Harri Haapasalo: Lean production 5.4.

2006

Lean production is a philosophy –

the philosophy of avoiding waste in
the production system (Parks 2003)

Lean production
Harri Haapasalo; D.Sc. Tech., M.Sc. Econ.
Professor in Industrial Engineering and Management
Department of Industrial Engineering and Management
e-mail: harri.haapasalo@oulu.fi, office TF320

Waste minimization and resources use optimization

Outline
1. Defining Lean Production
2. What leads us to Lean?
3. How to Implement lean?
4. Where to go after Lean – Agility? Value Nets?

Lean production
„ Is a multi-dimensional approach that incorporates a wide range of
management practises, including:
{ just-in-time,
{ quality systems,
{ work teams,
{ cellular manufacturing,
{ supplier management,
{ etc.,
in an integrated system
„ The main force is that these systems can operate synergistically to
create efficient and high quality system that manufactures finished
products at the pace of customer demand with little or no waste.
(Özbayrak, 2005)
„ The focus of lean approach is essentially the elimination of waste
or muda.
„ Shortly defined lean is doing more with less. (Agarwal et al. 2005)

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Harri Haapasalo: Lean production 5.4.2006

Five fundamental concepts to “lean

thinking” to promote lean production

„ value,
„ value stream,
„ flow,
„ pull production and
„ perfection

Another approach defining

cornerstones for Lean manufacturing

„ Cellular Manufacturing
„ Pull Scheduling (Kanban)
„ Six Sigma/Total Quality Management
„ Rapid Setup
„ Team Development

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Harri Haapasalo: Lean production 5.4.2006

The idea is to emphasize

leanness – in horizontal level
From functions to processes - flow

Product creation
Management

Management

Management
Production
Production

Production
Sales

Sales

Sales
Customer relationship MGMT

Order –delivery process

Functions rules Core prcesses defined Core processses

But functions still rules Are dominating

Prosess map by Rummler and

Brache
Customer

Generate Receive
order product
Sales

Check Submit Forward

order order product
Prodcution

Receive Start manu- Receive Pack

order facturing parts product
Puchasing

Receive Purchase
order parts

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Harri Haapasalo: Lean production 5.4.2006

“Leanness means developing a value stream

to eliminate all waste … “(Christopher & Towill
2001)
„ focus on waste – waste can be:
{ overproduction
{ waiting WASTE = MUDA

{ inventory or work in process

{ processing waste
{ transportation
{ motion
{ making defective produts
{ underutilizing people

Targets for prodcution

management

TUOTANNON
Targets for production
TAVOITTEET

OHJATTAVUUS
Controllability ALHAISET
Low LAATU
Quality TOIMITUSKYKY
Ability to deliver
Costs
KUSTANNUKSET

High productivity

MATERIAALI
Materials TYÖ
Work PÄÄOMA
Capital

Fixed -
KÄYTTÖ Floating
VAIHTO-
OMAISUUS
assets OMAISUUS
asets

OHJATTAVUUS
Conrollability High utilization
KAPASITEETIN Deceasing
VARASTOIHIN JA TOIMITUS
Ability to -
Of capasity KET:IIN
Tied in capital
KYKY
deliver
SITOUTUVAN
In inventories and
PÄÄOMAN
Work In Progress
LÄPÄISYAIKA
Lead time JOUSTAVUUS
Flexibility PIENENTÄMINEN

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Harri Haapasalo: Lean production 5.4.2006

Inconsistency of purposes
for production management
Ability to deliver –
Lead time

OPTIMUM

Minimize floating assets Maximize utilization

Inventories, WIP rate of capasity

Changing Face of
Manufacturing

1980s 1990s 2000+

Philosoph Mass production; Just-in-Time; Mass customisation;
y Product oriented Customer Service Customer value

People Individuals; Teams; Strategic leadership;

Self-oriented Company-oriented Process-oriented

Finance Labour allocation Activity based Integrated perf’nce

management
Materials Adversarial Supply Chain Value Chain
suppliers
Overall Just-in-Case Lean Agile
Posture

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Harri Haapasalo: Lean production 5.4.2006

Manufacturing Issues
Falling sales – where to find new customers?
Input costs increasing, sales income falling
No time to introduce new methods
No money to develop new products / processes
How to increase output without increasing costs?
Too small to compete OR
Too big to react quickly to changing market
Increasing complexity of legislation and regulation

What can I / we / anybody do about

it?

