Lean Manufacturing Tools, Principles, Implementation

 Welcome to Lean Manufacturing Tools, this website will educate you as to the various principles of Lean Manufacturing, Its tools and techniques and the people who have been instrumental in its rise. This site will also keep you up to date with new developments in the various industries in which lean is being implemented. As you scroll down this page you will find brief summaries of the various lean tools and techniques and links to pages where they are described in more detail.

What Is Lean Manufacturing?

Lean has been called many things in the past; world class manufacturing, Stock-less production to name a few, but what is Lean Manufacturing?  Follow this link for a full discussion of lean and a lean manufacturing definition.

The History of Lean Manufacturing

Lean Manufacturing has a history that goes back many hundreds of years before the model T Ford production lines and the Toyota Production System that we know today. For a full discussion look at the history of lean manufacturing.

The Benefits of Lean Manufacturing

Why would we want to implement lean manufacturing? What are the benefits of lean manufacturing? For a full round up of anecdotal benefits as well as factual statistics have a look at the benefits of lean manufacturing.

Principles and Philosophy of Lean Manufacturing

The Principles of Lean Manufacturing

There are five main principles of lean manufacturing as defined by Womack and Jones in their 1990 publication “The Machine that Changed the World”; but what are these lean principles?

Muda, Muri and Mura

Seven Wastes or 7 Mudas

Discover the the seven wastes of lean manufacturing and learn the difference betweenMuda, Mura and Muri.

Lean Manufacturing Tools

The tools of Lean Manufacturing

5S Workplace Organisation

5S Lean Manufacturing Tool

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5S is one of the basic building blocks of Lean Manufacturing, one of the first lean tools that you will start your implementation with and one without which you cannot succeed. But what is 5S, what are the benefits of 5S, and how do I set up a 5S program? 5S is not just for manufacturing processes, it is as applicable in service and 5S officeimplementations often give greater improvements in lead time than those conducted on your shop floor. With the addition of Safety as an additional “S” we get 6S; 5S plus Safety.

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Total Productive Maintenance

TPM to keep machines reliable

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Total Productive Maintenance (TPM) is the machinery equivalent of Total Quality Management (TQM) and involves everyone in the organization in focusing on eliminating the six big losses through the use of a performance measure known as OEE. TPM builds onPreventive maintenance and predictive maintenance programs and involves the operators through autonomous maintenance. This is another foundation stone of Lean manufacturing which ensures that you not only have reliable processes by eliminating breakdowns but also standardizes your processes, reduces and improves setups and increases product quality.

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Jidoka

Jidoka is one of the Pillars of the house of Lean

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One of the supporting pillars of the Toyota Production System and hence Lean Manufacturing,Jidoka is about built in quality and encompasses ideas such as Autonomation which is giving machines the “human touch” so that they can stop when things are incorrect, also Poka Yokeor mistake proofing to prevent defects being produced, accepted or passed on. It also encompasses the philosophy of stopping the production line when defects are discovered, jidoka provides the framework to drive the non-acceptance of problems and drives continual improvement.

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Process Mapping

Value Stream Mapping (VSM)

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Process mapping your value stream using ideas and techniques such as Value Stream Mapping (VSM) or simple Flow charting or spaghetti diagrams  are very powerful ways to identify and highlight the wasteful steps in your processes. This allows you to create future state maps and create action plans to simplify your work and drive improvements.

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Kaizen

Kaizen Event

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Kaizen is all about continuously improving every process in your business. This can be done through ongoing continual improvement or through a dedicated Kaizen Blitzdesigned to make a rapid improvement to a specific area of your business.

Key Lean Manufacturing Principles

There are several key lean manufacturing principles that need to be understood in order to implement lean. Failure to understand and apply these principles will most likely result in failure or a lack of committment from everyone in your organization. Without committment the process becomes ineffective. This page reviews some of the more critical lean manufacturing principles and should help you get started. Consider these to be the "guiding principles" of lean manufacturing as there are others that have not been included.

Elimination of Waste

One of the most critical principles of lean manufacturing is the elimination of waste (known as muda in the Toyota Production System). Many of the other principles revolve around this concept. There are 7 basic types of waste in manufacturing: 

Over Production 
Waste of Unnecessary Motion 
Waste of Inventory 
Production of Defects 
Waste of Waiting 
Waste of Transportation 
Waste of Overprocessing 

Although the above mentioned types of waste were originally geared toward manufactuing, they can be applied to many different types of business. The idea of waste elimination is to review all areas in your organization, determine where the non-value added work is and reduce or eliminate it.

Continuous Improvement

Continuous Improvement (commonly referred to by the Japanese word kaizen) is arguably the most critical principle of lean manufacturing. It should truly form the basis of your lean implementation. Without continuous improvement your progress will cease. As the name implies, Continuous Improvment promotes constant, necessary change toward achievment of a desired state. The changes can be big or small but must lend itself toward improvement (often many small changes are required to achieve the target). The process truly is continual as there is always room for improvement.

Continuous Improvement should be a mind-set throughout your whole organization. Do not get caught up in only trying to find the big ideas. Small ideas will often times lead to big improvements.

