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Source: Business-improvement.eu
Lean: Value adding organization

More articles about Lean can be found using the blue dropdown menu above left. This is the opening, introductory article.

Introduction lean manufacturing
Lean manufacturing is a method to improve industrial and administrative processes. Just as the Theory of Constraints (TOC) and Quick Response Manufacturing (QRM), Lean manufacturing was developed using a logistics management line of approach. Often a chain of activities is needed to finish a product or task. If in such a case the work is done fluently enough, it can be done without waiting times or (intermediate) stock. Striving for an optimal flow is therefore the fundamental principle of Lean manufacturing.

Lean concentrates on maximising the value which 'streams' towards the customers, and it traces and eliminates waste. For each family of products, a process flow diagram (value stream map) is used to identify which processes add value to the products or services provided by your company, and which don’t. The goal is to make a “value stream” as large as possible. This is done by gearing the steps which add value to one another, and by eliminating steps that don't add value. To see where a process deviates from the ideal picture, visual management is important. Workers and managers should be able to see at a single glance what goes well and what doesn't. In addition, it is important that everybody can contribute everyday to make the production chain increasingly better.

The idea to concentrate on maximizing the throughput is already very old, it goes back to the building of ships in Venice in the sixteenth century. Later this approach was adopted by Henry Ford, who developed a moving assemby line. With that line he could transform raw materials into a T-Ford in only 33 hours (flow-concept). After this, Toyota became leading regarding the further development of Lean manufacturing. Their most important contribution is that they made it possible to make multiple products on a single assemby line, while at the same time the production rate is determined by market demand (pull-concept). After all, making products which are not ordered yet is also a form of waste! Lean was defined as a combination of flow and pull by researchers of the Massachusetts Institute of Technology (MIT) in the US, after they had studied the Toyota Production System, see the lean cycle of Womack & Jones.

The value adding organization
Originally, Lean manufacturing was mainly applied by companies that produce goods via a series of consecutive steps. This means there are plenty of points where wastage can be minimized, especially if the company is part of a supply chain! Examples of these early Lean adopters can be found in the automotive, metal and electronics sectors.
Later, Lean evolved into a process management method that is generally applicable – even outside production. Especially Value Stream Mapping and lean management turned out to be useful in almost any organization, including hospitals. Lean can also be applied during product development, as Philips does when they speak about “Lean Product Innovation”.

The introduction of Lean on this webpage is mainly about the technical side of this approach. Note however, that the organisational part is just as important!


Lean Manufacturing  (introductory article 1)
Minimizing waste makes production chains more efficient
By Dr Jaap van Ede, editor-in-chief business-improvement.eu.

Lean manufacturing is all about making the “value stream” as big as it can be, so that the company concerned is spending all its time on creating added value for its customers. Other activities are regarded as waste. The more processing steps there are in a production process or supply chain, the more sources of waste can be minimized!

Ton Aerdts is director of a consultancy. He advises and supports companies during process improvement trajectories. He often applies techniques such as Lean Manufacturing, Six Sigma and Total Productive Maintenance.

According to Aerdts, about 15 years ago lean manufacturing used to have quite a negative connotation in the EU.

'Lean equals mean, that’s what people in Europe thought about it. Because of its strong emphasis on reducing waste, Lean was associated with reorganizations and redundancies. In the US however, Lean was often prescribed as compulsory. American companies often have European counterparts. That way, lean thinking has sort of slipped in by the back door in the EU, particularly in supply chains. The more parties and production steps are involved, the more sources of waste can be addressed. When an assembly plant embraces lean manufacturing, their suppliers will naturally follow.'

Efficiency is another factor which contributes to the increasing attention for Lean. 'Many companies have gone through major reorganizations, and don’t want to hire new employees immediately. Their first priority is improving the efficiency.'

Design of a Lean assembly line at Eaton Automotive
The design of the Lean assembly line at Eaton makes sure that there is room for only one intermediate piece of stock. The result is a one-piece flow. (Photo: Eaton Automotive, Montfoort)

The basis of lean manufacturing was laid as early as the 1950s by Toyota in Japan. Back then Toyota’s workplace manager, Taiichi Ohno decided that only industry processes that create value for customers are profitable. With this thought in mind he planted the seed for the famous Toyota Production System. Ton Aerdts points out: “You’ll notice that in Japan they are already applying Lean at third and fourth-level suppliers.”

Curiously, the name ‘lean manufacturing’ was not introduced by the Japanese, but by two Americans, James P. Womack and Daniel Jones from the Massachusetts Institute of Technology. 'The same applies to just-in-time, one of many methods that complement Lean. That expression was also introduced by Western researchers, who were describing Japanese production methods.'

