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The Design of Lean
Manufacturing Systems Using
Time-based Analysis
R.C. Barker
Dorman Smith Switchgear Limited, Preston, UK
Introduction
The methods discussed in this article provide a structured path to lean
manufacturing with analysis of the supply chain, component production and
assembly operations being possible to aid business process re-engineering and
benchmarking. Results of development work undertaken in a post-materials
requirments planning (MRP) environment using kanbansare also discussed. In
each of the above areas three distinct stages of development are used:-
(1) Gathering data from the existing organization to measure and determine
the existing value-adding capability, i.e.to identify the rate at which
value is added to a single product from the raw material stage through to
despatch and delivery to the customer.
(2) Changing the organization and improvement to processes, layout and
control systems with an emphasis on throughput time reduction and
value adding.
(4) Measuring the cost of adding value at each machine or process with
analysis of lower cost alternatives.
The resulting total analysis acts to guide investment and provides a non-
financial audit of conversion capability which can be used to design lean
manufacturing systems and business process re-engineering.
Back to Basics
Against a backdrop of rapid economic decline, severe international competition,
government spending cuts and a huge balance of payments deficit, British and
American manufacturers must now restructure their businesses at a speed
which is beyond the perception of many executives.
Restructuring, however, takes time, and three to five years would not be an
unrealistic timespan for the average organization to reach current Toyota or
Nippon Denso standards. A standard that includes partnership sourcing
agreements, running production systems with half a days stock, fully
empowering employees, a value-adding capability equal to 85 per cent of time
International Journal of Operations
&Production Management, Vol. 14
No. 11, 1994, pp. 86-96. MCB
University Press, 0144-3577
The author is a research candidate at UMIST (University of Manchester, Insititute of Science and
Technology), Manchester, UK in the Total Technology Department.
Design of Lean
Manufacturing
Systems
87
goods spend in the factory and processes which are so robust that output
quality is in the zero defect category. Many of these lean production
characteristics, although common in developed first generation Eastern or
Pacific rim manufacturers, are still not common in the UK or USA.
Here we face our first problem, despite a rapid growth in operations
management techniques over the last ten years, frameworks that measure
value-adding capability and input/output analysis tools remain at a primitive
stage. The need for such frameworkds for value adding analysis has already
been identified by Wisner and Fawcett[1], Walsham[2] and Blenkinsop and
Davis[3]. Yet without this clear and objective method of basic analysis to guide
restructuring we continue to dilute our efforts and encourage complex solutions
when they are not required. The author believes it is possible to combine
restructuring frameworks to support a just-in-time (JIT) philosophy with
cellular manufacturing techniques in order to regain lost development time. In
fact, a major problem with JIT philosophy and a fuzzy approach to waste
elimination is the lack of structuring afforded. For example, every motivated
employee wants to eliminate waste, improve quality, reduce throughput time,
etc., but without a method of analysing value-adding capability how can they
identify and differentiate between a $10 negative cost and a $5,000 negative
cost? In other words, your doctor always examines you first before prescribing
a cure and we should do the same in organizations: if management do not
analyse the total input/output conversion chain prior to restructuring action
how do they know where the bottlenecks or negative costs exist in the total
value-adding chain?
In theory the task of restructuring our organizations is simple, define what
the customer needs, remove non-value-adding activity, eliminate waste and
complexity, etc. In practice, however, another scenario evolves:
G Organizations rely on people to function, yet complexity within the
input/output chain usually means management fail to focus on primary
goals and many employees evolve a role or position from non-value-
adding activity. This makes restructuring difficult because
simplification means removing complex systems and therefore people.
G Complex systems and poor organizational design with high
maintenance costs make change difficult and slow, for example,
removing MRP (offline centralized push control) and installing kanban
systems (localized in line-pull control).
G The lack of analysis frameworks which span the total conversion chain
has enabled different groups within the organization to act in isolation or
at odds with the needs of total company objectives.
G Financial performance measurement does not help restructuring
justifications or the move to lean manufacturing.
To appreciate how difficult a task this restructuring process really is in practice
we must remember that a great number of British and American companies
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(many of which were household names) failed to make the transitional changes
required and are now gone for ever. In practice they failed to secure a linkage
and design lean production systems which met time and cost restraints
demanded by the customer. In an attempt to overcome these problems quite a
few international organizations use benchmarking at the corporate macro level
to measure their performance against others, see for example Shetty[4],
McGrath and Hoole[5] and Owen[6], but this does not aid lean systems design.
