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Source: Business-improvement.eu
Lean: Value adding organization
Robots are painting parts in a One Piece Flow at ScaniaLean Manufacturing, introductory article 2  (see also introductory article 1)
Losing waste
By Dr Jaap van Ede, business journalist, editor-in-chief business-improvement.eu, 06-09-2012
The first version of this article was published in the Dutch specialist journal Logistiek. This article is regularly updated on this website.

Lean manufacturing: With the help of a lean makeover that eliminates all sources of waste, your company will be transformed from a sluggish dinosaur into a nimble antilope, built for speed and efficiency.  Does this approach work, and where did it came from?

'Fat' production in large quantities creates diverging and converging streams in the factory, with materials waiting to be used at some places and intermediate stock piling up. One of the basic principles of lean manufacturing therefore is to create a flow-driven pipeline, with little work-in-progress. Lean first identifies the steps that add value for customers. Next, those steps are placed in sequence. The end result is that materials and semi-manufactured products flow through the factory in a continuous stream. That way, maximum value is created.

Sometime around 1950, Toyota manager Taiichi Ohno walked through his factory and asked himself this crucial question: “Which steps of our production process actually add value to our products?” With this thought, the factory manager laid the foundation of lean manufacturing.

Partly because of this, Toyota has been profitable almost every year since the 1950’s.

However, the term Lean was only introduced at the end of the 1980s, with the publication of the renowned 5-million-dollar, 5-year study on the future of the automobile industry, conducted by the Massachusetts Institute of Technology.

According to the authors, James P. Womack and Daniel Jones, the Toyota Production System owed its success to a special way of thinking: lean thinking.

'Everything comes down to minimizing waste', says Lean consultant Peter Leenders.. 'Adding value means only doing or making the things the customer is willing to pay for. Any other activities should be reduced as far as possible.'

There are seven categories of waste. The first five are: manufacturing errors and disruptions, waiting times, transport and movement, which includes searching for materials or tools.

The quest for efficient and flexible production

Efficient production does not go hand-in-hand with flexible production naturally. Of course, when you make a limited number of items and when the demand is relatively stable for a long period, then it is possible to design perfectly balanced production lines. You can compare this by digging channels through which specific groups of vessels (read products) will sail.

In practice however, customers ask for an increasing number of different products, often customized to their wishes. In addition, the pace of new market introductions is increasing. On top of this comes the effect of current economically turbulent times, with rapidly changing demand and customers that order more often, but in smaller quantities.

The result of these facts combined is that companies are forced to “dig” an increasing number of dedicated production channels. The only alternative seems to have a lot of intermediate stock (anchored ships). Both options are far from efficient!

Logistic improvement methods such as lean manufacturing and the Theory of Constraints (TOC) are however constantly evolving. As a result, many different solutions were developed to make production not only more efficient, but also more flexible.

There is also a logistic improvement method that focuses specifically on creating enough flexibility to produce customized products. This is Quick Response Manufacturing (QRM), developed as an extension to Lean.  QRM suggests a switch to cellular manufacturing with so-called Quick Response Cells (QRC's). Then, the routing for each item (or ship) does not need to be fixed in advance anymore. Instead, products are made by sending them along a freely selected number of QRC's.

The remaining two categories of waste are overproduction and stock. Leenders says, 'If you want to remove waste, production must become customer-driven. Only then you make no more than what you sold. Just-in-time production follows automatically from lean manufacturing.'

Robots spuiten onderdelen, in een One Piece Flow
Robots are painting parts in a One Piece Flow at Scania

According to Leenders, it’s best to limit the production quantity to one item at a time, thus creating a so-called One Piece Flow. 'Production in larger quantities creates diverging and converging streams in the factory, with materials waiting to be used at some places and intermediate stock piling up. One of the basic principles of lean manufacturing therefore is to create a flow-driven pipeline.'

Lean manufacturing first identifies the steps that add value for customers. Next, this steps are placed in sequence. Leenders says, 'The end result is that materials and semi-manufactured products flow through the factory in a continuous stream. This is known as the value stream.'

Lean manufacturing requires no special IT support. Leenders: 'You should make sure that the blueprint of your company’s processes is based on Lean activities. That’s important when you’re setting up an Enterprise Resource Planning or ERP-system.'

Besides lean manufacturing, there are various other process improvement methods. The Theory of Constraints for example is used to identify and then exploit the bottlenecks in a process. With Six Sigma the emphasis is on finding and eliminating quality disrupting factors, using statistical analysis. Leenders concludes, 'Those techniques actually deliver the same results as lean manufacturing: more throughput, less waste and an end product of good and constant quality.'

