Lean Production

Week 12-13:
Implementing the TPS
Review
Case study presentation

Tran Van Ly
Industrial Engineering & Management
International University
* Email: tvly@hcmiu.edu.vn 1
Room: A2-504
 Recall previous week
▪ Improvement
▪ Productivity
▪ Analysis
Recall previous week
 Learning Objectives
🖝Planning for application
🖝Best practices
Case study:

4
 Team Project

 🕮 
  
 Introductory steps to the TPS
1. Upper management plays a key role
2. Establish a project team
- Organize seminars, training
- Organize JIT practice team for sectional &
sub-sectional managers
3. Prepare an implementation schedule and set
goals to be achieved within the schedule
4. Introduce a pilot project
5. Move from a Downstream Process to an
Upstream Process
 Introductory a pilot project
What is being Piloted?
•The solutions you want to Pilot should come directly
off your Top Action List!
Where will the Pilot be run?
•Be specific
•Alert upstream and downstream customers who may
be affected by the pilot
•Manage the expectations of staff and supervisors in
that area
 Application Order of JIT Techniques

1. Introduction of the 5S foundation for

improvement
2. Introduction of “one-piece production”
need
a. Change from sitting labor to standing labor
b. Lay out machinery in process sequence
c. Connect adjacent processes
d. Construct U-shaped lines
e. Deploy multi-process handling by multi-skilled workers
f. Apply “Jidoka” in the sense of separating human
operations from machine processing
 Application Order of JIT Techniques

3. Implementation of small lot size production

and improvement of the setup method
4. Introduction of standard operations
a. Determine the required workforce number for each line,
based on takt time
b. Create a standard operations sheet
5. Implementation of smoothed production
6. Autonomation (“Jidoka”)
7. Introduction of Kanban cards
Target
Structure
Goals
Improvement
Specialized Skills Acquisition System

1. Practical work skills (manual skills)

2. System-building skills (problem-solving
ability)
3. People development skills (personnel
development skills)
 Balanced Scorecard

⬥ Balanced scorecard
■ measuring more than financial performance
● finances
● customers
● processes
● learning and growing
⬥ Key performance indicators
■ a set of measures that help managers evaluate
performance in critical areas

Copyright 2009 John 1-16

Wiley & Sons, Inc.
 Balanced Scorecard

Radar Chart Dashboard

Copyright 2009 John Wiley & 1-17

Sons, Inc.
 Balanced Scorecard
1. Financial perspective
Measures the ultimate results that the business provides to its
shareholders. They include profitability, revenue growth, return
on investment, economic value added (EVA), and shareholder
value.
2. Internal perspective
Focuses attention on the performance of the key internal
processes that drive the business. They include such
measures as quality levels, productivity, cycle time, and cost.
3. Customer perspective
Focuses on customer needs and satisfaction as well as
market share. This includes service levels, satisfaction
ratings, and repeat business.
4. Innovation and learning perspective
Directs attention to the basis of a future success—the
MANAGING FOR organization’s people and infrastructure. Key measures might
QUALITY AND include intellectual assets, employee satisfaction, market
PERFORMANCE innovation, and skills development.
EXCELLENCE, 7e, ©
2008 Thomson Higher 18
Education Publishing
 Key Idea

A good balanced scorecard contains both

leading and lagging measures and
indicators. Lagging measures (outcomes)
tell what has happened; leading measures
(performance drivers) predict what will
happen.

MANAGING FOR 19
QUALITY AND
 Baldrige Classification of
Performance Measures
• Customer-focused outcomes
• Product and service outcomes
• Financial and market outcomes
• Human resource outcomes
• Organizational effectiveness outcomes
• Governance and social responsibility
outcomes
MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher 20
Education Publishing
 Customer Measures

