The concept of flexible resources, in the form of multifunctional workers and general-purpose machines, is recognized as a key element of lean production, but most people do not realize that it was the first element to fall into place. Taiichi Ohno had transferred to Toyota from Toyoda textile mills with no knowledge of (or preconceived notions about) automobile manufacturing. His first attempt to eliminate waste (not unlike U.S. managers) concentrated on worker productivity. Borrowing heavily from U.S. time and motion studies, he set out to analyze every job and every machine in his shop. He quickly noted a distinction between the operating time of a machine and the operating time of the worker. Initially, he asked each worker to operate two machines rather than one. To make this possible, he located the machines in parallel lines or in L-formations. After a time, he asked workers to operate three or four machines arranged in a U-shape. The machines were no longer of the same type (as in a process layout) but represented a series of different processes common to a group of parts (i.e., a cellular layout).

• Multifunctional workers: perform more than one job.

• General-purpose machines: perform several basic functions.

The operation of different, multiple machines required additional training for workers and specific rotation schedules. Figure 16.3 shows a standard operating routine for an individual worker. The solid lines represent operator processing time (e.g., loading, unloading, or setting up a machine), the dashed lines represent machine processing time, and the squiggly lines represent walking time for the operator from machine to machine. The time required for the worker to complete one pass through the operations assigned is called the operator cycle time.

Figure 16.3. Standard Operating Rouitine for A Worker

Closely related to the concept of cycle time is takt time. "Takt" is the German word for baton, such as an orchestra leader would use to signal the timing at which musicians play. Takt time, then, is the pace at which production should take place to match the rate of customer demand. An operator's cycle time is coordinated with the takt time of the product or service being produced.

With single workers operating multiple machines, the machines themselves also required some adjustments. Limit switches were installed to turn off machines automatically after each operation was completed. Changes in jigs and fixtures allowed machines to hold a workpiece in place, rather than rely on the presence of an operator. Extra tools and fixtures were purchased and placed at their point of use so that operators did not have to leave their stations to retrieve them when needed. By the time Ohno was finished with this phase of his improvement efforts, it was possible for one worker to operate as many as 17 machines (the average was 5 to 10).

• Takt time: the pace at which production should take place to match customer demand.

The flexibility of labor brought about by Ohno's changes prompted a switch to more flexible machines. Thus, although other manufacturers were interested in purchasing more specialized automated equipment, Toyota preferred small, general-purpose machines. A general-purpose lathe, for example, might be used to bore holes in an engine block and then do other drilling, milling, and threading operations at the same station. The waste of movement to other machines, setting up other machines, and waiting at other machines was eliminated.

While it is true that Ohno first reorganized his shop into manufacturing cells to use labor more efficiently, the flexibility of the new layout proved to be fundamental to the effectiveness of the system as a whole. The concept of cellular layouts did not originate with Ohno. It was first described by a U.S. engineer in the 1920s, but it was Ohno's inspired application of the idea that brought it to the attention of the world. We discussed cellular layouts (and the concept of group technology on which it is based) in Chapter 7. Let us review some of that material here.

• Manufacturing cells: dissimilar machines brought together to manufacture a family of parts.

Cycle time is adjusted to match takt time by changing worker paths.

Cells group dissimilar machines together to process a family of parts with similar shapes or processing requirements. The layout of machines within the cell resembles a small assembly line and is usually U-shaped. Work is moved within the cell, ideally one unit at a time, from one process to the next by a worker as he or she walks around the cell in a prescribed path. Figure 16.4 shows a typical manufacturing cell with worker routes.

Work normally flows through the cell in one direction and experiences little waiting. In a one-person cell, the cycle time of the cell is determined by the time it takes for the worker to complete his or her path through the cell. This means that, although different items produced in the cell may take different amounts of time to complete, the time between successive items leaving the cell remains virtually the same because the worker's path remains the same. Thus, changes of product mix within the cell are easy to accommodate. Changes in volume or takt time can be handled by adding workers to or subtracting workers from the cell and adjusting their walking routes accordingly as shown in Figure 16.5.

Figure 16.4. Cells with Worker Routes

Figure 16.5. Worker Routes Lengthen as Volume Decreases

Because cells produce similar items, setup time requirements are low and lot sizes can be reduced. Movement of output from the cells to subassembly or assembly lines occurs in small lots and is controlled by kanbans (which we discuss later). Cellular layouts, because of their manageable size, workflow, and flexibility, facilitate another element of lean production, the pull system.

A major problem in automobile manufacturing is coordinating the production and delivery of materials and parts with the production of subassemblies and the requirements of the final assembly line. It is a complicated process, not because of the technology, but because of the thousands of large and small components produced by thousands of workers for a single automobile. Traditionally, inventory has been used to cushion against lapses in coordination, and these inventories can be quite large. Ohno struggled for five years trying to come up with a system to improve the coordination between processes and thereby eliminate the need for large amounts of inventory. He finally got the idea for his pull system from another American classic, the supermarket. Ohno read (and later observed) that Americans do not keep large stocks of food at home. Instead, they make frequent visits to nearby supermarkets to purchase items as they need them. The supermarkets, in turn, carefully control their inventory by replenishing items on their shelves only as they are removed. Customers actually "pull through" the system the items they need, and supermarkets do not order more items than can be sold.

