when an abnormality is detected. In case of a manual line, a shut-down system is usually installed in a fixed position.Waste: Any activity that consumes resources / increases product cost, without adding value for the customer. Most activities can be considered waste from customer’s perception and they are divided into two categories: 1. The first type of wastes does not add value, but cannot be avoided, due to current technology and production assets (such as invoicing, inter-operational packaging, certain inter-operational conveyance operations, etc.) 2. The second type of wastes does not add value and must be eliminated quickly.Single Piece Production Planning: A detailed plan for each batch / item used in the production process, containing all elements relevant to an error and waste-free process management. This is a basic tool of the Toyota Production System.Poka Yoke: A mistake proofing method - includes possibilities of visual or other type of signalling which indicate the specific status of a process, power / movement limitation devices, assembly devices, marking of the best position for conveyance, colour code used for assembly cables, etc. Thus, Poka Yoke is the first step in detecting and preventing errors that could affect the system. Poka – yoke is a product / production process designing technique, which prevents the occurrence of errors by designing processes, equipment and tools so that no operation could be possibly made incorrectly. In short, Poka Yoke entails: prevention of errors; detection in real time of abnormalities the moment they appear; immediate interruption of processes to prevent further malfunctions, removal of the original, malfunction –generating cause, before resuming the production process.First In, First Out (FIFO): The principle and practice of maintaining production in a precise order, in an adequate sequence, by making sure that the first item entering a processing operation or a storage area is also the first one leaving (this principle ensures that stored items do not loose their properties and that quality problems are not evaded by selecting only good items for delivery). Compliance with the FIFO rules is an essential requisite for implementation of the “pull” production system. 9/44
  10. 10. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017Production preparation: A strict method of designing production processes for a new product or completely re-designing the production processes for an existing product, for which customer requirements had been modified substantially. An inter-departmental team examines the entire production process, develops a series of alternatives for each production process and evaluates them from the perspective of the Lean criteria.Leading process: Is defined as that process of the value stream that sets the production pace for the entire flow (the leading process should not be mistaken for the process that determines a narrow space – the one “restricting” downstream processes due to capacity shortages upstream). The leading process is often located in the value stream in the closest point to the final customer, which is often the final assembly cell, where specific customization of the product for a certain customer begins. Nevertheless, if the product is continuously moving throughout the value stream according to the FIFO rule, then the leading process can be represented by the upstream process.Mass production: A production system developed in the 1920s, in order to organize and manage the production system, processing operations, relations with suppliers, customers, respectively. The particulars of this production system are: 1. Processes are designed sequentially rather than simultaneously. 2. Production processes are strictly ranked, with separate jobs for production planning and execution. 3. Finished products as well as raw materials are delivered in large batches, at various time intervals, function of the durations, often uncontrolled, of processing / replenishment. 4. Information is managed in systems with several hierarchical levels, setting the production level for each operation downstream the production process.Lean Production: Is a production management and organization system oriented towards developing products, production processes and relations with customers and suppliers so that it should require less human effort, less floor space, less capital, less lead time. Upon an adequate application of the Lean system, the products resulted have less flaws and better meet customer requirements, in comparison with the traditional production system. This production system is based on the methods developed by Toyota company after the Second World War. Once accomplished, the lean production system requires half of the human efforts, half of the production space or half of the investment capital traditionally required to obtain products of certain quality, in the conditions in which a wider variety of products can be made in smaller quantities and with lesser flaws than in the mass production system.Reprocessing: Remaking a faulty product.Shojinka: Flexible production cells (mix & volume).Toyota Production System (TPS): Production system developed by Toyota to obtain best quality, lowest cost and shortest production time, simultaneously eliminating wastes for the products made. TPS is based on two fundamental concepts, namely: JIT and Jidoka. Moreover, it uses other methods such as: standard work, Kaizen, PDCA cycle.“PULL” Production System: The Pull production system tends to eliminate overproduction and is one of the three major components of the JIT system, next to available operating time and continuous flow. In the “Pull” system, a downstream operation provides information to the upstream operation (often by means of the Kanban card) regarding what item or materials are necessary for processing, in what quantity, when and where they are necessary. The 10/44
