"Make Green, Go Green, by Going Lean

Presented By Paul V. Burnett

October 2007
RSM McGladrey, Inc. is a member firm of RSM International an affiliation of separate and independent legal entities.

Paul V. Burnett, BSME, MBA

IBM
John Deere
Ford Motor Company
Detroit Diesel Corporation
Applied Materials
Sanmina-SCI
RSM McGladrey
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How to Go Green?
How to Go Lean?
Why?

Doing nothing is not an option!

Governor Arnold Schwarzenegger signed into law emission
reduction targets for California:
By 2010, reduce GHG emissions to 2000 levels,
By 2020, reduce the GHG emissions to 1990 levels,
By 2050, reduce GHG emissions to 80 percent below 1990
levels

Green and Lean

15-30% of a manufacturing companys monthly energy bill creates

greenhouse gases.
The energy management within a facility - benchmark competitors.
Lean methodologies can be used to reduce waste in the
consumption of energy within a manufacturing facility.
The ultimate goal - eliminate equipment not needed in the process.
If elimination is not possible, minimize the use

plot energy consumption to predict maintenance schedules and replacement

cycles.

Analysis of Electric Industry CO2 Impacts

The electric industry cannot provide substantial reductions
in CO2 emissions in the near future to meet goals
Limited potential to switch to greener energy near-term
CO2 reduction must come from reducing demand
supported by new energy efficient technologies
conservation programs

A market-based collaborative systematic approach to

demand reduction is a critical success factor (profit
potential)
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The Economic Case For Change

Asset performance management can reduce energy
consumption by 6% to 11%.
DOE has established a minimum 10% energy reduction
guideline as attainable through the application of proper
maintenance and technology solutions.

G.A.S. Index: Global Asset Sustainability Index

G.A.S. Index = Availability * Performance * Quality *
Energy Efficiency
Availability = All downtime / Scheduled time
Performance = Actual output for scheduled time / Design
output for scheduled time
Quality = Total production minus defects or rework / Total
production
Energy Efficiency = Design energy consumption/Actual
energy consumption
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Example: Motor Efficiency

90,000 Watts

100 HP

76,000 Watts

1HP = .746 kWatts

15,400 Watts (17.4%)

Motor Efficiency Savings

Energy Savings = 90kW x 8,000 hrs./year x (1-(.828/.94)) =

87,336 kWh/yr.
At an average cost of 11 cents per kWh, the estimated
savings would be $9,607 per year.
Motor operating cost:
(100 HP x .746 kW/HP x 8,000 hrs. x $.11/KWh ) / .94 efficiency =
$69,838 per yr.
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Repair v. Buy

Break even analyses must be based on the increased

cost of purchasing a new, more energy efficient equipment
versus the energy consumption reduction.
The cost energy today ranges from 10-13 cents per
kilowatt-hour.

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Lean Definition
A philosophy of production that emphasizes the
minimization of the amount of all the resources
(including time) used in the various activities of
the enterprise.
- APICS Dictionary, 10th ed.

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Lean Enterprise
An enterprise with a focus on waste elimination
and the customers needs in all parts of its
operations, manufacturing and administration.
Emphasis is given to lean structures and
processes, flexibility of response and methods
and techniques to continually seize new
opportunities as they arise.
- APICS Lean SIG

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Early Lean Processes

Mass Production

Early 1900s
Ford Motor Company was a pioneer
Assembly line production
High volume production
Limited number of products
Significant cost reductions

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Today
More than 96% of all U.S. companies have less than 250 employees
Global competition / low cost labor
Demands by customers:

Higher quality
Innovation
Mass customization
Flexibility
Lower Costs

Limited resources
Source: U.S. Bureau of Census, 2004

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What is Lean?
It is NOT:
Collection of techniques or a methodology
Reduced staffing or low inventories

It IS:

A philosophy of manufacturing
Totally different way of thinking
A different value system
Seeks to eliminate waste (non-value added activities to the customer)
Emphasis on flow manufacturing

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What is Lean?
Lean Production
Total Quality Management (TQM)
Six Sigma
Cellular Manufacturing
Business Process Improvement (BPI)
Just in Time
Theory of Constraints
Zero Defects
SPC
TQC
Kanban

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Lean Characteristics
Focus is on the improvement of resource utilization:
Equipment setup time reduced
Scheduled machine maintenance
Orderly, clean workplace
Pull production being used
JIT inventory control
Factory layout in work cell arrangement by products
Active error elimination
Improved quality, etc.

