LEAN SYSTEMS

Lean operation is a flexible system of operation that uses considerably fewer

resources (i.e., activities, people, inventory, and floor space) than a traditional
system. Moreover, lean systems tend to achieve greater productivity, lower costs,
shorter cycle times, and higher quality than non-lean systems.

Lean systems are sometimes referred to as just-in-time (JIT) systems owing to their
highly coordinated activities and delivery of goods that occur just as they are
needed.

Introduction

Aka. The Toyota Production System

An assembly-line manufacturing methodology developed originally for Toyota and
the manufacture of automobiles. The goal of lean production is described as "to get
the right things to the right place at the right time, the first time, while minimizing
waste and being open to change".

Toyota focused on reducing system response time, instead of planning, so that the
production system was capable of immediately changing and adapting to market
demands.

Engineer Ohno, - developed the principles of lean production, discovered that in

addition to eliminating waste, his methodology led to improved product flow and
better quality

Characteristics of Lean System

1. Waste reduction —A hallmark of lean systems.
2. Continuous improvement —Another hallmark; never-ending efforts to
improve.
3. Use of teams —Cross-functional teams, especially for process improvement.
4. Work cells —Along with cellular layouts allow for better communication and
use of people.
5. Visual controls —Simple signals that enable efficient flow and quick
assessment of operations.
6. High quality —In processes and in output.
7. Minimal inventory —Excess inventory is viewed as a waste.
8. Output only to match demand —Throughout the entire system; referred to a
“demand pull.”
9. Quick changeovers —Enables equipment flexibility and output variety without
disruption.
10. Small lot sizes —Enables variety for batch production.
11. Lean culture —The entire organization embraces lean concepts and strives to
achieve them.

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Five principles embody the way lean systems function.
1. Identify customer values.
2. Focus on processes that create value.
3. Eliminate waste to create “flow”.
4. Produce only according to customer demand.
5. Strive for perfection.

Benefits and Risks of Lean Systems

There are numerous benefits of lean systems, as well as some risks. The key
benefits include:
o Reduced waste due to emphasis on waste reduction.
o Lower costs due to reduced waste and lower inventories.
o Increased quality motivated by customer focus and the need for high-
quality processes.
o Reduced cycle time due to elimination of non-value-added operations.
o Increased flexibility due to quick changeovers and small lot sizes.
o Increased productivity due to elimination of non-value-added
processes.

There are also certain risks that often accompany lean operations, such as:
o Increased stress on workers due to increased responsibilities for
equipment changeovers,problem solving, and process and quality
improvement.
o Fewer resources (e.g., inventory, people, time) available if problems
occur.
o Supply chain disruptions can halt operations due to minimal inventory
or time buffers.

The Toyota Approach

Many of the methods that are common to lean operations were developed as
part of Japanese car maker Toyota’s approach to manufacturing. Toyota’s
approach came to be known as the Toyota Production System (TPS)

 Muda : Waste and inefficiency. Perhaps the driving philosophy. Waste

and inefficiency can be minimized by using the following tactics.

 Kanban : A manual system used for controlling the movement of parts

and materials that responds to signals of the need (i.e., demand) for
delivery of parts or materials. This applies both to delivery to the factory
and delivery to each workstation. The result is the delivery of a steady
stream of containers of parts throughout the workday. Each container
holds a small supply of parts or materials. New containers are
delivered to replace empty containers.

 Heijunka : Variations in production volume lead to waste. The

workload must be leveled; volume and variety must be averaged to
achieve a steady flow of work.

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  Kaizen : Continuous improvement of the system. There is always room
for improvement, so this effort must be ongoing.

 Jidoka : Quality at the source. A machine automatically stops when it

detects a bad part. A worker then stops the line. Also known as
autonomation

The ultimate goal of lean is a balanced system

Those goals are to:
1. Eliminate disruptions.
2. Make the system flexible.
3. Eliminate waste, especially excess inventory.

Disruptions have a negative influence on the system by upsetting the smooth flow of
products through the system, and they should be eliminated. Disruptions are caused
by a variety of factors, such as poor quality, equipment breakdowns, changes to the
schedule, and late deliveries. Quality problems are particularly disruptive because in
lean systems there is no extra inventory that can be used to replace defective items.
All disruptions should be eliminated where possible. This will reduce the uncertainty
that the system must deal with.