Benchmarking for the multi-national company is relatively easy when
product costs, value-adding capability and response times are known in a range
of factories and plants in different countries. For the smaller organization,
however, a considerable amount of time is spent gathering data, which is both
costly and prone to inaccuracy. Also, going one stage further and attempting to
link macro (corporate) benchmarking to micro (process) benchmarking is not
easy and methods such as those proposed in this article are not well developed.
As Dr Ryugi Wada of Toyoda notes[7], The breakdown of macro-BM into
micro-BM is a considerably difficult task.
By using time-based value-adding frameworks, however, it is possible to link
macro-micro benchmarking and develop a methodology which aids the design
of lean manufacturing systems and can be used across the entire value-adding
chain. This method will now be discussed in detail.
Method of Analysis
The method of analysis described in this article is designed to be effective
within the batch manufacturing sector of industry but also can be used in other
value-adding environments. Prerequisites are: that parts/component
traceability systems to determine times and dates when action took place are
known; and that analysis is by product range, i.e. a factory within a factory
approach is used with product-related manufacturing cells to gain a better
vision of the total value chain.
In Figure 1 a model has been developed which is capable of displaying an
organizations ability to add value. This model is a blank representation on to
which real organizational data are imposed. Data recording the systems ability
to add value are obtained by tracking a single item through the process.
Characteristics of the supply chain are measured, i.e. when parts arrive and
their costs are recorded, and likewise component production and assembly cell
value-adding times are recorded, as a single item which is being produced
within the conversion system.
The reader should note at this point the two major differences which exist
between this and other methods of analysis, such as critical path analysis or
fishbone diagrams, etc., that:
G analysis of existing value-adding capability begins at the point of
assembly (first assembly operation), recording time taken to add value,
how much value was added and time of day (i.e. day, date, etc.). Likewise
the component parts used in assembly operation one (Op1) have arrival
date or production date recorded. There is thus an attempt to reduce
throughput time and remove non-value-adding activity at either side of
this central point of conversion; and
G all activity in the total conversion chain (raw material inputs to finished
product outputs) is divided into (+) positive value-adding activity and ()
negative non-value-adding activity.
As can be seen from Figure 1 it is possible to illustrate the total input/output
conversion chain relevant to a product family. In both component production
and assembly operations all activity is divided into positive value-adding
actions or negative non-value-adding time and waste. Once initial analysis has
identified negative costs, corrective work and continuous improvements must
begin to reduce throughput time and eliminate waste.
Gathering data from the organization to impose on the model is relatively
simple and centres on the tracking of a single product through the assembly
cell, simultaneously recording:
G when value is added in assembly (time of day, time taken to add value
and /$ value added) per assembly operation (see Figure 1); and
G the date component parts being assembled were produced and
purchased parts entered the factory.
Design of Lean
Manufacturing
Systems
89
value
added
Op6
Op5
Op4
Value-adding
operations
Time taken
to add value
(single item)
stock and
non-value-
adding time
(NVA)
(NVA)
Op3
Op2
(NVA)
(NVA)
Op1
value-
added
work-in-
progress
Queue
time
A
Queue
time
B
Part A
(example)
Part B
(example)
Part C
(example)
Purchased components
(distribution of inputs)
(example)
Throughput time per single item
(Days or hours as applicable)
Inputs
Actual live data concerning time
when value is added, day, date, etc.,
is obtained from tracking a single product
through the assembly operations
and imposing information on the model
Throughput time per single item
(days or hours as applicable to industry type)
Outputs
Assembly operations
(value-adding characteristics of a product comprising components
A-B-C, etc. and purchased parts)
Component supply operations
(value-adding characteristics)
Stock costs
*
* * *
*
*
*
*
*
*
*
*
*
= Value-adding operations
= negative carrying costs and non-value-adding
+
_
+
_
+
_
+
_
+
_
+
_
Key:
Queue
time C
Figure 1.
Typical Characteristics
Prior to Restructuring
Action
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Recording the above information is obviously repeated at each assembly
operation until the analysis is complete. In practice, the recording of component
parts which have low value is not required and investigation usually reveals
that a small number of parts account for 90 per cent of final assembly value.
Component Supply Operations in Detail
To enable component production throughput time reductions and therefore a
reduction in total conversion costs, internally manufactured components
processes will require analysis to improve value-adding capability. As stated
above in the initial rough cut analysis of total input/output operations, only
those components with high cost need to be investigated. The purpose of this
first action is to identify and remove non-value-adding activity which separate
value-adding operations, these typically account for 90 per cent of the time a
product is in the production system.
In Figure 2 an example is given of what the value-adding characteristics
relevant to producing a single component may look like when recorded on the
model. Generally the amount of value-adding in relation to total throughput
time shown in Figure 2 is optimistic; in practice it is not uncommon to find value
added in less than 20 minutes of an eight-hour working day. Obviously to
become lean all this non-value-adding activity must be removed.