Respect For Humanity

The next lean manufacturing principle has to do with people. The most valuable resource to any company are the people who work for it. Without these people the business does not succeed. When people do not feel respected, they tend to lose respect for the company. This can become a major problem when you are trying to implement lean.

Most people want to perform well in their jobs. Not only do they go to work to earn a living, but they also want to develop a sense of worth in their work. They want to feel like they have contributed to the company goals, like their work and effort has meant something. A company supporting a respect for humanity philosophy will appreciate their workers efforts and keep them in high regard.

Some of the methods to ensure your people know you respect them is through constant communication, praise of a job well done, listening to their ideas and helping out when necessary.

Levelized Production

As mentioned on the home page, the foundation of lean manufacturing is levelized production. The basis of this principle is that the work load is the same (or level) every day. Most manufacturing companies are at the mercy of their customers for orders. Before producing product, they wait to get orders. This leads to increased delivery lead time which may not satisfy customer requirements.

On the other end of the spectrum, some companies will produce based strictly on a forecast. This may result in excess product that is not required by the customer. Levelized production takes into consideration both forecast and history. The key ingredient for this lean manufacturing principle is utilization of a pull system.

Just In Time Production

The next key principle to mention is Just In Time (JIT) production. The basis behind this principle is to build what is required, when it is required and in the quantity required. Working in conjuction with levelized production, this principle works well with kanbans (a pull system). It allows for movement and production of parts only when required. This means components are not used in product that is not required and no time is wasted building unsaleable product.

Quality Built In

The last key lean manufacturing principle that I would like to touch on isQuality Built In . The idea behind this principle is that quality is built into the manufacturing process. Quality is built into the design of the part. Quality is built into the packaging. Throughout all areas of the product, from design to shipping, quality is a major consideration.

Automation with a human touch falls within this principle. Machines that can detect defects and stop production are an excellent example of this principle. Part profile mistake-proofing, which prevents an operator from mis-orienting parts, is another excellent example. In Lean Manufacturing (or any other system), the focus must be on doing it right the first time.

More Principles

As mentioned at the beginning of this page, there are other lean manufacturing principles. We have made mention of those that we consider critical based on our experience. Use the browser on the left to navigate through more lean definitions, tools and concepts that will help you understand and implement lean.

This link, Kanban Just-In-Time at Toyota: Management Begins at the Workplace will also help increase your knowledge of lean manufacturing principles. It is a good book for someone looking to understand the basic concepts of the Toyota Production System (the basis for lean manufacturing). It doesn't go into much detail about how to implement, but it does a good job of explaining the fundamentals in an easy to understand way (in true Japanese style using analogies). 

http://www.jaguarlandrover.com/media/23106/fy14-full-year-financial-statements.pdf

JAGUAR AND LANDROVER FULL YEAR FINANCIAL STATEMENT

Airbus A380 Tail Strike Test

REMOULDING OF TYRES

AIR PLANE RECYCLING

How Automobile Is Made

          In 1908 Henry Ford began production of the Model T automobile. Based on his original Model A design first manufactured in 1903, the Model T took five years to develop. Its creation inaugurated what we know today as the mass production assembly line. This revolutionary idea was based on the concept of simply assembling interchangeable component parts. Prior to this time, coaches and buggies had been hand-built in small numbers by specialized craftspeople who rarely duplicated any particular unit. Ford's innovative design reduced the number of parts needed as well as the number of skilled fitters who had always formed the bulk of the assembly operation, giving Ford a tremendous advantage over his competition.

        Ford's first venture into automobile assembly with the Model A involved setting up assembly stands on which the whole vehicle was built, usually by a single assembler who fit an entire section of the car together in one place. This person performed the same activity over and over at his stationary assembly stand. To provide for more efficiency, Ford had parts delivered as needed to each work station. In this way each assembly fitter took about 8.5 hours to complete his assembly task. By the time the Model T was being developed Ford had decided to use multiple assembly stands with assemblers moving from stand to stand, each performing a specific function. This process reduced the assembly time for each fitter from 8.5 hours to a mere 2.5 minutes by rendering each worker completely familiar with a specific task.

Ford soon recognized that walking from stand to stand wasted time and created jam-ups in the production process as faster workers overtook slower ones. In Detroit in 1913, he solved this problem by introducing the first moving assembly line, a conveyor that moved the vehicle past a stationary assembler. By eliminating the need for workers to move between stations, Ford cut the assembly task for each worker from 2.5 minutes to just under 2 minutes; the moving assembly conveyor could now pace the stationary worker. The first conveyor line consisted of metal strips to which the vehicle's wheels were attached. The metal strips were attached to a belt that rolled the length of the factory and then, beneath the floor, returned to the beginning area. This reduction in the amount of human effort required to assemble an automobile caught the attention of automobile assemblers throughout the world. Ford's mass production drove the automobile industry for nearly five decades and was eventually adopted by almost every other industrial manufacturer. Although technological advancements have enabled many improvements to modern day automobile assembly operations, the basic concept of stationary workers installing parts on a vehicle as it passes their work stations has not changed drastically over the years.

