Introduction to Operations

The DNA of Waste

Christian Terwiesch, Andrew M. Heller Professor of Operations,

Information and Decisions
 1

9.45 Arrival to hospital 1

 1

9.45 Arrival to hospital 1

9.50 First check-in; get buzzer 2 2
 1

9.45 Arrival to hospital 1

3
9.50 First check-in; get buzzer 2 2
Wait 3
 1

9.45 Arrival to hospital 1

3
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
 1

9.45 Arrival to hospital 1

3 5
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
10.10 Check in at booth; return to waiting area
Wait 5
 1

9.45 Arrival to hospital 1

3 5
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
10.10 Check in at booth; return to waiting area
Wait 5

10.20 Called by a nurse, directed to a changing room

Wait 6

6
 1

9.45 Arrival to hospital 1

3 5
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
10.10 Check in at booth; return to waiting area
Wait 5

10.20 Called by a nurse, directed to a changing room

Wait 6

11.00 Called by a nurse, directed to imaging room

Wait 7

7 6
 1

9.45 Arrival to hospital 1

3 5
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
10.10 Check in at booth; return to waiting area
Wait 5

10.20 Called by a nurse, directed to a changing room

Wait 6

11.00 Called by a nurse, directed to imaging room

Wait 7

11.20 Discuss procedure with provider 8

8
7 6
 1 10

9.45 Arrival to hospital 1

3 5
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
10.10 Check in at booth; return to waiting area
Wait 5

10.20 Called by a nurse, directed to a changing room

Wait 6

11.00 Called by a nurse, directed to imaging room

Wait 7

11.20 Discuss procedure with provider 8

11.30 Procedure starts

8 9
7 6
 1

9.45 Arrival to hospital 1

3 5
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
10.10 Check in at booth; return to waiting area
Wait 5

10.20 Called by a nurse, directed to a changing room

Wait 6

11.00 Called by a nurse, directed to imaging room

Wait 7

11.20 Discuss procedure with provider 8

11.30 Procedure starts
11.40 Procedure ends, return to changing room
Wait

8
7 6
 1

9.45 Arrival to hospital 1

3 5
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
10.10 Check in at booth; return to waiting area
Wait 5

10.20 Called by a nurse, directed to a changing room

Wait 6

11.00 Called by a nurse, directed to imaging room

Wait 7

11.20 Discuss procedure with provider 8

11.30 Procedure starts
11.40 Procedure ends, return to changing room
Wait

11.50 Tech confirms the quality of images 9 8 9

7 6
 1 10

9.45 Arrival to hospital 1

3 5
9.50 First check-in; get buzzer 2 2
Wait 3 4
10.05 Buzzer buzzes; go to check-in booth 4
10.10 Check in at booth; return to waiting area
Wait 5

10.20 Called by a nurse, directed to a changing room

Wait 6

11.00 Called by a nurse, directed to imaging room

Wait 7

11.20 Discuss procedure with provider 8

11.30 Procedure starts
11.40 Procedure ends, return to changing room
Wait

11.50 Tech confirms the quality of images 9 8 9

7 6
12.00 Go home 10
The Principles of Scientific Management: We
can see and feel the waste of material things.
Awkward, inefficient or ill-directed
movements of men, however, leave nothing
visible or tangible behind them.
— FREDERICK WINSLOW TAYLOR
Employers derive their knowledge of how
much of a given class of work can be done in
a day from either their own experience,
which has frequently grown hazy with age,
from casual and unsystematic observation of
their men, or at best from records […].

