August 7, 2015

Introduction to Lean

Free Course: Introduction to Lean

Content:

1. WWII had ended & Japan was struggling with 2. Adopting to the challenges. 3. Implications of Agreement. 4. Lean Production 5. Calculating Cost, Price, Profit/Loss 6. What is Value? 7. What is Waste? (Munda) 8. Related Concepts 9. What is Lean ?

 

Slides Content for references:

Introduction to Lean
By: www.SixLeanSigma.com
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– Limited capital
– A small domestic market
– Demand for a wide range of vehicle types
– High energy costs
– Competition was high as automakers from other countries were eager to establish themselves in Japan
– Japan was in a depression and the Americans had restricted credit
– Toyota was facing bankruptcy
– Toyota president (Kiichiro Toyota) proposed firing ¼ of workers, which caused a revolt
– The Toyota’s union was strong due to American had strengthened labor union rights (1946)

• WWII had ended & Japan was struggling with:
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• Adopting to the challenges:
– Toyota & union worked out an agreement
• ¼ of workers were let go
• Kiichiro Toyota resigned
• Works got 2 guarantees:
– Lifetime employment
– Pay graded to seniority and tied to company profitability through a system of bonuses
• Workers agreed to:
– Flexible work assignments
– Help the company continually improve
• Workers were essentially a fixed cost as a result

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• Implications of Agreement:

– Workers were essentially a fixed cost, same as the machinery, however the equipment could be depreciated. Therefore, Toyota had to get the
most of its workers.

• Continually train the work force to gain benefit from their skills, knowledge & experience.

• The employment contract was now based on cooperation, flexibility & mutual benefits.

• The company and workers became partners rather than enemies.

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Lean Production
• Key players in the Toyota Production System (TPS)
• Eiji Toyoda – as a young engineer studied Ford Rouge
• Taiichi Ohno considered to be a production genius of TPS
• Operations Management Consulting Division (OMCD) was established and brought the suppliers into the TPS
• The goals of a Lean system is to do more with less: less time, less space, less human effort, less machinery & less materials.
• It is a philosophy of adding value by reducing all non value adding activities and eliminating waste.

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Calculating Cost, Price, Profit/Loss
• In a closed system such prior to globalization we
could calculate the following:
Cost + Profit margin = Price
• That will not work today due to the global
economy and price competition. Today the model is:
Price (market place) ‐ Cost = Profit or Loss
• The market place is typically fixed or falling due to
global competition

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What is Value?
Before we can improve the process we have to understand what Value is. Strictly speaking:
• Value is whatever the customer is willing pay for; everything else is some form of waste.
• To add value the process must do three things:
– It must be important to the customer; important enough for them to pay for the product or service
– There must be some kind of physical change that occurs by doing the process to make the product or perform the service
– It must be done right the first time

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What is Waste?
• Waste (MUDA) is the opposite of Value, it is all things the customer is not willing to pay for.
• Consider a pallet maker
– The customer is willing to pay for:
• Materials
• Cutting and assembly
– Not willing to pay for:
• Rework
• Excess inventory
• Wait time
• Any other forms of muda

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Types of Muda Waste? Part 1 of 3
o Motion – this may be man or machine (i.e. poor work place set up or
ergonomics, unnecessary walking, reaching or twisting, etc.)

o Waiting ‐ occurs when there is large batch production or excessive
WIP, equipment problems up or down stream, and/or defective
material (i.e. waiting for materials, line stoppages, etc.)

o Conveyance – caused by inefficient work place layout, overly large
equipment or traditional batch production. This is typically necessary
muda, but must be minimized

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Types of Muda Waste? Part 2 of 3

o Correction – simply this is rework, it comprises all necessary materials,
time, and energy required to fix the defect or dispose of it.

o Over‐processing – this is doing more than what the customer is willing
to pay for., often driven by engineering groups seeking to achieve
certain technology goals.

o Inventory – keeping unnecessary raw material, parts, or
WIP. Often seen in MRP and push systems.

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Types of Muda Waste? Pat 3 of 3
o Over‐production – Taiichi Ohno described this as the root
of all manufacturing evils. Examples include:
o Building and maintaining large warehouses to hold inventory
o Extra workers or equipment
o Extra energy, material handling equipment, storage containers
o Extra interest payments on loans
o It is also the root cause of other types of muda: motion, waiting,
conveyance, correction, & inventory
o Knowledge disconnection – could be horizontal, vertical or
temporal. This can exist within a company, between
company division/plants, its customer and/or suppliers.
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Related Concepts
Related Concepts
• Mura – an unevenness in production typically due to fluctuating production plans.

• Muri – this means ‘hard to do’ and can be cause by variation in production, ergonomics, poor job or tool design, and/or poor specification, etc.

• Lean is not just muda elimination, it is also the creation of Flow and the continuous involvement of workers in improvement activities.

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What is Lean?
It’s Simple,

Reduce waste or creating more value
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