Raw Materials

Although the bulk of an automobile is virgin steel, petroleum-based products (plastics and vinyls) have come to represent an increasingly large percentage of automotive components. The light-weight materials derived from petroleum have helped to lighten some models by as much as thirty percent. As the price of fossil fuels continues to rise, the preference for lighter, more fuel efficient vehicles will become more pronounced.

Design

Introducing a new model of automobile generally takes three to five years from inception to assembly. Ideas for new models are developed to respond to unmet pubic needs and preferences. Trying to predict what the public will want to drive in five years is no small feat, yet automobile companies have successfully designed automobiles that fit public tastes. With the help of computer-aided design equipment, designers develop basic concept drawings that help them visualize the proposed vehicle's appearance. Based on this simulation, they then construct clay models that can be studied by styling experts familiar with what the public is likely to accept.Aerodynamic engineers also review the models, studying air-flow parameters and doing feasibility studies on crash tests. Only after all models have been reviewed and accepted are tool designers permitted to begin building the tools that will manufacture the component parts of the new model.

The Manufacturing
Process

Components

• 1 The automobile assembly plant represents only the final phase in the process of manufacturing an automobile, for it is here that the components supplied by more than 4,000 outside suppliers, including company-owned parts suppliers, are brought together for assembly, usually by truck or railroad. Those parts that will be used in the chassis are delivered to one area, while those that will comprise the body are unloaded at another.

Chassis

• 2 The typical car or truck is constructed from the ground up (and out). The frame forms the base on which the body rests and from which all subsequent assembly components follow. The frame is placed on the assembly line and clamped to the conveyer to prevent shifting as it moves down the line. From here the automobile frame moves to component assembly areas where complete front and rear suspensions, gas tanks, rear axles and drive shafts, gear boxes, steering box components, wheel drums, and braking systems are sequentially installed.
  
  

  

  Workers install engines on Model Ts at a Ford Motor Company plant. The photo is from about 1917.

  
  The automobile, for decades the quintessential American industrial product, did not have its origins in the United States. In 1860, Etienne Lenoir, a Belgian mechanic, introduced an internal combustion engine that proved useful as a source of stationary power. In 1878, Nicholas Otto, a German manufacturer, developed his four-stroke "explosion" engine. By 1885, one of his engineers, Gottlieb Daimler, was building the first of four experimental vehicles powered by a modified Otto internal combustion engine. Also in 1885, another German manufacturer, Carl Benz, introduced a three-wheeled, self-propelled vehicle. In 1887, the Benz became the first automobile offered for sale to the public. By 1895, automotive technology was dominated by the French, led by Emile Lavassor. Lavassor developed the basic mechanical arrangement of the car, placing the engine in the front of the chassis, with the crankshaft perpendicular to the axles.
  In 1896, the Duryea Motor Wagon became the first production motor vehicle in the United States. In that same year, Henry Ford demonstrated his first experimental vehicle, the Quadricycle. By 1908, when the Ford Motor Company introduced the Model T, the United States had dozens of automobile manufacturers. The Model T quickly became the standard by which other cars were measured; ten years later, half of all cars on the road were Model Ts. It had a simple four-cylinder, twenty-horsepower engine and a planetary transmission giving two gears forward and one backward. It was sturdy, had high road clearance to negotiate the rutted roads of the day, and was easy to operate and maintain.
  William S. Pretzer
• 3 An off-line operation at this stage of production mates the vehicle's engine with its transmission. Workers use robotic arms to install these heavy components inside the engine compartment of the frame. After the engine and transmission are installed, a
  

  On automobile assembly lines, much of the work is now done by robots rather than humans. In the first stages of automobile manufacture, robots weld the floor pan pieces together and assist workers in placing components such as the suspension onto the chassis.
  worker attaches the radiator, and another bolts it into place. Because of the nature of these heavy component parts, articulating robots perform all of the lift and carry operations while assemblers using pneumatic wrenches bolt component pieces in place. Careful ergonomic studies of every assembly task have provided assembly workers with the safest and most efficient tools available.

Body

• 4 Generally, the floor pan is the largest body component to which a multitude of panels and braces will subsequently be either welded or bolted. As it moves down the assembly line, held in place by clamping fixtures, the shell of the vehicle is built. First, the left and right quarter panels are robotically disengaged from pre-staged shipping containers and placed onto the floor pan, where they are stabilized with positioning fixtures and welded.
• 5 The front and rear door pillars, roof, and body side panels are assembled in the same fashion. The shell of the automobile assembled in this section of the process lends itself to the use of robots because articulating arms can easily introduce various component braces and panels to the floor pan and perform a high number of weld operations in a time frame and with a degree of accuracy no human workers could ever approach. Robots can pick and load 200-pound (90.8 kilograms) roof panels and place them precisely in the proper weld position with tolerance variations held to within .001 of an inch. Moreover, robots can also tolerate the
  

  The body is built up on a separate assembly line from the chassis. Robots once again perform most of the welding on the various panels, but human workers are necessary to bolt the parts together. During welding, component pieces are held securely in a jig while welding operations are performed. Once the body shell is complete, it is attached to an overhead conveyor for the painting process. The multi-step painting process entails inspection, cleaning, undercoat (electrostatically applied) dipping, drying, topcoat spraying, and baking.
  smoke, weld flashes, and gases created during this phase of production.
• 6 As the body moves from the isolated weld area of the assembly line, subsequent body components including fully assembled doors, deck lids, hood panel, fenders, trunk lid, and bumper reinforcements are installed. Although robots help workers place these components onto the body shell, the workers provide the proper fit for most of the bolt-on functional parts using pneumatically assisted tools.