— FREDERICK WINSLOW TAYLOR

Moving is not working. The Toyota style is
not to create results by working hard.
— TAICHI OHNO

Name of Initiative 19
All we are doing is looking at the timeline,
from the moment the customer gives us an
order to the point when we collect the cash.
— TAICHI OHNO

Name of Initiative 20
9:45 Patient arrives – lines up at check-in
9:50 Patient gets checked in and receives a buzzer
10:05 Buzzer buzzes; return to check-in, get directed to a check-in booth
10:10 Check in at booth to self-identify and confirm study, return to waiting area
10:20 Called by a nurse, directed to a changing room, change, wait there
11:00 Called by a nurse, directed to imaging room, wait in room for provider
11:20 Discuss procedure with provider
11:30 Procedure starts
11:40 Procedure ends, return to changing room, get dressed
11:50 Wait for the tech
12:00 Go home
Getting to Hospital: Going home:
Drive Get to car drive
Parking Enter
Talk End
Called by imaging Complete
To MD Proc.
Arrival Check-in nurse room

9:45 9:50 10:05 10:20 11:00 11:20 11:40 11:50

1 2 3 4 5 6 7 8 9 10

20 minutes
Imaging

Waiting rooms

Locker rooms

Restrooms

Overhead
• Utility
• Cleaning
• IT
• Conference

Cost: >$500 /sqft

Utilization?
Introduction to Operations
Wasting the Time of a Resource

Christian Terwiesch, Andrew M. Heller Professor of Operations,

Information and Decisions
25
26
Fieldston ES, Li J. Terwiesch C, Helfaer M, Verger J, Pati S, Surrey D, Patel K, Ebberson J, Lin R, Metlay J (2012)
Direct observation of bed utilization in the pediatric intensive care unit. J Hosp Med 7(4): 218:321.

27
 Value add time
Overall Equipment Effectiveness (OEE) =
Total paid time
Moving is not working. The Toyota style is
not to create results by working hard.
— TAICHI OHNO

29
 Waste:
Work or use of resources that does not add any Waste:
Idle time
customer value and is not necessary to Meaningless transport
maintain operations Stockpiling of inventory
Non Value add time:
Fixing defects
Receiving parts
Value add time: Unpacking input material
Pressing a button on a
Work that directly increases the value of the machine
product in the eyes of the customer (e.g.,
assembly of parts)

Incidental activity:
Work that does not directly increase customer Worker Work Value add time
time
value, but is necessary to maintain operations
 OEE of 50%
2x as much work with the same resources
Serve same number of customers with ½ resources
24 6

1.2
1.6
18 0.7
1.6

13 4.2

8.8

Sources: MIT Airline Data Project for airline block hours (gate-to-gate) and airborne hours; azcentral news for time-and-motion study of
American Airlines turnaround time; flightstatus.com for airport open/close information from Dallas Fort Worth (American Airlines Hub)
24 6

1.2
1.6
18 0.7
1.6

13 4.2

8.8

Sources: MIT Airline Data Project for airline block hours (gate-to-gate) and airborne hours; azcentral news for time-and-motion study of
American Airlines turnaround time; flightstatus.com for airport open/close information from Dallas Fort Worth (American Airlines Hub)
24 6

1.2
1.6
18 0.7
1.6

13 4.2

8.8

Sources: MIT Airline Data Project for airline block hours (gate-to-gate) and airborne hours; azcentral news for time-and-motion study of
American Airlines turnaround time; flightstatus.com for airport open/close information from Dallas Fort Worth (American Airlines Hub)
24 6

1.2
1.6
18 0.7
1.6

13 4.2

8.8

Sources: MIT Airline Data Project for airline block hours (gate-to-gate) and airborne hours; azcentral news for time-and-motion study of
American Airlines turnaround time; flightstatus.com for airport open/close information from Dallas Fort Worth (American Airlines Hub)
Introduction to Operations
The Seven Sources of Waste

Christian Terwiesch, Andrew M. Heller Professor of Operations,

Information and Decisions
 Motion
Defects
Over-processing
 Motion
Defects
Over-processing

These three sources of waste can be found by looking

at a resource in isolation

The other four sources of waste can be found

beyond one worker and looking at the process
 Motion
Defects
Over-processing
Idle Time
Inventory
Over production
Transportation
 Transportation
Inventory
Motion
Waiting (Idle Time)
Over-processing
Over production
Defects

