I recently read an article in the Operational Excellence Group: Getting to the Corporate Promised Land. It’s a great article listing the business benefits of Lean Manufacturing, or as I prefer to call it: Operational Excellence. The article cites progress and benefits in two companies – Toyota and Danaher. The benefits include: lead time reduction, productivity increase, WIP (work in Process) inventory reduction, quality improvement, and better space utilization. In addition, these companies showed very good EBIT (Earnings Before Interest and Tax) resulting in better cash flow from operations, and stock price appreciation that beat major stock indices over a period of over 30 years. I must confess, that I typically focus on the quality, productivity, and workplace benefits; but the financial benefits are equally amazing.
But how do you get there? The literature abounds in lean manufacturing strategies, sometimes very clear and sometimes confusing. Hence, I would like to revisit this topic to shed some light on the methodologies, and in addition, focus on the issues involved. The key methodologies, based on my years of experience, include:
The basics: getting organized via the 5S System
Frederick Taylor in his text on Scientific Management proposed cleanliness and orderliness in a factory. Henry Ford picked up on this when he wrote: “Good work is difficult excepting with good tools used in clean surrounding.” Japanese factories went further and popularized the 5S system of workplace organization. The 5S system refers to 5 activities beginning with the letter ‘S”, namely Seri (or Sort), Seiton (or Stabilize), Seiso (or Shine), Seiketsu (or Standardize), and Shitsuke (Sustain).
Objectives of the 5S System: Many operations that use the 5S system consider it a housekeeping program. But it’s much more than that: The main objective of 5S is to create an environment where problems can be easily identified and corrected. It also lays the foundation for good manufacturing practices and promotes operator discipline. Furthermore, when 5S is executed efficiently, it sets the stage for more advanced activities such as kanban and just-in-time manufacturing.
High performance via Standard Work
Standard Work documents the current methodology for building a product in the most efficient way with the best quality. If the Standard Work is implemented with operators trained correctly, then the work will be done in the same best way and of consistent quality – no matter where the work is done: another work shift, factory, or geography. Standard Work includes all the steps in the work sequence, the cycle time to complete the work, and the inventory required at the workstation. These standards are essential for the simplest to the most complex job in the factory.
I have read and heard discussions saying, “Imposing standardization can distract from allowing for individual flexibility and creativity”. To me the response is very clear: keep documenting and standardizing processes; the flexibility and creativity you want will come in improving these standards via kaizen or working on new ideas, knowing that the basics are in place. That’s the path to operational excellence.
Managing Cycle Time of production on the factory floor
Every assembly process on the factory floor takes time – whether it is done by manual assembly or by a machine. All the disparate processes in the factory need to be managed via the cycle time at each operation. Cycle time is the second component of standard work. If cycle times are not well managed, we can have one workstation producing too much and another workstation producing too little. This will result in congestion, bottlenecks, and excess inventory along the assembly line. Henry Ford said: “The easiest of all wastes and the hardest to correct is the waste of time, because wasted time does not litter the floor like wasted material.”
Therefore, what we must do is to manage the production floor like an orchestra with every instrument coordinated, with no missing or superfluous notes, and with the music flowing exactly to the beat of the conductor. As with an orchestra we use the concept of takt time to manage the flow. A well-orchestrated takt time system will ensure that the production line flows smoothly.
The benefits include: A planned and predictable output, repetitive efficiency, and consistent quality. It will provide quick visibility of production bottlenecks caused by poor quality or inventory issues; this visibility is obvious from line stops, poor utilization of equipment, bottlenecks, or accumulation of defects and inventory.
JIT (just-in-time) manufacturing via the Kanban system
Every assembly process on the factory floor results in an accumulation of inventory – whether it is raw material, work in process (WIP), or finished goods. High inventory is considered the origin of many kinds of waste and must be reduced. Waste includes the space occupied on the factory floor, quality defects, and inventory cost. Inventory is the third component of standard work, and good standard work requires us to operate with a minimum of inventory at each workstation. With lower inventory defects will quickly surface and inspection is easier because smaller quantities are easier to observe and check. The result will be higher quality products.
To achieve lower inventory and factory space, we implement just-in-time, or JIT, production, and manufacture only what is needed, when it is needed, and in the amount needed. This will allow us to minimize inventory in the stockroom and factory floor. This means we must run the manufacturing line with material arriving just before it needs to be processed. We do this via the kanban system. The stockroom must also implement kanban deliveries from suppliers to keep inventory low. The kanban process can be either manually or system managed. Initially, when kanban is implemented, material is pulled in smaller and smaller batches from stockroom and suppliers – this will expose many supply chain issues, which must be resolved via improvement cycles or kaizen – that is the benefit of JIT and kanban. According to Taiichi Ohno: “The aim of kanban is to make troubles come to the surface and link them to kaizen (improvement) activity”.
Machine management and TPM (Total Productive Maintenance)
Machines and equipment are used in every manufacturing process. They help to perform difficult tasks, increase efficiency, and improve quality of products. Machines, however, need to be managed to get results; specifically they must have quick setup times and high reliability. Production lead-time for manufacturing processes can be reduced by reducing machine setup time, via a SMED (Single Minute Exchange of Die) program. Shorter setup times means that machines can minimize the production lot size and reduce production inventories. This will allow for more efficient just-in-time manufacturing; this will also enable an operation to be efficient in high-mix low-volume production. Overall it will be a more responsive and cost-effective operation that responds quickly to small customer orders. This can open an operation to new business and market segments.
