Lean Manufacturing

Minus-Cost Principle
Cost + Profit = Selling Price

Toyota Production System

(Lean Manufacturing)

Taiichi Ohno (1912-1990), Toyota

executive pioneered the concept
To

do more and more with less and less

Less human effort

Less equipment
Less time
Less space
Less capital

Lean Production
(Levels of Abstraction)

Lean production has been described at

three levels
1.

Philosophical perspective
A.

Elimination of waste (Womack and

Jones,1996)

2.

Implementation of tools and techniques

3.

System design using three rules

What is Waste?

Waste is defined as any activity that does

not add value to a product from
customers perspective

Fujio Cho, Toyotas president defined

Anything

other than the minimum amount of

equipment, materials, parts, and workers
essential for production

Seven Categories of Muda

Muda means Waste

1.
2.
3.

4.
5.
6.
7.

Overproduction
Unnecessary Inventory
Transportation
Over Processing
Waiting
Unnecessary motion
Product Defects

Overproduction

Unnecessary Inventory

The Rocks in the Stream

Concept

Production Problems

Lowering the Water Level

Inventory
Reductions

Production Problems

Transportation

Waiting

Unnecessary Motion

Overprocessing

Defects

How Time is Spent by a Typical Part in a

Batch Production Machine Shop
Time in
factory

Time on M/c

Moving and Waiting

5%

30%

95%

70%

Time on m/c
Cutting

Loading, positioning,
gauging

Class Exercise

Students identify waste in their

organization

Wastes in IT Sector

How long did you wait to start a scheduled

meeting?
How many reports you created that nobody
read?
How much time you waited for a decision from
your superior?
How much rework you did while developing the
software?

Activities

Value-added
Makes

a product more complete

Non-value-added
Does

not add value in the customers eyes

and customer unwilling to pay

Required non-value-added

Value-added Activity

An activity that makes a product a more

complete product, in the eyes of the customer

The value is defined from customers point of

view

End result is the receipt of cash for our actions

Required Non-Value Added

Activity

Activity for which the customer is likely to

pay

We can change and improve the method

of performing these activities

Non-Value Added Activity

The activity that consumes time and resources

but does not advance the product to a more
complete or finished state. Adds no value in
the customers eyes and that customer is
unwilling to pay for

Seven categories of waste

Overproduction,

unnecessary motion, transport,

process, waiting, unnecessary motion

Basic Words

Seven forms of waste composed of nonvalue added activities, add cost

The value added activities, generate

revenues

Components of
Lead Time
Start of production
for a single item
Conversion Time

Value-added

Wait Time

End of production
for a single item
Move Time

Down Time

Nonvalue-added
Total Lead Time

Relationship Between Setup

Times and Lead Times
Long
Setup
Times

Large
Batch
Sizes

Longer Lead Times

Large
Inventory

Value Stream Mapping

Process mapping tool that enables all

stakeholders of an organization to
visualize and understand a process

To differentiate value from waste

Eliminate waste

Chinese Proverb: One picture is worth ten thousand words

Value Stream Map

Walking and drawing the processing steps
(material and information) for one
product family from door to door in your
plant

Value Stream Mapping

To maximize value and eliminate waste
1.
Form inter-disciplinary team
2.
Mapping the current key process how it actually
operates

Identify value added and non-value added activities

Eliminate non value added activities using Kaizen

(continuous incremental improvement)
3.
Develop future state value stream map

Takt Time
Available work time
per day
Takt Time = -------------------------------Customer demand rate
per day

TPS Terminologies

Ways to Eliminate NVAs

Rearranging sequence
Consolidating process steps
Changing work methods
Change type of equipment
Redesigning forms and documents
Improving operator training
Eliminate unnecessary steps

Toyota Production System

Multiple explanations for Toyotas

success:
Elimination

of waste
Using specific tools for production
Design Rules

Lean Tools and Techniques

1.
2.
3.

4.
5.
6.
7.
8.
9.
10.