Applying this concept to manufacturing requires a reversal of the normal process/information flow, called a push system. In a push system, a schedule is prepared in advance for a series of workstations, and each workstation pushes its completed work to the next station. With the pull system, workers go back to previous stations and take only the parts or materials they need and can process immediately. When their output has been taken, workers at the previous station know it is time to start producing more, and they replenish the exact quantity that the subsequent station just took away. If their output is not taken, workers at the previous station simply stop production; no excess is produced. This system forces operations to work in coordination with one another. It prevents overproduction and underproduction; only necessary quantities are produced. "Necessary" is not defined by a schedule that specifies what ought to be needed; rather, it is defined by the operation of the shop floor, complete with unanticipated occurrences and variations in performance.

• Push systems: rely on a predetermined schedule.

• Pull systems: rely on customer requests.

Although the concept of pull production seems simple, it can be difficult to implement because it is so different from normal scheduling procedures. After several years of experimenting with the pull system, Ohno found it necessary to introduce kanbans to exercise more control over the pull process on the shop floor.

Kanban is the Japanese word for card. In the pull system, each kanban corresponds to a standard quantity of production or size of container. A kanban contains basic information such as part number, brief description, type of container, unit load (i.e., quantity per container), preceding station (where it came from), and subsequent station (where it goes to). Sometimes the kanban is colorcoded to indicate raw materials or other stages of manufacturing. The information on the kanban does not change during production. The same kanban can rotate back and forth between preceding and subsequent workstations.

• Kanban: a card that corresponds to a standard quantity of production (usually a container size).

Kanbans are closely associated with the fixed-quantity inventory system we discussed in Chapter 13. Recall that in the fixed-quantity system, a certain quantity, Q, is ordered whenever the stock on hand falls below a reorder point. The reorder point is determined so that demand can be met while an order for new material is being processed. Thus, the reorder point corresponds to demand during lead time. A visual fixed-quantity system, called the two-bin system, illustrates the concept nicely. Referring to Figure 16.6a, two bins are maintained for each item. The first (and usually larger) bin contains the order quantity minus the reorder point, and the second bin contains the reorder point quantity. At the bottom of the first bin is an order card that describes the item and specifies the supplier and the quantity that is to be ordered. When the first bin is empty, the card is removed and sent to the supplier as a new order. While the order is being filled, the quantity in the second bin is used. If everything goes as planned, when the second bin is empty, the new order will arrive and both bins will be filled again.

Kanbans were derived from the two-bin inventory system.

This supplier kanban attached to a container rotates between Purodenso Manufacturing and a Toyota assembly plant. The part number, description, and quantity per container appear in the center of the card, directly beneath the kanban number. Notice the container holds four air flow meter assemblies. The store address in the upper left-hand corner specifies where the full container is to be delivered. The line side address in the upper right-hand corner specifies where the empty container is to be picked up. The lower left-hand corner identifies the preceding process (the assemblies come from Purodenso), and the lower right-hand corner identifies the subsequent process (N2). Barcoding the information on the card speeds processing and increases the accuracy of production and financial records.

Figure 16.6. The Origin of Kanban

Ohno looked at this system and liked its simplicity, but he could not understand the purpose of the first bin. As shown in Figure 16.6b, by eliminating the first bin and placing the order card (which he called a kanban) at the top of the second bin, (Q − R) inventory could be eliminated. In this system, an order is continually in transit. When the new order arrives, the supplier is reissued the same kanban to fill the order again. The only inventory that is maintained is the amount needed to cover usage until the next order can be processed. This concept is the basis for the kanban system.

Kanbans do not make the schedule of production; they maintain the discipline of pull production by authorizing the production and movement of materials. If there is no kanban, there is no production. If there is no kanban, there is no movement of material. There are many different types and variations of kanbans. The most sophisticated is probably the dual kanban system used by Toyota, which uses two types of kanbans: production kanbans and withdrawal kanbans. As their names imply, a production kanban is a card authorizing production of goods, and a withdrawal kanban is a card authorizing the movement of goods. Each kanban is physically attached to a con-tainer or cart. As shown in Figure 16.7, an empty cart signals production or withdrawal of goods. Kanbans are exchanged between containers as needed to support the pull process.

The dual kanban approach is used when material is not necessarily moving between two consecutive processes, or when there is more than one input to a process and the inputs are dispersed throughout the facility (as for an assembly process). If the processes are tightly linked, other types of kanbans can be used.

Kanbans maintain the discipline of pull production.

• Production kanban: a card authorizing production of goods.

• Withdrawal kanban: a card authorizing the movement of goods.

• Kanban square: a marked area designated to hold items.