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The Importance of Waste Elimination

Lean deals with the elimination or reduction of
many types of non-value-added activities, often
referred to as waste
The driving force for waste elimination is improved
value in the products and services customers buy

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Seven Popular Wastes

Overproduction
Waiting
Excessive transportation
Inappropriate processing (the hidden factory)
Unnecessary inventories
Unnecessary motion
Defects
- Taiichi Ohno
Toyota Production System

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The Nature of Wastes

1.

Overproduction

2.

Waiting

3.

Target and achievement unclear

Processes not statistically capable

Operators waiting
Operators slower than production line

Excessive Transportation

Widely spaced equipment waiting

Forklifts not available when needed

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The Nature of Wastes (continued)

4.

Inappropriate Processing

5.

Variability in operators performance

Processes not statistically capable

Inventory

Large safety stocks

Variable procurement lead times

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The Nature of Wastes (continued)

6.

Motion

7.

Double handling
Non-standard layouts
Equipment widely spaced from each other

Defects

Low material yields

Excessive process variability

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Correcting Wastes
1.

Overproduction

2.

Eliminate by reducing setup times.

Synchronizing quantities and timing between processes.
Make only what is needed now.

Waiting

Eliminate through synchronizing work flow.

Balancing uneven loads with flexible workers and equipment.

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Correcting Wastes (continued)

3.

Excessive Transportation

4.

Establish layouts and locations to make transport and handling

unnecessary, if possible.

Inappropriate Processing

Why should this item be made?

Why is each process necessary?
Are any processes being performed that are not part of the work
flow?

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Correcting Wastes (continued)

5.

Inventory

6.

Reduce by shortening setup times.

Improving work skills.
Smoothing fluctuations in demand for the product.
Reducing all the other wastes reduces the waste in stocks.

Motion

Study motion for economy and consistency.

Economy improves productivity, and consistency improves
quality.
Improve the motions, then mechanize or automate. Otherwise,
there is a danger of automating waste.

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Correcting Wastes (continued)

7.

Defects

Develop the production process to prevent defects.

Eliminate the need for inspection. At each process, produce no
defects.
Design processes to be failsafe (Poka yoke).
Quality processes yields quality products automatically.

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Can you think of other actions to eliminate

waste in your company?

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Leadership Function
Initiate needed change by identifying a vision
Aligning employees to that vision
Motivating to achieve that vision

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Leadership
Lean Change Infrastructure
Champion
CEO
Plant Management/President
Vice President

Vision &
Lean
Strategy
Value
No Waste
Flow
Pull
Standard Work
JIT

Project &
Training Plans
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
___________

Sponsors:
Manufacturing
Engineering
Quality

Lean Office

Facilitator

Team

Team

Facilitator

Team

Team

Facilitator

Team

Team

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Transparent Workplace

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Transparent Workplace

Define Processes
Value-Added Activities
A Value-Added Step
Value versus Non-Value-Added
Value-Stream Mapping
Typical Process Flow Analysis
Visual Order The Five Ss
Visual Control
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Transparent Workplace
Processes Definition
A particular method of doing something which involves a
number of steps, activities, or operations
Processes are found in manufacturing & service industries
Example:
Manufacturing
Office

Grind

Turn

Mill

Drill

Type
Contract

Obtain
Signature

Type
Envelope

Mail

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Process Map
Total Time: 10 Days
Value-Added Time: 6 minutes

Production
Control

Weekly
Orders

Supplier

Weekly
Orders

Customer

Weekly Schedule
Daily

Daily

Stamping

Weld
I

1 Day

1 Day
50 sec

Assembly
I

2 Days
40 sec

Paint
I

2 Days
90 sec

Shipping
I

3 Days
120 sec

Staging
1 Day

60 sec

Process Time Line

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Transparent Workplace
Value-Stream Mapping Process
Map customer requirements (orders)
Map order information flows
Map physical product/material flows
Map plant/office information flows
Add a process time line
Summarize current state
Ask questions at each step to determine waste or nonvalue-added areas
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Transparent Workplace
Summarize Current State
The % of value-creating time
The number of units of inventory required to support a
production unit
Total travel distance versus value-creating distance

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Transparent Workplace
What Are Value-Added Activities?
Add value to products & services that customers are
willing to pay for
Improvements that change a products or services form, fit or
function

Other activities use resources but add no value

Some non-value-added activities may be necessary

Based on current knowledge or technology
Long term goal - Eliminate
Remaining non-value-added activities should be eliminated
now!

