BUILDING A LEAN

BUSINESS SYSTEM
Professor Daniel T Jones
Chairman, Lean Enterprise Academy

Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Lean Management Summit

Marks a significant turning point for Lean Thinking in
Germany after two false starts in 1991 and 1997
The establishment of the Lean Management Institut
with RWTH Aachen lays a solid foundation here
Lean management has spread well beyond the shop
floor, across sectors and across the world
Germany at this point lags behind although we
have always believed that German industry has a
significant contribution to make to the future of Lean
Lean is actually a job saver rather than a job killer
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Toyota - the Lean Model

Most people now recognise that Toyota is setting
the pace based on its Lean business system

It leads in efficiency and quality around the world

It also leads in time to market for new products
And in introducing new technologies - like hybrids
It is globalising assembly and localising parts supply
It has overtaken Ford and plans to overtake GM!

Superficially Toyotas functional organisation looks

not unlike a German firm!
So what distinguishes the way it operates?
Lean Management Summit - Aachen, Germany 11 November 2004

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Toyotas Lean Strategy

Brilliant process management is our strategy.
We get brilliant results from average people
managing brilliant processes.
We observe that our competitors often get
average (or worse) results from brilliant people
managing broken processes.
Lean Thinking is Process Thinking
Just think what you could do with brilliant people
running brilliant processes!
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Lean Thinking
The objective is to manage the business backwards
from the customer definition of value - not forwards
from your organisation and your assets
To create lean primary processes to design, deliver
and support this value - with minimum wasted effort
and time and the necessary lean support processes
And to build a lean management system to develop,
sustain and improve these processes over time
Be clear about customer Purpose, before designing
the Processes and then organising the People
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Lean Principles
Specify value from the standpoint of the customer
(do they want goods and services or to solve their
problem?)
Identify the value stream for each product and
remove wasted activities
Make value flow towards the customer as quickly as
possible
Only at the pull of the customer
While striving for perfection (in products and
processes)
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

The Dynamics of Lean

No created
demand
amplification
Separate
capacity planning
from production
instructions

Reflexive
Pull all the
way back to
raw materials

Every
Product
Every
Interval
capability

Combine steps
where you can
to flow

Levelled and
released in
small quantities

Production
pulled from
every
upstream step

To only one
pacemaker
process

Every step is:Valuable

Capable
Available
Flexible
and Adequate

Demand signals
direct from the
customers
point of use

FIFO

With just the right

Standard
Inventory of:Cycle stock
Buffer stock and
Safety stock

Lean Management Summit - Aachen, Germany 11 November 2004

Uninterrupted
flow back to the
customers
point of use

No warehouses,
only Cross-Docks
and Mixed-model
Milk Runs

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Low Volume Lean

Lean is as relevant to build-to-order businesses
The starting point may be the engineering,
procurement and quotation process
Then breaking the order down into increments of takt
time to track progress and problems
And modularising the elements to be produced and
synchronising them
But does the customer really need all that
complexity?
Toyota is now developing Lean and Simple
equipment for use across the world
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Implementing
Lean

Current State Value Stream

Production
Control

Forecast
Michigan
Steel

Weekly Order

MRP

Forecast
State Street
Assembly

Daily Order

Check
progress
and stabilise

Weekly Schedule
Daily Ship
Schedule

Future State Value Stream

2 x Week

Daily

Production
Control

Forecast

Stamping

S. Weld 1

S. Weld 2
Michigan
Steel

Assembly 1
Daily Order

Forecast
Shipping

State Street
Assembly

Daily Order

Production
Daily Order
Lead Time
= 23.5 days
V S ManagerValue
Jim
Date 03/02/2003
Added Time
= 184 secs
Product
Value
Family
Stream
Business
Objective
Weld and
Objective
Assembly Cell

Value Stream Plan

Daily

Stamping

Ask the
key
questions

Assembly 2

Pacemaker
*Continuous flow from
weld to assembly
*Kaizen to 168 secs
*Eliminate weld
changeover
*Uptime weld #2
*Finished goods pull
Improve
Profitability *Materials handler
routes
In Steering
Brackets
Stamping
*Stamping Pull
*Stamping changeover

Supplier
*Pull coils with
daily deliveryr

Daily

Measurable
Goal
Shipping

Product Family
Steering Brackets
Person
in
Charge

Monthly Schedule
1

Zero WIP
< 168 s/t

Production
Lead Time
= 4.5 days
< 30 sec c/o
Value
100%
Added Time
2 days FG
= 166 secs
Pull Schedule

1 day inventory
+ pull schedule
batch size
300/160 pieces
c/o < 10 min
daily delivery
< 1.5 days of
coils at press

