Chapter 16

Operations Management: Sustainability
and Supply Chain Management

Thirteenth Edition, Global Edition
Chapter 16
Lean Operations
Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Outline
• Global Company Profile: Toyota Motor Corporation
• Lean Operations
• Lean and Just-in-Time
• Lean and the Toyota Production System
• Lean Organizations
• Lean in Services

Toyota Motor Corporation (1 of 2)
• One of the largest vehicle manufacturers in the world with
annual sales of over 10 million vehicles
• Success due to two techniques, JIT and TPS
• Continual problem solving is central to JIT
• Eliminating excess inventory makes problems immediately
evident

Toyota Motor Corporation (2 of 2)
• Central to TPS is employee learning and a continuing
effort to produce products under ideal conditions
• Respect for people is fundamental
• Small building but high levels of production
• Subassemblies are transferred to the assembly line on a
JIT basis
• High quality and low assembly time per vehicle

TPS Elements

Learning Objectives (1 of 2)
When you complete this chapter you should be able to:
16.1 Define Lean operations
16.2 Define the seven wastes and the 5Ss
16.3 Identify the concerns of suppliers when moving to
supplier partnerships
16.4 Determine optimal setup time

Learning Objectives (2 of 2)
When you complete this chapter you should be able to:
16.5 Define kanban
16.6 Compute the required number of kanbans
16.7 Identify six attributes of Lean organizations
16.8 Explain how Lean applies to services

Lean Operations (1 of 3)
• Lean operations supply the customer with exactly what
the customer wants when the customer wants it, without
waste, through continuous improvement
• Driven by “pulling” customer orders

• Just-in-time (JIT) focuses on continuous forced problem
solving
• Toyota Production System (T PS) emphasizes
continuous improvement, respect for people, and standard
work practices in an assembly-line environment

• Encompasses both JIT and TPS
• Sustains competitive advantage and increases return to
stakeholders
• Three fundamental issues
– Eliminate waste
– Remove variability
– Improve throughput

Eliminate Waste (1 of 2)
• Waste is anything that does not add value from the
customer point of view
• Storage, inspection, delay, waiting in queues, and
defective products do not add value and are 100% waste

Ohno's Seven Wastes
• Overproduction
• Queues
• Transportation
• Inventory
• Motion
• Overprocessing
• Defective products

Eliminate Waste (2 of 2)
• Other resources such as energy, water, and air are often
wasted
• Efficient, sustainable production minimizes inputs, reduces
waste
• Traditional "housekeeping" has been expanded to the 5Ss

The 5Ss (1 of 2)
• Sort/segregate – when in doubt, throw it out
• Simplify/straighten – methods analysis tools
• Shine/sweep – clean daily
• Standardize – remove variations from processes
• Sustain/self-discipline – review work and recognize
progress

The 5Ss (2 of 2)
• Sort/segregate – when in doubt, throw it out
• Simplify/straighten – methods analysis tools
• Shine/sweep – clean daily
• Standardize – remove variations from processes
• Sustain/self-discipline – review work and recognize
progress
Two additional Ss
• Safety – built-in good practices
• Support/maintenance – reduce
variability and unplanned downtime
Remove Variability
• Variability is any deviation from the optimum process
• Lean systems require managers to reduce variability
caused by both internal and external factors
• Inventory hides variability
• Less variability results in less waste

Sources of Variability (1 of 2)
• Poor processes resulting in improper quantities, late, or
non-conforming units
• Inadequate maintenance
• Unknown and changing customer demands
• Incomplete or inaccurate drawings, specifications, or bills
of material

Sources of Variability (2 of 2)
• Poor processes resulting in improper quantities, late, or non-
conforming units
• Inadequate maintenance
• Unknown and changing customer demands
• Incomplete or inaccurate drawings, specifications, or bills of
material
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Improve Throughput (1 of 2)
• The rate at which units move through a process
• Each wasted minute products are in the process, costs
accumulate and competitive advantage is lost
• A pull system increases throughput

Improve Throughput (2 of 2)
• By pulling material in small lots, inventory cushions are
removed, exposing problems and emphasizing continual
improvement
• Manufacturing cycle time is reduced
• Push systems dump orders on the downstream stations
regardless of the need

Lean and Just-In-Time
• Powerful strategy for
improving operations
• Materials arrive where they
are needed only when they
are needed
• Identifying problems and
driving out waste reduces
costs and variability and
improves throughput
• Requires a meaningful
buyer-supplier relationship
JIT and Competitive Advantage (1 of 2)
Figure 16.1