  11. 11. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 upstream supplier process starts processing items only when the downstream client process signals the “need” for items (for example, by means of a Kanban card). The “Pull” production system is the opposite of the “Push” system. “Pull” system entails “pulling” the product from the production line, at the pace set by customer demand. In order to reduce the risk of interruption of production as a consequence of an incorrect sizing of batches, occurrence of malfunctions, etc., certain tactical buffer stocks are provided, allowing the control of the stocks of unfinished products.“PUSH” Production System: The product is “pushed” along the production process, in batches that are large enough to: A. Satisfy current and future demands B. Compensate for problems that might occur during the course of the process.SMED: SMED - Single Minute Exchange of Die, is a quick and efficient method to make changeovers in production. SMED method is used to set a process and to tune it until it is brought to normal operation, with minimum waste, with a view to manufacture a certain product. In specialized literature, this method is also known as “Quick Changeover”. SMED is a concept according to which any changeover in production can and must last less than 10 minutes. Recently, they speak of a more advanced concept: OTED – One Touch Exchange of Die, which entails that production changeovers should last less than 100 seconds. The process of reducing the time necessary to prepare production changeover, from the processing of the last item of the previous product until the processing of the first good item of the next product. The basic steps in reducing this preparation time are: 1. Measuring the total time for setting and adjustment to the current state 2. Identifying internal and external operations, calculating individual times 3. Converting, to the extent to which it is possible, as many internal operations as possible into external operations 4. Reducing the time for the internal operations left 5. Reducing the time for the external operations 6. Standardizing the new procedure.Standard inventory: Quantity of products necessary before each operation, so that the production process should be carried out adequately. The size of the standard inventory depends on the extent of the variations in the downstream client process (creating the need for a buffer stock) and the capacity of the upstream supplier process (creating the need for a safety stock). An adequate Lean practice is to determine the size of the standard inventory for a process and afterwards to diminish continuously that dimension, but not before reducing the variability of the downstream client process and increasing the production capacity of the upstream supplier process.Inventory: Products and excess materials (and information) that cannot be consumed immediately, present along the stream value in various processing operations. Physical inventories are often characterized by the position they have along the value stream. Thus, there can be identified inventories of raw materials / materials / information, inventories of unfinished / in-process inventories, inventories of finished products that appear in various stages along the value stream.Supermarket: Term taken over from business practices, to define the location and organization for storing a buffer intended to satisfy the requirements of the downstream processes. Supermarkets are usually placed next to the upstream 11/44
  12. 12. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 suppler processes, so that to be able to see and fill the requirements for items of the downstream client processes. Each item or material has a well established place, so that the number of items necessary for processing the downstream client process should be easily added. The moment an item or a material is depleted, the worker shall inform the upstream supplier process of this by means of a specific signal (Kanban card or empty container / space)Overproduction: To produce more, faster or sooner than it is necessary for the following operation. Ohno considers overproduction the worst king of waste, as it generates and hides consecutive wastes such as unnecessary stocks, flaws, waiting and conveyance in excess.Production Cycle Time: The actual time necessary to complete an operation within a process. The total production cycle time includes all operations necessary, which must be correlated with the available operating time (which contains, in addition to the total production cycle time, also indirect productive times), so that waste caused by overproduction should be eliminated.Available Operating Time: The available operating time can be defined as the maximum time available to complete a product, so that customer demand should be met on time. It can be considered the beat of the Lean system (the takt / rhythm of processes)Total Production Time (Takt Time): Time necessary from reception of orders until their delivery. The following example is useful for explaining better the use of this category of time: Available Operating Time = Takt Time = Average Daily Demand for a Product = Daily Available Production Time / Daily Requirements If a production line must make 5000 items during an 8 hour shift, then the Available operating time (production takt time) = 8 hours / 5000 items = 0,0016 hours / item = 5,76 seconds per item. Therefore, the 5,76 seconds per item is the maximum time available to manufacture the necessary 5000 items during an 8 hour shift, so that to deliver the product on time, in compliance with client requirements. It should be differentiated between the available operating time (the time given by the customer to deliver a product), the production cycle time (technological time directly necessary to process the product) and total production time (duration that includes direct and indirect production times and which can be superior or inferior to the available operating time).Cost target: Represents the maximum cost for developing and producing a product, within a sub-supplier chain, so that final customer’s quality requirements should be met and manufacturers obtain an acceptable yield for the investment made. Toyota developed this cost targeting strategy for a small group of suppliers with which it had long-term relations. Thus, Toyota, together with these suppliers, assessed a fair / equitable price for a material supplied, upon estimating customers’ opinion on the value of the finished product and then, starting from the price considered the customer to be acceptable, it assessed iteratively, in reverse direction, the costs of all partners along the value stream, so that their necessities for marginal productivity be also satisfied.Conveyance: Moving the product from the place where it was manufactured to the place where it is needed. The distance covered can induce waste, as well as unnecessary conveyance.Visual factory – Andon: The capacity to understand the status of a production area within 5 minutes or less, through a simple observation, without using computers and without talking with anybody. 12/44
