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Lecture 7

Lean Manufacturing Strategy

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Interrelationship between corporate goals & manufacturing strategy

Corporate goals are the focus of corporate strategy. • Corporate strategy influences manufacturing strategy. • Manufacturing strategy defines the long-term capability of the factory. • The factoryʼs capabilities , in turn, help shape the corporate goals.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Blue Ribbon Panel on Global Manufacturing

Objective: To define manufacturing strategies that could guide global manufacturers into new millennium. Recommendations:

1) Companies should focus on lean methods of manufacturing & continuous improvement practices. 2) Single-piece flow is the optimal manufacturing method for meeting future customer demand. 3) Customers (internal & external) should pull product through the value stream. 4) Lean manufacturing is the best hope for a common global language of manufacturing.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Focus of lean manufacturing is customer

What is most important to the customer? • Satisfying the customer is the only way the factory can succeed. • Satisfying the customer is what the business is all about. • If the customer is not satisfied, it does not matter how efficient the operation is,how good the quality is, or how short the lead time is. • Establishing a manufacturing strategy requires first understanding the corporate goals, from the perspective of satisfying the customer.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

How to evaluate a factory?

Step 1: Before developing a manufacturing strategy, it is important to observe objectively how a factory is running. Step 2: The most critical observation is to check for WIP inventory in the plant. Step 3: Ask the question; why does the factory keep excess inventory? Step 4: Evaluate the following causes:

a) Is the equipment too unreliable?

b) Are setup times too long?

c) Is production scheduled in large batches?

d) Is there any other reason for keeping large excess inventory.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Observational tools used to assess the factory

1) Production flow diagram is used to identify all non- value-added steps in the production. 2) Value stream mapping is used to probe deeper and identify production anomalies such as;

a) Work-in-process inventory
b) Nonfunctional equipment
c) Wasted operator motion
d) Poor layout
e) Long setup times
f) Large batches or lot sizes
g) Uneven workload

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Example of lean manufacturing strategy

Name of the company: Batchmore Mfg. Co. Competitive strategy: Speedy delivery & quick response to the changing customer demand. Specific corporate goals:

Shorter order-to-delivery time (lead time) • High customer service (99% orders shipped on time) • Flexibility to produce different items • Respond quickly to changing customer demand • Lower investment in inventory (Low WIP) • Higher profit

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Results of factory assessment

Chronic equipment problem

Frequent downtime

Long setup times

Low machine utilization

Large amount of WIP everywhere

Current MRP system scheduling large lot sizes.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Following manufacturing initiatives (strategies) were discussed by the management

1) Create quality assurance dept.

2) Kaizen event to reduce setup times.

3) Improve maintenance policy on equipment (shut down every two weeks for maintenance).

4) Improve MRP scheduling system.

5) Immediate reduction of WIP.

6) Immediate reduction in lot size (batch size).

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Analysis of lean manufacturing strategies

1) Create quality assurance dept. Analysis: There is no mention of quality problems. 2) Kaizen event to reduce setup times. Analysis: Setup time reduction is not justified unless capacity utilization is high. Assessment shows low utilization. 3) Improve maintenance policy. Analysis: This will increase lead time and decrease the ability to respond to changing customer demand. 4) Improve MRP scheduling system. Analysis: It is a push system & does not support corp. goal. 5) Immediate reduction of WIP. Analysis: Reducing inventory without making other improvements will increase lead time & lower customer service. 6) Immediate reduction in lot size (batch size). Analysis: Smaller lot size will lower variability, inventory, cycle time, production cost and customer lead time.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

The importance of cycle time

This is the most important single lean manufacturing strategy with maximum competitive advantage. • Short cycle time can help both customer lead time and manufacturing WIP. • There are 3 critical elements of cycle time:

1) Queue time and waiting time 2) Cycle time is affected by WIP for a given throughput 3) Variance of cycle time

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Strategies to reduce cycle time

1) Queue time and waiting time: Cycle time can be reduced by lowering processing time, setup time, travel time, waiting for material handler time, queue time etc.

2) Cycle time is affected by WIP for a given throughput:

Cycle time can be reduced by identifying areas with large accumulation of WIP and taking actions on the root cause.

3) Variance of cycle time: Cycle time can be reduced by analyzing the difference between the shortest and longest cycle time (variance) and taking actions to reduce the variance.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Strategies to reduce cycle time & customer lead time

1) Analyze the cause of high WIP inventory. 2) Reduce the non-value-added waiting time. 3) Synchronize production processes throughout the value stream & group them in manufacturing cell. 4) Schedule steady and balanced workflow by releasing small orders more frequently. 5) Reduce variability throughout the Value stream.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Strategy # 1 Analyze the cause of high WIP inventory

Causes of high inventory

1)

Setup time is too long.

2)

Production is scheduled in large batches.

3)

The production equipment breaks down frequently.

4)

Frequent changes in shop orders.

5)

Frequent shortages of component parts.

6)

Departments working at different shifts.

7)

The next process is working at a slower rate.

8)

The next process is working on a different order.