JIT and Competitive Advantage (2 of 2)
Figure 16.1

Supplier Partnerships
• Supplier partnerships exist when a supplier and
purchaser work together to remove waste and drive down
costs
• Four goals of supplier partnerships are:
– Removal of unnecessary activities
– Removal of in-plant inventory
– Removal of in-transit inventory
– Improved quality and reliability

JIT Partnerships
Figure 16.2

Concerns of Suppliers
• Diversification – ties to only one customer increases risk
• Scheduling – don't believe customers can create a smooth
schedule
• Lead time – short lead times mean engineering or
specification changes can create problems
• Quality – limited by capital budgets, processes, or
technology
• Lot sizes – small lot sizes may transfer costs to suppliers

Lean Layout
• Reduce waste due to movement
Table 16.1
Lean Layout Tactics

Build work cells for families of products
Include a large number of operations in a small area
Minimize distance
Design little space for inventory
Improve employee communication
Use poka-yoke devices
Build flexible or movable equipment
Cross-train workers to add flexibility

Distance Reduction
• Large lots and long production lines with single-purpose
machinery are being replaced by smaller flexible cells
• Often U-shaped for shorter paths and improved
communication
• Often using group technology concepts

Increased Flexibility
• Cells designed to be rearranged as volume or designs
change
• Applicable in office environments as well as production
settings
• Facilitates both product and process improvement

Impact on Employees
• Employees may be cross-trained for flexibility and
efficiency
• Improved communications facilitate the passing on of
important information about the process (poka-yoke
functions can help)
• With little or no inventory buffer, getting it right the first time
is critical

Reduced Space and Inventory
• With reduced space, inventory must be in very small lots
• Units are always moving because there is no storage

Lean Inventory
• Inventory is at the minimum level necessary to keep
operations running
Table 16.2
Lean Inventory Tactics
Use a pull system to move inventory
Reduce lot sizes
Develop just-in-time delivery systems with suppliers
Deliver directly to point of use
Perform to schedule
Reduce setup time
Use group technology

Reduce Variability (1 of 3)
Figure 16.3

Figure 16.3

Figure 16.3

Reduce Inventory
• Reducing inventory uncovers
the "rocks"
• Problems are exposed
• Ultimately there will be
virtually no inventory and no
problems
• Shingo says "Inventory is
evil"

Reduce Lot Sizes (1 of 2)
Figure 16.4

Reduce Lot Sizes (2 of 2)
• Ideal situation is to have lot sizes of one pulled from one
process to the next
• Often not feasible
• Can use EOQ analysis to calculate desired setup time
• Two key changes necessary
– Improve material handling
– Reduce setup time
2 DS
Q*p 
H [1  (d / p )]

Setup Time Example
D = Annual demand = 400,000 units
d = Daily demand = 400,000/250 = 1,600 per day
p = Daily production rate = 4,000 units
Qp = EOQ desired = 400
H = Holding cost = $20 per unit
S = Setup cost (to be determined)
2 DS 2 DS
Q*p  Q 2p 
H [1  (d / p )] H [1  (d / p )]
(Qp2 )( H )(1  d / p ) (400) 2 (20)(1  1,600 / 4,000)

S   $2.40
2D 2(400,000)
Setup time = $2.40/($30/hour) = 0.08 hr = 4.8 minutes

Reduce Setup Costs (1 of 2)
• High setup costs encourage large lot sizes
• Reducing setup costs reduces lot size and reduces
average inventory
• Setup time can be reduced through preparation prior to
shutdown and changeover

Lower Setup Costs
Figure 16.5

Reduce Setup Costs (2 of 2)
Figure 16.6

Lean Scheduling (1 of 2)
• Schedules must be communicated inside and outside the
organization
• Level schedules
– Process frequent small batches
– Freezing the schedule helps stability
• Kanban
– Signals used in a pull system

Lean Scheduling (2 of 2)
• Better scheduling improves performance
Table 16.3
Lean Scheduling Tactics
Make level schedules
Use kanbans
Communicate schedules to suppliers
Freeze part of the schedule
Perform to schedule
Seek one-piece-make and one-piece-move
Eliminate waste
Produce in small lots
Make each operation produce a perfect part

Level Schedules
• Process frequent small batches rather than a few large
batches
• Make and move small lots so the level schedule is
economical
• Freezing the schedule closest to the due dates can
improve performance

Scheduling Small Lots
Figure 16.7

Kanban (1 of 6)
• Kanban is the Japanese
word for card
• The card is an authorization
for the next container of
material to be produced
• A sequence of kanbans
pulls material through the
process
• Many different sorts of
signals are used, but the
system is still called a
kanban

Kanban (2 of 6)
Figure 16.8

Kanban (3 of 6)
• When there is visual contact
– The user removes a standard-size container of parts
from a small storage area, as shown in Figure 16.8.
– The signal at the storage area is seen by the producing
department as authorization to replenish the using
department or storage area. Because there is an
optimum lot size, the producing department may make
several containers at a time.

