Harri Haapasalo Lean Production

Harri Haapasalo: Lean production

5.4.2006

Lean production is a philosophy – the philosophy of avoiding waste in the production system (Parks 2003)

Lean production Harri Haapasalo; D.Sc. Tech., M.Sc. Econ. Professor in Industrial Engineering and Management Department of Industrial Engineering and Management e-mail: [email protected], office TF320

Waste minimization and resources use optimization Outline 1. Defining Lean Production 2. What leads us to Lean? 3. How to Implement lean? 4. Where to go after Lean – Agility? Value Nets?

Lean production „

Is a multi-dimensional approach that incorporates a wide range of management practises, including: { { { { { {

„

„ „

just-in-time, quality systems, work teams, cellular manufacturing, supplier management, etc.,

in an integrated system The main force is that these systems can operate synergistically to create efficient and high quality system that manufactures finished products at the pace of customer demand with little or no waste. (Özbayrak, 2005) The focus of lean approach is essentially the elimination of waste or muda. Shortly defined lean is doing more with less. (Agarwal et al. 2005)

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Harri Haapasalo: Lean production

5.4.2006

Five fundamental concepts to “lean thinking” to promote lean production „ „ „ „ „

value, value stream, flow, pull production and perfection

Another approach defining cornerstones for Lean manufacturing „ „ „ „ „

Cellular Manufacturing Pull Scheduling (Kanban) Six Sigma/Total Quality Management Rapid Setup Team Development

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Harri Haapasalo: Lean production

5.4.2006

The idea is to emphasize leanness – in horizontal level

Functions rules

Sales

Product creation

Production

Management

Sales

Production

Management

Sales

Production

Management

From functions to processes - flow

Customer relationship MGMT

Order –delivery process

Core prcesses defined But functions still rules

Core processses Are dominating

Generate order

Receive product

Submit order

Forward product

Prodcution

Check order

Receive order

Start manufacturing

Puchasing

Sales

Customer

Prosess map by Rummler and Brache

Receive order

Purchase parts

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Receive parts

Pack product

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Harri Haapasalo: Lean production

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5.4.2006

“Leanness means developing a value stream to eliminate all waste … “(Christopher & Towill 2001) focus on waste – waste can be: { { { { { { { {

overproduction waiting inventory or work in process processing waste transportation motion making defective produts underutilizing people

WASTE = MUDA

Targets for prodcution management TUOTANNON Targets for production TAVOITTEET OHJATTAVUUS Controllability

ALHAISET Low Costs KUSTANNUKSET

LAATU Quality

TOIMITUSKYKY Ability to deliver

High productivity MATERIAALI Materials

TYÖ Work

PÄÄOMA Capital Fixed KÄYTTÖ OMAISUUS assets

OHJATTAVUUS Conrollability

High utilization KAPASITEETIN Of capasity LÄPÄISYAIKA Lead time

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JOUSTAVUUS Flexibility

Floating VAIHTOOMAISUUS asets Deceasing VARASTOIHIN JA KET:IIN Tied in capital SITOUTUVAN In inventories and PÄÄOMAN Work In Progress PIENENTÄMINEN

TOIMITUS Ability to KYKY deliver

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Harri Haapasalo: Lean production

5.4.2006

Inconsistency of purposes for production management Ability to deliver – Lead time

OPTIMUM

Minimize floating assets Inventories, WIP

Maximize utilization rate of capasity

Changing Face of Manufacturing 1980s

1990s

2000+

Philosoph y

Mass production; Product oriented

Just-in-Time; Customer Service

Mass customisation; Customer value

People

Individuals; Self-oriented

Teams; Company-oriented

Strategic leadership; Process-oriented

Finance

Labour allocation

Activity based

Integrated perf’nce management

Materials

Adversarial suppliers

Supply Chain

Value Chain

Overall Posture

Just-in-Case

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Lean

Agile

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Harri Haapasalo: Lean production

5.4.2006

Manufacturing Issues Falling sales – where to find new customers? Input costs increasing, sales income falling No time to introduce new methods No money to develop new products / processes How to increase output without increasing costs? Too small to compete OR Too big to react quickly to changing market Increasing complexity of legislation and regulation

What can I / we / anybody do about it?