We must also ensure that machines work every time. For that we need a TPM plan. The objective of TPM is to ensure that machines provide predictable performance, deliver exactly what we expect of them, with high productivity, zero (or low) errors, no breakdowns or accidents; all this at a reasonable cost.
Aiming for highest quality in manufacturing
Product and service quality is essential for any business. Furthermore, accumulation of defects in the factory, poor yields, and customer complaints must be well managed. To this end we need quality tools and systems to manage the factory floor, support services, and the overall business. The benefits of this effort will help ensure efficient processes, higher productivity, and less fire fighting. This will result in more time for innovation and creativity, improved quality of products and services, lower costs, and increased customer satisfaction and loyalty. Important methodologies are: Continuous improvement or Kaizen via the PDCA cycle, Quality Control & Management, Statistical Process Control, and Six Sigma.
Often, there is a concern on investing too much in continuous improvement – because of complacency or hubris, or one seeks a balance between cost and quality. This approach is dangerous in any organization, because complacency is the enemy of quality and customer satisfaction. Takoshi Hokake expresses this succinctly as the Whispering of Satan: “Balance between cost and quality” is such a phrase that affects us like opium. Tearing off this veil of this beautiful phrase “balance of cost and quality” — the “quality first” policy should be adopted. This is the very energy source. But I have no weapon to shut out this whispering of Satan.”
A case in point: the recent quality issues and recalls at Toyota. After an analysis, it was clearly due to several factors: a drive for cost reduction, outsourcing (to less robust suppliers), and hubris. Toyota has learned a lesson.
Employee development and participation
All the hard work discussed so far requires the potential of every person and supplier in the organization. The power of synergy they create cannot be overemphasized. Their effort must include: Kaizen and kaizen team activity, Employee Suggestion schemes, Employee education; plus partnering and working with suppliers on quality and kanban deliveries to minimize stockroom inventory and space. Such employee and partner engagement, and involvement, is necessary and priceless.
Putting all the tools together to get Continuous Flow Manufacturing
The superior methodology in manufacturing is to manufacture in a continuous flow process producing one-piece at a time or in small batches. Why? One-piece production maximizes throughput in manufacturing, minimizes WIP inventory, runs with the highest quality level, and provides a system that allows for continual improvement of the manufacturing process. Continuous flow can be either on linear or U-shaped lines, depending on volume and complexity. Continuous flow manufacturing is where all the techniques we have discussed above come together to provide Operational Excellence in manufacturing – to achieve World Class manufacturing.
One-piece continuous flow manufacturing will provide faster response to changing customer demand thus reducing lead time to customer orders; the manufacturing operation will also be able to respond quickly to customer demand including accepting smaller orders, which can open new market segments. All these benefits will result in an operation that is more efficient, cost effective, and customer oriented.
Doing the right things to achieve success in Operational Excellence via good planning
We have been discussing how to do things right: that is how to be productive, efficient, and less wasteful, with the best quality. However, it is equally important that we do the right things. This requires creativity, insight, and good planning. Planning also provides other benefits, including sharper objectives, improved performance standards, and management involvement. All of these result in a planned approach to tackling the market place that will result in higher productivity, quality, sales, and profits.
A good planning process needs to exist throughout an organization. The plan will include an analysis of the current situation, the objectives that must be pursued, actual implementation, and progress reviews. This plan must focus on breakthrough product and service strategies that will lead to market success – both short-term and long-term strategies must be covered. We recommend the use of the Hoshin Kanri planning process. And yes, there are other good planning processes.
An alternative planning process, or a subset of planning, is The Theory of Constraints. Dr. Goldratt expounded and popularized this theory in a business book, actually a fast paced novel: The Goal. In his book he discusses the concept of system constraints or bottlenecks that hinder progress and profit in a business. Goldratt uses the concept of removing bottlenecks or the weakest link in the business organization. According to Goldratt, the goal of a business is to increase profit. To get there, management must find the weakest link in an organization that is constraining profit, fix it, and then find the next weakest link and fix it, and so on. Goldratt says that the weakest links are constraints that are usually caused by management policies. Such constraints sit somewhere in the system but their effect appears somewhere else. Only management can find and fix such constraints. For example: If the company’s backlog management policy hinders rapid delivery of product and revenue goals, only senior management can fix it. This weak link has to be fixed, after which the next weak link must be fixed. This approach will continue to strengthen the business organization and lead to higher profitability.
In a future article I will write on: Getting started on or improving your current effort in lean, plus provide an assessment checklist to highlight your strengths, weaknesses, and opportunities in lean manufacturing.
By Soin Singh
Extracted from this author’s book: Winning With Operational Excellence
Soin Singh is Director of Quality at Venture Corporation. Prior to that he was General Manger (Distribution and Supply Chain) at Hewlett Packard. He has a Doctorate in Supply Chain management and has authored several books including: Total Quality Control and Winning With Operational Excellence