A flexible system is one that is robust enough to handle a mix of products, often on a
daily basis, and to handle changes in the level of output while still maintaining
balance and throughput speed. This enables the system to deal with some
uncertainty. Long setup times and long lead times negatively impact the flexibility of
the system. Hence, reduction of setup and lead times is very important in a lean
system.

Waste represents unproductive resources; eliminating waste can free up resources

and enhance production.

In the lean philosophy, there are eight wastes:

1. Excess inventory —beyond minimal quantities, an idle resource takes up floor
space and adds to cost.
2. Overproduction —involves excessive use of manufacturing resources.
3. Waiting time —requires space, adds no value.
4. Unnecessary transporting —increases handling, increases work-in-process
inventory.
5. Processing waste —makes unnecessary production steps, scrap.
6. Inefficient work methods —reduce productivity, increase scrap, increase work-
in process inventory.
7. Product defects —require rework costs and possible lost sales due to
customer dissatisfaction.
8. Underused people—relates to mental and creative abilities as well as physical
abilities.

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The list of wastes also can identify potential targets for continuous improvement
efforts.

The kaizen philosophy for eliminating waste is based on the following tenets:
1. Waste is the enemy, and to eliminate waste it is necessary to get the hands dirty.
2. Improvement should be done gradually and continuously; the goal is not big
improvements done intermittently.
3. Everyone should be involved: top managers, middle managers, and workers.
4. Kaizen is built on a cheap strategy, and it does not require spending great sums
on technology or consultants.
5. It can be applied anywhere.
6. It is supported by a visual system: a total transparency of procedures, processes,
and values, making problems and wastes visible to all.
7. It focuses attention where value is created.
8. It is process oriented.
9. It stresses that the main effort of improvement should come from new thinking
and a new work style.
10. The essence of organizational learning is to learn while doing.

Four BUILDING BLOCKS of lean production systems the building blocks are:
1. Product design.
2. Process design.
3. Personnel/organizational elements.
4. Manufacturing planning and control.

Speed and simplicity are two common threads that run through these building
blocks.

Product Design
Four elements of product design are important for a lean production system:
1. Standard parts.
2. Modular design.
3. Highly capable production systems with quality built in.
4. Concurrent engineering.

Process Design
Eight aspects of process design are particularly important for lean production
systems:
1. Small lot sizes.
2. Setup time reduction.
3. Manufacturing cells.
4. Quality improvement.
5. Production flexibility.
6. A balanced system.
7. Little inventory storage.
8. Fail-safe methods.

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Failsafing refers to building safeguards into a process to reduce or eliminate the
potential for errors during a process. The term that was used initially was baka-yoke,
which meant “foolproofing.”

However, due to its offensive connotation, the term was changed to poka-yoke,
which means “mistake proofing.”

Andon system of lights used at each workstation to signal problems or slowdowns.

Personnel/Organizational Elements

There are five elements of personnel and organization that are particularly important
for lean systems:

1. Workers as assets.
Well-trained and motivated workers are the heart of a lean system.

2. Cross-trained workers.
Workers are cross-trained to perform several parts of a process and operate a
variety of machines

3. Continuous improvement.
Lean system workers receive extensive training in statistical process control,
quality improvement, and problem solving.

4. Cost accounting.
Traditional accounting methods sometimes distort overhead allocation because
they allocate it on the basis of direct labor hours. However, that approach does
not always accurately reflect the consumption of overhead by different jobs

5. Leadership/project management.
Managers are expected to be leaders and facilitators, not order givers. Lean
encourages two-way communication between workers and managers.

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Manufacturing Planning & Control

The following are the seven elements of manufacturing planning and control that are
important for lean systems:
1. Level loading
2. Pull systems
3. Visual systems
4. Limited work-in-process (WIP)
5. Close vendor relationships
6. Reduced transaction processing
7. Preventive maintenance and housekeeping

Level Loading

Level loading (production leveling), refers to the balanced output rates of activities
within a process. It is a measure of satisfying customer demand through inventory
management by modifying the current production schedule in time to satisfy the
customers' requested delivery dates and quantities. Level loading emphasizes rate-
based production, and production schedules are relatively fixed over a short time
horizon.