Kanban (4 of 6)

Kanban (5 of 6)
• When the producer and user are not in visual contact, a
card can be used; otherwise, a light or flag or empty spot
on the floor may be adequate
• Usually each card controls a specific quantity of parts
although multiple card systems may be used if there are
several components or if the lot size is different from the
move size

Kanban (6 of 6)
• Kanban cards provide a direct control and limit on the
amount of work-in-process between cells
• A complicating factor in a manufacturing firm is the time
needed for actual manufacturing (production) to take place

The Number of Kanban Cards or
Containers
• Need to know the lead time needed to produce a container
of parts
• Need to know the amount of safety stock needed
Demand during  Safety

Number of kanbans lead time stock
containers   Size of container

Number of Kanbans Example
Daily demand = 500 cakes

Production lead time = 2 days
(Wait time +
Material handling time +
Processing time)
Safety stock = 1/2 day
Container size = 250 cakes
Demand during lead time = 2 days × 500 cakes = 1,000

Safety stock = ½ × Daily demand = 250
1,000  250
Number of kanbans  5
250

Advantages of Kanban
• Small containers require tight schedules, smooth
operations, little variability
• Shortages create an immediate impact
• Places emphasis on meeting schedules, reducing lead
time and setups, and economic material handling
• Standardized containers reduce weight, disposal costs,
wasted space, and labor

Lean Quality
• Strong relationship
– Lean cuts the cost of obtaining good quality because
Lean exposes poor quality
– Because lead times are shorter, quality problems are
exposed sooner
– Better quality means fewer buffers and allows simpler
Lean systems to be used

Lean Quality Tactics
Table 16.4
Lean Quality Tactics

Use statistical process control
Empower employees
Build fail-safe methods (poka-yoke, checklists, etc.)
Expose poor quality with small lots
Provide immediate feedback

Toyota Production System (1 of 3)
• Continuous improvement
– Build an organizational
culture and value system
that stresses
improvement of all
processes, kaizen
– Part of everyone’s job
• Respect for people
– People are treated as
knowledge workers
– Engage mental and
physical capabilities
– Empower employees
• Processes and standard work practice
– Work shall be completely specified as to content,
sequence, timing, and outcome
– Internal and external customer-supplier connections
are direct
– Material and service flows must be simple and directly
linked to the people or machinery involved
– Process improvement must be made in accordance
with the scientific method at the lowest possible level of
the organization

• Processes and standard work practice
– Stopping production because of a defect is called
jidoka
– Dual focus
 Education and training of employees
 Responsiveness of the system to problems
– Result is continuous improvement

Lean Organizations
• Understanding the customer and the customer's
expectations
• Functional areas communicate and collaborate to make
sure customer expectations are met
• Implement the tools of Lean throughout the organization

Building a Lean Organization (1 of 2)
• Transitioning to a Lean system can be difficult
• Build a culture of continual improvement
• Open communication
• Demonstrated respect for people
• Gemba walks to see work being performed

Building a Lean Organization (2 of 2)
• Lean systems tend to have the following attributes
– Respect and develop employees
– Empower employees
– Develop worker flexibility
– Develop collaborative partnerships with suppliers
– Eliminate waste by performing only value-added
activities

Lean Sustainability
• Two sides of the same coin
• Maximize resource use and economic efficiency
• Focus on issues outside the immediate firm
• Driving out waste is the common ground

Lean in Services
• The Lean techniques used
in manufacturing are used in
services
– Suppliers
– Layouts
– Inventory
– Scheduling

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Operations Management: Sustainability

and Supply Chain Management

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

Copyright © 2020 Pearson Education Ltd. All Rights Reserved.

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Lean Layout Tactics

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(Qp2 )( H )(1  d / p ) (400) 2 (20)(1  1,600 / 4,000)

Setup time = $2.40/($30/hour) = 0.08 hr = 4.8 minutes

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Demand during  Safety

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Daily demand = 500 cakes

Demand during lead time = 2 days × 500 cakes = 1,000

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