8th source of waste: the waste of intellect

 Spotting Waste:
Tedious
May not be getting the full picture
Digitized
More access to data

Service Operations:
Time stamped data available
Digital exhaust
Introduction to Operations
Wasting Flow Time

Christian Terwiesch, Andrew M. Heller Professor of Operations,

Information and Decisions
 Waiting Casting Machining Assembly
customers

Casting Machining Assembly

Wait for Transport Wait for previous Set-up Wait for other Wait for Transport
Wait for casting Wait for
transport production cycle to members of the transport assembly
end batch

Time
 Service Blueprint:
A framework to map out a process emphasizing a temporal and a spatial dimension
Source: Yves Pigneur
Connected Strategy
Introduction to Operations
Achieving a Smooth Process Flow

Christian Terwiesch, Andrew M. Heller Professor of Operations,

Information and Decisions
Push vs Pull strategies
(JIT deliveries)

Mixed model production

Single unit flows

 Station 1 Station 2 Station 1
20 units/h 10 units/h 15 units/h

Push Pull
approach approach
 Pull: Kanban

Visual way to implement a pull system

Amount of WIP is determined by number of cards
Kanban = Sign board
 Pull: Kanban

Visual way to implement a pull system

Amount of WIP is determined by number of cards
Kanban = Sign board
 Pull: Kanban

Visual way to implement a pull system

Amount of WIP is determined by number of cards
Kanban = Sign board
 Pull: Kanban

Visual way to implement a pull system

Amount of WIP is determined by number of cards
Kanban = Sign board
 Pull: Kanban Pull: Synchronized production

Authorize
production
of next unit

Visual way to implement a pull system Parts shipped right to assembly line
Amount of WIP is determined by number of cards Real-time synchronization
Kanban = Sign board Done for large parts (seat)
Work needs to be authorized by demand Inspected at source
 Inventory

Scale Economies
Specialization
 Production with large batches

Inventory
Cycle
Inv.
Cycle

Inventory

Beginning of End of
Month Month
Produce Station wagon

Produce Sedan
 Production with large batches Production with small batches

Inventory Cycle
Cycle Inv.
Inv.
Cycle

Inventory

Beginning of End of Beginning of End of

Month Month Month Month

Produce Station wagon

Produce Sedan
 Mixed Model Production:

Heijunka

Keeps inventory low

Unevenness in flow

Unreasonable amount of work over-burdening

a machine or operator is avoided
Cheaper… but greater quantity Toyota mind-set
“Consume one, buy
one”
Introduction to Operations
Module Review and Practice Problem

Christian Terwiesch, Andrew M. Heller Professor of Operations,

Information and Decisions
 Benz Patent Motorwagen, 1886

The Mannheim – Pforzheim trip (66 miles)

by Bertha Benz

Carl Benz, 1844 - 1929

 The moving assembly line:
Inspired by slaughter houses
Reduced time from 12 hours to 2:30 hours
Allowed the use of unskilled labor
By 1924: 10 million Model T’s were built

Henry Ford, 1883-1947

Cost 950
USD/unit
360
290

1904 1916 1926

1910 Model T
 1930
Toyota Automatic Loom Works

1937
Toyota Motor Co.

Kiichiro Toyoda, Taiichi Ohno, started in 1947

1894-1952 1943
Model SA launched

1950
Production of 300 trucks
Almost bankrupt

1947 Model SA
General Motors Framingham Assembly Plant Versus Toyota Takaoka Assembly Plant, 1986

GM Framingham Toyota Takaoka

Gross Assembly Hours per Car 40.7 18
Assembly Defects per 100 Cars 130 45
Assembly Space per Car 8.1 4.8
Inventories of Parts (average) 2 weeks 2 hours

