December 2010

Process Improvement

and Production

Systems A literature study

Course Project: Logistics and production systems

Prepared by: Mansour Ahmadi

Masoud Zafarzadeh

Yigit Can Ciniviz

Anil Gunaydin

1

Preface

This research discusses ways operational activities support the business

strategy and enhance competitiveness: the Material Requirement Planning and

continuous improvement of business processes. To put our discussion in

perspective, we begin with an improvement strategy, Six Sigma. Next, each

phase in six sigma’s DMAIC approach is discussed in more detail. In the next

chapter, we talk about MRP and present a detailed approach toward it. In the

third chapter we continue our discussion of process improvement strategies

and address the second process improvement strategy, namely lean. The trend

toward integrating Just in time production system and lean will also be

discussed in that chapter.

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Chapter 1;

Process Improvement:

Minimizing Variation

Through Six Sigma

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Table of contents:

1. Abstract ______________________________________________________ 4

2. Introduction ___________________________________________________ 4

3. DEMAIC Approach ______________________________________________ 4

3.1 Define Phase ________________________________________________________________ 5

3.1.1 Project Selection ___________________________________________________________________ 5

3.1.1.1 Brainstorming _________________________________________________________________ 5

3.1.1.2 Multi-Voting ___________________________________________________________________ 5

3.1.1.3 The Pareto Chart _______________________________________________________________ 6

3.1.2 Analysis of the Customer’s Voice ______________________________________________________ 6

3.1.3 Value Stream Mapping ______________________________________________________________ 7

3.1.4 Identification of Quick Wins __________________________________________________________ 7

3.2 Measure Phase ______________________________________________________________ 7

3.2.1 Determining X Variables _____________________________________________________________ 7

3.2.1.1 Cause & Effect Diagram __________________________________________________________ 7

3.2.1.1 Cause & Effect Matrix ___________________________________________________________ 8

3.2.1.2 Data Types and Sampling ________________________________________________________ 8

3.2.2 Measurement System Analysis (MSA) __________________________________________________ 9

3.2.3 Operational definition & Data collection plan ____________________________________________ 9

3.2.4 Baselining the Y Data ______________________________________________________________ 10

3.3 Analyze Phase ______________________________________________________________ 10

3.3.1 Data distribution __________________________________________________________________ 11

3.3.2 Variation ________________________________________________________________________ 11

3.3.3 5 why’s __________________________________________________________________________ 11

3.3.4 Regression _______________________________________________________________________ 11

3.4 Improve Phase _____________________________________________________________ 11

3.4.1 Design of Experiments _____________________________________________________________ 11

3.4.2 Taguchi Methods __________________________________________________________________ 12

3.5 Control Phase ______________________________________________________________ 12

3.5.1 Control chart _____________________________________________________________________ 12

3.5.2 Out of Control Action Plan __________________________________________________________ 12

4. DMADV Approach _____________________________________________ 13

5. Case Study; Six Sigma at ABB ____________________________________ 14

6. Conclusion ___________________________________________________ 15

7. References ___________________________________________________ 15

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1. Abstract The research starts with an introduction on Six Sigma. DMAIC approach is explained in details, with

its tools and deliverables in each phase then. A summary about DMADV and its application comes

later and our discussion is closed by a case study at ABB and a conclusion.

2. Introduction The Six Sigma concept firstly was developed by Bill Smith, a senior engineer at Motorola, in

1986 as a way to standardize the way defects were tallied. In the famous book The Six Sigma

Way, Six Sigma is defined as:

A comprehensive and flexible system for achieving, sustaining and maximizing

business success. Six Sigma is uniquely driven by close understanding of customer

needs, disciplined use of facts, data, and statistical analysis, and diligent attention to

managing, improving, and reinventing business processes. (P. xi)

Arguably, one reason for the success of Six Sigma programs where others have failed is

that Six Sigma prepares a structured, logical and disciplined approach to problem

solving. Although there are different methodologies for using in Six Sigma such as

Theory of Inventive Problem Solving, Lean, 5 whys, Ford 8Ds and Is/Is Not Cause

Analysis, DEMAIC and DMADV have shown to be powerful framework accompany with

Sigma metrics. Define, Measure, Analyze, Improve and Control comprise the major

phases of DEMAIC approach which usually used for enhancement the existing systems.