Company Actions: How can we Compete? Competitive Strategies: 80’s Quality

90’s

2000+

Porter

Treacy & Wiersema

Delivery Price Flexibility Image

Focus & Differentiation

Value Proposition

… …

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Harri Haapasalo: Lean production

5.4.2006

Lean Thinking roots are in Toyota Philosophy ‰ ‰ ‰ ‰ ‰ ‰ ‰ ‰ ‰ ‰

Doing it all for the Customer Levelled production kanbans K K Pull system work replacement Continuous-flow production centre Takt time Multi-skilling TQM TPM lf Se nt e vem Poka Yoke o r imp r ous ompetito u C ntin Co SPC Standardised work change Present Uncompetitive Competitive Kaizen

Day 1 20 7

Day 2 20 7

27 27

27 27

Day 5 20 5 25 27

store withdraw & process

work centre

batches

Upper action limit

average

‰

Qnty 100 27 5 132 135

Upper warning limit time

action?

Competitiveness

‰

Item Runner Repeater Stranger Load Cap’ty

Time

Lean Manufacturing „

Builds on roots but with specific focus on: {

Lead time reduction „ „

{ { {

Regular production New products

Flexibility improvement Variability reduction Cost reduction

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Harri Haapasalo: Lean production

5.4.2006

Customer focus „

Lean production aims to optimize performance of the production system against a standard of perfection to meet unique customer requirements (Howell 1999)

Going Lean „ „ „

„ „

the value needs to be created in the eyes of the final customer, focus on value is therefore translated across functional and company boundaries, the lean message suggests that the focus on attention should not be on the company or functional department but instead on the complete value stream (Hines et al. 2000) to reach this point every company involved in supply chain has to go lean, this is very demanding part, which needs collaboration and time.

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Harri Haapasalo: Lean production

5.4.2006

How to go lean Objective

Method

1

Understand customers and what value they want

Setting the direction, targets and checking results

2

Define the internal value stream

An internal framework for delivering value

3

Eliminate waste, make info & products flow, pulled by customer needs

Appropriate method to make necessary change

4

Extend the definition of value outside your company

Externalise the value focus to the whole value stream

5

Continually aim for perfection

Strive for perfection in the product and in all processes and systems

Levels of Lean thinking (Simons & Zokaei 2005)

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Harri Haapasalo: Lean production

5.4.2006

Lean Toolbox – derived from Toyota Philosophy

Value stream mapping 1. Define value precisely from the end customer perspective. specific product needs specific capabilities specific price, delivery and quality expectations 2. Identify the entire value stream for each product line and eliminate waste. Product definition and development Material transformation Information management 3. Make the value added activities flow. Through radical shifts in process methodology and organizational structure Improving processes from end-to-end by eliminating scrap, downtime and WIP Moving towards continuous operations vs. batch processing 4. Provide what the customer wants only when the customer wants it. Let the end customer pull products from the manufacturing value stream Minimize finished goods inventories and WIP 5. Pursue perfection through continuous improvement When lean principles are applied throughout the value stream, odd things begin to happen; People recognize there is no end to reducing effort, time, space and mistakes, Your products become more closely aligned with the customer needs.

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Harri Haapasalo: Lean production

5.4.2006

Example of process map {

Note value-add time -vs- lead time

Generate order

Receive product

Submit order

Forward product

Prodcution

Check order

Receive order

Start manufacturing

Puchasing

Sales

Customer

Prosess map by Rummler and Brache

Receive order

Purchase parts

University of Oulu, Waste minimization and resources use optimization course

Receive parts

Pack product

11

Harri Haapasalo: Lean production

5.4.2006

5S - the foundation for a disciplined approach to workplace „

5S is derived from five Japanese words starting with letter S that describe principles of good housekeeping: { { { { {

„ „

1. Sort 2. Set in Order 3. Shine 4. Standardize 5. Sustain

It cleans and organizes areas around machinery and equipment. It creates a safer work environment, removes clutter, creates a labelling system for ease of recognition, introduces audit procedures, and creates a more inviting work place. (Piatkowski 2004)