Paint

• 7 Prior to painting, the body must pass through a rigorous inspection process, the body in white operation. The shell of the vehicle passes through a brightly lit white room where it is fully wiped down by visual inspectors using cloths soaked in hi-light oil. Under the lights, this oil allows inspectors to see any defects in the sheet metal body panels. Dings, dents, and any other defects are repaired right on the line by skilled body repairmen. After the shell has been fully inspected and repaired, the assembly conveyor carries it through a cleaning station where it is immersed and cleaned of all residual oil, dirt, and contaminants.
• 8 As the shell exits the cleaning station it goes through a drying booth and then through an undercoat dip—an electrostatically charged bath of undercoat paint (called the E-coat) that covers every nook and cranny of the body shell, both inside and out, with primer. This coat acts as a substrate surface to which the top coat of colored paint adheres.
• 9 After the E-coat bath, the shell is again dried in a booth as it proceeds on to the final paint operation. In most automobile assembly plants today, vehicle bodies are spray-painted by robots that have been programmed to apply the exact amounts of paint to just the right areas for just the right length of time. Considerable research and programming has gone into the dynamics of robotic painting in order to ensure the fine "wet" finishes we have come to expect. Our robotic painters have come a long way since Ford's first Model Ts, which were painted by hand with a brush.
• 10 Once the shell has been fully covered 1 V with a base coat of color paint and a clear top coat, the conveyor transfers the bodies through baking ovens where the paint is cured at temperatures exceeding 275 degrees Fahrenheit (135 degrees Celsius).
  

  The body and chassis assemblies are mated near the end of the production process. Robotic arms lift the body shell onto the chassis frame, where human workers then bolt the two together. After final components are installed, the vehicle is driven off the assembly line to a quality checkpoint.
  After the shell leaves the paint area it is ready for interior assembly.

Interior assembly

• 11 The painted shell proceeds through the interior assembly area where workers assemble all of the instrumentation and wiring systems, dash panels, interior lights, seats, door and trim panels, headliners, radios, speakers, all glass except the automobile windshield, steering column and wheel, body weatherstrips, vinyl tops, brake and gas pedals, carpeting, and front and rear bumper fascias.
• 12 Next, robots equipped with suction cups remove the windshield from a shipping container, apply a bead of urethane sealer to the perimeter of the glass, and then place it into the body windshield frame. Robots also pick seats and trim panels and transport them to the vehicle for the ease and efficiency of the assembly operator. After passing through this section the shell is given a water test to ensure the proper fit of door panels, glass, and weatherstripping. It is now ready to mate with the chassis.

Mate

• 13 The chassis assembly conveyor and the body shell conveyor meet at this stage of production. As the chassis passes the body conveyor the shell is robotically lifted from its conveyor fixtures and placed onto the car frame. Assembly workers, some at ground level and some in work pits beneath the conveyor, bolt the car body to the frame. Once the mating takes place the automobile proceeds down the line to receive final trim components, battery, tires, anti-freeze, and gasoline.
• 14 The vehicle can now be started. From here it is driven to a checkpoint off the line, where its engine is audited, its lights and horn checked, its tires balanced, and its charging system examined. Any defects discovered at this stage require that the car be taken to a central repair area, usually located near the end of the line. A crew of skilled trouble-shooters at this stage analyze and repair all problems. When the vehicle passes final audit it is given a price label and driven to a staging lot where it will await shipment to its destination.

Quality Control

All of the components that go into the automobile are produced at other sites. This means the thousands of component pieces that comprise the car must be manufactured, tested, packaged, and shipped to the assembly plants, often on the same day they will be used. This requires no small amount of planning. To accomplish it, most automobile manufacturers require outside parts vendors to subject their component parts to rigorous testing and inspection audits similar to those used by the assembly plants. In this way the assembly plants can anticipate that the products arriving at their receiving docks are Statistical Process Control (SPC) approved and free from defects.

Once the component parts of the automobile begin to be assembled at the automotive factory, production control specialists can follow the progress of each embryonic automobile by means of its Vehicle Identification Number (VIN), assigned at the start of the production line. In many of the more advanced assembly plants a small radio frequency transponder is attached to the chassis and floor pan. This sending unit carries the VIN information and monitors its progress along the assembly process. Knowing what operations the vehicle has been through, where it is going, and when it should arrive at the next assembly station gives production management personnel the ability to electronically control the manufacturing sequence. Throughout the assembly process quality audit stations keep track of vital information concerning the integrity of various functional components of the vehicle.