Figure 16.8a shows the use of kanban squares placed between successive workstations. A kanban square is a marked area that will hold a certain number of output items (usually one or two). If the kanban square following his or her process is empty, the worker knows it is time to begin production again. Kanban racks, also known as supermarkets, are illustrated in Figure 16.8b. When the allocated slots on a rack or shelf are empty, workers know it is time to begin a new round of production to fill up the slots, often times, these racks or shelves will be open-backed and placed between two operations. If the distance between stations prohibits the use of kanban squares or racks, the signal for production can be a colored golf ball rolled down a tube, a flag on a post, a light flashing on a board, or an electronic or verbal message requesting more.

Figure 16.7. Dual Kanbans

Figure 16.8. Other Types of Kanbans

• Signal kanbans a triangular kanban used to signal production at the previous workstation.

Signal kanbans are used when inventory between processes is still necessary. It closely resembles the reorder point system. As shown in Figure 16.8c, a triangular marker is placed at a certain level of inventory. When the marker is reached (a visual reorder point), it is removed from the stack of goods and placed on a kanban post, thereby generating a replenishment order for the item. The rectangular-shaped kanban in the diagram is called a material kanban. In some cases it is necessary to order the material for a process in advance of the initiation of the process.

• Material kanban: a rectangular kanban used to order material in advance of a process.

Kanbans can also be used outside the factory to order material from suppliers. The supplier brings the order (e.g., a filled container) directly to its point of use in the factory and then picks up an empty container with kanban to fill and return later. It would not be unusual for 5000 to 10,000 of these supplier kanbans to rotate between the factory and suppliers. To handle this volume of transactions, a kind of kanban "post office" can be set up, with the kanbans sorted by supplier, as in Figure 16.8d. The supplier then checks his or her "mailbox" to pick up new orders before returning to the factory. Bar-coded kanbans and electronic kanbans can also be used to facilitate communication between customer and supplier.

• Supplier kanbans: rotate between the factory and suppliers.

It is easy to get caught up with the technical aspects of kanbans and lose sight of the objective of the pull system, which is to reduce inventory levels. The kanban system is actually very similar to the reorder point system. The difference is in application. The reorder point system attempts to create a permanent ordering policy, whereas the kanban system encourages the continual reduction of inventory. We can see how that occurs by examining the formula for determining the number of kanbans needed to control the production of a particular item.

The number of kanbans needed can be calculated from demand and lead time information.

where

To force the improvement process, the container size is usually much smaller than the demand during lead time. At Toyota, containers can hold at most 10% of a day's demand. This allows the number of kanbans (i.e., containers) to be reduced one at a time. The smaller number of kanbans (and corresponding lower level of inventory) causes problems in the system to become visible. Workers and managers then attempt to solve the problems that have been identified.

Determining the Number of Kanbans

Julie Hurling works in a cosmetic factory filling, capping, and labeling bottles. She is asked to process an average of 150 bottles per hour through her work cell. If one kanban is attached to every container, a container holds 25 bottles, it takes 30 minutes to receive new bottles from the previous workstation, and the factory uses a safety stock factor of 10%, how many kanbans are needed for the bottling process?

solution

Given:

L = 30 minutes = 0.5hour

S = 0.10 (150 × 0.5) = 7.5

C = 25 bottles

Then,

Round either up or down (three containers would force us to improve operations, and four would allow some slack).

Small-lot production requires less space and capital investment than systems that incur large inventories. By producing small amounts at a time, processes can be physically moved closer together and transportation between stations can be simplified. In small-lot production, quality problems are easier to detect and workers show less tendency to let poor quality pass (as they might in a system that is producing huge amounts of an item anyway). Lower inventory levels make processes more dependent on each other. This is beneficial because it reveals errors and bottlenecks more quickly and gives workers an opportunity to solve them.

The analogy of water flowing over a bed of rocks is useful here. As shown in Figure 16.9, the inventory level is like the level of water. It hides problems but allows for smooth sailing. When the inventory level is reduced, the problems (or rocks) are exposed. After the exposed rocks are re-moved from the river, the boat can again progress, this time more quickly than before.

Although it is true that a company can produce in small lot sizes without using the pull system or kanbans, from experience we know that small-lot production in a push system is difficult to co-ordinate. Similarly, using large lot sizes with a pull system and kanbans would not be advisable. Let's look more closely at the relationship between small lot sizes, the pull system, and kanbans.

From the kanban formula, it becomes clear that a reduction in the number of kanbans (given a constant container size) requires a corresponding reduction in safety stock or in lead time itself. The need for safety stock can be reduced by making demand and supply more certain. Flexible resources allow the system to adapt more readily to unanticipated changes in demand. Demand fluctuations can also be controlled through closer contact with customers and better forecasting systems. Deficiencies in supply can be controlled through eliminating mistakes, producing only good units, and reducing or eliminating machine breakdowns.

Lead time is typically made up of four components:

Processing time can be reduced by reducing the number of items processed and the efficiency or speed of the machine or worker. Move time can be decreased if machines are moved closer to-gether, the method of movement is simplified, routings are standardized, or the need for movement is eliminated. Waiting time can be reduced through better scheduling of materials, workers and machines, and sufficient capacity. In many companies, however, lengthy setup times are the biggest bottleneck. Reduction of setup time is an important part of lean production.