Pull Systems
Cellular Layout
Uniform Plant Loading (Heijunka)
Small lot sizes
Minimized set-up times
Kanban Systems
Quality at source (Poka-Yoke)
Flexible Resource
Total Productive maintenance
5S

1. Traditional Production

1. Continuous Flow
(One-piece flow)

1. Traditional vs. Lean

Approach

1. Pull vs. Push (Traditional)

Pull Method: A method where customer demand

activates the production of service or item. Work
releases are authorised

Push Method: A push method where the

production of the item begins in advance of
customer needs. Work releases are scheduled

1. Pull Systems

Push vs. Pull

Show Video
VTS_02_1.VOB

2. Cellular Layouts

Cells group dissimilar machines to process

parts with similar shapes or processing
requirements

2. Cellular Layout
Process (Functional) Layout

Group (Cellular) Layout

A cluster
or cell

T
T
M
M

T
T
M
M

T
T
D
D

CG
SG
D
D

Similar resources placed

together

CG

SG

SG

CG

CG

D
D

SG

Resources to produce similar

products placed together

3. Uniform Plant Loading

(Heijunka)
Mixed model production

LEVELLED PRODUCTION
Levelled production means producing various models on the same production line to cater
the customer demand. See the following diagram. The various products are shown in the
form of different geometrical shapes. Assume they are different models of vehicles being
produced on the same production line.

Production leveling is done by finding the ratio of demand of various models. Instead of
producing batches of the same model, mix models are produced on the same production
line according to the ratio of their demand in the market.
This is how customers do not have to wait for long and throughout the month all the
customers are served equally well

Uniform Plant Loading (Maruti)

Tata Motors Plant

4. Small Lots
Use lot sizes as small as possible
Advantages

Average

level of inventory less

Pass through the system faster
Quality problems are detected fast
Easier to schedule

Disadvantage
Multiple

set ups

5. Minimized Set up Times

Small lot sizes to make mixed models

Japanese workers:
US workers

German

workers

800 T,

time: 10 mins
time: 6 Hrs
time: 4 Hrs

Set Ups
Internal (Done when m/c is stopped); disruptive

External

(Done when m/c is running)

Convert internal to external set ups

Abolish the setup itself (uniform product design)
Single Minute Exchange of Dies (SMED)

Video
Internal and External set up
VTS_02_2.VOB

6. Kanban System
Kanban post

7. Quality at Source

Emphasis on eliminating defects at their origination points

Workers act as inspectors

Jidoka (the authority of the workers to stop the line if quality problems
encountered)

Andons or call lights

Each worker given access to andons to seek help.

Visual control of quality

Poka-Yoke
Are either warnings that signal existence of a problem or controls
that stop production until the problem is resolved
Minimize human errors
http://facultyweb.berry.edu/jgrout/everyday.html

Errors in Service
Service Error

Server Errors
(67%)

Customer Errors
(33%)

Classifying Service Poka-Yokes

Server Errors

Customer Errors
Preparation:
Failure to bring necessary
materials before the encounter

Task:
Doing work incorrectly
Treatment:
Encounter:
Failure to listen to
Failure to follow system flow
customer
Resolution:
Tangible:
Failure to signal service failure
Errors in physical
Failure to execute post
elements of service (dirty
encounter actions
waiting rooms, unclear
bills)

8. Flexible Resource
Multifunctional workers
General purpose machines

9. Total Productive Maintenance

(TPM)

Eliminating causes of machine failure

Maximizing effectiveness of machine throughout
its entire life
Involving everyone in all departments and at all
levels
TPM develops a maintenance system
Central to TPM is the concept of Overall
Equipment Effectiveness (OEE)

Overall Equipment
Effectiveness(OEE)

OEE =
Availability Rate * Performance Rate * Quality Rate

OEE captures six big losses which result

in reduced effectiveness of using an
equipment

OEE
Availability: % of scheduled time that the
operation is available to operate. Often
referred to as Uptime.
Performance: Speed at which the work
centre runs as a % of designed speed
Quality: Good units produced as a % of
total units produced

OEE

Can be applied to any individual work

centre or rolled up to department or plant
levels

OEE

10. 5 Elements of 5S
Sort: Remove all unnecessary material
and equipment
2. Straighten: Make it obvious where
things belong
3. Shine: Clean everything, inside and out
4. Standardize: Establish policies and
procedures to ensure 5S
5. Sustain: Training, daily activities
Note: Some add 6thS for safety
1.

4S: Place for Cleaning Supplies

4S: Equipment Storage Area

4S: Peg Board for Tools

4S: Hazardous Waste

Measuring and Tracking 5S

Toyota Production System

Multiple explanations for Toyotas

success:
Elimination

of waste
Using specific tools for production (SMED,
Poka Yoke)
Design Rules

TPS

Spear and Bowen article

Toyota Production System

(Design Rules)

Design Rules to design work processes

Activity

Connections
Pathways

Rule 1: Activity

All work shall be highly specified as to

Content

Sequence
Timing
Outcome

Specified Tasks

Rule 2: Connections

Every customer-supplier connection must

be direct and there must be an
unambiguous yes-or-no way to send
requests and receive responses

