Takt Time LG

Ie aoaJ r lfe Ti i Vl e , se (e m e21) n r tnl u aoLa h k g o m 1Iu 2Dc br00 tn i o n n nn u s e
L a T ikn e n hn ig
j u n lh me a e www. h n i g e n c m/ j t o ra o p g : t i k n l a . o il
Activity Based Costing Value Stream Mapping
S. S. Abuthakeer *
P.V. Mohanram
Department of Mechanical Engineering, PSG College of Technology, Coimbatore, 641 004, India E-mail Adres: syathpsgtech@gmail.com
Department of Mechanical Engineering, PSG College of Technology, Coimbatore, 641 004, India
G. Mohan Kumar
Park College of Engineering and Technology, Avinashi Road, Kaniyur, Coimbatore 641 659, India
ABSTRACT This paper attempts to integrate Value Stream Map (VSM) with the cost aspects. A value stream map provides a blueprint for implementing lean manufacturing concepts by illustrating information and materials flow in a value stream. The objective of the present work is to integrate the various cost aspects. The idea is to introduce a cost line, which enhances the clarity in decision making. The redesigned map proves to be effective in highlighting the improvement areas, in terms of quantitative data. TAKT time calculation is carried out to set the pace of production. Target cost is set as a bench mark for product cost. The results of the study indicates that implementing VSM led to reduction in the following areas: processing lead time by 34%, processing cycle time was reduced by 35%, Inventory level by 66% and product cost from Rs 137 to Rs 125. It was found that adopting VSM in a small scale industry can make significant improvements. 1. Introduction
KEYWORDS
Lean manufacturing, Value stream map, Activity based costing, Target costing.
ARTICLE INFO
Received 21 December 2010 Received in revised form 27 December 2010 Accepted 29 December 2010 Available online 31 December 2010
Success in modern manufacturing industry directly correlates to how a company handles global competition. Cost effective solutions and practices are essential to stay competitive in the market. Many manufacturing facilities have experienced the drastic changes and are in a process of undergoing physical and cultural transformation to adopt the concept of lean thinking. Lean has been originally created and defined as the process of eliminating waste (Womack et al. 1990) Toyota along with the support a system to reduce or eliminate waste and non-value added activities from the various process (Ohno, 1988; Shingo and Dillon, 1988).
________________________________ * Corresponding Author
S. S. ABUTHAKEER, P. V. MOHANRAM, G. M. KUMAR /International Journal of Lean Thinking Volume 1, Issue 2 (December 2010)
The conceptual framework for categorizing all of the tools and practices of lean production in five basic areas: Value: Define value from the standpoint of the customer. However, in reality, the final customer is th e o nly o ne w ho can s pecify the val ue of a specific pr oduct or service by paying a price for it. Value stream: View your product delivery sy stem as a con tinuous flow of processes that add value to the product. Flow: The product should constantly be moving through the value stream towards the customer at the pace of demand. Pull: Product should be pulled through the value stream at th e customers demand rather than being pushed on to the customer Perfection: The never-ending pursuit of eliminating waste in the system such that the products can flow seamlessly through the value stream at the rate of demand. 2. Literature Survey VSM can serv e a s a go od starting p oint for any enterprise tha t want s t o be le an and describe value st ream as a collection of all value added a nd non-value added activities which are required to bring a product or a g roup of products using th e sam e resources through the main flows, from raw material to the hands of customers (Chandandeep, 2006). Researchers define the VSM as the process of visually mapping the flow of information and m aterial. It he lps to visualize the station cycle tim es, inve ntory a t each sta ge, manpower a nd information f low a cross t he s upply c hain ( Womack a nd J ones, 1996). A value s tream map provides a blueprint f or im plementing lean m anufacturing c oncepts by illustration how the flow of information and materials should operate. Balkema a nd Rotterdam (2 004) have c reated curr ent sta te map fo r a ste el producer, a steel service center and first-tier component supplier. The current state map identifies huge piled of inventory and long lead-time. In the future state map target areas were subjected to different lean tools including kanban, supermarket, and continuous flow. Ballard and Howell (1994) suggest that, the value stream mapping can serve as a good starting point for any enterprise that wants to be lean. It prov ides a common language for