Small-lot production improves quality and reduces lead time.

Several processes in automobile manufacturing defy production in small lots because of the enormous amount of time required to set up the machines. Stamping is a good example. First, a large roll of sheet steel is run through a blanking press to produce stacks of flat blanks slightly larger than the size of the desired parts. Then, the blanks are inserted into huge stamping presses that contain a matched set of upper and lower dies. When the dies are held together under thousands of pounds of pressure, a three-dimensional shape emerges, such as a car door or fender. Because the dies weigh several tons each and have to be aligned with exact precision, die changes typically take an entire day to complete.

Figure 16.9. Reduced Inventory Makes Problems Visible

Obviously, manufacturers are reluctant to change dies often. Ford, for example, might produce 500,000 right door panels and store them in inventory before switching dies to produce left door panels. Some manufacturers have found it easier to purchase several sets of presses and dedicate them to stamping out a specific part for months or years. Due to capital constraints, that was not an option for Toyota. Instead, Ohno began simplifying die-changing techniques. Convinced that major improvements could be made, a consultant, Shigeo Shingo, was hired to study die setup systematically, to reduce changeover times further, and to teach these techniques to production workers and Toyota suppliers.

Shingo proved to be a genius at the task. He reduced setup time on a 1000-ton press from 6 hours to 3 minutes using a system he called SMED (single-minute exchange of dies). SMED is based on the following principles, which can be applied to any type of setup:

• Internal setup: setup activities that can be performed only when a process is stopped.

• External setup setup activities that can be performed in advance.

In order to view the setup process objectively, it is useful to assign the task of setup-time reduction to a team of workers and engineers. Videotaping the setup in progress often helps the team generate ideas for improvement. Time and motion study principles (like those discussed in the Supplement to Chapter 8) can be applied. After the new setup procedures have been agreed on, they need to be practiced until they are perfected. One only has to view the pit crews at the Indy 500 to realize that quick changeovers have to be orchestrated and practiced.

The flow of production created by the pull system, kanbans, small lots, and quick setups can only be maintained if production is relatively steady. Lean production systems attempt to maintain uniform production levels by smoothing the production requirements on the final assembly line. Changes in final assembly often have dramatic effects on component production upstream. When this happens in a kanban system, kanbans for certain parts will circulate very quickly at some times and very slowly at others. Adjustments of plus or minus 10% in monthly demand can be absorbed by the kanban system, but wider demand fluctuations cannot be handled without sub-stantially increasing inventory levels or scheduling large amounts of overtime.^[25]

• Uniform production levels: the result from smoothing production requirements on the final assembly line.

Figure 16.10. Some Common Techniques for Reducing Setup Time

One way to reduce variability in production is to guard against unexpected demand through more accurate forecasts. To accomplish this, the sales division of Toyota takes the lead in production planning. Toyota Motor Sales conducts surveys of tens of thousands of people twice a year to estimate demand for Toyota cars and trucks. Monthly production schedules are drawn up from the forecasts two months in advance. The plans are reviewed one month in advance and then again 10 days in advance. Daily production schedules, which by then include firm orders from dealers, are finalized four days from the start of production. Model mix changes can still be made the evening before or the morning of production. This flexibility is possible because schedule changes are communicated only to the final assembly line. Kanbans take care of dispatching revised orders to the rest of the system.

Reduce variability with more accurate forecasts.

Another approach to achieving uniform production is to level or smooth demand across the planning horizon. Demand is divided into small increments of time and spread out as evenly as possible so that the same amount of each item is produced each day, and item production is mixed throughout the day in very small quantities. The mix is controlled by the sequence of models on the final assembly line.

Reduce variability by smoothing demand.

Toyota assembles several different vehicle models on each final assembly line. The assembly lines were initially designed this way because of limited space and resources and lack of sufficient volume to dedicate an entire line to a specific model. However, the mixed-model concept has since become an integral part of lean production systems. Daily production is arranged in the same ratio as monthly demand, and jobs are distributed as evenly as possible across the day's schedule. This means that at least some quantity of every item is produced daily, and the company will always have some quantity of an item available to respond to variations in demand. The mix of assembly also steadies component production, reduces inventory levels, and supports the pull system of production. Let's look at an example of mixed-model sequencing.

Mixed-Model Sequencing

Tyrone Motors makes cars, hybrids and vans on a single assembly line at its Cleveland plant. September's sales forecast is for 220 vehicles. Hybrids sell at twice the rate of cars and three times the rate of vans. Assuming 20 working days in September, how should the vehicles (H, C, and V) be produced to smooth production as much as possible?

Solution

If the preceding example sounds extreme, it is not. Toyota assembles three models in 100 variations on a single assembly line at its Tahara plant, and the mix is juggled daily with almost no warning. The plant is highly automated, and each model carries with it a small yellow disc that transmits instructions to the next workstation. Cars roll off the final assembly line in what looks like unit production—a black Lexus sedan, a blue Camry, a red Lexus sports coupe, a white Corolla with left-hand drive, and so on.

