Free Course: Introduction to Lean
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
– 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:
• 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
• 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.
• 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.
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
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
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:
• Cutting and assembly
– Not willing to pay for:
• Excess inventory
• Wait time
• Any other forms of muda
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
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.
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.
• 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.
What is Lean?
Reduce waste or creating more value
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