  13. 13. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017Value: The value of the products, as perceived by customers and reflected in the sale price and market demand. Value-adding activities: are those activities considered by the customer to add value to that respective product. Non-value-adding activities: any other activity which generates costs, but does not add value to the product, from customer’s perception. c) Scope The business environment of Romania, in continuous development, requires fromSMEs an ongoing adjustment to market demands, especially in the conditions of Romania’saccession to the European Union. Market globalization leads to an increase in competition.There is no divine right to stay in business; therefore, small and medium-sized enterprises ofRomania should become aware that the key to survival is competitiveness. Enhancing the productivity of the SMEs that operate in the manufacturing field, as wellas cutting production costs is possible by applying the Lean Manufacturing method. Thesearguments are the reason for which companies, firms, organizations in industrialmanufacturing and logistic planning, but also of the economic and social fields shouldbecome familiar and should apply Lean concepts, which lay at the basis of productionmanagements and which means survival in a global market. d) Categories of users The top and medium level managers – general manager, deputy manager, salesmanager, human resources, marketing consultants, area managers in SME with businessesin production, services, retail and distribution, consultants, entrepreneurs, specializedpersonnel in the financial field, employees. e) Details on the organisation who created the module The National Council of Small and Medium Sized Private Enterprises of Romania(CNIPMMR) with headquarters in Bucharest, 1-3 Valter Mărăcineanu St., 1st Entrance, 1stfloor, sector 1, Postal code 010155, is a confederation of associations of SMEs (employers’association representative at national level - www.cnipmmr.ro). One of the missions of ourorganization is to provide professional services, which should lead to an improvement in theactivity of small and medium sized enterprises of Romania. Taking into consideration the extensive experience of cooperation with entrepreneurs andbased on the knowledge of the business environment of Romania, CNIPMMR, through theProject Department, makes available to SMEs and SME associations, in addition to supportservices, such as facilitation of information and assistance regarding irredeemable financingsources, other financing access services and training and vocational services. As lifelong learning represents a prerequisite tool without which one cannot keep up withthe new challenges and requirements of the environment in which every organization carriesout its business, the objective of these vocational and training services is the lifelonglearning and improvement of the employees: Development of business skills of the SME personnel with a view to the adjustment to the global market and to Romania’s accession to EU; Improvement of the economic and technical performances of SMEs by increasing the vocational training of the personnel; Increase of the number of successful entrepreneurs. The vocational training services consist of a series of training modules authorized bythe National Council for Adult Vocational Training (CNFPA), which enables us to issuediplomas/certificates recognized by the Ministry of Labour, Social Solidarity and Family andby the Ministry of Education and Research. The course offer consists of: ProjectManagement, SME Management (course consisting of 7 modules specialized in: 13/44
  14. 14. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017PRODUCTIVITY AND INVESTMENT MANAGEMENT, PROCUREMENT MANAGER,FINANCIAL MANAGEMENT FOR MANAGERS IN NON-FINANCIAL SECTORS,MANAGEMENT OF THE PRODUCTION PROCESS, CHANGE MANAGEMENT, RISKMANAGEMENT, ENTERPRISE RESOURCES MANAGEMENT), NEGOTIATIONS –TECHNIQUES AND PROCEDURES OF MANAGERIAL AND ORGANIZATIONALCOMMUNICATION, PROBLEM SOLVING WITH TRIZ METHODOLOGY. Other courses offered by CNIPMMR refer to: Techniques for Finding and Keeping aJob, Launching Income Generating Businesses, Development of the Entrepreneurship,Business Plan and Company Activity Strategy, Social Responsibility of SMEs MODULE CONTENTCHAPTER 1: METHODS FOR GATHERING AND ANALYZING THE DATA NECESSARYTO CUT COSTS Lean Manufacturing is a systematic approach to identifying and eliminating waste (nonvalue-added-activities) through continuous improvement of the production flux of the productbased on client’s demand, pursuing perfection. (The MEP Lean Network). Lean production is a time-based philosophy. By reducing production time new productscan be introduced faster on the market, as well as shorter time between the expenditure andcollection of money (collection of the cash flow).Learning objectives: Identifying waste / waste causes Lean evaluation / Lean measurements Becoming aware of the current situation of the value stream and of the analysis methods for cutting costs1.1. WASTE Waste means any element that raises the product cost, without adding value for thecustomer. Waste can be caused by many factors, such as: machinery location, excessivesetup time, uncompetitive production process, poor preventive maintenance, uncontrolledwork methods, lack of personnel training, boredom, production planning, lack of organizationat the workplace, lack of quality and trust in suppliers, lack of concern (responsibility),transmitting faulty items to the production flow, lack of communication of improvements,overproduction, large stocks, conveyance/transportation, non-value added processes,waiting time, counting, etc.. Lean Manufacturing is a system that imposes 7 types of waste: 1. Overproduction: producing more, sooner, faster than required by the next process. 2. Transportation: moving the product from where it was produced to where it is necessary. The distance represents a waste. 3. Reprocessing: remaking a faulty product. Materials, manpower, machinery used to remove flaws raise the total cost of the product. 4. Movement: every movement of individuals or machineries that do not add value to the product. 5. Waiting: when individuals and machineries are inactive, waiting for the previous process to be completed. 6. Inventories: products that cannot be consumed immediately. The inventory is a necessary evil. Inventories should be in small quantities; therefore an alternative method should be selected to minimize inventories. Inventories conceal the reality and determine managers to make wrong decisions. 7. Processing works which is not necessary. 14/44