Company Actions: How

can we Compete?
Competitive Strategies:

80’s 90’s 2000+

Porter Treacy &
Quality Wiersema
Delivery
Focus
Price Value
&
Flexibility Proposition
Differen-
Image tiation
…
…

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Harri Haapasalo: Lean production 5.4.2006

Lean Thinking roots are in

Toyota Philosophy Item
Runner
Repeater
Qnty
100
27
Day 1
20
7
Day 2
20
7
Day 5
20

Stranger 5 5
‰ Doing it all for the Customer Load 132 27 27 25
Cap’ty 135 27 27 27
‰ Levelled production store
kanbans
withdraw & process
‰ Pull system K K

work work
‰ Continuous-flow production centre replacement
centre
batches

‰ Takt time
Upper action limit

Multi-skilling

average
‰ Upper warning limit

‰ TQM time

‰ TPM Competitiveness
action?
lf
Se nt
‰ Poka Yoke imp
r ovem
r
e

u ous ompetito
ntin C
‰ SPC Co

‰ Standardised work
change
Present
‰ Kaizen Uncompetitive Competitive
Time

Lean Manufacturing
„ Builds on roots but with specific focus
on:
{ Lead time reduction
„ Regular production
„ New products
{ Flexibility improvement
{ Variability reduction
{ Cost reduction

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Harri Haapasalo: Lean production 5.4.2006

Customer focus
„ Lean production aims to optimize performance of the
production system against a standard of perfection to
meet unique customer requirements (Howell 1999)

Going Lean
„ the value needs to be created in the eyes of the
final customer,
„ focus on value is therefore translated across
functional and company boundaries,
„ the lean message suggests that the focus on
attention should not be on the company or
functional department but instead on the complete
value stream (Hines et al. 2000)
„ to reach this point every company involved in
supply chain has to go lean,
„ this is very demanding part, which needs
collaboration and time.

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Harri Haapasalo: Lean production 5.4.2006

How to go lean
Objective Method

Setting the direction,

Understand customers and
1 targets and checking
what value they want
results

Define the internal value An internal framework for

2
stream delivering value

Eliminate waste, make info

Appropriate method to
3 & products flow, pulled by
make necessary change
customer needs
Extend the definition of
Externalise the value focus
4 value outside your
to the whole value stream
company
Strive for perfection in the
Continually aim for
5 product and in all
perfection
processes and systems

Levels of Lean thinking

(Simons & Zokaei 2005)

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Lean Toolbox – derived from

Toyota Philosophy

Value stream mapping

1. Define value precisely from the end customer perspective.
- specific product needs
- specific capabilities
- specific price, delivery and quality expectations
2. Identify the entire value stream for each product line and eliminate waste.
- Product definition and development
- Material transformation
- Information management
3. Make the value added activities flow.
- Through radical shifts in process methodology and organizational structure
- Improving processes from end-to-end by eliminating scrap, downtime and WIP
- Moving towards continuous operations vs. batch processing
4. Provide what the customer wants only when the customer wants it.
- Let the end customer pull products from the manufacturing value stream
- Minimize finished goods inventories and WIP
5. Pursue perfection through continuous improvement
When lean principles are applied throughout the value stream, odd things begin to
happen;
- People recognize there is no end to reducing effort, time, space and mistakes,
- Your products become more closely aligned with the customer needs.

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Harri Haapasalo: Lean production 5.4.2006

Example of process map

{ Note value-add time -vs- lead time

Prosess map by Rummler and

Brache
Customer

Generate Receive
order product
Sales

Check Submit Forward

order order product
Prodcution

Receive Start manu- Receive Pack

order facturing parts product
Puchasing

Receive Purchase
order parts

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Harri Haapasalo: Lean production 5.4.2006

5S - the foundation for a

disciplined approach to workplace
„ 5S is derived from five Japanese words starting with
letter S that describe principles of good
housekeeping:
{ 1. Sort
{ 2. Set in Order
{ 3. Shine
{ 4. Standardize
{ 5. Sustain
„ It cleans and organizes areas around machinery and
equipment.
„ It creates a safer work environment, removes clutter,
creates a labelling system for ease of recognition,
introduces audit procedures, and creates a more
inviting work place. (Piatkowski 2004)