The strenght of Lean is that steps in a production chain are geared to one another in such a way, that maximum value is created for the customers. Muda - work that does not add value - is pushed back by reducing the amount of muri (unnessary load of a person or a machine) and mura (unneveness in the work load)

The Lean cycle of Womack & Jones:  in five steps towards flow and pull
Womack & Jones distinguish the following five steps in the lean improvement cycle:
  1. Identify – per product or product family – what the customer values.
  2. Use value stream mapping (VSM) to indicate which processes add value and which don’t. Eliminate eight types of loss: overproduction, inventory, manufacturing faults, manufacturing disruptions, waiting times, transport, unnecessary movements - which includes searching for things in the workplace - and last but not least: unexploited talent.
  3. Create flow: Ensure that materials flow smoothly through your company. Stoppages lead to stockpiling and therefore to waste.
  4. Create pull: Make your production chain demand-driven. Producing an item no one has ordered is also a form of waste.
  5. Constantly strive for perfection, therefore return to step 1

Value stream mapping
In lean manufacturing only those processes for which a client is willing to pay are regarded as profitable. Any other activities are essentially waste, and should be restricted as much as possible.

'Value stream mapping is the most important tool to achieve this', Aerdts explains. 'You map your company processes in a flow diagram, using arrows and blocks. At each point you indicate how much time is actually spent on making the product, and how much time is wasted on other aspects, such as waiting and transport. If you do this for an average company then it’s quite normal to find that less than 1% of the time is spent on adding value! The goal of lean manufacturing is to raise that percentage. You can do this, for example, by combining production steps at one workstation, or by decreasing the stock between workstations.'

This idea is not completely new. Henry Ford (1863-1947), the father of our modern assembly lines, already suggested that machines should be placed as close to each other as possible, so that no stocks could fit between them. Aerdts agrees. 'We’re constantly re-examining old production concepts. I still learn something new from that every day. Think of methods that were invented in the 20th century, such as demand-driven production. These concepts are now being used to minimize sources of waste.'

Once a companies starts to apply lean manufacturing, they tend to put that label on all other process improvement methods they already use. This broad use of the term “Lean” can lead to confusion.

'Some companies try to reduce the number of machine breakdowns under the heading Lean', says Aerdts. 'But if you visit them it turns out that in they are applying Total Productive Maintenance. I think it’s better to select the process improvement method best suited to solve a particular problem, and then call that method by its correct name. General Electric was one of the first companies to apply Six Sigma. This process improvement method focuses on the elimination of quality disruptive factors, by using statistical analysis. These days GE is using lean manufacturing as well, and they call this combination Lean Six Sigma. I don’t want to encourage that. If you want to bring all your efficiency improvement methods under one umbrella, that’s fine. However then it’s best to think up a new name for it,  like for example GE Production System.'

The evolution and state-of-the-art regarding Lean

There are people who grasp each problem within Toyota, to state that Lean now really is out of date. Others fight tooth and nail to defend the production system of the Japanese car manufacturer. Both attitudes are rather peculiar.

What we call Lean today, is no more or less then the state-of-the-art to deliver good quality products or services on time, and at the lowest possible cost. So, even if Toyota fails, this does not mean that Lean comes to an end. Regardless of how well Toyota is doing, our view on smart production will continue to evolve, like it did during the last century. Besides that it catches the eye that Lean turns out to be applicable in an increasing number of organization types. Even design to order production and administrative processes can be made Lean. This is also a matter of evolution, since Lean is adapted to match with these new environments. More about this in the article the evolution and state-of-the-art regarding Lean.

Organizational side

Lean aims to maximise the value which 'streams' towards the customers. To clarify this, the introductory article on this webpage is mainly about technical aspects and tools like Value Stream Mapping and Kanban. However, you should realize that these things only give direction to your improvement activities.

Besides a technical side Lean has also an organizational side. The importance of that was underestimated for a long time, see for exampe The Lean manager. Nowadays, the attention for the organisational side of Lean increases. How can I make problem solvers of all my employees, is a question that many researchers try to answer. It is important to create a culture in which everyone in your company can identify and solve problems by themselves. For articles about how to release problem-solving power, see our discussion of the book Toyota Kata and the lean transformation of confectionary producer Leaf

The two most well-known ‘Lean improvement houses’ are the Toyota Production System (TPS) and the Toyota Way.

The words 'system' and 'way' indicate how these relate to each other!

The Toyota Production System (TPS) describes the hard, technical and visible side of Lean. The aim of the TPS is to maximise the flow (throughput) on the shop floor. You can think of TPS as the 'what' in Lean. Respect for People is not part of it!

In contrast, this is a central in the Toyota Way. This soft and invisible side of Lean describes the 'how'. While the TPS makes improvement options visible, the Toyota Way teaches us how people on the workfoor can exploit these. The Toyota Way is all about respect for people, their problem-solving skills, and their commitment to continuous improvement!