  15. 15. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 In any enterprise, three types of activities can be identified: Value-adding activities (VA) – are those activities which, in the eye of the final consumer, make a product or a service more valuable; Non-value adding activities (NVA) – are those activities which, in final consumer’s perspective, don’t make a product or a service more valuable. Nonetheless, not all non-value adding activities can be eliminated; they can be divided into: o non-value adding activities, some of which are indispensable and others necessary to certain extent – are those activities which, from final consumer’s perspective, don’t add value to product or service, but which are necessary (invoicing, inspection, work safety actions, etc.). o non-value adding activities that are not necessary in the current conditions. In the case of a physical product (production or logistic flow), the ration between therates corresponding to the three types of activities and the duration of overall productioncycle, within a regular company (but not an international one), is of approximately: 5% value-adding activity, 60% non-value adding activity and 35% necessary but non-value addingactivity. In the case of an informational environment (e.g.. administrative office, distributionprocess, data processing), the ratio between the rates corresponding to the three types ofactivities and the duration of the overall production cycles, within a regular company (but notan international one), is of approximately: 1% value-adding activity, 49% non-value addingactivity and 50% necessary, but non-value adding activity.1.2. LEAN ASSESSMENT In order to find out whether your company is Lean or if you want to find out how “Lean”you are, you must find answers to the questions “Where are you now”” and “Where do youwant to go?”. In other works, you should visualize the current situation, with its strengths andthe weaknesses that must be mended. Then decide whether to adopt an improvement cycle,a quick and accurate action plan, flexible in time, to accomplish the objectives set. As a Lean assessment tool, you can use an assessment questionnaire, then trace the“radar chart”, highlighting the current situation and the desired situation. The assessment questionnaire includes a list of aspects, for the description of whichquestions on categories of interests are asked, then a score is granted for each answer thatis adequate to the situation and a total is identified, representing a certain ranking, on a scalefrom 0 to 100%. Assessed areas refer to: Inventories – e.g.: size of the inventory of finished product, for unfinished production, materials, speed of turnover, etc. Team – e.g.: type of organization, waging system, work safety system, turnover of labour, etc. Processes – e.g.: how many large machineries or single-process areas are there (through which more than 50% of the product must pass); types of processes, batch sizes, production changeover time, product variety, etc. Maintenance – e.g.: registration / availability of data on equipment (operating, repairs history and spare parts, manuals and spare parts), types of maintenance used, frequency of malfunctions, existence of a preventive intervention plan, etc. Layout and material handling – e.g..: the amount of the total floor space used to place and handle materials, the amount of floor space of an enterprise, organized according to functional criteria or cells / process types, degree of efficiency in general 15/44
  16. 16. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 administration, appearance of the enterprise, cleanness, etc. Suppliers – e.g.: average number of suppliers for each raw material or purchased material, replenishment rate, specific procurement clauses; percentage of the raw material and products purchased from skilled suppliers, and which do not require qualitative acceptance, etc. Setup– e.g..: the general average setup time (in minutes) for the most importance piece of equipment, the percentage of operators trained to apply quick setup techniques, existence of a work procedure, etc. Quality – e.g..: percentage of the total employees who were trained to apply statistical control techniques, percentage of statistically controlled operations, general rate of non-compliances, etc. Scheduling / control – e.g..: percentage of the production run that “flows” directly from one operation to the next (with no intermediate warehousing), degree of compliance with delivery terms, etc. Visual management – e.g.: notice boards in the enterprise, available posted data, rate of information update, etc. An example of Index table for scores obtained in such an assessment: No. of STRATEGIC SECTION SECTION POINTS questions AVERAGE % IMPACT TARGET / section FACTOR 1.0 Inventory/stocks 0 3 0.00 0% 11.0% 99.0% 2.0 Team 0 6 0.00 0% 9.5% 85.5% 3.0 Processes 0 6 0.00 0% 11.0% 99.0% 4.0 Maintenance 0 5 0.00 0% 8.0% 72.0% 5.0 Layout and 0 5 0.00 0% 11.1% 100.0% material handling 6.0 Suppliers 0 5 0.00 0% 9.0% 81.0% 7.0 Setup 0 3 0.00 0% 11.1% 100.0% 8.0 Quality 0 4 0.00 0% 10.0% 90.0% 9.0 Scheduling / control 0 3 0.00 0% 9.0% 81.0% 10.0 Visual mgmt 0 3 0.00 0% 10.0% 90.0% Company: xxx SUM: 100% Date: 01/01/2005 MAX: 11.1% The strategic impact factor allows each enterprise to set the priority areas, with weightsby which the scores obtained are multiplied, so that results could be compared in the Radarchart, which illustrates the situation and objectives and shows the priority action fields. Here is an example of radar chart, according to the score obtained after analyzing thecategories illustrated above: 16/44
