Chapter 14

Lean
Operations

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
 Chapter 14: Learning Objectives
 You should be able to:
1. Explain what is meant by the term lean operations system
2. List each of the goals of a lean system and explain its importance
3. List and briefly describe the building blocks of lean
4. List the benefits of a lean system
5. Outline the considerations important in converting a traditional
mode of operations to a lean system
6. Point out some of the obstacles that might be encountered when
converting to a lean system
7. Describe value stream mapping

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 Lean Operations
 A flexible system of operation that uses considerably less
resources than a traditional system
Tend to achieve
 Greater productivity
 Lower costs
 Shorter cycle times
 Higher quality

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Lean: Ultimate Goal
The ultimate goal:
 Achieve a system that matches supply to customer
demand; supply is synchronized to meet customer
demand in a smooth uninterrupted flow
 A balanced system
One that achieves a smooth, rapid flow of materials and/or
work through the system

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Goals and building blocks of lean systems

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 Lean: Supporting Goals
The degree to which lean’s ultimate goal is achieved
depends upon how well its supporting goals are
achieved:
1. Eliminate disruptions
2. Make the system flexible
3. Eliminate waste, especially excess inventory

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 Waste
 Represents unproductive resources

 Seven sources of waste in lean systems (as defined by TOYOTA):

1. Inventory

2. Overproduction

3. Waiting time

4. Unnecessary transporting

5. Processing waste

6. Inefficient work methods

7. Product defects

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Lean: Building Blocks

Product design

Process design

Personnel/organizational elements

Manufacturing planning and control

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Building Blocks: Product Design

Four elements of product design important for lean

systems:
1. Standard parts
2. Modular design
3. Highly capable systems with quality built in
4. Concurrent engineering

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 Building Blocks: Process Design

 Eight aspects of process design that are important

for lean systems:

1. Small lot sizes
2. Setup time reduction
3. Manufacturing cells
4. Quality improvement
5. Production flexibility
6. A balanced system
7. Little inventory storage
8. Fail-safe methods
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 Process Design: Small Lot Sizes
 In the lean philosophy, the ideal lot size is one

 Benefits of small lot size

 Reduced in-process inventory

 Lower carrying costs

 Less storage space is necessary

 Inspection and rework costs are less when problems with quality do occur

 Permits greater flexibility in scheduling

 Less inventory to ‘work off’ before implementing product improvements

 Increased visibility of problems

 Increased ease of balancing operations

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Process Design: Setup Time Reduction

Small lot sizes and changing product mixes

require frequent setups
Unless these are quick and relatively
inexpensive, they can be prohibitive
Setup time reduction requires deliberate
improvement efforts
 Single-minute exchange of die (SMED)
A system for reducing changeover time
 Group technology may be used to reduce setup time by
capitalizing on similarities in recurring operations

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Process Design: Manufacturing Cells

One characteristic of lean production systems

is multiple manufacturing cells
Benefits include
Reduced changeover times
High equipment utilization
Ease of cross-training workers

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Process Design: Quality Improvement

Quality defects during the process can disrupt

the orderly flow of work
Autonomation (jidoka)
 Automatic detection of defects during production
Two mechanisms are employed
1. One for detecting defects when they occur
2. Another for stopping production to correct the cause of the
defects

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 Process Design: Work Flexibility
Guidelines for increasing flexibility
1. Reduce downtime due to changeovers by reducing
changeover time
2. Use preventive maintenance on key equipment to reduce
breakdowns and downtime
3. Cross-train workers so they can help when bottlenecks
occur or other workers are absent
4. Use many small units of capacity; many small cells make it
easier to shift capacity temporarily and to add or subtract
capacity
5. Use off-line buffers. Store infrequently used safety stock
away from the production area
6. Reserve capacity for important customers
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Process Design: Balanced System
Takt time
The cycle time needed to match customer demand
for final product
Sometimes referred to as the heartbeat of a lean
system
Takt time is often set for a work shift
Procedure:
1. Determine the net time available per shift
2. If there is more than one shift per day, multiply the
net time by the number of shifts
3. Compute the takt time by dividing the net
available time by demand
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Process Design: Inventory Storage
Lean systems are designed to minimize
inventory storage
 Inventories are buffers that tend to cover up recurring
problems that are never resolved
partly because they are not obvious
partly because the presence of inventory makes them
seem less serious

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Process Design: Fail-Safe Methods

Poka-yoke (Fail Safing)

Building safeguards into a process to
reduce or eliminate the potential for
errors during a process
Examples
Electric breakers
Seatbelt fastener warnings
ATMs that signal if a card is let in a machine
Designing parts that can only be assembled in the
correct position

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Building Blocks:
Personnel/Organizational
Five personnel/organizational elements that
are important for lean systems:
Workers as assets
Cross-trained workers
Continuous improvement
Cost accounting
Leadership/project management

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Personnel/Organizational:
Workers as Assets
Workers as assets
Well-trained and motivated workers are the
heart of the lean system
They are given greater authority to make decisions,
but more is expected of them

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Personnel/Organizational:
Cross-Trained Workers

Cross-trained workers
Workers are trained to perform several parts of
a process and operate a variety of machines
Facilitates flexibility
Helps in line balancing