9)

The factory is not making what the customer wants.

10) Absenteeism of specialized workers.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Inventory can hide problems

Inventory can hide problems When the water level (inventory) is high, then the rocks (problems) are

When the water level (inventory) is high, then the rocks (problems) are hidden. By reducing the water level (inventory), the rocks (problems) can be exposed and addressed.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

5 steps to reduce inventory

1) Look for excess inventory. 2) Understand that it is there to protect the factory from a problem. 3) Find the underlying cause of the problem. 4) Solve the root cause of the problem. 5) Lower the inventory level.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Strategy # 2 Reduce the non-value-added waiting time

Make a distinction between production lot size and transfer lot size. • Reduce the transfer lot size as small as the factory can handle. • Establish a cap or maximum amount of WIP allowed in the system. • Establish a pull production control system.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Strategy # 3 Synchronize production

Avoid overbuilding an item just because the production is running well. • Spread production evenly throughout the month & avoid end of the month production rush. • Synchronize production processes by grouping them into manufacturing cells. • Develop the concept of single-piece flow system with pull production control.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Strategy # 4 Schedule steady and balanced workflow

Keep workload as steady as possible. • Schedule small orders through the plant. • Load factory resources as even as possible. • Release orders frequently in small lot sizes. • Establish production routing based on product family (value stream), because similar products require similar processing & simplified setups. • Strive for steady workload & balanced workflow by working on bottlenecks (constraining operations).

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Strategy # 5

Reduce variability throughout the Value stream

Install JIT practices. • Focus on the internal & external sources of variability such as equipment downtime, long setups, late deliveries from supplies, lot size from suppliers, production lot size etc. • Eliminate or reduce variability. • When variability is unavoidable, learn to adapt to it and minimize its negative effects.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Examples of not-so-lean manufacturing

4 wheels represent: customer, production, inventory & quality

represent: customer, production, inventory & quality Copyright 2006 © by Dr. Govind Bharwani, Wright State
represent: customer, production, inventory & quality Copyright 2006 © by Dr. Govind Bharwani, Wright State
represent: customer, production, inventory & quality Copyright 2006 © by Dr. Govind Bharwani, Wright State

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Example of lean manufacturing

Example of lean manufacturing Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Before implementation of lean manufacturing

Before implementation of lean manufacturing Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

After implementation of lean manufacturing

After implementation of lean manufacturing Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Work content time gap

Work content time gap Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

5S & Visual Control are also critical to lean manufacturing strategy

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

5 Elements of 5S

Sort Straighten Shine Standardize Sustain

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Sort

When in doubt, move it out • Prepare red tags • Attach red tags to unneeded items • Remove red-tagged items to dinosaur burial groundEvaluate / disposition of red-tagged items

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Straighten

Make it obvious where things belong

1. Lines Divider lines • Outlines • Limit lines (height, minimum/maximum) • Arrows show direction

2. Labels Color coding • Item location

3. Signs Equipment related information • Show location, type, quantity, etc.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Shine

Clean everything, inside and out • Inspect through cleaning • Prevent dirt, and contamination from reoccurring

Result of above actions

Fewer breakdowns Greater safety Product quality More satisfying work environment

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Standardize

Establish guidelines for the team 5-S conditions

Make the standards and 5-S guidelines visual

Maintain and monitor those conditions

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Sustain

Determine the methods your team will use to maintain adherence to the standards

5-S concept training 5-S communication board Before and after photos One point lesson Visual standards and procedures Daily 5-minute 5-S activities Weekly 5-S application

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Before 5S implementation

Before 5S implementation •   To eliminate the wastes that result from “ uncontrolled ” processes.
Before 5S implementation •   To eliminate the wastes that result from “ uncontrolled ” processes.

To eliminate the wastes that result from uncontrolledprocesses. • To gain control on equipment, material & inventory placement and position. • Apply Control Techniques to Eliminate Erosion of Improvements. • Standardize Improvements for Maintenance of Critical Process Parameters.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

After 5S implementation

Clear, shiny aisles • Color-coded areas • No work in process

•   Color-coded areas •   No work in process Copyright 2006 © by Dr. Govind
•   Color-coded areas •   No work in process Copyright 2006 © by Dr. Govind

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Workplace Observation

Clearly define target area • Identify purpose and function of target area • Develop area map • Show material, people, equipment flow • Perform scan diagnostic • Photograph problem areas • Develop a project display board (area)

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Visual Factory Implementation

Develop a map identifying the access ways(aisles, entrances, walkways etc.) and the actionareas. • Perform any necessary realignment of walkways, aisles, entrances. • Assign an address to each of the major action areas. • Mark off the walkways, aisles & entrances from the action areas • Apply flow-direction arrows to aisles & walkways • Perform any necessary realignment of action areas. • Mark-off the inventory locations • Mark-off equipment/machine locations • Mark-off storage locations (cabinets, shelves, tables) • Color-code the floors and respective action areas

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

The key to lean manufacturing strategy is small lot leveled mixed model production

Copyright 2006 © by Dr. Govind Bharwani, Wright State University