This idea comes from a change in quality control ideology over the years. Formerly, quality control was seen as a final inspection process that sought to discover defects only after the vehicle was built. In contrast, today quality is seen as a process built right into the design of the vehicle as well as the assembly process. In this way assembly operators can stop the conveyor if workers find a defect. Corrections can then be made, or supplies checked to determine whether an entire batch of components is bad. Vehicle recalls are costly and manufacturers do everything possible to ensure the integrity of their product before it is shipped to the customer. After the vehicle is assembled a validation process is conducted at the end of the assembly line to verify quality audits from the various inspection points throughout the assembly process. This final audit tests for properly fitting panels; dynamics; squeaks and rattles; functioning electrical components; and engine, chassis, and wheel alignment. In many assembly plants vehicles are periodically pulled from the audit line and given full functional tests. All efforts today are put forth to ensure that quality and reliability are built into the assembled product.

The Future

The development of the electric automobile will owe more to innovative solar and aeronautical engineering and advanced satellite and radar technology than to traditional automotive design and construction. The electric car has no engine, exhaust system, transmission, muffler, radiator, or spark plugs. It will require neither tune-ups nor—truly revolutionary—gasoline. Instead, its power will come from alternating current (AC) electric motors with a brushless design capable of spinning up to 20,000 revolutions/minute. Batteries to power these motors will come from high performance cells capable of generating more than 100 kilowatts of power. And, unlike the lead-acid batteries of the past and present, future batteries will be environmentally safe and recyclable. Integral to the braking system of the vehicle will be a power inverter that converts direct current electricity back into the battery pack system once the accelerator is let off, thus acting as a generator to the battery system even as the car is driven long into the future.

The growth of automobile use and the increasing resistance to road building have made our highway systems both congested and obsolete. But new electronic vehicle technologies that permit cars to navigate around the congestion and even drive themselves may soon become possible. Turning over the operation of our automobiles to computers would mean they would gather information from the roadway about congestion and find the fastest route to their instructed destination, thus making better use of limited highway space. The advent of the electric car will come because of a rare convergence of circumstance and ability. Growing intolerance for pollution combined with extraordinary technological advancements will change the global transportation paradigm that will carry us into the twenty-first century.

Where To Learn More

Books

Abernathy, William. The Productivity Dilemma: Roadblock to Innovation in the Automobile Industry. Johns Hopkins University Press, 1978.
Gear Design, Manufacturing & Inspection Manual. Society of Manufacturing Engineers, Inc., 1990.
Hounshell, David. From the American System to Mass Production. Johns Hopkins University Press, 1984.
Lamming, Richard. Beyond Partnership: Strategies for Innovation & Lean Supply. Prentice Hall, 1993.
Making the Car. Motor Vehicle Manufacturers Association of the United States, 1987.
Mortimer, J., ed. Advanced Manufacturing in the Automotive Industry. Springer-Verlag New York, Inc., 1987.
Mortimer, John. Advanced Manufacturing in the Automotive Industry. Air Science Co., 1986.
Nevins, Allen and Frank E. Hill. Ford: The Times, The Man, The Company. Scribners, 1954.
Seiffert, Ulrich. Automobile Technology of the Future. Society of Automotive Engineers, Inc., 1991.
Sloan, Alfred P. My Years with General Motors. Doubleday, 1963.

Periodicals

"The Secrets of the Production Line," The Economist. October 17, 1992, p. S5.

— Rick Bockmiller

Read more: http://www.madehow.com/Volume-1/Automobile.html#ixzz39aXQJ211

Toyota Production System

The practical expression of Toyota's people and customer-oriented philosophy is known as the Toyota Production System (TPS). This is not a rigid company-imposed procedure but a set of principles that have been proven in day-to-day practice over many years. Many of these ideas have been adopted and imitated all over the world.

TPS has three desired outcomes:

• To provide the customer with the highest quality vehicles, at lowest possible cost, in a timely manner with the shortest possible lead times.
• To provide members with work satisfaction, job security and fair treatment.
• It gives the company flexibility to respond to the market, achieve profit through cost reduction activities and long-term prosperity.

TPS strives for the absolute elimination of waste, overburden and unevenness in all areas to allow members to work smoothly and efficiently. The foundations of TPS are built on standardisation to ensure a safe method of operation and a consistent approach to quality. Toyota members seek to continually improve their standard processes and procedures in order to ensure maximum quality, improve efficiency and eliminate waste. This is known as kaizen and is applied to every sphere of the company's activities.

Kaizen - Continuous Improvement

Kaizen is the heart of the Toyota Production System.

Like all mass-production systems, the Toyota process requires that all tasks, both human and mechanical, be very precisely defined and standardised to ensure maximum quality, eliminate waste and improve efficiency.

Toyota Members have a responsibility not only to follow closely these standardised work guidelines but also to seek their continual improvement. This is simply common sense - since it is clear that inherent inefficiencies or problems in any procedure will always be most apparent to those closest to the process.

The day-to-day improvements that Members and their Team Leaders make to their working practices and equipment are known as kaizen. But the term also has a wider meeting: it means a continual striving for improvement in every sphere of the Company's activities - from the most basic manufacturing process to serving the customer and the wider community beyond.

Just In Time

It is perhaps not widely known that the 'just in time' approach to production that has now gained almost universal acceptance in world manufacturing was actually pioneered by Toyota. In fact, a Toyota engineer coined the term itself.

This, too, is a simple but inspired application of common sense.