• Customer satisfaction and dissatisfaction

• Customer retention
• Gains and losses of customers and customer
accounts
• Customer complaints and warranty claims.
• Perceived value, loyalty, positive referral, and
customer relationship building
MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher 21
Education Publishing
 Product and Service
Measures
• Internal quality measurements
• Field performance of products
• Defect levels
• Response times
• Data collected from customers or third parties
on ease of use or other attributes
• Customer surveys on product and service
performance
MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher 22
Education Publishing
 Financial and Market
Measures
• Revenue
• Return on equity
• Return on investment
• Operating profit
• Pretax profit margin
• Asset utilization
• Earnings per share
MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher
23
Education Publishing
 Human Resource Measures

• Employee satisfaction
• Training and development
• Work system performance and effectiveness
• Safety
• Absenteeism
• Turnover <10% left the company

MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher
Education Publishing
24
 Organizational Effectiveness
Measures
• Cycle times
• Production flexibility
• Lead times and setup times
• Time to market
• Product/process yields
• Delivery performance
• Cost efficiency MANAGING FOR
QUALITY AND
• Productivity PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher
25 Education Publishing
 Governance and Social
Responsibility Measures
• Organizational accountability
• Stakeholder trust
• Ethical behavior
• Regulatory/legal compliance
• Financial and ethics review results
• Community service
• Management stock purchase activity
MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher 26
Education Publishing
 Practical Guidelines
• Fewer is better.
• Link to the key business drivers.
• Include a mix of past, present, and future
• Address the needs of all stakeholders.
• Start at the top and flow down to all levels of
employees
• Combine multiple indexes into a single index
• Change as the environment and strategy
changes
• Have research-based targets or goals
MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher 27
Education Publishing
 Process-Level Measurements
• Does the measurement support our mission?
• Will the measurement be used to manage change?
• Is it important to our customers?
• Is it effective in measuring performance?
• Is it effective in forecasting results?
• Is it easy to understand and simple?
• Are the data easy/cost-efficient to collect?
• Does the measurement have validity, integrity, and
timeliness?
• Does the measure have an owner?
MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher 28
Education Publishing
 Key Idea

Good measures and indicators are

actionable; that is, they provide the basis
for decisions at the level at which they are
applied.
Data Reliability – How well does an
indicator consistently measure the “true
value” of the characteristic?
Data Accessibility – Do the right people
have access to the data?
MANAGING FOR QUALITY AND
PERFORMANCE EXCELLENCE,
7e, © 2008 Thomson Higher
Education Publishing 29
 Common Process Quality
Measures

• Nonconformities (defects) per unit

• Errors per opportunity
• DPMO – defects per million opportunities

MANAGING FOR
QUALITY AND
PERFORMANCE
EXCELLENCE, 7e, ©
2008 Thomson Higher
Education Publishing
30
 Creating Effective
Performance Measures

• Identify all customers and their requirements

and expectations
• Define work processes
• Define value-adding activities and process
outputs
• Develop measures for each key process
• Evaluate measures for their usefulness

MANAGING FOR 31
QUALITY AND
 Analyzing and Using Data
• Analysis – an examination of facts and data
to provide a basis for effective decisions.
• Examples
– Examining trends and changes in key
performance indicators
– Making comparisons relative to other business
units, competitor performance, or best-in-class
benchmarks
– Calculating means, standard deviations, and
other statistical measures
– Seeking to understand relationships among
different performance indicators using
MANAGING FOR sophisticated statistical tools such as correlation
QUALITY AND
PERFORMANCE
and regression analysis
EXCELLENCE, 7e, ©
2008 Thomson Higher 32
Education Publishing
 Key Idea

A good balanced scorecard contains both

leading and lagging measures and
indicators. Lagging measures (outcomes)
tell what has happened; leading measures
(performance drivers) predict what will
happen.

