By Dada Adefolami
Principles for lean enterprise derive from lean manufacturing and Six Sigma principles: There are five principles, originating from lean manufacturing, outlined by James Womack and Daniel Jones. Value: Understand clearly what value the customer wants for the product or service
The term lean was first used by Womack, Jones and Roos to describe the Toyota Production system. It means far more than simply cutting costs, as the history of lean production shows.
Lean management is an approach to running an organization that supports the concept of continuous improvement, a long-term approach to work that systematically seeks to achieve small, incremental changes in processes in order to improve efficiency and quality
In the early 20th century, American car manufacturers such as Ford and General Motors developed mass production systems. These allowed car manufacturers to produce thousands of identical cars, using standardized parts and components. The moving production line was introduced, where the car body moved along a conveyor belt, and at each stage, factory workers added components to it until the finished product came off the production line. The resulting economies of scale meant that the motor car became much more affordable to the average family.
In 1950, Eiji Toyoda, an engineer, and member of the family that started the Toyota Company, visited the Ford Rouge plant in Detroit. He studied the production techniques being used at Ford closely and on return to Japan discussed them with his production manager Taiichi Ohno. The two of them came to the conclusion that the methods used at Ford could not be copied directly at Toyota. Over the years, they made several innovations that we now refer to as lean:
1. More flexible production lines allowing smaller batch sizes
2. Greater involvement of employees
3. Elimination of non-value adding functions
4. Identifying the root causes of problems
5. Constructive relations with suppliers
6. Greater contact with customers
flexible production lines
One feature of mass production was the difficult set up processes for the machinery. A particular machine might be used to make parts for several different cars. Setting up the machine to make a particular part was a difficult process requiring precision. If the set-up was not correct the parts being made would be useless. It often took two days to set up a machine, and skilled engineers were required to perform the task.
In the mass production factories, the solution to the long set-up process was to have long production runs, making hundreds or even thousands of a particular part before resetting the machine to make parts for a different model. Alternatively, a dedicated set of machines might be used for one particular car, meaning that once the initial set up had taken place, no further set ups were required.
In the early years, Toyota was a small company producing for the domestic market. Demand was insufficient to allow the company the luxury of having long production runs when only a small number of units of each part were required. Toyota spent time investigating a quicker way of setting up the machines so that production could feasibly take place in small batch sizes. In some cases, such as the stamping machine, they managed to reduce set up times from typically one day to three minutes. What’s more, the production line staff were trained to do the set-ups, so it was not necessary to employ engineers.
The small batch sizes meant that the volume of work in progress and the associated inventory holding costs were much lower; as soon as a part was made in one process, it was used in the next. An unintended advantage was also discovered; because parts from one process were used almost straightaway in the next, any defects were noticed very quickly. Thus, any faulty machine set-ups would be corrected before many bad units had been made.
A further advantage was that the factories became much more flexible, allowing a wider variety of products to be made. Having shorter set-up times allowed machines to be used to produce a greater variety of parts and, therefore, cars.
involvement of employees
Employee involvement in key decision making not only to leverage employees’ unique skills, but also to motivate them, signaling that their impact on the company is meaningful.
The motor industry is very cyclical. Workers in the mass production plants understood their job might be lost in the next economic downturn. Not surprisingly staff had little motivation to do more than the minimum.
Staffs at Toyota on the other hand were offered jobs for life – a guarantee that they would not be laid off during the next downturn. They were also provided with a steep career path, where promotion led to a high increase in salary. In return, employees at all levels would be expected to become involved in helping to continuously improve the operations.
The teams would be expected to have meetings periodically with the industrial engineers, to discuss ways to improve the production process. Toyota recognized that the assembly workers on the floor, far from being replaceable, were a great source of knowledge.
Elimination of non-value adding functions
Adding value to an organization doing the right stuff efficiently and reduce non-value added (wasted) time. This represents an enormous opportunity for improving employee productivity. Time … a critical performance variable the consumption of time in the workplace is a critical performance variable that few organizations begin to properly measure.