TPM is a systematic methodology

to eliminate equipment
breakdowns and quality defects
„ productive maintenance involving total employee
participation and it must be carried out on a
companywide basis
„ system of preventive maintenance plans and
procedures for the equipment’s life span
„ TPM focuses its methodology on elimination of six
major obstacles to equipment effectiveness:
1. Equipment failure
2. Setup and adjustment
3. Idling and minor stoppages
4. Reduced speed
5. Production of scrap and defects
6. Reduced yield from start-up to stable production

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Harri Haapasalo: Lean production 5.4.2006

Key to Lean Manufacture is

measurement
OPTIM
UM

„ Need clear, objective focus on value

„ Example: OEE (Overall Equipment Effectiveness)
{ A composite measure of the ability of a process to carry out
value adding activity
{ OEE = % availability x % output achieved x % perfect output
{ If change to a process increases OEE it is worthwhile
Actual Available Production Time Planned Downtime
Theoretical time minus planned downtime and shutdowns PM, Shutdowns,
This is the realistic best available production time (100%) Holidays

Machine Running Time Unplanned Losses

Actual production hours minus downtimes Breakdowns, HR, Availability
This is possible production if 100% performance Set-up time

Net Operating Time Speed losses

Machine speed against theoretical speed Idling, minor Performance OEE
This is the possible output if 100% quality stopages
performance

Useful Production Time Quality Losses,

Material in minus product out adjustments, Set-up Quality
This is the real output waste

Error Proofing
„ a systematic approach for anticipating and
detecting potential defects and preventing
them from reaching either internal or
external customer
„ Error proofing is also mentioned in literature
with closely related terms such as, fail
saving, poka yoke, zero defects and design
for manufacture and assembly.
„ Error Proofing seeks to proactive
identification and prevention of errors at the
source.

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Harri Haapasalo: Lean production 5.4.2006

Setup Time Reduction

„ Setup is a set of activities needed to prepare for the
next part to be produced
„ Setup time is the total amount of elapsed time from
completion of the last good part from the previous
setup to the first good part from the new setup
„ There are two elements to setup time reduction:
{ equipment modifications such as technical improvements,
{ elimination of waste in setup methodology
„ Both activities will contribute significantly to
minimize setup time

Continuous Flow
„ It studies production pace, manpower requirements,
equipment utilization, and manufacturing
methodologies
„ is defined as movement of material from value-
added process to value-added process without
transport time or storage in buffers
„ all the knowledge of lean methodologies, tools, and
process are put to an ultimate test of generating
cost reductions and improvements to quality,
efficiency, and performance

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Pull System
„ Pull system includes vital elements such as,
kanban to promote JIT and visual controlling
„ For unique items consumed in production
lines, uniform containers (kanban) can be
used to standardize lot sizes to signal the
need to replenish materials and simplify
transport between the vendor and customer
„ Materials can be pulled into production lines
as needed to support the required
production rate of finished goods

Standardized Work
„ Standardized work is the optimum combination of
operators, machines and materials to ensure that a
task is completed the same way every time with
minimum waste. This may sound a trivial but it isn’t.
„ Standardized work seeks to establish and clarify the
best method of production at the present time.
„ Standards must be specific and scientific – meaning
that they are based on facts and analysis, not on
custom, guessing or memory
„ Standards must be adhered to;
{ they are useless if no one follows them.
{ for a standard to be standard, it will be consistently
followed and respected.

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Elements of the standard

operations (Monden 1983)

Agile – a step on from lean?

„ Roots of agile in America defence industry – developing the ability
to react and reorganise to successful equipment bids
„ Lean and agile have common components
{ quality, reliability, improvement, etc
{ But lean is process focused, agile is boundary focused
„ Ability to thrive in constant, unpredictable change
„ Key attributes of agile
{ Customer value focus (solutions not products)
{ Flexibility to adapt to fundamental market changes
„ Not simply changes in product mix
{ Competing from multiple fronts, possibly virtually
{ Organisational knowledge, including ability to adapt IT systems to
support new processes
„ Sometimes Agility has been defined as a sum of Lean and
Flexibility

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Types of flexibility
„ Planning flexibility – the system's ability at the
planning stage to take up a structure suited to the
relevant range of tasks.
„ Commissioning flexibility (teettäminen) – the
system's ability to be adapted or set up for the given
tasks, so that the system's capability can be verified
and it remains constant.
„ Insensitivity (epäherkkyys) – the ability to function in
spite of variations in the assembly.
„ Versatility (muunnettavuus) – the ability to change
over directly to other foreseen tasks.
„ Adaptability (mukaantuvaisuus) – the ability to be
changed over to unforeseen tasks.
„ Flexibility of re-use – the ability to be rebuilt for
other tasks.