In order to reduce kanban sizes and improve speed of response to feed
assembly operations, each single component being produced is tracked through
the components department. Time when value is added can be recorded and
information from a bill of materials will provide operation values. The resulting
analysis provides guidance for manufacturing engineers and cell members of
how savings can be achieved. Common solutions are reductions in set-up time,
installation of extra machines or adjustment of working practices, all of which
should be designed to allow a near continuous chain of value-adding. From
Total throughput time
(Continuous improvements are implemented to eliminate
non-value-adding time and improve percentage of
total time spent adding value)
Actual time when value is
added is imposed on the model
by tracking a component through
production departments and
adding costs
Positive value-
adding
operations
Raw material
inputs
Start of value-
adding cycle
Negative non-
value-adding
and waste
Op1
Op2
Op3 Op4
Op5
Op6
Total cost
of stock
Component
to assembly
(NVA)
Non-value-
adding activity
queue time
(NVA)
(Days/hours as applicable)
11 10 9 8 7 6 5 4 3 2 1
Non-value-
adding time
Amount of value added
Time value is added
(total = Op1 + 2 + 3 + 4 + 5 + 6)
typically less than 10 per cent
of total time in the factory
Completion of component
prior to assembly
0 = Requirement time/date
0
+
_
Figure 2.
Detailed Analysis of
Component Supply
Operations (One Part)
(Internally
Manufactured Parts)
Design of Lean
Manufacturing
Systems
91
experience it has been found that almost all the changes needed in the
production cells can be carried out by the cell group. The major advantage
gained from using this model lies in the fact that the whole value-adding chain
can be illustrated, and micro benchmarked, and actions prioritized. This is very
important for both managers and operators who have a global/macro view of
the value-adding chain (to aid removal of major constraints) and also a micro
view of single operations.
When throughput times have been reduced it is possible both to reduce
interprocess stock and to give improved response to customer demand which
invariably is never smooth. Following the first investigation and development
actions it will be possible substantially to reduce negative costs (i.e. stock,
queue times, etc.) and improve the flow of product through the factory.
In Figure 1, interdepartmental (interface) queue time is included in the model;
this is the non-value-adding gap that appears when component parts are made
ahead of the requirement date and must be stored until the assembly demand
date. In the post MRP factory, kanbansystems (pull not push) will have largely
eliminated these costly areas of waste. During the process of re-engineering,
however, kanbansystems will need adjusting to reflect the improved levels of
response in both component and assembly departments. Also in some
organizations where product derived cellular manufacturing is in place, it has
been possible to combine component production and assembly cells in one area
to design, in effect, a mini factory or total conversion in one cell.
When restructuring actions have been ongoing for a period of time (say six
months) subsequent investigations can be conducted with new data imposed on
the model to measure and benchmark the improvements made to the conversion
system. These developments should now form part of a continuous
improvement approach allied to process capability improvements, employee
learning and empowerment.
Purchased Parts Supply Chain in Detail
In every manufacturing organization a percentage of the component parts used
in final assembly operations will be purchased. When value-adding capability
in assembly cells is analysed by modelling the value-adding time (at a certain
date) it is also possible to record when those purchased parts being assembled
entered the factory. World-class manufacturers in the West would normally
expect purchased component parts to arrive within a few days of the assembly
requirement date, while in Japan it is not uncommon for component parts to
arrive within hours of requirement. Conducting a value-adding audit in the UK
usually reveals weak supply chain logistics with either stockouts, because the
system cannot respond to peaks in demand, or parts being delivered weeks in
advance of the required assembly date. Both of the above situations obviously
raise costs of conversion or affect customer service levels.
Gathering data from the organization about the existing capability of the
supply chain is relatively simple because time, date and costs of inputs can be
recorded and imposed on the model to give a total distribution of inputs and the
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associated carrying stock costs (see Figure 3). When the higher cost items have
been recorded for a single product, i.e. tracked through an assembly cell on a
particular date, the relevant arrival dates give the information that is required
to begin development work. A long and flat stock costs graph immediately
indicates poor logistics and high costs; in contrast, a narrow but high profile
reflects JIT deliveries and low supply chain stock.
When the initial analysis is complete the characteristics of a particular
organization are known, and although this single analysis is only a snapshot
at one point in time the value-adding capability of that organization is known.