This is in sharp contrast to the large lots of similar items produced by mass production facto-ries, in which luxury cars might be produced the first week and a half of the month, midsize cars the second week and a half, and small cars the final week. Under mass production, it's difficult to change product mix midway through the month, and small-car customers would have to wait three to four weeks before their order would be available.

For lean systems to work well, quality has to be extremely high. There is no extra inventory to buffer against defective units. Producing poor-quality items and then having to rework or reject them is a waste that should be eliminated. Producing in smaller lots encourages better quality. Workers can observe quality problems more easily; when problems are detected, they can be traced to their source and remedied without reworking too many units. Also, by inspecting the first and the last unit in a small batch or by having a worker make a part and then use the part, virtually 100% inspection can be achieved.

Smaller lot sizes encourage quality.

Quality improves when problems are made visible and workers have clear expectations of perfor-mance. Production systems designed with quality in mind include visible instructions for worker or machine action, and direct feedback on the results of that action. This is known as visual control. Examples include kanbans, standard operation sheets, andons, process control charts, and tool boards. A factory with visual control will look different from other factories. You may find machines or stockpoints in each section painted different colors, material-handling routes marked clearly on the floor, demonstration stands and instructional photographs placed near machines, graphs of quality or performance data displayed at each workstation, and explanations and pictures of recent improvement efforts posted by work teams. Figure 16.11 shows several examples of visual control.

Visual control of quality often leads to what the Japanese call a poka-yoke. A poka-yoke is any foolproof device or mechanism that prevents defects from occurring. For example, a dial on which desired ranges are marked in different colors is an example of visual control. A dial that shuts off a machine whenever the instrument needle falls above or below the desired range is a poka-yoke. Machines set to stop after a certain amount of production are poka-yokes, as are sensors that prevent the addition of too many items into a package or the misalignment of components for an assembly.

• Visual control: procedures or mechanisms that make problems visible.

• Poka-yoke: a foolproof device that prevents defects from occurring.

Quality in lean systems is based on kaizen, the Japanese term for "change for the good of all" or continuous improvement. Recall, we discussed kaizen earlier in Chapter 2. As a practical management system based on trial-and-error experiences in eliminating waste and simplifying operations, lean was created and is sustained through kaizen. Continuous improvement is not something that can be delegated to a department or a staff of experts. It is a monumental undertaking that requires the participation of every employee at every level. The essence of lean success is the willingness of workers to spot quality problems, halt operations when necessary, generate ideas for improvement, analyze processes, perform different functions, and adjust their working routines. In one year alone workers at Toyota's Georgetown, Kentucky, plant suggested 500 kaizens, 99.8% of which were implemented. Team member ideas helped the plant install the first assembly line shared by a sedan and a minivan.

• Kaizen: a system of continuous improvement; "change for the good of all."

Figure 16.11. Examples of Visual Control

One of the keys to an effective kaizen is finding the root cause of a problem and eliminating it so that the problem does not reoccur. A simple, yet powerful, technique for finding the root cause is the 5 Why's, a practice of asking "why?" repeatedly until the underlying cause is identified (usu-ally requiring five questions). An often-cited example follows.^[26]

• 5 Why's: repeatedly asking "why?" until a root cause is identified.

ALONG THE SUPPLY CHAIN

Universal Studios Holds "Treasure Hunt" Kaizen Event

For three days last spring, Universal Studios Theme Park sent teams of workers on a treasure hunt to improve processes. Formerly owned by General Electric, studio executives had been schooled on lean production principles and kaizen events. This event, called a Treasure Hunt, was held to find ways to streamline processes and reduce energy consumption. Ten diverse teams were formed, consisting of engineers, managers, facilities personnel, vendors, contractors, and frontline workers. After prehunt kaizen training, each team was given an area on which to focus. The teams viewed processes and equipment when idle, during start-up, during normal operation, during peak periods, and during breaks. Key areas examined were prep kitchens, office buildings, rides such as Jurassic Park and The Mummy, and attractions such as the Terminator show. Although each area had its own unique problems, lean principles could be applied across the board.

Each team identified, and more importantly, quantified opportunities for improvement. All together, the teams identified almost 2 million dollars in potential savings with less than a year's payback on investments. That's treasure hunting at its best.

Source: Lean Manufacturing and the Environment, "GE & Universal Studios Hollywood—The Treasure Hunt Model," retrieved from the EPA Web site at http://www.epa.gov/lean/studies/treasure.htm.

5 Why's Example:

Problem: The Washington Monument is deteriorating.

Solution: Turn on the monument lights a half hour later.

It was the idea that workers could identify quality problems at their source, solve them, and never pass on a defective item that led Ohno to believe in zero defects. To that end, Ohno was determined that the workers, not inspectors, should be responsible for product quality. To go along with this responsibility, he also gave workers the unprecedented authority of jidoka—the authority to stop the production line if quality problems were encountered.