  17. 17. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 1.0 Inventory 100% Lean Profile 90% 10.0 Visual mgmt 2.0 Team 80% 70% 60% 50% 40% 9.0 Scheduling 30% 3.0 Process 20% 10% 0% 8.0 Quality 4.0 Maintenance 7.0 Setup 5.0 Layout TARGET 6.0 Suppliers ACTUAL The assessment questionnaire should be adapted to the type of company / branch, asthe “Lean” level starts with general questions, adjusted to the needs of the company, branch,the important factors of the score list being adaptable to needs. Lean assessment is carried out taking into account also the socio-technical system,that is elements correlated internally (internal system) with the environment. Leanassessment is carried out in order to accomplish a common objective. For the purpose of theLean assessment, input into the internal system, the environment and expected output aretaken into consideration. Input into the internal system is defined as work, materials, capital,energy, information, which are the correlations, influences and continuous interactions of theinternal system with the continuously changing environment. The environment is representedby the society, the natural environment, market, technology, government, etc. Expectedoutputs can be products / services, but also undesirable outputs such as pollution, loss,waste. Lean assessment can be carried out by means of other measurements and analyses,upon which data are gathered and analyzed, feedback for control of problems is immediatelyobtained, and actions are taken based on data on improvement of performances. Thebiggest problem in many organizations is the lack of action based on the data gathered,although they are gathered and reported.1.3. LEAN INDICATORS There are four key elements in the production environment: productivity, quality,safety and costs. The typical indicators for Lean production refer to these four elements andconsist of determining the time from reception of an order until its delivery, speed of turnover,duration until the first product of a certain kind is obtained, the rate of on-time deliveries,overall equipment efficiency (OEE).Productivity Overall productivity is the ratio between the quantity of products (output) made in asystem during a certain period and with a quantity of resources (input) used within the sameperiod of time. Total productivity is the quantitative measure for the results obtained pursuantto the use of those respective resources. Total output / Total input. Partial productivity is the ratio between outputs and inputs specific to distinctivefactors. Thus, it can be determined: Labour productivity: total output / man-hour used Materials productivity: total output / materials consumed Capital productivity: total output / cost of capital Energy productivity: total output / consumption of energy 17/44
  18. 18. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 The difference between productivity, efficiency and effectiveness is the following: o Efficiency: How well is the input used? o Effectiveness: How good are the results? o Productivity: Out-put-input ratio Productivity should reflect the capacity to produce what it is necessary, when it isnecessary, where it is necessary, in the volume and percentage necessary, in the mostfinancially efficient manner. It is very important that the Input factor, which should eliminatethe non-productive time and the Kanban waiting time (a long Kanban waiting time shows anunbalance between processes). In accordance with the Lean principle, the enhancement of the value created should bemade with the same, or even less resources.Quality Productive performance is determined in many cases by machineries / equipment orby human intervention: raw materials, inspections, interventions in case of malfunctions, etc. The REAL performance of piece of equipment can be determined by several method,but a sage and accurate estimation is given by the overall equipment effectiveness (OEE),according to which, specific TPM (Total Productive Maintenance) methods are applied. When calculating the OEE, it should be taken into consideration the availability (howmuch per cent of the overall effectiveness is availability), process efficiency (how much percent of the overall equipment effectiveness is the process efficiency) and percentage ofgood products (how much per cent of the overall equipment effectiveness is goodproducts). Availability: is diminished because of the time during which the equipment did not operate, although it could have been available – operating time vs. loading time. Operating time Availability = x 100 Loading timeUseful estimations: Loading time = (Usual works hours + extra hours) – (scheduled idle time + over-capacity)Note: It should be performed a critical review of the idle time scheduled! Operating time = Loading time – idle timeNote: Consideration should be given to malfunctions, lack of power, lack of personnel, lack orraw materials, lack of tools, setups, cleaning, ….. Process efficiency (performance): possible causes for which the equipment does not function, and it is not obtained a sufficient production, can be due to inactivity caused by need for personnel, interference with other machineries, low operating speed, adjustments, tests, small interruptions, training hours, etc. Teoretical cycle time / product x no. of products Efficiency = x 100 Operating timeNote: You should know how the work hours are used and what is the cycle time for a productor the average cycle time: Percentage of good products (quality): Net operating time (functioning) = net running time – time lost due to malfunctions No. of products − No. of scraps Percentage of good products = x 100 No. of products 18/44
  19. 19. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017OEE – overall equipment effectiveness Real performance of a piece of equipment or the synthetic efficiency for a work loadof 8 hours is given by the formula: D B C D = x x , where: A A B C- A is the loading time- B is the operating time or the gross running time- C is the net operating time- D is the useful operating time: B C D = availability; = efficiency; = quality A B C The conclusion reached by the Japanese Lean specialists after carrying out thesemeasurements is that "Equipment in our factories is used at half of their capacity. There is noreason that yours should be different". (Yamashina 1989)Example of OEE calculation A. Daily production time = 60 min. x 8 hours = 480 min. B. Daily schedule idle time (starting manufacturing, scheduled maintenances, interruptions for meetings) = 20 min. C. Daily loading time = A – B = 460 min. D. Downtime loss (if it lasted 20 min., preparation 20 min., setup 20 min.) = 60 min. E. Daily operating time = C – D = 400 min. G. Daily production = 400 items H. Good pieces factor = 98% I. Theoretical cycle time = 0,5 min./piece J. Actual cycle time = 0,8 min./pieceBased on these data, the following results are obtained: F. Actual run rate = J x G = 0,8 x 400 = 320 min. T. Availability E / C x 100 = 400/460 x 100 = 87% M. Speed rate = I / J x 100 = 0,5/0,8 x 100 = 62,5% N. Net operating rate = F / E x 100 = (0,8 x 400)/400 x 100 = 80% L. Process efficiency= M x N x 100 = 0,625 x 0,800 x 100 = 50%OEE = Overall plant productivity = T x L x H x 100 = 0,87 x 0,50 x 0,98 x 100 = 42,6% On-time delivery measures the capacity of the value stream to ship products tocustomer at the moment requested by the customer. The indicators that can be used are: Time between the input of raw materials and output of products: is determined by the quantity of inventory on the value stream, expressed in days or running hours or by the overall inventory quantity referred to product shipment rate, speed of turnover. Quality indicators: rate of good pieces, time lapsed until the first good piece is obtained. 19/44