Essentially, 'just in time' manufacturing consists of allowing the entire production process to be regulated by the natural laws of supply and demand.

Customer demand stimulates production of a vehicle. In turn the production of the vehicle stimulates production and delivery of the necessary parts and so on.

The result is that the right parts and materials are manufactured and provided in the exact amount needed - and when and where they are needed.

Under 'just in time' the ultimate arbiter is always the customer. This is because activity in the system only occurs in response to customer orders. Production is 'pulled' by the customer rather than being 'pushed' by the needs or capabilities of the production system itself.

The linkage between customer demand and production is made by analysing takt time, a device for measuring the pace of sales in the market in relation to the capacity of a manufacturing plant. For example, if a plant operates for 920 minutes per day and daily demand is for 400 vehicles, then takt time will be 2.3 minutes.

If takt times are reduced more resources are allocated. Toyota never tries to accommodate changes in demand by making substantial changes in individuals' workloads.

Assigning more Members to a line means that each handles a narrower range of work. Assigning fewer means that each handles a broader range. Hence the paramount importance of having a well-trained, flexible and multi-skilled workforce.

Within the plant itself, the mechanism whereby production is regulated in this way is known as the kanban.

A kanban is simply a message. For example, in the assembly shop this message takes the form of a card attached to every component that is removed and returned when the component is used. The return of the kanban to its source stimulates the automatic re-ordering of the component in question.

Paperwork is minimised. Efficiency is maximised. And the Members themselves are completely in charge.

Jidoka

In Japanese 'jidoka' simply means automation. At Toyota it means 'automation with a human touch'.

In 1902 Sakichi Toyoda invented the world's first automatic loom that would stop automatically if any of the threads snapped. This principal, jidoka, of designing equipment and processes to stop and call attention to problems immediately when they sense a problem is a central concept of TPS.

The most visible manifestation of 'automation with a human touch' at the Altona plant is the andon cord situated above the line. The presence of the andon cord permits any Team Member to intervene and bring production to a halt if abnormalities occur.

The Toyota Production System has inherited the principle originated by Henry Ford of breaking down work into simple steps and distributing those steps amongst employees on the line. But employees in the Toyota system are in charge of their own jobs. Through their teams, they run their own worksites. They identify opportunities for making improvements and take the initiative in implementing those improvements in co-operation with management.

Suppliers & TPS

Just-in-time manufacturing and other elements of the Toyota Production System work best when they are a common basis for synchronising activity throughout the production sequence. This is an egalitarian arrangement in which each process in the production flow becomes the customer for the preceding process and each process becomes a supermarket to the following process.

Independent suppliers participate on an equal footing with Toyota operations in the production flow, each fulfilling their own role in that flow.

The only participant in the entire sequence who does not answer to anyone is the customer who selects a vehicle in the marketplace.

Suppliers who participate in the Toyota Production System enjoy the same benefits that Toyota does from the system. Just-in-time manufacturing can dissolve inventories at parts suppliers just as readily and effectively as it does at Toyota's assembly plants. Product quality improves, too. That's because the Toyota Production System includes measures for illuminating defects whenever and wherever they occur.

Suppliers who adopt the Toyota Production System also report improvements in employee-management relations. That is mainly because the system provides for an expanded role for employees in designing and managing their own work. It brings together employees and management in the joint pursuit of improvements in productivity, quality, and working conditions.

Supply Chain Management
Version: 1.0
Subject index: 581: production/scheduling, 331: inventory/production, 831: transportation
One liner: An overview of various methods in supply chain management, including supply chain design, production scheduling, and distribution considerations
Body:

An Introduction to Supply Chain Management

Ram Ganeshan
Terry P. Harrison

Department of Management Science and Information Systems
303 Beam Business Building
Penn State University
University Park, PA 16802 U.S.A. 
Email: Ganeshan (rxg112@silmaril.smeal.psu.edu), Harrison (hbx@psu.edu)

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A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry and firm to firm.
Below is an example of a very simple supply chain for a single product, where raw material is procured from vendors, transformed into finished goods in a single step, and then transported to distribution centers, and ultimately, customers. Realistic supply chains have multiple end products with shared components, facilities and capacities. The flow of materials is not always along an arborescent network, various modes of transportation may be considered, and the bill of materials for the end items may be both deep and large.



Traditionally, marketing, distribution, planning, manufacturing, and the purchasing organizations along the supply chain operated independently. These organizations have their own objectives and these are often conflicting. Marketing's objective of high customer service and maximum sales dollars conflict with manufacturing and distribution goals. Many manufacturing operations are designed to maximize throughput and lower costs with little consideration for the impact on inventory levels and distribution capabilities. Purchasing contracts are often negotiated with very little information beyond historical buying patterns. The result of these factors is that there is not a single, integrated plan for the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be integrated together. Supply chain management is a strategy through which such an integration can be achieved.
Supply chain management is typically viewed to lie between fully vertically integrated firms, where the entire material flow is owned by a single firm, and those where each channel member operates independently. Therefore coordination between the various players in the chain is key in its effective management. Cooper and Ellram [1993] compare supply chain management to a well-balanced and well-practiced relay team. Such a team is more competitive when each player knows how to be positioned for the hand-off. The relationships are the strongest between players who directly pass the baton, but the entire team needs to make a coordinated effort to win the race.