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Transparent Workplace
A Value-Added Step
A process that physically changes the work passing
through it that makes it more valuable to the customer
A step requested by the customer - they are willing to pay
for it

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Transparent Workplace
Value versus Non-Value-Added
Value-Added Activities

Non-Value-Added Activities

Entering order
Ordering materials, supplies
Preparing drawings
Assembling
Shipping to customers
Processing customer deposits
Examining patients
Filing insurance claims
Dispensing event tickets
Fueling airplane

Waiting/sorting
Moving
Kitting/staging
Counting
Inspecting
Checking
Recording
Obtaining approvals
Testing
Reviewing
Copying
Filing
Revising/reworking
Tracking work

- Charlene B. Adair & Bruce A. Murray,

Breakthrough Process Redesign

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Value Stream Costing

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Traditional Accounting and Lean Controls

System/Issue

Traditional Accounting

Lean

Production Inventory Control

Work Order
Production tracking
Inventory Cycle Count

Kanban
Visual signals
Five S

Procurement

Purchase order approval

Three way match in AP

Key Suppliers
Master POs
Supplier Certification

Quality of Products

Detailed inspection
Rework or scrap

Standardized work
Single-piece flow

Production Cost Control

Standard cost
Variance Reports
Analysis of Variance

Cell/VS CSFs and measures

Analysis of Root Cause

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Costs Outside the Value Stream

Identify tasks not related to the Value Stream
Exp. - ISO 9000

These costs are not allocated to the Value Stream

They are treated as sustaining costs of the business
Budgeted
Controlled

No need for full absorption costing

Value Stream costing proves relevant, accurate cost info
about the Value Stream
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Transparent Workplace
Value-Stream Mapping (VSM)
Observe & record the flows of orders, materials, goods and
information for a product family
Product family: A group of product variants passing through
similar processing steps that use common equipment

Mapping identifies waste situations for improvements

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What are some value-added

non-value-added activities
at your company?

&

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Transparent Workplace
Visual Order The Five Ss
To eliminate waste, you must first find it
Visual order makes waste evident and is a good starting
point for managing resources
Toyota Production - Five Ss as the method for exposing
waste & poor utilization of resources

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Transparent Workplace
Visual Order The Five Ss

Sort
Set in order
Shine
Standardize
Sustain
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Transparent Workplace
Lockheed & Boeings Six Ss
SORT

SUSTAIN

6S

STRAIGHTEN

SHINE

SAFETY

STANDARDIZE

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Transparent Workplace
The Six Ss
Sort: Classify tools, parts, instructions into necessary &
unnecessary
Set in Order: Make it visible & easy to use; 3 Es = easy
to see, easy to get & easy to return
Shine: Conduct cleanup to identify abnormalities
Standardize: Put a system in place to readily identify
abnormal conditions
Safety: Identify & eliminate dangerous & hazardous
conditions
Sustain: Make a habit of properly maintaining & following
standard practices
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Transparent Workplace
Visual Control
Awareness of whats happening
Manpower: Skill levels, performance, continuous training
Machines: Develop Maintenance schedules and use them
Materials: Demand Signals indicating shortages; shadow boards
for location of tools
Methods: Standard Worksheets and Operating Procedures
Measurements: Performance trends
Display schedule
Quality targets
Reductions in setup & lead times

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Pull versus Push Production Strategy

Lean Principles
Value

Value
Stream

Flow

Pull

Perfection

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Pull

No one upstream should produce any good or service

until the customer downstream asks for it
Kanban

Lean Principles
Value

Value
Stream

Flow

Pull

Perfection

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Push

Build product to forecast

Excess inventory
Poor utilization & distribution of product
Filled distribution channels
50% of all books manufactured are shredded
Lean Principles
Value

Value
Stream

Flow

Pull

Perfection

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Pull

Design
Schedule based on actual demand signals
Produce exactly what the customer wants
Flow takes place throughout the supply chain, not just
inside your production facility
Lean Principles
Value

Value
Stream

Flow

Pull

Perfection

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Pull
Benefits
High throughput
Excellent protection against stock-outs
Higher flexibility
Less congestion
Shorter lead times
Higher customer service
Lean Principles
Value

Value
Stream

Flow

Pull

Perfection

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Perfection
Begins with visualizing the perfect process
Continuous process to remove waste by eliminating effort,
time, space and defects

Lean Principles
Value

Value
Stream

Flow

Pull

Perfection

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Final Thoughts Lean and Green

There is a social responsibility component to saving

energy and reducing the amount of CO2 emissions.
Green as a marketing tool.
Select an small area with high visibility and a manageable
number of variables for the first G.A.S. Assessment and
Lean project.
The journey is never-ending and definitely not easy
(especially at first) but the results are well worth the effort.
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QUESTIONS?

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Paul V. Burnett, BSME, MBA

RSM McGladrey, Inc.
Senior Consultant - Operations and Financial
221 3rd Ave SE, Suite 300
Cedar Rapids, IA 52401
319.298.5298

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