If applied properly, level loading can balance a process by reducing the non-value
added portion of the process cycle time, and removing the waste of items in queue.

Pull Systems

“A workstation pulls output from the preceding station as it is needed.”

A pull system is a lean systems strategy used to reduce waste in the production
process. Under this system, the materials used in the manufacturing process are
only replaced once they have been processed/consumed. As such, companies only
make enough products to meet current demand. Virtually all of the firm’s resources
are used in the production of goods that will immediately be sold to customers.

Pull System vs. Push System

An alternate system used in manufacturing is a push system. Under the push

system, units are produced based on forecasted demand and then “pushed” into
the market. Firms using a push system must have a reliable prediction of what the
customer will buy and at what quantities using historical company data and current
market information.

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 Comparison between Push & Pull Systems

(Source: IndustryWeek, 2018)

“Pull systems aren’t necessarily appropriate for all manufacturing operations

because they require a fairly steady flow of repetitive work. Large variations in
volume, product mix, or product design will undermine the system.” (Stevenson)

Visual Systems

Kanban System
Kanban is a visual system for managing work as it moves through a process.
Kanban visualizes both the process (the workflow) and the actual work passing
through that process. The goal of Kanban is to identify potential bottlenecks in your
process and fix them so work can flow through it cost-effectively at an optimal speed
or throughput. (Digité, 2018)

Kanban System was developed by Taiichi Ohno at the Toyota Production System.
“Kanban” refers to a card or other device that communicates demand for work or
materials from the preceding station, and promotes a perless production control
system. Kanban is the Japanese word meaning “signal” or “visible record.” Under
this system, the authority to pull, or produce comes from a downstream process.

Two main types of Kanban Systems

1. Production kanban (p-kanban): signals the need to produce parts.
2. Conveyance kanban (c-kanban): signals the need to deliver parts to the next
work.

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 Kanban Vs MRP Systems

Limited Work-In-Process

Work in process is goods in production that have not yet been completed. These
goods are situated between raw materials and finished goods in the production
process flow (Accountingtools.com, 2018).

WIP limits are fixed constraints that firms impose upon themselves in order to limit
the total number of partially finished goods at any given time. The following are the
benefits of reduced WIP inventories:
 Lower carrying costs
 Increased flexibility
 Saves cost for rework/scrapping if there are design changes.

CONWIP (Constant WIP)

The CONWIP (Constant Work In Progress) system is very similar to a kanban

system, except that the CONWIP card is not associated with a certain part type, but
only with a certain quantity (also at least one) (Merek et al, 2001).

Close Vendor Relationships

JIT systems is enhanced by long-term relationships between firms and its suppliers.
Given a long-term relationship, vendors are more willing to commit resources to the
job of shipping according to a buyer’s ‘demanding’ JIT systems.

The potential benefits of having good vendor relations would include:

 Consistent high quality, flexibility, frequent small deliveries.
 Quick response to problems.

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 Traditional VS Tiered Supplier Networks

Traditional
 The organizations make its
suppliers compete against each
other.
 The suppliers can supply the same
component or raw material to the
organization’s competitors thus
harming the organizations
business.
 Organizations tend to waste
resources and a lot of time loses
its suppliers to the competitors.
 Suppliers end up absorbing poor
order placement from the
organizations.
 The whole network faces
sluggishness or inertia
Tiered
 The suppliers work as a strategic
alliance to provide components to
the organization.
 Inventory costs as well as the
overall time involved are reduced.
 Order execution is improved and
organizations do not face the
challenge of losing its suppliers to
the competitors.
 There is little or no rivalry between
the suppliers

Reduced Transaction Processing

The Hidden Factory

The Hidden Factory is a term that refers to activities in an operation or standard
operating procedure. A few examples of Hidden Factories are workarounds, rework,
or any of the different organizational wastes. Most organizations have some form of
a Hidden Factory, and being able to “see” these in an organization requires a full
understanding of a firm’s operations (Shmula, 2008).