  20. 20. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 Not taken into consideration are the reprocessed products, and the evaluation of these indicators is carried out in various process phases, not just at the end.1.4. VSM - VALUE STREAM MAP The analysis of the current situation is carried out in order to obtain a clear ad commonimage of the “target system” of the unit under analysis, referred to its “current state” and toprovide input for planning change required to accomplish the objectives planned. The purpose of the analysis is to define the existence of the business in which we areinvolved, why do we exist, what do we do, how do we act, the way in which we add value tobusiness and customers, while accomplishing our objective. In order to become familiar withthe current situation, a set of tools is used. Examples of methods of analysis of the current situation: Assessments at organizational level: tools used, Baldrige or EFQM criteria for excellence in performances, SWOT analysis, internal strengths and weaknesses, opportunities and external threats. Assessment of the production system: focus on the use of team practices by the employees in the production / service field. Assessment of the management: 360 degree assessment of management practices. Input/output analysis refers to: ▫ Suppliers: entities (groups, functions or organizations) which provide input to the team. ▫ Input: materials, equipment, information, individuals, financial resources, etc. needed by the team to carry out processes. ▫ Value added processes: processes that the team carries out in order to transform input into output – a process adding value to input by transforming it or by using it to produce something new. Examples: repairing of a product, delivery of products, processing a customer’s order,preparing an annual statement, making a product, preparing and organizing a trainingcourse, identifying training necessities, establishing design quotas, mail delivery etc. ▫ Output: products or services created by the team; what is handed over to the customer. ▫ Customers: individual or group who receives and uses the output made by the team. Regardless whether it is an internal or external customer, it uses the output provided by the team Internal customer – product or services user (s) within the organization. External customer – user of a global product or service of the organization, from outside that organization (usually referred to as “final user” or “consumer”). Value analysis: quantifies various types of waste. It is used to quantify types of waste such as those caused by overproduction, waiting, transport, processes that add additional costs, inventories, various unnecessary conveyances (movements), scraps. The method can be applied successfully to productive (manufacturing) environment, toanalyze production process performances, as well as to non-productive environments, toanalyze overheads (OVA - Overhead Value Analysis), or time management. Work Sampling (the snapshot observation method): it is applied in order to obtain a snapshot of the current situation, but also because “You cannot manage what you do not measure”, in accordance with the theory formulated by Prof. Em. Carl R. 20/44
  21. 21. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 Lindenmeyer. Here are several principles on which this method is based: ▫ The method entails a non-continuous observation, that is sampling of observation situations. Random, short observations are made within a precise period of time, on previously established routs, which should not be unique. ▫ For the measurements to be as precise as possible (with an error rate as low as possible), the personnel should be informed, not only the person directly involved in making observations. . The method can be applied by carrying out the following steps: 1. STEP 1: it is made a preliminary investigation, to determine the values to be analyzed. For example, in the case of a warehouse, it should be taken into consideration thehandling of goods, the time necessary to enter data into computers, absence of variousmembers of the personnel during the work day, for various reasons, the time during whichnothing is made, various other elements, function of what we want to measure. 2. STEP 2: it is conceived a data gathering and reporting form, which should include observation lines and columns for the elements observed. Here is an example of observation sheet referred to as "snapshot observation sheet": Object: _____________________ Date: ______________ Moment A B C D E F G T1 T2 T3 T4 Total % 3. STEP 3: it is determined the number of observations, function of the degree of precision accepted. The number of observations function of the degree of precision expected is determinedwith the formula: 4. p.(100 − p ) n= a2 Where: n = number of necessary observations p = the highest rate of testing observation a = the precision expected (error) The factor “4” corresponds to a degree of trust of 0,95. If we want another limit of the degree of trust, we should use the formula: 2 N =⎜ ⎛ Z α ⎞ q(1 − q) ⎟ ⎝ v ⎠ Where: α is the degree of precision, v is the admissible error margin, q is the estimated 21/44