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Personnel/Organizational:
Continuous Improvement
Continuous improvement
Workers in lean systems have greater
responsibility for quality, and they are expected
to be involved in problem solving and
continuous improvement
Lean workers receive training in
Statistical process control
Quality improvement
Problem solving

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Personnel/Organizational:
Cost Accounting
Cost accounting
Activity-based costing
Allocation of overhead to specific jobs based on their
percentage of activities

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Personnel/Organizational:
Leadership
Leadership/project management
Managers are expected to be leaders and
facilitators, not order givers
Lean systems encourage two-way
communication between workers and managers

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Building Blocks: MPC
Seven elements of manufacturing
planning and control (MPC) are
particularly important for lean system:
1. Level loading
2. Pull systems
3. Visual systems
4. Limited work-in-process (WIP)
5. Close vendor relationships
6. Reduced transaction processing
7. Preventive maintenance and housekeeping

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MPC: Level Loading

Lean systems place a strong emphasis on

achieving stable, level daily mix schedules
MPS – developed to provide level capacity
loading
Mixed model scheduling
Three issues need to be resolved
 What is the appropriate product sequence to use?
 How many times should the sequence be repeated daily?
 How many units of each model should be produced in each
cycle?

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 MPC: Pull Systems
Push system
Work is pushed to the next station as it is
completed
Pull system
A workstation pulls output from the preceding
workstation as it is needed
Output of the final operation is pulled by customer
demand or the master schedule
Pull systems are not appropriate for all operations
Large variations in volume, product mix, or product
design will undermine the system
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MPC: Communication

Communication moves backward through the

system from station to station
Each workstation (customer) communicates its
need for more work to the preceding workstation
(supplier)
Assures that supply equals demand
Work moves “just in time” for the next operation
Flow of work is coordinated
Accumulation of excessive inventories is avoided

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MPC: Visual Systems
Kanban
 Card or other device that communicates demand for
work or materials from the preceding station
 Kanban is the Japanese word meaning “signal” or “visible record”

 Paperless production control system

 Authority to pull, or produce, comes
from a downstream process.
 Two main types of kanbans:
1. Production kanban (p-kanban): signals the need to produce
parts
2. Conveyance kanban (c-kanban): signals the need to deliver
parts to the next work center.

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Kanbans
Ideal number of kanban cards
DT (1  X )
N
C
where
N  Total number of containers (1 card per container)
D  planned usage rate of using work center
Average waiting time for replenishm ent of parts plus
T
average production time for a container of parts
Policy variable set by management that relects possible inefficien cy
X
in the system (the closer to 0, the more efficient the system
Capacity of a standard container (should be no more
C
than 10 percentof daily usage of the part

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MPC: Limited WIP

Benefits of lower WIP

Lower carrying costs
Increased flexibility
Aids scheduling
Saves costs of scrap and rework if there are
design changes
Lower cycle-time variability

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MPC: Close Vendor Relationships
Lean systems typically have close
relationships with vendors
They are expected to provide frequent, small
deliveries of high-quality goods
A key feature of many lean systems is the
relatively small number of suppliers used

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MPC: Reduced Transaction Processing

Lean systems seek to reduce costs associated

with the ‘hidden factory’:
Logistical transactions
Balancing transactions
Quality transactions
Change transactions

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Preventive Maintenance
and Housekeeping
Preventive maintenance
Maintaining equipment in good operating
condition and replacing parts that have a
tendency to fail before they actually do fail
Housekeeping
Maintaining a workplace that is clean and free
of unnecessary materials

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Lean vs. Traditional Philosophies

Factor Traditional Lean

Inventory Much to offset forecast Minimal necessary to
errors, late deliveries operate
Deliveries Few, large Many, small
Lot sizes Large Small

Setup; runs Few, long runs Many, short runs

Vendors Long-term relationships Partners

are unusual

Workers Necessary to do the work Assets

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Transitioning to Lean Systems
1. Make sure top management is committed and
that they know what will be required
2. Decide which parts will need the most effort to
convert
3. Obtain support and cooperation of workers
4. Begin by trying to reduce setup times while
maintaining the current system
5. Gradually convert operations, begin at the end
and work backwards
6. Convert suppliers to JIT
7. Prepare for obstacles
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 Obstacles to Conversion
1. Management may not be fully committed or
willing to devote the necessary resources to
conversion
2. Workers/management may not be cooperative
3. It can be difficult to change the organizational
culture to one consistent with the lean
philosophy
4. Suppliers may resist

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Lean Services
In service the focus is often on the time needed
to perform the service because speed is often
the order winner
Lean benefits can be achieved in the following
ways:
 Eliminate disruptions
 Make system flexible
 Reduce setup and lead times
 Eliminate waste
 Minimize WIP
 Simplify the process

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JIT II

JIT II:
 A supplier representative works right in the
company’s plant, making sure there is an
appropriate supply on hand
 It is often referred to as vendor managed
inventory (VMI)

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 Operations Strategy
 Be careful to study the requirements and benefits of lean
systems before making a decision to convert operations
 Evaluate strengths and weaknesses of current operations
 The decision to convert can be sequential
 Weigh the pros and cons of a lean approach to inventories
 Supplier management is critical to a lean operation

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