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talking a bout m anufacturing process. It tie s to gether le an c oncepts a nd t echniques which help to avoid "cherry picking". It forms the basis for an implementation plan by helping to design t he whole f low. Ha lpan a nd Kue ckmann ( 2001) e xplain value strea m mapping in aircraft manufacturing. They draw current and future state maps were developed with the objective of reducing lead time according to customer requirements. The implementation of the f uture state m ap attained l ead-time re duction. S ummer, 1 998 has described A ctivity Based C osting ( ABC), ide ntify various c ost components a nd a nalyze t he relative contribution to the tota l cos t. The es sence of ABC is that, product consumes act ivity, activity consumes resource and resources generate cost. Thus it is necessary to develop the relationship b etween acti vity, c oast drivers an d ac tivity measures. Target c osting is to anticipate the ac ceptable ma rket p rice th rough in tensive customer focus. D esign and manufacturing teams all ies to b ring th e product within th e targ et cost. Targ et cost is the cost that can be incurred while still earning the desired benefit. The objective of the present work is to demonstrate how a manufacturing system op erates with timing of step-by step activities.
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3. Methodology The various steps in implementation of VSM are shown in Figure 1 and are discussed in the following sections. The process analyses is carried out by collecting data from various enquiries with shop floor experts and directly participates in measuring the time involved in various processes (Sahoo et al, 2008).
Figure 1. Steps in implementing Value Stream Map The new con cept in troduced in the autho rs rese arch i s to ma p/measure th e cost involved i n the va lue s tream. T he stu dy re searches led us t o i nvolve various costing systems and inventory management systems. A case study of a small motor manufacturing company participated in LEAN project has also been presented. The current and future state drawings are mapped for the shaft manufacturing. Future state maps were developed with the objective of reducing lead time and cost according to customer requirement. The cost analysis is carried out b y adding the es sence of ac tivity based costing and target costing. In this paper, while gen erating the VSM, the main processes are identified and the processing costs are calculated for individual processes, now these individual costs
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are the a ctivity cost .The summation of th e activity costs gives the manufacturing cost of the product. The calculations of the activity cost are elaborated in methodology. The conce pts o f ABC inv entory management sy stem is u sed to classify the handling cost of the work i n process i nventory. S o t he c lassification of th e i nventory helps us t o differentiate the various cos ts inc urred i n handling the different w ork i n p rocess between different stations. The redesigned VSM is shown in Figure 2.
Figure 2. Cost Integrated Value Stream Map The present study uses the philosophy of target costing to set the t arget manufacturing cost. Target cost is the cost that can be incurred while still earning the desired profit. The target cost is calculated as follows: Target cost = Selling price Desired profit (1)
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3.1 Process Analysis The m ajor activity i n the process analysis is t o portrait t he ti me lin e. Th e ti me li ne contains both value added and non-value added time and is calculated as follows: (2) (3) (4)
VTi = CTi NVTi = Processing time = Processing lead time =
(5) 3.2 Cost Analysis The id ea is to add a cost line alo ng with the e xisting time l ine in VSM. Co st line enables better vis ualization a nd also improves the cla rity of d ecision m aking. While the value added cost is brought ou t by th e summation o f the d irect co st invo lved in eac h process, non value added cost analysis is brought about by classifying the inventory as per the holding cost. The cost calculations are as follows:
Value added Activity cost =
+
(6) (7) (8)
=0 (when no material is added in a activity)
Nonvalue added activity cost = + Customer ready to pay = +
Customer not ready to pay =