Flexibility vs agility
„ agility is an ability to quickly respond to
changes in an uncertain and changing
environment, or even cause changes that
are favourable to the organisation
„ whereas flexibility is taken to mean the
ability of companies to respond to a variety
of customer or other requirements which
exist within defined constraints
„ flexibility is an important aspect in agility
„ agility is more external and flexibility is
internal

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Different views on lean -vs-

agile
The journey
Traditional
Traditional Lean
Lean Agile
Agile
A spectrum of companies
Lean
Lean Agile
Agile
Make to stock Make/Engineer to order,
Low variety High variety, Service culture
Mass, repetitive “Product Innovator”?
“Cost minimiser” “Customer intimate”?

Complementary
Make to forecast Make to order
Stock
(to decouple)
Material
Lean
Lean Agile
Agile customer
suppliers

Upstream variation Downstream variation

LEAN vs. AGILE

(Christopher 2000)

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Establishing Foundations for

Lean, Agile …
Culture
change

„ Need the classic pre-requisites for any

programme Use of
champion
{ Strategy
{ Commitment
{ Objectives
{ Communication
{ Empowerment
{ Establish framework
{ Activity plan, cost, time and execution
{ Measurement and evaluation system

Developing towards an
agile supply chain
Goldman’s (1995) distinctive forces that drive towards agility:
1) market fragmentation,
2) production to order in arbitrary lot sizes,
3) information capacity to treat masses of customers as
individuals,
4) shrinking product lifetimes,
5) convergence of physical products and services,
6) global production networks,
7) simultaneous inter-company co-operation and competition,
8) distributed infrastructures for mass customization,
9) corporate reorganization and
10) pressure to internalize prevailing social values.

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Theoretical framework for the

agile supply chain
ICT utilization
Virtual

demand driven

responsive Market Agile Process speed, flexibility

and flexible sensitive supply integration and quality
chain

modular design and

Network modular manufacturing
based processes

Value net,
value-adding partnership (VAP)

„ a group of independent companies working close to each other

to manage the flow of products and services through the whole
value chain
„ digitally linked network of customer-supplier relationships that
creates value to all of its counterparts,
{ Customer aligned.

{ Collaborative and systemic.

{ Agile and scalable.

{ Fast flow.

{ Digital.

„ Value creation 1. Non-value adding (NVA);

{ VA, (Type two MUDA)
2. Necessary but non-value adding (NNVA);
{ NVA, (Type one MUDA)
{ NNVA 3. Value-adding (VA)

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6 principles of ICT system in SCM

 Information must be readily and consistently available to all that

need it. Information availability can reduce operating and planning
uncertainty.
 Information must be accurate. Increased information accuracy
decreases uncertainty and reduces inventory requirements.
 Information must be timely. The delay between when an activity
occurs and when it is visible in the information system reduces
planning effectiveness and increases inventory.
 Information should be appropriately formatted. The right
information must be in the right structure and sequence.
 Information systems must be exception-based in order to highlight
problems and opportunities.
 Information systems should be flexible to be able to meet both
system users and customers’ needs.

Bowersox & Closs (1995)

Useful literature
„ James Womack & Daniel Jones, 1996, Lean
Thinking: Banish Waste and Create Wealth in
your Corporation (Simon & Schuster)
„ John Bicheno, 2000, The Lean Toolbox, 2nd
edn (Picsie Books)
„ Peter Hines & David Taylor, 2000, Going
Lean: a guide to implementation (Lean
Enterprise Research Centre, Cardiff Business
School)
„ Imai, M. 1997. Gemba Kaizen: a
commonsense, low-cost approach to
management New York, McGraw-Hill

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