To encourage jidoka, each worker is given access to a switch that can be used to activate call lights or to halt production. The call lights, called andons, flash above the workstation and at several andon boards throughout the plant. Green lights indicate normal operation, yellow lights show a call for help, and red lights indicate a line stoppage. Supervisors, maintenance personnel, and engineers are summoned to troubled workstations quickly by flashing lights on the andon board. At Toyota, the assembly line is stopped for an average of 20 minutes a day because of jidoka. Each jidoka drill is recorded on easels kept at the work area. A block of time is reserved at the end of the day for workers to go over the list and work on solving the problems raised. For example, an eight-hour day might consist of seven hours of production and one hour of problem solving.

This concept of allocating extra time to a schedule for nonproductive tasks is called undercapacity scheduling. Another example of undercapacity scheduling is producing for two shifts each day and reserving the third shift for preventive maintenance activities. Making time to plan, train, solve problems, and maintain the work environment is an important part of lean's success.

Machines cannot operate continuously without some attention. Maintenance activities can be performed when a machine breaks down to restore the machine to its original operating condition, or at different times during regular operation of the machine in an attempt to prevent a breakdown from occurring. The first type of activity is referred to as breakdown maintenance; the second is called preventive maintenance.

Breakdowns seldom occur at convenient times. Lost production, poor quality, and missed deadlines from an inefficient or broken-down machine can represent a significant expense. In addition, the cost of breakdown maintenance is usually much greater than preventive maintenance. (Most of us know that to be true from our own experience at maintaining an automobile. Regular oil changes cost pennies compared to replacing a car engine.) For these reasons, most companies do not find it cost-effective to rely solely on breakdown maintenance. The question then becomes, how much preventive maintenance is necessary and when should it be performed?

With accurate records on the time between breakdowns, the frequency of breakdowns, and the cost of breakdown and preventive maintenance, we can mathematically determine the best preventive maintenance schedule. But even with this degree of precision, breakdowns can still occur. Lean production requires more than preventive maintenance—it requires total productive maintenance.

• Jidoka: authority to stop the production line.

• Andons: call lights that signal quality problems.

• Undercapacity scheduling: extra time built into a schedule for planning, problem solving, and maintenance.

• Breakdown maintenance: repairs needed to make a failed machine operational.

• Preventive maintenance: a system of periodic inspection and maintenance designed to keep a machine in operation.

This lighted board shows where an andon cord has been pulled to signal a problem on the line at Toyota Motor Corp.'s plant in Georgetown, KY. If the issue is not fixed before the car reaches the next stage of assembly, the line stops.

Total productive maintenance (TPM) combines the practice of preventive maintenance with the concepts of total quality—employee involvement, decisions based on data, zero defects, and a strategic focus. Machine operators maintain their own machines with daily care, periodic inspections, and preventive repair activities. They compile and interpret maintenance and operating data on their machines, identifying signs of deterioration prior to failure.^[27]They also scrupulously clean equipment, tools, and workspaces to make unusual occurrences more noticeable. Oil spots on a clean floor may indicate a machine problem, whereas oil spots on a dirty floor would go unnoticed. In Japan this is known as the 5 S's—seiri, seiton, seiso, seiketsu, and shisuke—roughly translated as sort, set, shine, standardize, and sustain. Table 16.1 explains the 5 S's in more detail.

In addition to operator involvement and attention to detail, TPM requires management to take a broader, strategic view of maintenance. That means:

Supplier support is essential to the success of lean production. Not only do suppliers need to be reliable, their production needs to be synchronized to the needs of the customer they are supplying. Toyota understood this and developed strong long-term working relationships with a select group of suppliers. Supplier plants encircled the 50-mile radius around Toyota City, making deliveries several times a day. Bulky parts such as engines and transmissions were delivered every 15 to 30 minutes. Suppliers who met stringent quality standards could forgo inspection of incoming goods. That meant goods could be brought right to the assembly line or area of use without being counted, inspected, tagged, or stocked.

• Total productive maintenance (TPM): a system that combines the practice of preventive maintenance with the concepts of total quality.

Suppliers who try to meet the increasing demands of a lean customer without being lean themselves are overrun with inventory and exorbitantly high production and distribution costs. Lean supply involves:

Lean production is not appropriate for every type of organization. Professor Rajan Suri, author of Quick Response Manufacturing, notes that the key to lean production is creating flow. To do this, lean manufacturers determine takt times, create a level schedule, and use kanbans to control production. This approach starts to have serious deficiencies when applied to companies that have high variability in demand (takt time breaks down), or large variety of low-volume products (too many kanbans in the system), or custom-engineered products (there are no kanbans for something that is yet to be designed).

NICOLE SANDERS

Commodity Manager for Danaher Motion

Danaher Motion is a leading global manufacturer of motion control products that improve the efficiency and productivity of complex manufacturing operations. I am a commodity manager of Danaher, responsible for sourcing, purchasing, and e-procurement of all the electronics components that go into our products. I locate suppliers, negotiate contracts, manage supplier relations, and supervise the work of four buyers.