Lean Management Summit - Aachen, Germany 11 November 2004

John
Dave
Sam
Mike
Sue
James

Fred
Tim

Graham

www.leanuk.org

Current State

30
20

Across the
Value Stream

ppm

Amplification

40

10

2000

Quality & Delivery

%
10

1500
1000

500

F E D C B A

ppm

Amplification

40

Future State 2

30
20

1000

F
%
40

Cross Dock

73
8

10

ALPHA MOTORS
F E D C B A

Quality & Delivery

2000

1000

Time
Value
Stream Compression
44d

500
0

Dist. Centre

55m

%
10

1500

Assembly

20

Ideal State

30

BETA WIPERS

ppm

Amplification

Cross Dock

Wipers

Steps

Warehouse

GAMMA
STAMPING

Dist. Centre

F E D C B A

DELTA
STEEL

10

1500

Stamping

Flow and Pull between Plants500

10
Steel

Quality & Delivery

2000

Time reduced
from 24 to 3
days

Steel

DELTA
STEEL

Stamping

Wipers

GAMMA
STAMPING

BETA WIPERS

Assembly

Time
Steel

ALPHA MOTORS

Steps

Time
reduced
from 44 to
24 days

39
8

Dist. Centre

16d
55m

A
Stamping
Cell

Wiper
Cell

Assembly

Time

EPSILON
STEEL

SUPPLIER PARK

ALPHA MOTORS

Steps

30
8

Lean Management Summit - Aachen, Germany 11 November 2004

3d
55m

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Using a Common Language

Acme Stamping Steering Bracket Value Stream Improvement
Background
) Acme supplies stamped steel steering brackets (LH & RH) to State
Street Assembly. The product goes through 5 manufacturing processes &
shipping.
) The customer uses 18,400 pcs/month & requires daily shipments in
pallets of 10 trays of 20 brackets. A pallet is either all RH or LH.
Current Situation
) Lead time for steering bracket from coil steel to shipment = 23.6 days
) Of 23.6 days, only 188 seconds are spent making a bracket.
) Large inventories of material between each process.
) Long changeover times, downtime in welding.

Recommendations
) Create continuous flow through weld & assembly
) Establish TAKT time . Base the pace of work through weld & assembly
on customer demand.
) Set new weld - assembly cell as pacemaker for entire value stream.
) Establish EPE_ build schedule for stamping based on actual use of
pacemaker cell & pull steel coils from supplier based on actual usage by
stamping.
) Improve uptime in weld.
) Establish material handling routes for frequent withdrawal & delivery.
) Establish new production instruction system with Levelling Box.
Future State Map

Current State Map

6 Week
Mi chi gan
Steel Co.

6
Week
Mi chi gan
Steel Co.

Forecas
t
Weekly

Producti on
Contr ol

Fax

90/60/3
0 Day
Forecas
Daily
t
Ord

90/60/ 3

Production
Control

0 Day
Forecas
Daily
t
Ord

Daily
Order

20

State Str eet

Assem bl y

er

Weekly Schedule

Foreca
Daily
st
Order

State Str eet

Assem bl y

er

OXO
X

Ship
Sche
dule

1x dai ly

Analysis
) Each process operates as isolated islands, disconnected from the
customer.
) Push system, material builds up between each process.
) Each process builds according to its own operating constraints
(changeover, downtime etc.)
) Plans based on 90 & 30 day forecasts from customer. Weekly
schedule for each department. System is frequently overridden to make
delivery
Goals
) Improve profitability of steering bracket value stream.
) Reduce lead time - 23.6 days to 4.5 days.
) Reduce inventories:
) Stamping 7.6 days to 1 day.
Lean Enterprise Academy
) Welding 6.5 days to 0 days.
) Shipping 4.5 days to 2 days.

Action Plan
Deliverables

CCF at pacemaker
Kaizen each CT to >TT
Weld uptime to 100%
CO reduction to < TT
Pull at pacemaker
FG = 2 days
KB
Matl handling
Levelling Box
Pull from Stamping
WIP = 1 day
CO < 10 min
Pull from supplier
Info flow
Daily delivery
RM = 1.5 days

Responsible

Review

For
Problem
Solving,
Managing
Projects
and
Planning

Follow Up
) Reviews & involvement of related departments TBD.
www.leanuk.org
)Other functions: Production Control Material Handling, Purchasing,
Maintenance, Human Resources, Finance.

Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Managing Lean
It is not an extension of continuous improvement or a
tool box but a system redesign for each value stream
Involving design & production as well as logistics,
production control, maintenance, purchasing etc.
It is not about what works theoretically or automation
but a robust system tolerating day to day disturbances
It will not happen unless someone is responsible for
each Value Stream Plan and unless they get the
necessary support and resources from functional
departments (which also means lean in every office!)
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Challenges for Management

To reconcile the Chief Engineers plans for each
product family with the resources required in each
function and the overall needs of the business
To move away from centralised, cognitive
production control systems to stable levelled
processes triggered by reflexive pull
To spread lean across office support activities
despite the resistance to standardisation lean
frees up time for creativity and problem solving

Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Lean Product Development

Strong leadership from the Chief Engineer, drawing
on resources from functional departments
More time is spent pursuing sets of alternatives
so that fewer engineering changes are needed later
Once agreed detailed engineering proceeds very
rapidly, using standardised processes and checklists
and pull communication to trigger work a fully
industrialised design process across every project
Manufacturing and key suppliers are involved
throughout to ensure quality and low cost based on
long term joint product and process analysis
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

Future Lean
The biggest gains come from rethinking the product
and the process based on the lean experience of
trying to improve todays design, equipment and
locations
Toyota is targeting every new product to deliver
increased functionality at 30% lower costs forcing
step changes rather than incremental improvements
They are also designing Lean and Simple
equipment for use across the world which is a
challenge for future engineers
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

An Agenda for Action

We will continue to write down the lean knowledge
and to push the frontiers of lean implementation
You need to build a much greater pool of lean
experience in Germany to compensate for the fact
there is no Toyota plant here!
We need to build examples of successful lean
implementation that enable to others to see why this
counterintuitive thinking works better
The biggest challenge is to provide a new direction
for tomorrows engineers designing lean for
tomorrows global realities
Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org

BUILDING A LEAN
BUSINESS SYSTEM
Professor Daniel T Jones
www.leanuk.org

Lean Management Summit - Aachen, Germany 11 November 2004

www.leanuk.org