The concept Respect for People expresses that managers need the expertise and help of production workers for ongoing improvement. Craftsmanship in Lean is not something that 'lower' educated people do, but a thing to be proud of, and a skill that many 'higher' educated people do not possess.

Craftsmanship is much more appreciated in Japan than in the west. Japanse words like monozukuri, the art of making things, and Takumi, an honorary title for an expert in his or her production step, highlight this.

Supply network
Lean manufacturing is perfectly fit for flow-driven and discrete manufacturing, as we find in the automotive, metal and electronics sectors. Companies in those sectors have production lines with many processing steps and thus many potential sources of waste to detect and remove. In addition, they are often part of a supply network. The more complex the supply and production path to the final product, the more complicated it is to apply Lean, but also the more there is to gain.

Broad applicable
Multiple (consecutive) processing steps are not only common in discrete manufacturing, but are also found in environments like hospitals and even in offices. Also then there is a lot to gain by synchronizing the production steps, and by removing wasteful activities. Especially value stream mapping turns out to be a very a broad applicable improvement tool.

> See also: Lean manufacturing, introductory article 2
> See also: Lean manufacturing, the evolution and state of the art

Lean Manufacturing jargon

The goal of Lean manufacturing is to make value streams, per category of products, as big as possible. Seven categories of waste should therefore be reduced as far as possible: overproduction, inventory, manufacturing faults, manufacturing disruptions, waiting times, transport and unnecessary movement. The last category includes looking for materials or tools in the workplace.

The above mentioned sources of waste can be identified by Value Stream Mapping. After that, there are many tools which can be used to reduce wasteful activities. Many of those tools are based on (sometimes much older) production concepts, which were developed in the 20th century.

The things which are - besides value stream mapping - most typical for Lean are described below, together with their relationship to Lean. Note however that there are many other useful tools, like the measurement of the Overall Equipment Effectiveness, see Total Productive Maintenance.

  1. Just-in-time (JIT): Production and/or delivery only starts after a (replenishment) order is placed. This prevents overproduction and therefore stockpiling.

  2. Kanban: This is a Japanese word meaning “sign”. Kanban applies JIT in a production chain to reduce intermediate stock. Components are made only when a sign indicates that they are needed by the next workstation. In the past these signals were in the form of cards, nowadays Kanban systems are sometimes electronic.

  3. Flow manufacturing: Per family of products, the machinery is positioned in the same order as the processing steps, to achieve a constant flow of materials and products through the factory. In addition, the batch size per production step is made as small as possible. This decreases the inventory and throughput time.

  4. One Piece Flow: This means moving only one workpiece at a time between operations. Sometimes this is seen as the holy grail within Lean manufacturing since it makes production possible with (almost) no intermedairy stock.

  5. Takt time: This is the heartbeat of a lean production system. Takt time is the time required per production step to satisfy the demand. If your customers order 240 pieces a day and your workday is 8 hours, then the takt time is 480 minutes/240 pieces = 2 minutes per processing step.

  6. Heijunka or leveling: This means smoothing the type and quantity of production over a fixed period of time, to reduce disturbance of the flow.

  7. Andon: A system - for example triggered by pulling a cord - to notify management, maintenance, and other workers of a quality or process problem. Problems are seen as possibilities for improvement!

  8. Cellular manufacturing: All required items (people, materials, machines) to make a certain product or product category are clustered in “production cells”. This approach can be seen as an alternative to flow manufacturing with dedicated production lines for families of products. Cellular manufacturing often is a good solution within companies that make customer-specific products.
    > See also: Quick Response Manufacturing

  9. SMED: This stands for Single Minute Exchange of Dies, a concept developed by Shiego Shingo of Toyota. He suggested that molds used to form car bodies should be exchangeable within ten minutes. Later the term “SMED” was expanded to encompass the reduction of machine change-over times in general, with the aim to reduce waiting times, so that demand-driven production with small batch sizes becomes possible.

  10. Visual management: This refers to an orderly organization of the work floor, so that everyone can survey the status of the entire production process in a glance. This way workers and managers can quickly intervene if problems arise, which reduces the number of mistakes.

  11. 5 Why's or Why-Why-Why: Method for root cause analysis, by repeatedly asking why a problem occured to reach a deeper level.

  12. Kaizen: Japanese for "improvement", or "change for the better". Kaizen-teams continuously improve their processes, step-by-step

  13. Lean management: In a Lean environment, everything is focused on stimulating and helping people, to achieve increasingly better business results together! To build a culture like that requires a profound transformation.

  14. Go to the Gemba (Go and See): As a part of Lean management, managers should visit the workplace much more frequent then before, to help find and solve problems. So, Lean is not simply reducing waste, but the management part is half of the job. This subject is dealt with on the site section lead & change.