33
 12-34
Toyota Production System’s Four Rules:
Spear and Bover (1999)

1. All work shall be highly specified as to content,

sequence, timing, and outcome
2. Every customer-supplier connection must be direct,
and there must be an unambiguous yes-or-no way
to send requests and receive responses
3. The pathway for every product and service must be
simple and direct
4. Any improvement must be made in accordance with
the scientific method, under the guidance of a
teacher, at the lowest possible level in the
organization
 Rule 1: How People Work

• Focus on the details

• 1st unstated rule: every activity must
be specified for success
– May seem obvious, but the majority of
managers outside Toyota do not take this
approach)
 Rule 1: Car Seat Example

“ When a car’s seat is installed, the bolts

are always tightened in the same
order, the time it takes to turn each
bolt is specified, and so is the torque
to which the bolt should be tightened.
Such exactness is applied not only to
the repetitive motions of production
workers but also to the activities of all
people regardless of functional role.”
 Rule 1: Toyota’s Method

• Seven-step process with specific

steps and lengths of time
• There is a well developed sequence of
events for each particular job
• When employees deviate from these
details it is obvious
 Rule 1: Toyota’s Hypotheses

• Performing the activity tests two hypotheses:

1) The person doing the activity is capable of
performing it correctly
2) Performing the activity creates the expected
outcome
Example:
“If they can’t insert the seat in the specified way
within the specified amount of time, then they are
clearly refuting at least one of the hypotheses,
indicating that the activity needs to be
redesigned or the worker must be trained again.”
 Rule 2: How People Connect

• Every connection must be standardized &

direct, specifying:
– people involved
– form & quantity of goods and services
– way requests are made by each customer
– expected time that requests will be met
• Rule creates supplier-customer relationship
• Result: “…no gray zones in deciding who
provides what to whom and when.”
 Rule 2: Application
• Toyota uses kanban cards to set up direct
links between suppliers and customers
• Other companies use supervisors to answer
calls for help; no specific person assigned
– “…when something is everyone’s problem it
becomes no one’s problem.”
• Toyota’s workers expected to ask for help
• Testing hypothesis keeps system flexible,
allowing for constructive adjustment
 Rule 3: How the Production Line is
Constructed
• All products and services flow along a
simple specified path
– no forks or loops to convolute the flow; all
direct to specific persons or machines
– change only when production line is
expressly redesigned
• Toyota production lines accommodate
many types of products
• All of the rules allow Toyota to conduct
experiments and remain flexible and
responsive
 Rule 4: How to Improve
• What can be improved:
– Production activities
– Connections between workers or
machines
– Manufacturing pathways
• Improvements must be made:
– Using the scientific method
– Under the guidance of a teacher
– At the lowest possible organizational
level
 Rule 4: How to Improve

• How do you use the scientific

method?
– Frame problems using first three rules
– Formulate and test hypotheses
– Question assumptions
– Don’t confuse goals with predictions
based on hypotheses
e.g. Reducing changeover time by two-thirds
 Rule 4: How to Improve

• Who does the improvement?

– Frontline workers, with assistance from
supervisors
– Problem scale determines how many
organizational levels are included in the
solution
• Toyota’s commitment to learning
– Operations Management Consulting Division
(OMCD)
– Toyota Supplier Support Center (TSSC)
 Notion of the Ideal

• People motivated by a common goal

– Sense of what the ideal production
system would be
– Make improvements beyond what is
“necessary”
• Very pervasive
• Essential to the Toyota Production
System
 Notion of the Ideal

• Concrete Definition:
– The output of an ideal person, group of
people, or machine:
• Is defect free;
• Can be delivered one request at a time;
• Can be supplied on demand in the version
requested;
• Can be delivered immediately;
• Can be produced without waste;
• Can be produced in a safe work
environment.
 Organizational Impact of the Rules

• The rules create an organization with

a nested modular structure by:
– Making people capable and responsible
for their own work
– Standardizing connections between
individual customers and suppliers
– Pushing the resolution of connection and
flow problems to the lowest possible level
 Organizational Impact of the Rules

• Benefit: People can implement design

changes in one part without unduly
affecting other parts
– Toyota can delegate a lot of responsibility
without creating chaos
Lean Implementation Requirements: Design 12-49

Flow Process

• Link operations
• Balance workstation capacities
• Redesign layout for flow
• Emphasize preventive maintenance
• Reduce lot sizes
• Reduce setup/changeover time
 12-50