Gross assembly hours per car are calculated by dividing total hours of effort in the plant by the total number of cars produced
Defects per car were estimated from the JD Power Initial Quality Survey for 1987
Assembly Space per Car is square feet per vehicle per year, corrected for vehicle size
Inventories of Parts are a rough average for major parts
General Motors Framingham Assembly Plant Versus Toyota Takaoka Assembly Plant, 1986

GM Framingham Toyota Takaoka

Gross Assembly Hours per Car 40.7 18
Assembly Defects per 100 Cars 130 45
Assembly Space per Car 8.1 4.8
Inventories of Parts (average) 2 weeks 2 hours

Gross assembly hours per car are calculated by dividing total hours of effort in the plant by the total number of cars produced
Defects per car were estimated from the JD Power Initial Quality Survey for 1987
Assembly Space per Car is square feet per vehicle per year, corrected for vehicle size
Inventories of Parts are a rough average for major parts
General Motors Framingham Assembly Plant Versus Toyota Takaoka Assembly Plant, 1986

GM Framingham Toyota Takaoka

Gross Assembly Hours per Car 40.7 18
Assembly Defects per 100 Cars 130 45
Assembly Space per Car 8.1 4.8
Inventories of Parts (average) 2 weeks 2 hours

Gross assembly hours per car are calculated by dividing total hours of effort in the plant by the total number of cars produced
Defects per car were estimated from the JD Power Initial Quality Survey for 1987
Assembly Space per Car is square feet per vehicle per year, corrected for vehicle size
Inventories of Parts are a rough average for major parts
General Motors Framingham Assembly Plant Versus Toyota Takaoka Assembly Plant, 1986

GM Framingham Toyota Takaoka

Gross Assembly Hours per Car 40.7 18
Assembly Defects per 100 Cars 130 45
Assembly Space per Car 8.1 4.8
Inventories of Parts (average) 2 weeks 2 hours

Gross assembly hours per car are calculated by dividing total hours of effort in the plant by the total number of cars produced
Defects per car were estimated from the JD Power Initial Quality Survey for 1987
Assembly Space per Car is square feet per vehicle per year, corrected for vehicle size
Inventories of Parts are a rough average for major parts
 Zero non-value added
activities (muda)

Zero defects, zero breakdowns, zero inventory, zero set-up

Production flow synchronized with demand (JIT) Quality methods to reduce defects
One-unit-at-a-time flow Fool-proofing (poka-yoke) and visual feed-back
Mixed model production (heijunka) Detect-stop-alert (Jidoka)
Piece-by-piece transfer (ikko-nagashi) Defects at machines (original Jidoka)
Match production demand based on Takt time Defects in assembly (Andon cord)
Pull instead of push Build-in-quality (tsukurikomi)
Supermarket / Kanban
Make-to-order Reduce inventory to
expose defects
 Zero non-value added
activities (muda)

Zero defects, zero breakdowns, zero inventory, zero set-up

Production flow synchronized with demand (JIT) Quality methods to reduce defects
One-unit-at-a-time flow Fool-proofing (poka-yoke) and visual feed-back
Mixed model production (heijunka) Detect-stop-alert (Jidoka)
Piece-by-piece transfer (ikko-nagashi) Defects at machines (original Jidoka)
Match production demand based on Takt time Defects in assembly (Andon cord)
Pull instead of push Build-in-quality (tsukurikomi)
Supermarket / Kanban
Make-to-order Reduce inventory to
expose defects
 Zero non-value added
activities (muda)

Zero defects, zero breakdowns, zero inventory, zero set-up

Production flow synchronized with demand (JIT) Quality methods to reduce defects
One-unit-at-a-time flow Fool-proofing (poka-yoke) and visual feed-back
Mixed model production (heijunka) Detect-stop-alert (Jidoka)
Piece-by-piece transfer (ikko-nagashi) Defects at machines (original Jidoka)
Match production demand based on Takt time Defects in assembly (Andon cord)
Pull instead of push Build-in-quality (tsukurikomi)
Supermarket / Kanban
Make-to-order Reduce inventory to
expose defects
 Zero non-value added
activities (muda)