In product or process development DMADV is usually applied which contains Define,

Measure, Analyze, Design and Verify. However lots of tools and techniques are using in

different stages of mentioned methods.

3. DEMAIC Approach In fact DEMAIC method is adaptation of scientific method to process improvement;

gathering information to make decision and verify decision before committing business

resources.

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3.1 Define Phase

The primary goal of Define phase is that Six Sigma team focused on the right issue to be

improved. The main deliverables of Define phase are:

Project Selection

Team Charter

Analysis of Customer’s Voice

Critical Measures of Quality and Process

Value Stream Map

Quick Wins Identification

3.1.1 Project Selection

A good Six Sigma project should:

Impact a key business goal

Require analysis to uncover the root cause of the problem

Benefit from the application of statistical tools (e.g. data is available or can be made available for decision-making purposes)

Have cross-function or cross-business impact

Address a source of customer pain or dissatisfaction

Focus on improving a key business process

Produce quantifiable results (e.g. financial savings, customer satisfaction)

Be able to be completed in time to make a difference to the business goal

Be scoped so that results can be achieved in 4-6 months The Six Sigma team members should be determined and the Team charter must be prepared. The Team Charter is used to clarify the project for team members, leader, sponsor and stakeholders. It contains Documented Business Case, Opportunity for Improvement, Goals, Scope, Timeline and Members of the Project Team. Then, following Methods are utilized to specify the project topic.

3.1.1.1 Brainstorming

Brainstorming is almost the most popular team tools and most of the people know its rules:

The topic of the brainstorming session should be clearly stated. Individuals are allowed to complete suggestions or thoughts without interruption or

critique. Suggestions should be kept as brief as possible to maintain a fast pace. The primary goal is to generate a quantity of ideas. The focus is building on suggestions of others, as well as generating new ideas. An environment of creativity and innovation is encouraged.

3.1.1.2 Multi-Voting

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While brainstorming is used to generate a number of issues, Multi-Voting is applied to narrow the list of items. In this method, usually each member can vote for a fraction of items, e.g. half of them, and at the end a number of Choices which got more ballots, will be selected.

3.1.1.3 The Pareto Chart

The Pareto Chart is a bar chart in which the bars are for a group of issues and their height indicates the frequency of occurrence. The Idea motivating this chart is that 80% of the count will be due to 20% of the categories. The team may create a Pareto chart and choose the tallest bar as the area of opportunity to be addressed on their project.

3.1.2 Analysis of the Customer’s Voice

In the Define phase, the team has to clearly understand what the process requirements are. This involves listening to Voice of the Customer and Voice of the Business and translating these data into measures called Critical to Quality and Critical to Process measures. The VOC data are what the customer wants and needs and could be gathered from reference databases, listening posts and research methods. The team may hear from a variety of customers, but not all customers’ voice brings equal value to business; thus the team should determine the customers to listen to. In the next step, the VOC data should be classified in three categories based on Kano Analysis; Must Be’s, Primary Satisfiers and delighters.

Then, this information translates to Critical Customer Requirements or CCR’s. A CCR is a specific characteristic of the product or service demanded by customer. CCR must be measureable with a target and an allowable range. However, usually CCR is too high and needs to be broken down to more detailed measures called Critical to Quality (CTQ) measures. For instance, the customer may require the cycle time from order to delivery to

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be one month. Since the team may only be working on one piece of the total process for that cycle time, their CTQ may be the cycle time for their process, e.g. the order entry process.