Development of the supply chain to achieve JIT deliveries can usually be
achieved by adopting direct cell feeds controlled by kanban card, fax or
electronic message. In most cases, families of parts such as mouldings, turned
parts or fasteners can be made into a kit and arrival dates controlled by a pull
system, i.e. simple kanbancard. Globally, of course, other developments within
the supplier base will be required; partnership sourcing must be a central issue
also, while minimum and maximum demand with purchase order cover must be
communicated to the supplier, for example, every three to six months.
Through continuous improvement the logistics of supplying weekly, daily or
hourly can be determined. Subsequent analysis should also be made to measure
the effect of the improvement work undertaken and to benchmark the
organization against others.
Using this framework to analyse the impact of negative costs and stock
within the total input/output conversion chain it is important to remember that
now the total logistics picture is known you have the choice and, if necessary,
trade-offs can be made.
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
11 10 9 8 7 6 5 4 3 2 0 1
Time x stock costs per day = total stock costs prior to action
Partnership sourcing agreements are developed to enable
just-in-time deliveries (direct to cell)
(high-value items are given priority)
Total stock costs
(a result of the above inputs /$ carrying costs profile)
Assembly date
(point of conversion)
Typical distribution
sought following
development of
just-in-time supplies
0 = Requirement time/date
in assembly
Arrival time of purchased parts
in relation to assembly due date
In practice component part numbers
identify arrival dates
Typical distribution of component inputs in relation to
assembly date and associated stock costs, prior to improvement actions
(items required for one product range)
(Days/hours as applicable)
Negative costs
+

Key:
* = Date of component delivery
recorded in relation to assembly date
Figure 3.
Detailed Analysis of
Purchased Component
Supply Chain
Design of Lean
Manufacturing
Systems
93
Assembly Operations in Detail
In attempting to minimize product conversion costs and reduce the time taken
to add value, the method of analysis selects the assembly cell as a focal point
and driver. In effect, this part of the value-adding chain is our nearest link to the
customer within the organization and becomes the demand point. Using the
method of analysis described in this article, an attempt is made to reduce
throughput time by eliminating all non-value-adding elements up to this point.
Ideally we must be in a position to supply the customer with product while
holding minimal finished goods or component stocks. Rapid response times and
the ability to change product type therefore, become design prerequisites within
assembly cells.
In Figure 4 the typical value-adding characteristics of an assembly cell prior
to development are illustrated and value-adding ratios of 5 per cent are not
uncommon. In redesigning the cell we aim to match total throughput time to
value-adding with no idle time between operations. In order to gather live data
so the unique characteristics of an assembly cell (and the supply chain) can be
imposed on the model, a single product is tracked through the assembly cell and
value-adding operation times recorded. Certain parts are used in assembly
operations and those component production or arrival on-site dates are
simultaneously recorded on the model. Tracking and recording the total
assembled product will provide a snapshot of the value-adding capability of
the conversion system which, in effect, is a representative audit of a system
which pulses around a standard of development. The resulting information
provides guidance for improvement and benchmarking.
amount of value
added
Completed goods
ready for despatch
to customer
Total stock costs
prior to sale
0 = Customer
requirement date
Outputs
Non-value-adding time
(typically 90 per cent of total throughput time)
(Days or hours as applicable)
Value-adding
operations
Op1
Op2
(NVA) (NVA)
Op3
Non-value-adding activity,
a result of queue time or
poor design
Time taken
to add value
$ amount of value added
(NVA)
Op4
Op5
Op6
9 8 7 6 5 4 3 2 1 0
Total assembly throughput time prior to improvement actions
(non-value-adding elements are removed progressively to reduce
costs and improve response to customer demand)
Positive value-
adding operations
Negative non-value-
adding time and
waste
Inputs
+

Analysis of total value-adding capability takes place by tracking a single product

through assembly and recording simultaneously when value is added
(a) in assembly and (b) when component parts being assembled were made
internally or purchased parts arrived at the plant
Figure 4.
Detailed Analysis of
Assembly Operations
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Results and Further Research
In Figure 5 some results of using the method to micro-benchmark and restructure
in the electrical switchgear industry are shown for product X. In this case
substantial improvements to the production system were made at Dorman Smith
Switchgear Limited located in north-west England. Here it was possible to reduce
negative costs substantially in both the supply chain and assembly operations.
Internal component supply chains were improved so that all parts were
produced within five days of the assembly date, while partnership sourcing
developments and direct cell feeds of purchased parts ensured all purchased
parts were also delivered within a maximum of five days from the assembly date.
In redesigning the assembly cell it was possible to reduce substantially
throughput time to just 35 minutes, eliminating non-value-adding activity.
Further development is under way with this product group[8] but developments
to date have produced the results shown in Tables I and II.