Standardization as starting point
Case study Scania

According to Gerard Bannink, logistics manager at Scania, the US economy has long been driven by the idea that you can never make too much. 'That’s how material requirements planning or MRP thinking was born,' says Bannink. “For instance, refrigerators were made in huge numbers, based on predicted demand.'

Bannink continues, 'In Japan however, after World War II, almost everything was in short supply. That’s why Toyota placed the emphasis on minimizing waste and building their cars on demand. Note however, that the Japanese themselves don’t talk about lean manufacturing. That is because this way of thinking has become so inherent to their manufacturing processes.'

After the recession of the nineties, people in the US and Europe started to think lean as well. 'First, emphasis was laid on the mean and clean aspects”, Bannink clarifies, 'There was to much focus on cost reduction. Later, the emphasis shifted to satisfying the customer. Since then the aim is to add value to products with as little waste as possible, and having materials stream through the factory.'

This idea is not new, Bannink points out. 'Lean manufacturing heralds a revival of many 20th century production concepts, such as Ford’s in-line production system and working with autonomous teams. And of course the Kanban system of Toyota.'

One Piece Flow painting: A customer-specific colour is sucked up form a small can, and is then transported to the painting robots.
One Piece Flow painting:  A customer-specific colour is sucked up form a small can, and is transported to the painting robots.

The senior management of Scania and Toyota came together in 1995 for the first time, when seven Swedish colleagues of Bannink visited the Toyota factories in America. After a few small pilot projects, Scania rolled out the structured way of thinking and working, prescribed by lean manufacturing, through the entire company. Bannink says, 'Now we call it the Scania Production System. That is because our system is a customized version of the Toyota Production System.'

Scania Production System
The Scania Production System (SPS) is literally built like a house. Bannink explains: 'Our values are the foundation: the customer comes first, we respect our workers and we strive for as little waste as possible. The floor represents how we’ve standardized our working methods. Finally, the walls show how we’re making improvements, mainly through production-on-demand and by something which we call ‘error-free from me’. With that, we mean that we aim to produce every part correctly, first time right.'

Bannink continues, 'At first you might not see the link between standardization and minimizing waste. Let me clarify this by comparing it with standardizing the process of making a apple pie. My wife is Indonesian and she peels the apples away from her, while Western people usually peel towards themselves. The direction of peeling however has no effect on the result. Only things which influence the product quality should be written down in the recipe, which then becomes the standard working method.'

All Scania employees have attended in-house courses in lean manufacturing. Part of that course is a simulation using Lego blocks. Bannink: 'You assemble those Lego blocks to trucks, for example. First you do it the old way, and later you standardize the process. Then you will notice that the quality improves, and that it becomes easier to take over someone else’s task.'

Production capacity at Scania’s Zwolle site increased from 100 to 150 trucks a day, between 2000 and 2004. During that period, Bannink was logistics project leader. 'The SPS had little impact on the project organization, but it did influence the decisions we made. Given a choice between two alternatives, safety and quality became the deciding factors, not cost.'

The Zwolle factory was reorganized, so that production occurs in flow. In addition, contracts with some suppliers were revised so that their materials would arrive just in time. In additition, the work floor became much more conveniently arranged. 'That’s important,' concludes Bannink, 'To achieve error-free production, you need to be able to go and see, and intervene quickly if problems occur. We now have what we call an interactive factory. For IT support we use an ERP-system which was developed in-house.'

Tips to introduce Lean Manufacturing
  • Read, from James P. Womack and Daniel Jones: (1) The machine that changed the world. New York, Rawson and Associates (1990). (2) Lean thinking. Touchstone Books (1996). Read, from Ballé and Ballé, (1) The Gold Mine and (2) The Lean manager
  • Read all the articles and case studies on this site!
  • Visit companies that are Lean. While doing that, think above all: how can I apply this in my situation?
  • Standardize your work processes, this will form the basis for improvement.
  • Organize your work flow according to the “value stream”.
  • Eliminate all activities that do not add value to the product, also in the office. Intermediate stock and waiting times are taboo, everywhere!
  • Delegate as much responsibility as possible to (autonomous teams of) people who add value to your product or service.
  • Ensure that all your employees understand the Lean principles.
  • Don’t forget research & development. Product development is Lean if the new products are precisely conform customer’s wishes, and if those products can be manufactured efficiently, in a Lean way.

  • Lean is like dieting: watch out for a yo-yo effect. Check continuously if non-value adding processes are re-introduced. If so, eliminate them again.

  • Contact a consultancy firm for help, here's a list of our sponsors/advertisers of the site-section Lean*
    *) see also our disclaimer

> See also: Lean manufacturing, introductory article 1
> See also: Lean manufacturing, the evolution and state of the art

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