Lean Implementation Requirements: Total Quality

Control

• Worker responsibility
• Measure SQC
• Enforce compliance
• Fail-safe methods
• Automatic inspection
 12-51
Lean Implementation Requirements:
Stabilize Schedule

• Level schedule

• Underutilize capacity

• Establish freeze windows

Lean Implementation Requirements: Work
with Vendors

• Reduce lead times

• Frequent deliveries

• Project usage requirements

• Quality expectations
Lean Implementation Requirements: Reduce
12-53

Inventory More

• Look for other areas

• Stores

• Transit

• Carousels

• Conveyors
Lean Implementation Requirements: Improve
12-54

Product Design

• Standard product configuration

• Standardize and reduce number of

parts

• Process design with product design

• Quality expectations
 12-55
Lean Implementation Requirements:
Concurrently Solve Problems

• Root cause

• Solve permanently

• Team approach

• Line and specialist responsibility

• Continual education
Lean Implementation Requirements: Measure Performance

• Emphasize improvement
• Track trends
"We are drowning
in information
but starved for
knowledge.“
-- John Naisbitt
 Costing Simplification
Accurate and scalable global manufacturing costing
process that enables enhanced management
decision making and operational analysis.
• Simplify and standardize processes across regions and
businesses
• Focus on manufacturing efficiencies and cost control
• Drive improved global sourcing and production decisions

• Support appropriate pricing levels across products and

customers

• Enhance understanding of customer and product level

profitability
 CONVERSION COST MODELS

• Cost drivers can be grouped into three categories

– Batch size
– Cycle time
– Complexity
• Proposed models utilize these same inputs
– Equation Model
– Cube Model
• Goal to balance accuracy and level of effort
– Prove through testing at multiple plants and
technologies
– Must have a methodology to support annual standard
updates
 EQUATION MODEL
Cost Per Gal vs Batch Size
6,000 Cost Per Batch vs Batch Size
2.000
5,000
4,000 1.500

3,000 1.000
2,000
1,000 0.500

- -
- 2,000 4,000 6,000 8,000 - 2,000 4,000 6,000 8,000

Cost/Batch = (A + B * X) * Y * Z Cost/Gal = ((A + B * X) * Y * Z )/ X

Where: Notes:
A = per batch $ cost per cycle time hour Constant for each plant or region
B = per gal $ cost per cycle time hour Constant for each plant or region
X = Batch size in gals Product specific
Y = Batch cycle time in hours Product specific
Z = Formula difficult factor (avg = 1.0) Product specific

Plant cost center is broken into fixed and variable and then determined to be a cost/batch
or a cost/gal. These are used to calculate A & B for a plant.

•Components on continuum—no batch size buckets

•Allocates both fixed and variable costs as appropriate by batch
and/or gal
•Potential to have multiple difficulty factors (confirm during
testing)
•Option to simplify inputs
 COST CUBE MODEL

Batch Size Range = Small, Med, Large

Cycle Time = Short, Med, Long
Complexity *= Simple, Avg, Difficult

*Complexity factors may include: QC,

filling requirements, special operator
requirements

•Fewer inputs – simple vs precision

•Creates 27 discreet cost buckets
•Potential of multiple cubes within a plant to align
with production processes
•Complexity factor needs will be confirmed during
testing
 Summary/Homework
A bottleneck process’s regular operating time is 460 minutes.
Design completion time per unit is 54 seconds. Assume that a
cutting tool can use 20 units in 120 seconds. Provided the cycle
time of this process is 96 seconds, daily customer demand is 500
units
- Could the company satisfy its customer demand? Why?
- What may cause this situation (list down as much as possible) ?
- How should they do to fulfill customer demand? Propose your
solutions
 Team Project Presentation
Propose your day of presentation
Email your report and presentation files 02 working days before
class day (Only print out once completed)
All member must involve
Learn from and comment on other project is highly appreciated
With your team consensus, add the following data to your report
# Full Name Contribution (%)
1  
2  
.  
n  
Total 100%

Thank, good lucks and see you

all!