Concluding Notes
In this article we have seen that it is possible to combine process, re-engineering
and benchmarking methods of analysis suitable for application in
manufacturing industry. We know from experience in the UK that it is not
difficult to become complacent and confuse world-class value-adding capability
with high profitability derived from low competition in high margin markets.
Assembly Supply chain
Before
After
25

-25
Positive
Negative
25
16
Positive
Negative
20 15 10 5 10 20 30 40 50 60 70
Number of working hours Number of working days
Value (s)

Figure 5.
Product X before and
after Analysis 2D
Model
Design of Lean
Manufacturing
Systems
95
For example, it is possible to have an organization with poor value-adding
capability and high costs of conversion, but because market margins are high,
success derived through purely profit measurement can be misleading and
dangerous. For the company with high costs of input/output conversion there is
always a risk that truly world-class competition derived through adoption of
lean manufacturing methods will arrive in the marketplace and lower selling
prices to levels which cannot be achieved by existing domestic producers.
Without a framework for analysis it is impossible to see how a co-ordinated
restructuring could take place which aims to balance the organization and
make full use of organizational energy. For example, some firms have poor
supply chains with high stock costs allied to good assembly processes, while
others may be quite the reverse; yet without a framework for analysis and
guidance how can the executive or cell team decide where effort is best
rewarded? The design of lean manufacturing systems, to be effective, must
include analysis that is deeper than generalizations concerning quality, profit or
Direct to cell kits Stock holding costs
Previous stock Current stock
Kanbancontrol ( thousands) ( thousands)
Fasteners three stock points to one 55 12
MCCBturned parts 11 4
MCCB tips and copper 35 15
MCCBmouldings:
SPkit was 7 codes, now 1 40 24
TP kit was 9 codes, now 1
Totals 141 55
Table I.
Details of MCCB
Supply Chain
Developments
Old cells at
Old cells February, 1993
Cell work in progress stock 12,000 375
Supply chain component stock 146,000 76,000
Kanbanstock (internal components)
cost of full two kanbansystem 23,400 18,000
Throughput time per single unit 20 hours 35 minutes
Number of people in three cells 21 16
Each cell size (m
2
) 109 50
Output per day each cell 110 115 Triple pole/day
Re-test per day Now <Triple pole
Number of continuous improvements
identified to date 29
Assembly cell value-adding ratio (per cent) 2 63
Table II.
Moulded Case Circuit
Breaker Assembly
Cell/Supply Chain
Details of Continuous
Improvements and
Comparisons of Three
Assembly Cells
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past performances. Value-adding audits which can measure an organizations
resource and energy conversion provide a structured path to these world-class
standards. This offers advantages over standard financial performance
measurement reporting methods based on historical information by providing
guidance and a measure of primary goal effectiveness in isolation of market
conditions.
Using the methods developed in this article it is possible to take data from
almost any manufacturing company, measure the value-adding capability and
guide restructuring investment to balance the flow of work. This obviously
affects throughput time reduction and cash generation, allowing a measure of
the untapped potential within the organization.
References
1. Wisner, J.D. and Fawcett, S.E., Linking Firm Strategy to Operating Decisions through
Performance Measurement, Production and Inventory Management Journal, Third
Quarter, 1991, pp. 5-10.
2. Walsham, G., Management Science and Organisational Change: A Framework for
Analysis, OMEGA: International Journal of Management Science, Vol. 20 No. 1, 1992,
pp. 1-9.
3. Blenkinsop, S., and Davis, L., The Road to Continuous Improvement, OR(Operations
Research) Insight, Vol. 4 No. 3, July-September 1991, pp. 23-6.
4. Shetty, Y.K., Aiming High: Competitive Benchmarking for Superior Performance, Long
RangePlanning, Vol. 26 No. 1, 1993, pp. 39-44.
5. McGrath, M.E. and Hoole, R.W., Manufacturings New Economics of Scale, Harvard
Business Review, May-June 1992, pp. 94-102.
6. Owen, J.V., Benchmarking World Class Manufacturing, Manufacturing Engineering
(USA), 1992, pp. 29-34.
7. Wada, R., The Significance of Benchmarking in Corporate Management, Paper
presented at a joint DTI (JETRO) Seminar, Church House Conference Centre, Westminster,
London, 3 June 1993.
8. Barker, R.C., Achieving Increased Production Efficiency A Systems Approach, Long
RangePlanning, Vol. 25 No. 5, 1992, pp. 99-105.
Further Reading
Barker, R.C., Time-based Performance Measurement: A Model to Aid Competitive
Restructuring, Management Decision, Vol. 31 No 4, 1993, pp. 4-9.