4. Case Study
(9)
A case study con ducted at a motor manufacturing co mpany i s presented a nd so me o f the observations may be useful to the practicing engineers in implementing VSM in small, medium a nd la rge enterprises. M uch of the ea rlier w ork have a ttempted c omplementary lean manufacturing too ls in la rge s cale industries and have rec orded their e xperiments. Hence, there is a need to implement such a lean tool in small and medium size industries.
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4.1 Selection of Critical Product Family The first step is the selection of the critical part family. After the through study of all part families, one part family was rather preferred over all the product families. The Rotor is main heart of the motor. 4.2 Documentation of Customer Information Interaction with the manager revealed information regarding customers requirement. It was understood, the company has a wide range of customers requesting for a wide range of product from 0 .5 hp to 20 hp motor. The requirement of motors was estimated to be 1000 motors/month. 4.3 Identification of Main Processes A quick walk th rough th e shop fl oor (gemba) helped us in identifying th e main processes. T he m ain processes in volved i nclude: bar cu tting, roughing, F inishing, Threading I, Threading II, key machining and rotor turning.
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Figure 3. Current State Map
4.4 Define the Data to be collected The data in th e da ta box se rves to track down the opportunities for i mprovement. Collection of appropriate d ata b enefits in qui ck t racking o f opp ortunities. The data box envelopes the following data like cycle time, change over time, up time, machine hour rate, labor hour rate, material cost and the available time. The inventory triangle envelopes two data, work in p rocess inventory b etween eac h process and respective handling cost of inventory. Cost and time lines are calculated using the above mentioned model. The current state map is shown in Figure 3. 4.4 Future state map The objective of the future state map is to match the production rate with TAKT time and to achieve the target cost as the manufacturing cost. Hear, for the present study TAKT time is take n as t he benchmark for process pace and target cost was set as the b enchmark for the manufacturing cost 4.5 TAKT time: a Benchmark for Process Pace Takt demonstrates the rate at which the customer buys the product. TAKT reflects the frequency at which th e p roduct has to release by the customer demand per shift. the m anufacturer to m eet customer demands. Takt time is calculated by dividing available working time per shift (in sec) with
TAKT Time =
Available working time per shift = Operating time - Breaks = 23280 seconds/shift Demand=1000 shafts/month Demand per shift=40 shafts/shift TAKT time = 582 seconds/shift TAKT o f 5 83 rep resents that, every shaft has to be co mpleted in e very 582 sec onds. The current state map sights out that the roughing process consumes 18 seconds more than takt time. In order t o solve this, fi nishing and roughing processes are carried out in the CNC machine, thus reducing set-up time and other manual interactions; also the cycle time
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of th e process i s re duced to 120 seconds. T he old mac hine is dedicated to th read cutting operation only. Thus, the total line is balanced. 4.6 Target cost: a Benchmark for Product Cost Target cost is se t by subtracting the market cost by the target profit; the target profit is assigned by the management. The target cost reflects the cost at which the product has to be manufactured. In t his case after consulting with the management, the target cost was set at Rs125. Now the lean tools serves as a cost minimization tool to minimize the gap between the Target cost and manufacturing cost. Daily shipment of bar stock was implemented to reduce the handling cost at the start of the value stream. Sin gle minute exch ange of dyes wa s imp lemented in the CNC mac hine (finishing process), in order to minimize the lot/batch size. The future state map is shown in figure 4. 5. Results and Discussions The implementation of daily shipment resulted in reducing the inventory handling cost from Rs. 30 to Rs. 9, and the inventory is reduced from 100 parts to 30 parts at the start of the va lue stream. The implementation of SME D serves t o re duce the in ventory by 6 6% before the finishing process.
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Figure 4. Future State Drawing
Graphs ar e en closed to v isualize t he ben efits in i mplementing l ean tool s are presented in Figure 5-8.
Figure 5. Comparisons of cycle time of current and future state
Figure 6. Comparison of processing time in seconds
Figure 7. Comparison of processing lead time in days
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Figure 8. Comparison of product cost 6. Conclusions This research carries evidence of genuine advantages of applying lean principles in a small scale m otor manufacturing. As far as our knowledge is concerne d, it is the first time cost analysis is integrated with the value stream map. It was evidenced that VSM is an ideal tool to expos e the waste in value stream an d identify improvement areas. This paper substantiates the effectiveness of lean principle in a sy stematic mann er with th e help of va rious t ools, s uch as c ost anal ysis in v alue stream ma pping, single m inute exchange o f dy es and so on . Availability of inf ormation s uch as m aterial and m oney flow f acilitates a nd va lidates t he de cisions to im plement lean m anufacturing, fu rther would a lso m otivate t he or ganization dur ing the actua l im plementation i n or der to obtain the desired benefits. Eventually it e nables the c ompanies to m ove towards their ultimate goal leading to, sustainability, profit and profitability. 7. References Balkema, A.A. and Rotterdam , Lean Construction, International Journal of Production Economics 2004; pp.111-125. Ballard, G. and Howe ll, G., Implementing lean construction, Journal of Production and Inventory management 1994; pp. 37-48. Grewal, C., An initiative to implement lean manufacturing using value stream mapping in a small company, Int. J. Manufacturing technology and management 2006; pp 55-61.
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Halpin, D.W. and Kueckmann, M., Lean Construction & Simulation, Proceedings of the Winter Simulation Conference 2001; pp 131-139. Ohno, T., Toyota Production system press; 1988. Sahoo, A.K., Singh, N.K., Shankar, R. and Tiwari, MK., Lean philosophy: implementation in a forging company, International Journal of Advanced Manufacturing Technology 2008; pp.125-131. Shingo, S. and Dillon, A.P., press; 1988. Summer, C .R., Th e R ise o f A ctivity-Based co sting. Part One: What Is an ActivityBased Cost system?, Journal of Cost Management 1998; pp. 45-54. Womack, J. D., J ones, D.T . a nd R oos, D., The Mac hine th at Ch anged th e Wo rld: Th e study of Lean Production, Harper Perennial Publishers: New York; 1990. Womack, J.P. and J ones, D.T., Lean thinking: ba nish w aste and cr eate w ealth in you r corporation, New York, NY: Simon & Schuster; 1996. A study of the T oyota produc tion system : Productivity Bey ond Large-scale produ ction: Produ ctivity
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Ie aoaJ r lfe Ti i Vl e , se (e m e21) n r tnl u aoLa h k g o m 1Iu 2Dc br00 tn i o n n nn u s e

Activity Based Costing Value Stream Mapping

________________________________ * Corresponding Author

VTi = CTi NVTi = Processing time = Processing lead time =

Value added Activity cost =

=0 (when no material is added in a activity)

Nonvalue added activity cost = + Customer ready to pay = +

Customer not ready to pay =

Figure 3. Current State Map

Figure 4. Future State Drawing

Figure 5. Comparisons of cycle time of current and future state

Figure 6. Comparison of processing time in seconds

Figure 7. Comparison of processing lead time in days

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