Streamlined communication

Rule 3: Pathways

The pathway for every product and service

must be simple and direct

Simple process architecture

Rule 4: Scientific Problem Solving

Any improvement must be made in

accordance with the scientific method,
under the guidance of a teacher, at the
lowest possible level in the organization
Hypothesis-driven problem solving

What usually happens

Improvement

If worked to the
new standards

Innovate
Innovate
Actual

Adapted from: Imai, Kaizen

Time

Continuous Improvement

A3 Problem Solving: The Toyota Way

5 Whys Approach

A workstation starved for work

Why starved? A pump failed
Why pump failed? It ran out of
lubricant
Why it ran out of lubricant? A leaky
gasket not detected
Why leaky gasket not detected?
Lack of training

Quality Management and SPC

What is Quality?
Degree

to which performance of a product or

service meets or exceeds customer
expectations
Performance - Expectations>0, performance has
exceeded customer expectations
Performance = Expectations, expectations have
been met
Performance Expectations <0, expectations have
not been met

Performance and Conformance

Quality

Different kinds of quality

Performance quality
Refers to the ability of the product to excel along one
or more performance dimensions (attributes)
Conformance quality
Because of inherent variability in production
processes, nothing is produced exactly according to
specifications. The degree of match between
specifications and the actual product or service is
what we call as conformance quality

Quality Article

Competing on eight dimensions of quality

(Harvard Business Review, Nov-Dec
1987) by David Garvin

Dimensions of Quality:
Manufactured Products
Product quality is often judged on eight dimensions:

Performance primary product characteristics

Features secondary characteristics that supplements the
primary characteristics
Reliability How often does the product fail? Consistency of
performance
Conformance to standards meeting design specifications
Durability How long the product lasts; its life span before
replacement
Serviceability ease of repair, speed of repair
Aesthetics sensory characteristics (sound, feel, look)
Perceived Quality past performance, reputation, recognition

Article Key Points

Eight dimensions of quality
Companies need not pursue all eight
dimensions

If

pursued, products become costly

Companies need to find what dimensions

customers care for and work on those
dimensions
Proper

market research is key

Some Quality Issues in Recent

Times Indian companies

Safety features in Indian made passenger

vehicles
Five Indian made hatchbacks failed in New
Car Assessment Program (NCAP) Test
Banning of Indian drugs in US for some Indian
pharmaceutical companies for poor
manufacturing practices
Ranbaxy, Wockhardt, RPG Life Sciences and
many

Quality Gurus
Walter Shewart
W. Edward Deming
Joseph Juran
Armand V. Feigenbaum
Philip Crosby
Kaoru Ishikawa
Taguchi

Key Contributors to Quality

Management
Shewart

Control Charts

Deming

14 points, special vs. common cause

variation

Juran

Quality is fitness-for-use

Feigenbaum

Customer defines quality

Crosby

Quality is free, zero defects

Ishikawa

Cause-and-effect diagrams

Taguchi

Taguchi loss function

Ohno and Shingo

Continuous improvement

Modern Definition of Quality

Quality is inversely proportional to variability

Reduction of variability is the fundamental idea in quality
control.

Describing Variability

Measures of variability (or spread out)

Range

Variance

and the standard deviation

Stem-and-leaf plot
Histogram
Box Plot
Coefficient of variation

Quality Improvement

Quality improvement is the reduction of

variability in processes and products

Describing Variability

Stem-and-leaf display (Graphical display about a data

set)

Box Plot (Graphical Display)

Shape
Spread
Central tendency
Central tendency
Spread or variability
Departure from symmetry
Identification of outliers

Histogram

Same as above

Histogram

Coefficient of Variation

Coefficient of Variation, c = /
= standard deviation
= mean

Where

If c<0.75 , low variability

If 0.75 <= c <=1.33, moderate variability
If c >= 1.33, High variability

Where in the Process to Inspect?

Raw materials and purchased parts
Finished products
Before a costly operation or where
significant value is added to the product
Before an irreversible process
Before a covering process

Note: Inspection is an appraisal activity that compares goods and services to a

standard

How Much to Inspect and How

Often?