Zero defects, zero breakdowns, zero inventory, zero set-up

Production flow synchronized with demand (JIT) Quality methods to reduce defects
One-unit-at-a-time flow Fool-proofing (poka-yoke) and visual feed-back
Mixed model production (heijunka) Detect-stop-alert (Jidoka)
Piece-by-piece transfer (ikko-nagashi) Defects at machines (original Jidoka)
Match production demand based on Takt time Defects in assembly (Andon cord)
Pull instead of push Build-in-quality (tsukurikomi)
Supermarket / Kanban
Make-to-order Reduce inventory to
expose defects

Adjustment of capacity to meet takt-time

Flexibility
Multi-task assignment (takotei-mochi)
Reduction of Variability
Standardization of work Quartile Analysis
Standard operating procedures
Quality circles (Kaizen)
Worker involvement Fishbone diagrams (Ishikawa)
Skill development / X-training
 Learning Objectives:

Understand the waste of capacity at a resource and measure it using OEE

Understand the waste of flow time of a flow unit and measure it using %-VAT

Know the origins of lean and understand the architecture of the Toyota
Production System

Be able to balance a process using takt time

Understand ways to control the amount of inventory in a process

Key Definitions

Value add time: Work that directly increases the value of the product in the eyes of the customer
Incidental activity: work that does not directly increase customer value, but is necessary to maintain
operations
Waste: use of resources that does not add any customer value and is not necessary to maintain
operations
OEE: Overall Equipment Effectiveness; the ratio of value adding time to paid time
Takt time: the cycle time of the process that is needed to meet demand
%-VAT: the percentage of a flow unit’s flow time that it receives value adding work
Pull system: a system in which the advancement of a flow unit in the process is driven by demand
Synchronized production: extreme form of a pull system in which every unit is produced and shipped
just in time
Kanban: a form of a pull system that has a limited (pre-authorized) amount of inventory

Value add time

Overall Equipment Effectiveness (OEE) =
Total paid time
Key Formulas:
Total value add time of a unit
Flow Time Efficiency (%VAT) =
Flow time
As an equipment provider for several Olympic cyclists, Carbon Bike Frames (CBF) operate a very expensive
wind tunnel facility near San Diego, California. The wind tunnel is used to find the best compromise between
between ergonomics and aerodynamic for the cyclist. Presently, more and more cyclists are interested in
CBF’s services, and so the company considers building a second facility. However, given the enormous
costs of the wind tunnel, it also wants to explore a more effective use of the current facility. An initial data
collection reveal that:
The standard fitting time for a cyclist is 2 hours. On average, the wind tunnel is used for 7 fitting
procedures a day (new customers or customers who want a refit). The wind tunnel is available 24
hours a day.
CBF offers a free second session if it tuns out that the bike fit was done incorrectly. About 2 out if 7 of
the customers come back for such a “refit”, which takes the same amount of time as the initial fit.
Twenty minutes of each fitting procedure is spent setting up the bike on a stationary trainer and getting
the athlete ready. Almost all of this could happen outside the wind tunnel; that is, while another fitting
procedure is still going on.
About one day out of 10, the wind tunnel is down for maintenance or repair

What is the OEE of the wind tunnel? Recall that the wind tunnel can be used 24 hours a day.
Citizens of a not to be named country are required to renew their passports every 10 years. For passport
renewal, they have to collect a set of documents that they then send to the country’s capital.

The average time in the mail is about 2 days.

It takes 4 days before a clerk in the capital looks at the passport renewal. This takes about 10 minutes.
The clerk then asks his assistant to prepare a form that is sent to the government’s printing office. The
assistant completes this task within 3 days and it takes another 2 days in transit to the printing office.
There, the dossier waits an average of 10 days before the new passport is printed, and operation that takes
about 2 minutes.
It is then sent back to the citizen, which typically takes 2 days.

What is the percent value-add time in this flow? Use 24 hours per day as the potential work time.