Supply Chain Decisions

We classify the decisions for supply chain management into two broad categories -- strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {\it are} the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain.
There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory, and 4) transportation (distribution), and there are both strategic and operational elements in each of these decision areas.

Location Decisions

The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. (See Arntzen, Brown, Harrison and Trafton [1995] for a thorough discussion of these aspects.) Although location decisions are primarily strategic, they also have implications on an operational level.

Production Decisions

The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities--and this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility.

Inventory Decisions

These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw materials, semi-finished or finished goods. They can also be in-process between locations. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels.

Transportation Decisions

The mode choice aspect of these decisions are the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels, and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm's transport strategy.

Supply Chain Modeling Approaches

Clearly, each of the above two levels of decisions require a different perspective. The strategic decisions are, for the most part, global or "all encompassing" in that they try to integrate various aspects of the supply chain. Consequently, the models that describe these decisions are huge, and require a considerable amount of data. Often due to the enormity of data requirements, and the broad scope of decisions, these models provide approximate solutions to the decisions they describe. The operational decisions, meanwhile, address the day to day operation of the supply chain. Therefore the models that describe them are often very specific in nature. Due to their narrow perspective, these models often consider great detail and provide very good, if not optimal, solutions to the operational decisions.
To facilitate a concise review of the literature, and at the same time attempting to accommodate the above polarity in modeling, we divide the modeling approaches into three areas --- Network Design, ``Rough Cut" methods, and simulation based methods. The network design methods, for the most part, provide normative models for the more strategic decisions. These models typically cover the four major decision areas described earlier, and focus more on the design aspect of the supply chain; the establishment of the network and the associated flows on them. "Rough cut" methods, on the other hand, give guiding policies for the operational decisions. These models typically assume a "single site" (i.e., ignore the network) and add supply chain characteristics to it, such as explicitly considering the site's relation to the others in the network. Simulation methods is a method by which a comprehensive supply chain model can be analyzed, considering both strategic and operational elements. However, as with all simulation models, one can only evaluate the effectiveness of a pre-specified policy rather than develop new ones. It is the traditional question of "What If?" versus "What's Best?".

Network Design Methods

As the very name suggests, these methods determine the location of production, stocking, and sourcing facilities, and paths the product(s) take through them. Such methods tend to be large scale, and used generally at the inception of the supply chain. The earliest work in this area, although the term "supply chain" was not in vogue, was by Geoffrion and Graves [1974]. They introduce a multicommodity logistics network design model for optimizing annualized finished product flows from plants to the DC's to the final customers. Geoffrion and Powers [1993] later give a review of the evolution of distribution strategies over the past twenty years, describing how the descendants of the above model can accommodate more echelons and cross commodity detail.
Breitman and Lucas [1987] attempt to provide a framework for a comprehensive model of a production-distribution system, "PLANETS", that is used to decide what products to produce, where and how to produce it, which markets to pursue and what resources to use. Parts of this ambitious project were successfully implemented at General Motors.
Cohen and Lee [1985] develop a conceptual framework for manufacturing strategy analysis, where they describe a series of stochastic sub- models, that considers annualized product flows from raw material vendors via intermediate plants and distribution echelons to the final customers. They use heuristic methods to link and optimize these sub- models. They later give an integrated and readable exposition of their models and methods in Cohen and Lee [1988].
Cohen and Lee [1989] present a normative model for resource deployment in a global manufacturing and distribution network. Global after-tax profit (profit-local taxes) is maximized through the design of facility network and control of material flows within the network. The cost structure consists of variable and fixed costs for material procurement, production, distribution and transportation. They validate the model by applying it to analyze the global manufacturing strategies of a personal computer manufacturer.
Finally, Arntzen, Brown, Harrison, and Trafton [1995] provide the most comprehensive deterministic model for supply chain management. The objective function minimizes a combination of cost and time elements. Examples of cost elements include purchasing, manufacturing, pipeline inventory, transportation costs between various sites, duties, and taxes. Time elements include manufacturing lead times and transit times. Unique to this model was the explicit consideration of duty and their recovery as the product flowed through different countries. Implementation of this model at the Digital Equipment Corporation has produced spectacular results --- savings in the order of $100 million dollars.
Clearly, these network-design based methods add value to the firm in that they lay down the manufacturing and distribution strategies far into the future. It is imperative that firms at one time or another make such integrated decisions, encompassing production, location, inventory, and transportation, and such models are therefore indispensable. Although the above review shows considerable potential for these models as strategic determinants in the future, they are not without their shortcomings. Their very nature forces these problems to be of a very large scale. They are often difficult to solve to optimality. Furthermore, most of the models in this category are largely deterministic and static in nature. Additionally, those that consider stochastic elements are very restrictive in nature. In sum, there does not seem to yet be a comprehensive model that is representative of the true nature of material flows in the supply chain.