The amount of inspection can range from no inspection

whatsoever to inspection of each item.
Low cost, high volume items require less inspection
High-cost, low volume items require intensive inspection
Majority of the quality control applications lie somewhere
between the two

Most require some inspection, but it is neither possible nor

economically feasible to examine every part of a product or
every aspect of a service for control purposes

As a rule, operations with high proportion of human involvement necessitate

more inspection than mechanical operations

Costs of Quality

Prevention Costs (costs associated with tasks intended to prevent

defects from occurring)
Quality Planning (developing & implementing quality
management program)
Process monitoring
Training
Purchasing better equipment that produces less variation
Working with vendors to increase the quality of input materials
Process redesign to reduce errors
Quality data acquisition and analysis
Quality improvement projects

Costs of Quality

Appraisal Costs (assessing the condition of

materials and processes at various points in
process)
Inspection and testing of incoming materials
Product inspection and test at various stages
Maintaining accuracy of test equipment
(calibration)
Laboratory testing

Costs of quality estimated to be between 15%-20% of sales at most companies

Crosby

Cost of Quality

Internal failure costs (defects discovered before shipment)

Scrap
Rework
Process downtime
Retest
Failure analysis
Disposition
External failure costs (defects discovered after shipment)
Customer complaint
Warranty charges
Liability costs
Returned product/material

External and internal failure costs together accounted for 50%-80% of COQ
Juran

The Costs of Quality

Cost of Quality

Quality Cost Trend Prediction

as a Function of Time

Reporting Quality Costs

A

motor company produces small motors for use

in lawn mowers and garden equipment. The
company instituted a quality management program
in 2006 and has recorded the cost data and
accounting measures for four years

An Evaluation of Quality Costs

2006

2007

2008

2009

--Prevention

$27,000

41,500

74,600

112,300

--Appraisal

$155,000

122,500

113,400

107,000

--Internal
failure costs

$386,400

469,200

347,800

219,100

--External
failure Costs

$242,000

196,000

103,500

106,000

TOTAL

$810,400

$829,200

$639,300

$544,400

--Sales

$4,360,000

4,450,000

5,050,000

5,190,000

--Mfg. costs

$1,760,000

1,810,000

1,880,000

1,890,000

QUALITY
COSTS

ACCOUNTING
MEASURES

Quality Index Number

Year

Quality Sales Index

Quality Mfg. Cost Index

2006

18.58

46.04

2007

18.63

45.18

2008

12.66

34.00

2009

10.49

28.80

Quality Index = (Total quality costs / Base)100

Cost of Quality

It is estimated that the cost to fix a problem at the customer end is about 5 times the
cost to fix a problem at the design stage

Cost of Quality
Ce + Ci + Ca + Cp
Cost of Quality= -------------------------------------Cb + Ce + Ci + Ca + Cp
Ce = External failure cost
Ci = Internal failure cost
Ca = appraisal cost
Cp = prevention cost
Cb = measured base production cost ( no costs for quality)

Consequences of Poor Quality

Loss of business
Liability
Productivity
Costs

Process Control

Starts with measuring an important

variable. This can be a
Product

Diameter of a metal component, weight of a bag of

potato chip

Process

attribute

Attribute

Temperature in a restaurants oven, length of

waiting time in a ticket booth, pressure applied in a
molding process

Statistical Process Control

(SPC)

A statistical process control involves testing a random

sample of output from a process to determine whether the
process is producing items within a pre-selected range

SPC uses statistical tools to observe the performance of the

production process in order to detect significant variations
before they result in the production of a sub-standard article.

SPC is about monitoring consistency and repeatability of a

process

Major Objectives of SPC

Quickly detect the occurrence of

assignable causes of process so that
investigation of the process and corrective
action may be undertaken before nonconforming units are manufactured

Reducing variability in the process

Why Quality Problems?

Variation in output is due to two reasons:

Common

Cause or random variation

Assignable

variation

or Special cause or controllable

Statistical Process Control Tools

(SPC)

Variation in output is due to:

Common causes (also known as natural variation)
Inherent variation present in every process
Causes may difficult to distinguish or wholly
unidentifiable
Resulting degree of variation is minor
Assignable causes (known as special variation)
Variations due to specific causes
A process subject to assignable variation is out of control

Statistical Process Control

Tools (SPC)

Control (or in control or stable)

A

process that exhibits only common cause

variation is said to be in control or stable

A process is said to be out of control when

it exhibits assignable variation
Examples:

less experienced worker has

replaced an experienced worker, machine
malfunctioning, change of machine settings

Natural and Assignable Variation

Process Control: Three Types of Process Outputs

Relationship Between Population and Sampling

Distribution

Control Charts

A control chart is a time ordered plot of sample statistics

Sometimes called the voice of the process
Graphical display of a quality characteristics (for example, level of
beer in each bottle in a bottling plant)
Distinguish between random and non-random variability
Chart contains a center line and two limits
Upper control limit
Lower control limit
If the process is in control, all sample points will fall between them
As long as points fall within control limits the process is in
statistical control
However, any point outside limits investigate the assignable
causes