Different Firm Transactions

Transaction Class Examples Costs

Ordering, execution, and
Logistical transactions confirmation of materials
transported from one
location to another.
Forecasting, production
planning, production
Balancing transactions
control, procurement,
scheduling, and order
processing.
Determining and
communicating
Quality transactions
specifications, monitoring,
recording, and follow-up
activities.
Shipping and receiving
personnel, expediting
orders, data entry, and
data processing.
The personnel involved in
these and supporting
activities.
Appraisal, prevention,
internal failures and
external failures.

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Preventive Maintenance & Housekeeping

Preventive maintenance programs and proper housekeeping are important in

improving workplace efficiency and preventing injuries.

Preventive Maintenance
Maintaining equipment in good operating condition and replacing parts that have a
tendency to fail before they actually do fail. This helps to protect assets and prolong
the useful life of production equipment, improve system reliability, decrease cost of
replacement and system downtime as well as reduce injuries (WSPS, 2018).

Housekeeping
Maintaining a workplace that is clean and free of unnecessary materials. Effective
housekeeping includes keeping work areas neat and orderly, maintaining floors from
slip and trip hazards, removing waste materials, and having a good workplace
layout, aisle markings, adequate storage facilities and maintenance (WSPS, 2018).

JIT vs Traditional Systems

The table below shows as summary of the differences between a traditional and just-
in-time manufacturing systems:

(Source: Stevenson, 2005)

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Value Stream Mapping

A visual tool to systematically examine the flow of materials and information. It is a

lean management tool that aids managers in visualizing the steps needed to obtain
materials from customers until the delivery of the finished goods to the customer. As
with other business process mapping methods, it helps managers to understand the
business better and look for areas that need improvement.
The following are steps in value stream mapping suggested by Stevenson:
1. Specify value from the standpoint of the end customer.
2. Identify all the steps in the value stream and create a visual (map) of the value
stream.
3. Eliminate steps that do not create value to create flow.
4. Use next-customer-in-the-process demand to pull from each preceding
process as needed to control the flow.
5. Repeat this process as long as waste exists in the system.

An analysis of the value stream can uncover improvement opportunities by asking

key questions.
 Where are the process bottlenecks?
 Where do errors occur?
 Which processes have to deal with the most variation?
 Where does waste occur?

5W2H

5W2H stands for 5 Ws and 2Hs: Who, What, When, Where, Whey How and How
much. This is a very simple tool to help managers think thorough quality
improvement opportunities when working on improving a process of a system.

ERP and Lean Systems

Lean systems focus on pacing production and synchronizing delivery of incoming

supply. ERP helps in providing lean planning and scheduling capability that is linked
to customer demand. ERP systems enable the leveling of schedules and
synchronization of supply chain activities with paced company operations
(Stevenson, 2005).

Transition to Lean Systems: Key Points (Stevenson, 2005)

1. Get top management commitment
2. Decide which parts need most effort
3. Obtain support of workers
4. Start by trying to reduce setup times
5. Gradually convert operations
6. Convert suppliers to JIT
7. Prepare for obstacles

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Challenges in Transition:
1. Management may not be committed
2. Workers/management may not be cooperative
3. Suppliers may resist

Lean Services

Lean services is the application of the lean manufacturing concepts and principles to
service operations. It is distinct from the usual ‘lean manufacturing’ in that lean
services are not concerned with the making of 'hard' or tangible products.

The basic goal of lean systems in the service organization is to provide optimum
response to the customer with the highest quality service and lowest possible cost.
 Eliminate disruptions
 Make system flexible
 Reduce setup and lead times
 Eliminate waste
 Minimize WIP
 Simplify the process

JIT 2

A supplier representative works right in the company’s plant, making sure there is an
appropriate supply on hand. JIT 2 is similar to JIT, except that SUPPLIER-
CUSTOMER relations are further strengthened due to supplier presence and active
involvement in the firms manufacturing process.

Benefits of Lean (JIT) Systems

In sum, the following are the benefits of lean systems:

 Reduced inventory levels
 High quality
 Flexibility
 Reduced lead times
 Increased productivity
 Increased equipment utilization
 Reduced scrap and rework
 Reduced space requirements
 Pressure for good vendor relationships
 Reduced need for indirect labor

PRIMARY Reference Text

Operations Management, 12th Edition by W. Stevenson

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