Rough Cut Methods

These models form the bulk of the supply chain literature, and typically deal with the more operational or tactical decisions. Most of the integrative research (from a supply chain context) in the literature seem to take on an inventory management perspective. In fact, the term "Supply Chain" first appears in the literature as an inventory management approach. The thrust of the rough cut models is the development of inventory control policies, considering several levels or echelons together. These models have come to be known as "multi-level" or "multi-echelon" inventory control models. For a review the reader is directed to Vollman et al. [1992].
Multi-echelon inventory theory has been very successfully used in industry. Cohen et al. [1990] describe "OPTIMIZER", one of the most complex models to date --- to manage IBM's spare parts inventory. They develop efficient algorithms and sophisticated data structures to achieve large scale systems integration.
Although current research in multi-echelon based supply chain inventory problems shows considerable promise in reducing inventories with increased customer service, the studies have several notable limitations. First, these studies largely ignore the production side of the supply chain. Their starting point in most cases is a finished goods stockpile, and policies are given to manage these effectively. Since production is a natural part of the supply chain, there seems to be a need with models that include the production component in them. Second, even on the distribution side, almost all published research assumes an arborescence structure, i. e. each site receives re-supply from only one higher level site but can distribute to several lower levels. Third, researchers have largely focused on the inventory system only. In logistics-system theory, transportation and inventory are primary components of the order fulfillment process in terms of cost and service levels. Therefore, companies must consider important interrelationships among transportation, inventory and customer service in determining their policies. Fourth, most of the models under the "inventory theoretic" paradigm are very restrictive in nature, i.e., mostly they restrict themselves to certain well known forms of demand or lead time or both, often quite contrary to what is observed.
The preceding sections are a selective overview of the key concepts in the supply chain literature. Following is a list of recommended reading for a quick introduction to the area.

Bibliography

1. Arntzen, B. C., G. G. Brown, T. P. Harrison, and L. Trafton. Global Supply Chain Management at Digital Equipment Corporation. Interfaces, Jan.-Feb., 1995.
2. Ballou, R. H. 1992. Business Logistics Management, Prentice Hall, Englewood Cliffs, NJ, Third Edition.
3. Breitman, R. L., and J. M. Lucas. 1987. PLANETS: A Modeling System for Business Planning. Interfaces, 17, Jan.-Feb., 94-106.
4. Cohen, M. A. and H. L. Lee. 1985. Manufacturing Strategy Concepts and Methods, in Kleindorfer, P. R. Ed., The Management of Productivity and Technology in Manufacturing, 153- 188.
5. Cohen, M. A. and H. L. Lee. 1988. Strategic Analysis of Integrated Production-Distribution Systems: Models and Methods. Operations Research, 36, 2, 216-228.
6. Cohen, M. A. and H. L. Lee. 1989. Resource Deployment Analysis of Global Manufacturing and Distribution Networks. Journal of Manufacturing and Operations Management, 81-104.
7. Cooper, M. C., and L. M. Ellram. 1993. Characteristics of Supply Chain Management and the Implications for Purchasing and Logistics Strategy. The International Journal of Logistics Management, 4, 2, 13-24.
8. Deuermeyer, B. and L. B. Schwarz. 1981. A Model for the Analysis of System Service Level in Warehouse/ Retailer Distribution Systems: The Identical Retailer Case, in: L. B. Schwarz (ed.), Studies in Management Sciences, Vol. 16--Multi-Level Production / Inventory Control Systems, North-Holland, Amsterdam, 163-193.
9. Geoffrion, A., and G. Graves. 1974. Multicommodity Distribution System Design by Benders Decomposition. Management Science, 29, 5, 822-844.
10. Geoffrion, A., and R. Powers. 1993. 20 Years of strategic Distribution System Design: An Evolutionary Perspective, Interfaces. (forthcoming)
11. Houlihan, J. B. 1985. International Supply Chain Management. International Journal of Physical Distribution and Materials Management, 15, 1, 22-38.
12. Lee, H. L., and C. Billington. 1992. Supply Chain Management: Pitfalls and Opportunities. Sloan Management Review, 33, Spring, 65-73.
13. Lee, H. L., and C. Billington. 1993. Material Management in Decentralized Supply Chains. Operations Research, 41, 5, 835-847.
14. Masters, J. M. 1993. Determination of Near-Optimal Stock Levels for Multi-Echelon Distribution Inventories. Journal of Business Logistics, 14, 2, 165-195.
15. Schwarz, L. B. 1981. Introduction in: L. B. Schwarz (ed.), Studies in Management Sciences, Vol. 16--Multi-Level Production / Inventory Control Systems, North-Holland, Amsterdam, 163-193.
16. Stenross, F. M., and G. J. Sweet. 1991. Implementing an Integrated Supply Chain in Annual Conference Proceedings, Oak Brook, Ill: Council of Logistics Management, Vol. 2, 341-351.
17. Vollman, T. E., W. L. Berry, and D. C. Whybark. 1992. Manufacturing Planning and Control Systems, Irwin, Homewood, IL.

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    Refers to: Production planning, inventory management, distribution and transportation, mathematical programming
    Referenced by:
    Contributors: Ram Ganeshan (rxg112@silmaril.smeal.psu.edu), Terry Harrison (hbx@psu.edu)
    Status: Work that is updated on a regular basis
    
    

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    Last Update: 22 May 1995
    Terry P. Harrison, hbx@psu.edu