Control Charts

If all the points plot inside the limits, but

behave in a nonrandom manner
indication that process is out of control and
needs investigation

A Control Chart

In Statistical Control
A process that is operating with only
chance cause of variation present is said
to be in statistical control
If the process is in control, all the plotted
points should have an essentially random
pattern

Reasons for Popularity of Control

Charts
Proven technique for improving
productivity
Effective in defect prevention
Prevents unnecessary process adjustment
Provides diagnostic information
Provides information about process
capability

Statistical Process Control Tools

Control Charts for variables (Characteristics that are expressed on a

numerical scale: density, weight, diameter, resistance, length, time, volume)
X-bar Chart and R-Chart
X-bar chart for process average
R-chart for process variability

Control Charts for attributes (characteristic that cant be measured on a

numerical scale: smell of cologne acceptable or not acceptable, color of a
fabric acceptable or not)
p-chart and c-chart
p-charts for percent defective in a sample
c-charts for counts (e.g. # of defects)

SPC Tools

Control Charts for variables (X-chart, R-Chart)

Variables

data are measured on continuous

scale
Length
Width
Weight
Voltage
Viscosity
Amount of time needed to complete a task

Mean Control Chart (x-bar

chart)
A mean control chart or x-bar chart can be
computed in one of the two ways.
Choice depends on what information is
available

If

process standard () is known from past

experience or historical data

Mean Control Chart (x-bar

chart)

Mean Control Chart (x-bar

chart)

If the process standard deviation is not known, a

second approach is to use the sample range as
a measure of process variability. The
appropriate formulas for control limits are

R-Chart Control Limits

D3, D4 = constants that provide 3 standard deviations (3) limits

for a given sample size

X-bar Chart Limits

A2 = constant to provide three sigma limits for the sample mean

Steps in developing X-bar and Rchart

Collect data on the variable measured (time, weight,

diameter). Collect at least 20-25 samples randomly.
Sample size should be of 4 to 5 units.
Compute range for each sample, and average R-bar
Calculate the UCL and LCL
Plot the sample ranges. If all are in control, process is in
statistical control
Calculate UCL and LCL for x-bar chart
Plot the sample means. If all are in control, process is in
statistical control.

Control Limits are Based on

Sampling Distribution

Zones for Identification of

Nonrandom Pattern

Control Chart Patterns

Control Chart Patterns

Pattern Recognition in Control

Charts

Recognizing non-random patterns on the control

chart
One point plots outside 3 limits
Two or three consecutive points plot beyond
2 limits
Four out of 5 consecutive points plot at a
distance of 1 or beyond from the centre line
Eight consecutive points on one side of centre
line

p-chart

Control charts for attributes

p-chart measures % defective items or proportion defective
items in a sample

Total # defects from all samples

p-bar = ---------------------------------------# samples Sample size
Appropriate when data consists of two categories of items
Good or bad, pass or fail
Examples: # bad light bulbs and good light bulbs in a given
lot
# of bad glass bottles and good glass bottles

P-chart Limits

c-chart

Appropriate when number of defects are counted

because not possible to compute proportion defective
Examples
Number of accidents per day
Number of crimes committed in a month
Blemishes on a desk
Complaints in a day
Typo errors in a chapter of the text book
# customer invoice errors

C-chart Limits

C-bar = average no. of defects per unit = Total number of defects

No of samples

Process Capability

Specifications: A range of values imposed by designers

of the product or service based on customer
requirements
Control limits and based on production process, and they
reflect process variability
Process variability: Natural or inherent variability in a
process due to randomness
Process capability: The inherent variability of process
output relative to the variation allowed by the design
specifications

Measures of Process Capability

Measures of Process Capability

Process

Capability Ratio
Process Capability Index

Process Capability Ratio

Cp = (Upper Spec Lower Spec) / 6

If Cp < 1, process range > tolerance range

Process not capable of producing within design
specifications
If Cp = 1, Tolerance range and process range are same
If Cp > 1, Tolerance range > process range
A desirable situation
Ideally Cp > 1.33

Process Capability

Process Capability

Process Capability

Cp does not take into account where the

process mean is located relative to the
specifications

Cp simply measures the spread of the

specifications relative to the six sigma
spread in the process

Process Capability Index

Generally, if Cp = Cpk, the process is centered at the midpoint of the specifications

When Cpk < Cp, the process is off center

Process Capability
(Sequential Steps)
1.
2.

Calculate Cpk to check centrality

Calculate Cp to check whether the
process variation are within design
specifications