The job has changed quite a bit since I started working here. Until a year ago, we used forecasts from our material requirements planning (MRP) system to generate purchase orders. It would not be uncommon to purchase the same item from eight different vendors over the course of a year. Today our core supplier base has been reduced from 400 vendors to 10, and most of our parts (3000 to 4000 of them) use kanbans to generate replenishment orders. We provide our suppliers with a sixmonth forecast of demand with weekly, then daily, updates. A supplier must be able to fill an order within five days with 100% good quality. We are in the process of moving 40% of our dollar spend to low-cost regions, such as China and Malaysia. The logistics of global supply is not as difficult for small products such as electronics. Shipments can be air freighted from China in a week's time, versus five weeks by ship. Increased moisture content of the product is a bigger problem than long lead times.

New suppliers submit bids to our RFQ (request for quote). Then we conduct site audits on probably three suppliers that had reasonable bids. We look at their business processes, their production operations, their bottlenecks, workflow, quality systems, and capability to deliver. A typical contract is for three to five years with built-in price reductions of 5% a year. The contract is very explicit including not only the negotiated price, but also required finished goods, raw material and work-inprocess stocking levels, liability issues, forecasts of demand, logistics, inventory review cycles, kanban procedures (such as quantities per container), policies on rejects, repairs, and corrective action, air freighting, and dock dates. For the first few months, we'll perform 100% incoming inspection on goods from new suppliers and ask them to submit statistical process control data (which we call part qualifying checksheets). For the next few months, we'll sample, say 100 pieces, of a 500-piece shipment. If all goes well, after six months we accept the supplier shipments dock to stock.

Danaher is passionate about continually improving its operations and eliminating waste. We use kaizen teams for continuous improvement and policy deployment to focus our improvements on break-through achievements. Every year we have policy goals for Quality, Delivery, Cost, and Innovation (QDCI) that cascade down from corporate to department levels. I'm at level six, after the CEO, vice president of operations, global supply chain manager, plant manager, and purchasing manager. My buyers are at level seven. This year our quality objectives refer to reducing the number of returns and the efficient processing of those returns. Ontime delivery goals are 85% to voice of the customer (i.e., to customer request, not our promise dates). Our purchase price reduction goal is $2 million for the year, and employees must participate in a number of kaizen events. Each of my buyers, for example, will be members of five kaizen teams and leader of one of them. My goal is to attain a Black Belt in Materials Kaizen.

You know, when I look back at what I learned in my operations management class. It's amazing how much what we talked about is actually used in the business world.

It is also difficult to maintain the discipline of lean production, even for Toyota, as we see in the next Along the Supply Chain box.

Nor is lean production the best choice for high-volume repetitive items where mass production is more common. Even Toyota produces high-demand components (typically, small items that require stamping and forging) in lots as large as 10,000 units, sending them to subsequent processes in small batches only when requested.

Lean production can also present problems when unexpected changes in demand or supply occur. For example, a fire at one supplier's brake factory shut down three Toyota plants one year.^[29] In the United States, longshoremen strikes have cut off overseas supply and brought hundreds of factories to a halt. Add to that possible epidemics, natural disasters, terrorist attacks, and armed conflicts, and being completely lean is not very appealing.

Thus, lean production must be compatible with a company's products, processes, and customers. Companies must also assess risk and uncertainty in their business environment, and adapt lean practices accordingly. Even with these drawbacks, however, we have found that most types of businesses can find some parts or processes that can benefit from lean concepts. That includes service industries.

Retail stores provide customers with more choices faster than ever before. Lean retailing, like lean production, involves smaller, more frequent orders and rapid replenishment of stock. For ex-ample, Zara, a Spanish fashion chain, ships new products to its stores around the world every few days, not once a season. The company produces over 11,000 different stock items per year, instead of several hundred. Time-to-market (from design to store) is an amazing 10 days. That means Zara can keep up with fashion trends and adjust its merchandise accordingly.^[30]

Lean banking is practiced by Bank of America, Citibank, ING Direct, Jefferson Pilot, and Progressive Insurance, among others. The banking and insurance industries are particularly well suited to lean techniques because of their repetitive processes. Significant savings in both time and money can be achieved through differentiating processes, rationalizing decision approvals, simplifying service offerings, designing services in modules, and standardizing processes.

Lean concepts are popular in the health care industry. One reason is the interest of corporations in keeping the cost of health care down. Pella Corporation loans its employees to a regional health center for "hot teams" to scrutinize medical operations. Boeing convinced 30 executives from Seattle's Virgnia Mason Medical Center to spend two weeks in Japan studying Toyota's methods. ThedaCare of Wisconsin hired lean production consultants after touring a lean snow blower plant nearby.^[31]

In Iowa, a group of manufacturers, including Maytag, formed a task force to facilitate lean best practices in their local health care systems. People from hospitals, health care providers, third-party insurance providers, and manufacturing executives met together to identify waste and map out the way money and information flows through the health care system. The group discovered that every insurance company and employer had specific plans and rules for processing employee health care claims, requiring different information on a multitude of forms. The forms were so confusing that much of the processor's time was spent calling the provider for clarifica-tions and reworking returned claims.

At ThedaCare, a dozen doctors, nurses, and staffers brainstormed ways of cutting a typical 61 minute office visit to 30 minutes or less. They constructed a 25-foot process map of a pneumonia patient's office visit, concluding that 17 steps were useful and 51 were not. At the end of the session, the team concluded that doctor's assistants should be assigned to a pool rather than individual doctors and that lab tests should be performed in examining rooms rather than at a central location.