TPM is a systematic methodology to eliminate equipment breakdowns and quality defects „

„ „

productive maintenance involving total employee participation and it must be carried out on a companywide basis system of preventive maintenance plans and procedures for the equipment’s life span TPM focuses its methodology on elimination of six major obstacles to equipment effectiveness: 1. Equipment failure 2. Setup and adjustment 3. Idling and minor stoppages 4. Reduced speed 5. Production of scrap and defects 6. Reduced yield from start-up to stable production

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Harri Haapasalo: Lean production

5.4.2006

Key to Lean Manufacture is measurement „ „

OPTIM UM

Need clear, objective focus on value Example: OEE (Overall Equipment Effectiveness) {

{ {

A composite measure of the ability of a process to carry out value adding activity OEE = % availability x % output achieved x % perfect output If change to a process increases OEE it is worthwhile

Actual Available Production Time Theoretical time minus planned downtime and shutdowns This is the realistic best available production time (100%)

Planned Downtime PM, Shutdowns, Holidays

Machine Running Time Actual production hours minus downtimes This is possible production if 100% performance

Net Operating Time Machine speed against theoretical speed This is the possible output if 100% quality

Useful Production Time Material in minus product out This is the real output

Quality Losses, adjustments, Set-up waste

Unplanned Losses Breakdowns, HR, Set-up time

Speed losses Idling, minor stopages performance

Performance

Availability

OEE

Quality

Error Proofing „

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„

a systematic approach for anticipating and detecting potential defects and preventing them from reaching either internal or external customer Error proofing is also mentioned in literature with closely related terms such as, fail saving, poka yoke, zero defects and design for manufacture and assembly. Error Proofing seeks to proactive identification and prevention of errors at the source.

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Harri Haapasalo: Lean production

5.4.2006

Setup Time Reduction „ „

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Setup is a set of activities needed to prepare for the next part to be produced Setup time is the total amount of elapsed time from completion of the last good part from the previous setup to the first good part from the new setup There are two elements to setup time reduction: { {

„

equipment modifications such as technical improvements, elimination of waste in setup methodology

Both activities will contribute significantly to minimize setup time

Continuous Flow „

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It studies production pace, manpower requirements, equipment utilization, and manufacturing methodologies is defined as movement of material from valueadded process to value-added process without transport time or storage in buffers all the knowledge of lean methodologies, tools, and process are put to an ultimate test of generating cost reductions and improvements to quality, efficiency, and performance

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Harri Haapasalo: Lean production

5.4.2006

Pull System „ „

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Pull system includes vital elements such as, kanban to promote JIT and visual controlling For unique items consumed in production lines, uniform containers (kanban) can be used to standardize lot sizes to signal the need to replenish materials and simplify transport between the vendor and customer Materials can be pulled into production lines as needed to support the required production rate of finished goods

Standardized Work „

„ „

„

Standardized work is the optimum combination of operators, machines and materials to ensure that a task is completed the same way every time with minimum waste. This may sound a trivial but it isn’t. Standardized work seeks to establish and clarify the best method of production at the present time. Standards must be specific and scientific – meaning that they are based on facts and analysis, not on custom, guessing or memory Standards must be adhered to; { {

they are useless if no one follows them. for a standard to be standard, it will be consistently followed and respected.

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Harri Haapasalo: Lean production

5.4.2006

Elements of the standard operations (Monden 1983)

Agile – a step on from lean? „ „

Roots of agile in America defence industry – developing the ability to react and reorganise to successful equipment bids Lean and agile have common components { {

„ „

quality, reliability, improvement, etc But lean is process focused, agile is boundary focused

Ability to thrive in constant, unpredictable change Key attributes of agile { {

Customer value focus (solutions not products) Flexibility to adapt to fundamental market changes „

{ {

„

Not simply changes in product mix

Competing from multiple fronts, possibly virtually Organisational knowledge, including ability to adapt IT systems to support new processes

Sometimes Agility has been defined as a sum of Lean and Flexibility

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Harri Haapasalo: Lean production

5.4.2006

Types of flexibility Planning flexibility – the system's ability at the planning stage to take up a structure suited to the relevant range of tasks. Commissioning flexibility (teettäminen) – the system's ability to be adapted or set up for the given tasks, so that the system's capability can be verified and it remains constant. Insensitivity (epäherkkyys) – the ability to function in spite of variations in the assembly. Versatility (muunnettavuus) – the ability to change over directly to other foreseen tasks. Adaptability (mukaantuvaisuus) – the ability to be changed over to unforeseen tasks. Flexibility of re-use – the ability to be rebuilt for other tasks.