  22. 22. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 value. 4. STEP 4: the duration of snapshot observations is determined. If the duration is too short, it is not representative and therefore, it must be extended.The pace at which observations are made (how many observations are made in a day and atwhat interval) is established according to the daily number of possible observations and thetotal number of necessary observations. For example, for a number of 20 observations thatcan be made within a day (function of the area to be covered, the duration of the route, thedistance between the locations included in the route) and a number of 400 observationsnecessary to reach an acceptable precision, 20 days are required to provide them. 5. STEP 5: determination of the moments of random observations (which should lead to results free from systematic deviation). It can be used any software that generates random numbers or tables of random numbers. For example, for a 10 min. tour (route), respectively 6 tours that can be made in onehour, it means that 48 tours can be made in an 8 hour shift (08.00-16.00). Therefore, thework day is divided into 48 intervals, numbered from 1 to 48, it is drawn a table with 50random numbers and these numbers are transformed into hours/min. In order to establishthe moments (time) at which the observation tour can begin, the moments thus identified areentered chronologically in the reporting form and then the tours that should be made duringthe planned breaks are eliminated. 6. STEP 6: the actual observations are made. Observations are made in “snapshot” manner, at pre-determined moments, varying theroutes (preestablished variants) as much as possible, in order to eliminate to the maximumextent the risk of entering into certain easily noticeable behavioural patters. After eachobservation, a line of the “snapshot observation sheet” is filled in. At the end of theobservations period, the rate for the element traced is calculated with the formula: Ai Ci = x100 B where, Ci = rate of the activity i, i = 1 ... n, n – number of observations Ai = number of observations (appearances) for activity i B = total number of observations (for all activities) 7. STEP 7: it is calculated the precision (error) with which observations were made. If there were not sufficient observations, and a low accuracy is not admissible,additional observations should be made. p.(100 − p) a = 2. n where: a = current precision p = current rate (of the activities studied) n = number of observations 8. STEP 8: results analysis 2 ⎛z⎞ n = ⎜ ⎟ p (1 − p ) ⎝e⎠ 22/44
  23. 23. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 where: n = number of observations z = coefficient of plausible probability (degree of trust) that the result estimated (p = weight of the element studied) should be within the limits of an admissible error; to be taken from special tables. e = relative admissible error Z= Z= Z= 2,58 for a precision of 99% 1,96 for a precision of 95% 1,40 for a precision of 85% 2,33 for a precision of 98% 1,70 for a precision of 92% 1,00 for a precision of 68% 2,00 for a precision of 95,5% 1,65 for a precision of 90% Value stream mapping is carried out with the help of the results obtained by applyingone or all the analysis tools previously mentioned (or other specific tools). The value streammap includes all actions (both value added, as well as non-value added) currently performedto make the product run through the main specific technological processes. In order to map the value stream, you should take into consideration the material flow(external procurement sources, inventories, production plan made according to the estimatedmarket demand, production process, means of transportation, working personnel) and theinformation flow (manual and electronic information flows) that include all elementsconcurring at the accomplishment of a production processes in a company. The stream value map is a visual representation of the value stream, with all aspectsclearly illustrated. In the following, it is presented a sample: Then, all elements represented in the value stream map are associated with durations– production cycle time, inventory consumption time, setup time, etc., so that by the end weshould be able to determine the overall time necessary for a product to run through the flow 23/44
  24. 24. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017described. When mapping the value stream, a series of symbols are used, such as: C/T=1sec C/O=1hour Tuesday I Michigan Uptime=85% + Thursday 200 T Steel Co. 4600L 27,600 sec. av. 2400R EPE=2weeks Inventory Delivery by truck Process External sources Data box Change d Finished goods to Pull arrow Operator Kaizen customers Supermarket “Lightening” Week. S OXOX S Manual Electronic Plan Safety BoxHaijunka inventory information information flow flow B B Production Feeding Signalling Kanban Kanban Kanban Kanban Buffer WorkstationCHAPTER 2: METHODS OF CUTTING COSTS BY REORGANIZING PRODUCTIONPROCESSES2.1. JUST IN TIME (JIT) PRODUCTION. JIT is production compliant with customer’s request: what it is necessary, when it isnecessary and in what quantity is necessary. JIT is a manufacturing philosophy of greatsignificance for industrial companies, due to the short response time (“flexibility”),proliferation on new market shares and products, creation of short product lifecycles. JIT = Philosophy + method + workers “who think” Philosophy Methodology Zero defects Overall concern for quality Zero malfunctions Total Preventive Maintenance Zero inventories KANBAN Zero setup time SMED – Single Minute Exchange of Die Zero material handling Compact layout Zero production time Competitive engineering The JIT strategy consists of constantly reducing the time necessary to transformcustomer order into actual deliveries, and it is concept developed within the ToyotaProduction System. JIT consequences in a workshop consist of visual control of the line, reducedconsumption of materials, production planning according to a mix series of products, celllayout, item standardization. 24/44