In the mass production factories, the assembly workers were given very basic monotonous tasks to perform. The foremen who supervised the workers did not perform any assembly tasks. Engineers reset the machines, housekeepers cleaned the factory area, and so on. The assembly workers were treated with little respect and considered to be easily replaceable.
In Toyota, production was based on teams. All members of a team were highly trained, and could do all tasks – assembly, machine sets-ups, and cleaning the factory area. The team leader replaced the foreman, but unlike the foreman the team leader would perform assembly tasks as well as coordinating the team. This led to more motivated teams and ensured that no wages were wasted on indirect labour that did not add value to the final product.
In business, the difference between the sale price and the production cost of a product is the unit profit. In economics, the sum of the unit profit, the unit depreciation cost, and the unit labor cost is the unit value added. Summing value added per unit over all units sold is total value added. Total value added is equivalent to revenue less outside purchases of materials and services.
These are things that make the company better – more profitable and a better place to work. Value add contributions include measurable roles and activities. These are examples of value add activities and contributions. Saved money. Often people only think about making money, but saving money can be just as valuable, if not more so.
The root cause of problems
Problem statement is a brief description of the issues that need to be addressed by a problem-solving team and should be presented to them or created by them before they try to solve the problem
In the production lines of Ford and General Motors, workers were required to perform their tasks at the right speed to avoid slowing the production line. Defects inevitably did occur, such as the discovery that a part was defective after it had been assembled. The production line could not be stopped, however, and so the defective unit would continue its journey through the rest of the production line, with the defect becoming compounded. At the end of the line was a rectification department where faulty car would be investigated and fixed. It was fairly typical that 20% to 25% of all cars produced would end up here.
In the Toyota factory, if a worker spotted a defect, he would pull a cord that would stop the production line, so the error could be fixed. Workers were then required to identify the cause of the error using a technique called ‘the five whys’. The five whys approach involved firstly asking why the defect arose. Having identified the cause, then it was asking why the cause arose, and so on, thus drilling down to find the root cause that would then be fixed. Such errors were unlikely to arise again. These days, virtually no Toyota cars require reworking when they come off the production line.
Lean Six Sigma is a methodology that relies on a collaborative team effort to improve performance by systematically removing waste, combining lean manufacturing / lean enterprise and Six Sigma to eliminate the eight kinds of waste (muda) : Transportation , Inventory , Motion , Waiting , Over production , Over processing , Defects , and Skills
Productive relations with suppliers
Supplier relationship management (SRM) is the discipline of strategically planning for, and managing, all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions.
The mass production approach to sourcing the various parts for the vehicles was to design the parts in-house. The majority of the parts would also be made in-house, while various suppliers who would be asked to bid to make the parts that could not be. Often, the lowest price suppliers would win the business. Suppliers would therefore be more interested in keeping their costs down than in helping the manufacturers to improve their products by offering the latest innovations.
Toyota did not design the parts, but would tell the suppliers what was needed – for example, a braking system that would stop a 1,000kg car that was moving at 100 kilometers per hour within 60 meters. The supplier would then be required to use their own expertise to design and produce such a system. Thus, Toyota could benefit from the expertise of their suppliers and save time on detailed design of all components needed.
Toyota would pay their suppliers a price that would enable them to make a fair profit, but would work with the suppliers to reduce costs using techniques such as target costing. Cost savings would then be shared by the two organizations.
In order to overcome the problem of coordinating the supply of parts from suppliers and avoiding over or under production, Ohno had the idea of the famous ‘just in time’ or ‘pull’ system. The idea of this was that a part would only be produced when an instruction was received from the next link in the supply chain. There would be no producing for inventory and no need for buffer inventory. The point of this was not only to reduce inventory levels and associated costs, but to put pressure on all parts of the supply chain to become more responsive to changes in demand.
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