  15. A3 management: To structure a dialogue between a problem solver and his or her mentor, a piece of paper with the size of an A3 is used. On this paper, the problem analysis is put down by the mentee. Next, the A3 is rewritten several times after hints from the mentor. An A3 can for example be revised after a visit to the Gemba which yields new information, or after receiving feedback from the workers about a possible improvement solution presented on the A3. This way, the A3 becomes a report of a journey, from the problem description to the suggested counter measures.

  16. True North: Lean is not about improving anything, but should be focused on things that increase the creation of value.

The concepts above are typical in lean manufacturing but can also be applied in combination with other process improvement methods. Many other concepts, be it less exclusively related to Lean, can also be used to reduce waste. Several popular methods are:

  1. Poka-yoke: Japanese for “simple, error-proof”. The aim is to minimize the chance of errors in processes.

  2. 5S: This refers to the five Japanese words seiri, seiton, seison, seiketsu and shitsuke. These stand for guidelines to organize a workplace in such a way that visually driven, lean production becomes possible. The emphasis is on a clean, tidy and organized workplace.

Case study: Eaton Automotive

Eaton Automotive in Montfoort, the Netherlands, produces mirror controls for cars. 'Before 1995 we were a family business,’ says Onno Oenema, Assembly Engineering Manager. 'Straight after the takeover by the American company Eaton, we became firmly committed to lean manufacturing. Soon after that we attended courses in value stream mapping. We didn’t need help from an external consultancy firm, because support came and still comes from America. Eaton is a big company, comparable to General Electric. We have our own in-house knowledge center for lean manufacturing and quality control.'

Oenema thinks that Americans are very good at introducing process improvement methods. 'They simply enforce change,' he says. 'Their corporate culture permits that. It’s far more hierarchical than what we Northern Europeans are used to. That’s why the EU was lagging behind when it comes to Lean. But now there is growing interest in Lean thinking. The Dutch Association of Suppliers, the NEVAT, regularly organizes Lean symposia.'

After lean manufacturing was introduced in his factory, Oenema quickly saw significant changes. 'The most obvious waste we eliminated was our inventory of intermediate parts. We make about a hundred types of mirror controls. These all contain about twenty synthetic parts, that we have to spray paint and assemble. Before Lean, we had a storage rack, fifty meters long and four meters high, filled right up with stock. Sometimes we had enough inventory for a whole week of production! Now, our inventory per article never exceeds the amount which is sufficient for four hours of production. So we just don’t need that huge storage rack anymore.'

Freed space
The freed space came in handy during a revision of the factory lay-out. 'Once we’d mapped our value stream and our various production processes, it became clear that our work floor organization was illogical', Oenema continues. 'Now we’ve aligned our machines in flow. Parts and materials enter the factory at one end, and the finished products exit at the other end.'

Lean at Eaton Automotive
Lean at Eaton Automotive, Montfoort (photo Eaton)

Eaton makes a distinction between takt time and machine time. 'The takt time is determined by customer demand,' Oenema explains. 'As a rule, we never produce faster than the speed at which the customer’s orders arrive. Our machine cycle time must equal the takt time at least, but should preferably be faster. If our workers have finished a particular operation, then they can start doing something else.'

Information on the machine’s performance is visible on boards besides each machine.  A multidisciplinary team – with engineers, operators and maintenance technicians – implements improvements autonomously and continuously. 'This approach has led to considerably fewer machine breakdowns and less product rejection.'

Information about the machine performance is crucial to identify and address the causes of the most frequently ocurring breakdowns. 'That’s why we invested in software that automatically updates the data.'

Since the work flow is demand-driven, batch sizes are now smaller and change-overs occur more frequently. This has had most impact on the operation of the spray painting machines. Oenema: 'Because we need to swap the dies now much faster than before, the application of SMED is very important to us.'

Lean manufacturing is not restricted to the factory floor. Eaton also looks for potential improvements in assembly equipment design. This department designs all the machines the company uses to assemble the mirror controls. 'We examined the design process. Value stream mapping has thrown a clear light on quite a lot of non-value added time, specifically waiting times. That’s interesting, as everyone in the design department always seemed to be extremely busy! The root cause turned out to be missing information, when a design is passed on from one designer to another.'

The aim is to re-organize the design steps in as logical a sequence as possible. 'We’ve devised a standard protocol, with the aim to implement lean manufacturing concepts at every phase of the machine design process, such as Poka Yoke or SMED-principles', Oenema says. 'This early management is already having effect. We’ve designed a manual assembly line for a sister-company in Ireland. While doing that, we made sure there is only space between the machines to store one intermediate part'

> For a more recent and more comprehensive Lean case study, read the article about Sara Lee

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