  25. 25. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017 Just In Time production has two basic principles: continuous production flow andthe “Pull” system. Continuous production flow is necessary because batch production is too slow toanswer the takt time requested by the customer, and lead to excessive inventories, whichprevent the detection in due time of the non-compliances occurred during the productionprocess . JIT or processing in continuous unitary flow (item by item), is made in accordance withthe following principles: Production is structured as a synchronized chain in which each individual has a balanced work volume, as referred to his/her supplier and customer in this chain. All individuals finish work at the same time. The product is moved downstream, in a synchronized manner. Each individual has the power to stop the production process, whenever he/she notices a defect. The takt time sets the production pace so that it matches the sales pace. The total operating time (takt time) is the work time (total of seconds available in aworking day) referred to the volume of necessary products (daily production demand). Theproduction pace is given by the Cycle time, which is the actual time necessary for a workerto complete a cycle within his/her process. In order to balance the cycle times of various processes, it is used a method calledHeijunka, which focuses on levelling production. Production cells can be created to fit a veryirregular demand. In this case, a buffer of finished products is used to level the productionplan running. Manufacturing cells usually entail workstations placed close to each other, arranged inU-shapes, serviced by multiple-skilled workers, with flexible processes – a product or a sub-assembly can be produced, multiple ranges of products. Cells can have workstations inter-related with other work cells or sub-cells, which means that cells become flexible (Shojinka –flexible production cells), thus, a wide variety of products can be made with basic technologyand unspecialized machineries. In cells, the load per worker is flexible, and the number of workers can be modified inorder to adapt the capacity to the necessary of products. Equipment should be flexible(multifunctional machineries). Amongst the benefits of using production cells, we can mention: It is allowed the flow of a single item, due to the improvement of the first run of the product (enhanced quality due to a quick feedback) It helps obtaining a better Kanban It reduces the need to move items due to an improvement of the cycle time It increases productivity due to unit cost savings It signals problems, so that the causes should be quickly and completely removed It allows a better use of the floor space. Within work cells, teams have increased powers and are self-managed. Supervisorsdo not manage the team, but they rather coach, train and motivate it. Teams meet on dailyfor 10 – 15 minutes and review the production objectives for that respective day, reviewworks tasks and assign to team members, special instructions, quality and productionproblems, what are the emergency plans in case of non-attendance, reasons for earlyleaving of personnel., schedules of extra hours and partial substitutions, daily update of theweekly situation, major events, such as customer visits. In other words, advanced teams areinvolved in member selection criteria, in implementation of the production process, in 25/44
  26. 26. Training module: Lean Manufacturing–Cost cutting methods Pilot Project no. RO/03/B/F/PP-175017evaluating the employees and performance-related problems. “Push” production system is a traditional production system, in which the product is“pushed” through the production process, in batches large enough to satisfy current andfuture demands and to compensate for problems that might occur during the process. ThePush System starts with the kick-off of the production based on a plant which is preparedbased on existing orders, but also on forecasted ones (from customers). The specific way ofthinking in this situation is “We make it, they (the management) will sell it eventually!”. The market demands determined for some time now, the emergence of a “Pull”production system, in which downstream processes pull from upstream what they needand when they need it. Upstream processes then make up the materials consumed. Theproduct can be pulled through the production system at the takt time, which is at thedownstream limit of the entire process. Finished products are made by levelling productionwith the help of tactical buffer inventories collected in a Kanban system of starting processingprocesses, a system that offers control over the entire unfinished production inventoryexisting on the flow. The “Pull system” starts when the customer purchases products, in case of repeatedorders or when the customer places an order for a new product. This system focuses on theidea “If they demand it, we shall produce it”. The “pull” system allows small batch production. Thus, inventories are reduced byminimizing the number of Kanban card on the flow and the production enters a continuousflow, with continuous movement of small batches of material or of the production obtained. Small batch production has many advantages, because it reduces inventories, requiresless floor space, hence smaller capital investments, brings processes closer to each other, itmakes easier to detect quality problems, and it creates interdependency between processes. Other advantages are given by the reduction of the setup time. Small batches requireshorter setup, thus the setup times can be reduced from hours to minutes. For this purpose,Shingo developed the SMED (Single Minute Exchange of Dies) system, in which toolchangeovers are made in less than 10 minutes. According to the SMED principles, in order to cut setup time it is required: To separate the internal setup from the external one. To transform the internal setup into external (off line). To rationalize all setup aspects. To carry out setup activities simultaneously, until they are completely removed. Here are several setup reduction techniques: presetting the setups required, use ofquick fastening devices, use of locks, prevent non-alignments, eliminate certain tools,interchangeable sets, easier movements, etc. Small batch production requires mix series of products. JIT allows simultaneousproduction or assembly or a series of distinctive product using the same productionequipment. This is known as production in mixed series of products such as: A A B A A C AA B A A B A A C A A B A A C A B, or other similar. The result is the repetitive flow production, against the traditional, large batchproduction. The production in mixed series requires smaller batches and shorter setups. Launch of production plans the manufacture of the same mixed series of products,every day, during a certain period of time, or different sequences of mixed series. Machineload can be changed from one month to another, but it shall remain the same each day of acertain period of time, which allows simultaneously meeting several orders and reducing theinventories of finished products. Here are several application principles for the production in mixed series: 26/44