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„ „ „ „

Flexibility vs agility „

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„ „

agility is an ability to quickly respond to changes in an uncertain and changing environment, or even cause changes that are favourable to the organisation whereas flexibility is taken to mean the ability of companies to respond to a variety of customer or other requirements which exist within defined constraints flexibility is an important aspect in agility agility is more external and flexibility is internal

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Harri Haapasalo: Lean production

5.4.2006

Different views on lean -vsagile The journey Traditional Traditional A spectrum of companies

Lean Lean

Agile Agile

Lean Lean

Agile Agile

Make to stock Low variety Mass, repetitive “Cost minimiser”

Make/Engineer to order, High variety, Service culture “Product Innovator”? “Customer intimate”?

Complementary Make to forecast

Material suppliers

Lean Lean

Stock (to decouple)

Upstream variation

Make to order

Agile Agile

customer

Downstream variation

LEAN vs. AGILE (Christopher 2000)

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Harri Haapasalo: Lean production

5.4.2006

Establishing Foundations for Lean, Agile … Culture change

„

Need the classic pre-requisites for any programme { { { { { { { {

Strategy Commitment Objectives Communication Empowerment Establish framework Activity plan, cost, time and execution Measurement and evaluation system

Use of champion

Developing towards an agile supply chain Goldman’s (1995) distinctive forces that drive towards agility: 1) market fragmentation, 2) production to order in arbitrary lot sizes, 3) information capacity to treat masses of customers as individuals, 4) shrinking product lifetimes, 5) convergence of physical products and services, 6) global production networks, 7) simultaneous inter-company co-operation and competition, 8) distributed infrastructures for mass customization, 9) corporate reorganization and 10) pressure to internalize prevailing social values.

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Harri Haapasalo: Lean production

5.4.2006

Theoretical framework for the agile supply chain ICT utilization Virtual demand driven

responsive and flexible

Market sensitive

Agile supply chain

Network based

Process integration

speed, flexibility and quality

modular design and modular manufacturing processes

Value net, value-adding partnership (VAP) „

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„

a group of independent companies working close to each other to manage the flow of products and services through the whole value chain digitally linked network of customer-supplier relationships that creates value to all of its counterparts, { Customer aligned. { Collaborative and systemic. { Agile and scalable. { Fast flow. { Digital.

Value creation { { {

VA, NVA, NNVA

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1. Non-value adding (NVA); (Type two MUDA) 2. Necessary but non-value adding (NNVA); (Type one MUDA) 3. Value-adding (VA)

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Harri Haapasalo: Lean production

5.4.2006

6 principles of ICT system in SCM 

Information must be readily and consistently available to all that need it. Information availability can reduce operating and planning uncertainty.



Information must be accurate. Increased information accuracy decreases uncertainty and reduces inventory requirements.



Information must be timely. The delay between when an activity occurs and when it is visible in the information system reduces planning effectiveness and increases inventory.



Information should be appropriately formatted. information must be in the right structure and sequence.



Information systems must be exception-based in order to highlight problems and opportunities.



Information systems should be flexible to be able to meet both system users and customers’ needs.

The

right

Bowersox & Closs (1995)

Useful literature „

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James Womack & Daniel Jones, 1996, Lean Thinking: Banish Waste and Create Wealth in your Corporation (Simon & Schuster) John Bicheno, 2000, The Lean Toolbox, 2nd edn (Picsie Books) Peter Hines & David Taylor, 2000, Going Lean: a guide to implementation (Lean Enterprise Research Centre, Cardiff Business School) Imai, M. 1997. Gemba Kaizen: a commonsense, low-cost approach to management New York, McGraw-Hill

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