Flowcharts, mistake-proofing, flow management, quick setups, and kaizen are just a few of the lean health-care tools.

One of the first elements of lean production to receive widespread acclaim among manufacturers was just-in-time inventory. Too often, just-in-time erroneously meant minimizing a company's inventory by pushing inventory back onto their suppliers. While dominant companies in an industry sought lean objectives within their four walls, outside suppliers suffered. A number of suppliers in the U.S. auto industry were bankrupted by this approach. In the end, the need to hold excess inventory to fulfill a customer's just-in-time mandate resulted in a higher total supply chain cost.

Leaning a supply chain means "pulling" a smooth flow of material through a series of suppliers to support frequent replenishment orders and changes in customer demand. To accomplish this, firms need to share information and coordinate demand forecasts, production planning, and inventory replenishment with suppliers and supplier's suppliers throughout the supply chain.

Developing and maintaining a lean production system within a firm is difficult enough; coordinating a lean supply chain across hundreds of different companies with different goals and cost structures is extremely challenging. The first step is to build a highly collaborative business environment that ensures all of the participants in the supply chain reap the rewards of a leaner system. Adopting the technology to support such a system is purely secondary.

Time, as well as cost, is reduced in a lean supply chain; however, recent trends toward outsourcing great distances lengthen supply chain time and make it more difficult not only to coordinate suppliers but also to ensure their commitment to lean goals. In response, some companies are "near shoring" products that have volatile demand. Nike, for example, outsources the production of shoes to Asia, but locally produces personalized items such as bags.

Lean and Six Sigma are natural partners for process improvement. The predominance of both techniques in today's corporate environment reinforces the value of both continuous and breakthrough improvements. Lean concentrates on eliminating waste and creating flow while Six Sigma reduces variability and enhances process capabilities. Lean is associated more with continuous improvement, whereas, Six Sigma quality often requires breakthrough improvements.

Lean's kaizen initiatives enable Six Sigma by streamlining processes and empowering workers with teamwork and problem-solving skills. Six Sigma provides sophisticated statistical techniques to solve the more complex problems uncovered by lean systems. Together they accelerate the rate of process improvement and help sustain the results.

• Lean six sigma: a combination of lean's principles for eliminating waste with Six Sigma's reduction of variability.

Lean's mandate to eliminate waste and operate only with those resources that are absolutely necessary aligns well with environmental initiatives. Managers and workers can be trained to identify environmental wastes and improvement opportunities alongside the many other wastes and improvement opportunities uncovered by lean. This provides several benefits to business, industry, and consumers.

Environmental waste is often an indicator of poor process design and inefficient production. Applying lean concepts can significantly reduce material costs, energy costs, and regulatory compliance costs, as well as unnecessary risks to worker health and safety. Learning to see environmental wastes during process improvement efforts can open significant business improvement opportunities and further strengthen lean results. In addition, as consumer and societal concerns about the environment increase, companies that provide products or services with fewer environmental impacts can gain market share and create a sustainable competitive advantage.

Recognizing the potential gains from integrating lean and environmental initiatives, the U.S. Environmental Protection Agency (EPA) recommends that companies:

Value stream mapping (VSM) is a tool for analyzing process flow and eliminating waste. Maps of the current state and the future state of a system are created. VSM has several special icons, as shown in Exhibit 16.1, that differ from traditional flowcharts. These are related to lean production methods and include different types of kanbans, as well as material and information flows for both pull and push systems, and "aha" kaizen bursts. At the heart of the map are process icons with accompanying data boxes denoting the number of workers, cycle time (C/T), changeover time (C/O), and other relevant information about the process. Process steps are connected with arrows and typically include inventory or waiting time icons in-between the steps. A stepped timeline of metrics placed under the process flow separates value-added from non-value added time or resources. This provides a basis for the improvement initiative, that is, redesigning the process with a new value stream map that reduces or eliminates the waste and inefficiencies that have been identified.

Figure E16.1. Value Stream Mapping Symbols in Micrisofts Visio

Exhibit 16.2 shows two steps of a process with both time and environmental metrics, and Exhibit 16.3 shows a value stream map for an emergency room. While initially used primarily in manufacturing, value stream maps have become an essential tool for improvements in the service sector. Creating the maps with a group of stakeholders helps create buy-in when process changes are proposed. The maps are created by "going to see" the process in action, rather than from memory.

Figure E16.2. A Simple Value Stream Map

Source: Adapted from Environment Protection Agency, "Value Stream Mapping," Lean and the Environment Toolkit, retrieved from http://www.epa.gov/lean/toolkit/ch3.htm.

Figure E16.3. Emergency Room Value Stream Map

Source: Adapted from E. Dickson, S. Singh, D. Cheung, C. Wyatt, and A. Nugent, "Application of Lean Manufacturing Techniques in the Emergency Department," The Journal of Emergency Medicine, Volume 37, Issue 2, p. 177–1 82.