3.1.3 Value Stream Mapping

Depiction of Process Map in order to discriminate the Value-added tasks from Non Value-Added ones, called Value Stream Mapping. Usually it starts with the drawing of key positions and processes in the organization as Squares. The information and material flow among these parts are showed by arrows then. The production rate, batch size, cycle time and other relevant data are added later in the tables below each process. Finally different activities are classified to Value-added and Non Value-added based on their Value for the customer. The six Sigma team should highly concentrate on Non Value-Added ones to eliminate or minimize them.

3.1.4 Identification of Quick Wins

For many processes that haven't been under continuous improvement, some fixes may be obvious. The team should address these obvious fixes; they may add to the team's motivational level and may help convince others of the importance of the project. These fixes are called Quick Wins.

3.2 Measure Phase

The team needs to collect data to measure the current state of CTQ or CTP and determine their baseline. The deliverables of Measure Phase are:

X & Y data to be collected Measurement system analysis Operational definition & Data collection plan Baseline Data

3.2.1 Determining X Variables

The X variables are the data which affect the Y’s, here CTQ’s and CTP’s. The team measures the CTQ and CTP to set the baseline, while collecting the X data concurrently to analyze their relationships later. There are different methods for determination of X’s such as Cause & Effect Diagram and Cause & Effect Matrix.

3.2.1.1 Cause & Effect Diagram

It is also known as the Fishbone Diagram. The CTQ or CTP is placed on the head of the fish and the potential X’s are brainstormed to be labeled on bones. However, the typical bones are People, Machine, Materials, Environments and methods. It is important to draw one

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fishbone diagram for each CTQ or CTP. The following figure shows the start of Cause and Effect Diagram on Cycle time for lab results in a hospital.

3.2.1.1 Cause & Effect Matrix

Usually two methods are used to determine the most relevant X’s to be measured; multi-voting (that was illustrated in define phase) and Cause & Effect Matrix.

In a Matrix, Y’s are written as columns and X’s as Rows. Different weights are assigned to Y’s and correlation rates (from a predetermined range) among X’s and Y’s are entered in the cells. Finally the summation of multiplication between correlations and weights for each X is calculated and the X’s with bigger points are chosen for Data Collection.

3.2.1.2 Data Types and Sampling

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The X or Y can be from two type variables: Discrete or Continuous. The team should try to find continuous variables or change the existing ones in the way to become continuous. Usually continuous variables need smaller sample size and there are more statistical tools and methods for analyzing them. Since examination of whole items or population is not possible, the team has to take samples. A good sample should be a correct representative from its population. Usually it depends on the sample size; however the team should consider the time, effort, availability and possibility of big size sampling. There are three important attributes for continuous variables: the center of the data, the spread of the variability and the shape of data distribution. The center can be measured by the mean or median. A sample mean is defined as below:

∑

The spread of the data are measured by Variance as below:

∑

3.2.2 Measurement System Analysis (MSA)

MSI is done to verify the measurement system produces valid data. A measurement system is defined as:

“The collection of operations, procedures, gauges and other equipment, software, materials, facilities and personnel used to assign a number to the characteristic being measured”

For a continuous measurement, there are a variety of statistical properties that can be determined: stability, bias, precision (which can be broken down into repeatability and reproducibility), linearity, and discrimination. For a discrete measurement, estimates of the error rates can be determined for within appraiser, each appraiser versus standard, between appraisers, and all appraisers versus standard. The team may not be able to conduct a formal measurement system study. However, they should still review the measurement system and consider ways in which the data produced may have error. Software packages can help with the analysis of data from a measurement study for both continuous and discrete data.

3.2.3 Operational definition & Data collection plan

Data collection could be difficult. To simplify the process, the team should prepare operational definition, data collection plan and maybe data collection form. To have reliable and consistent measurement, each Y should possess a single, agreed-upon definition. The plan also specifies when, where, who, what and how data should be gathered to be valid. In addition, most teams need to gather data manually; thus they have to developed simple, straightforward forms to minimize errors. Data collection is a key determiner of Six Sigma projects’ time; therefore it is quite important to select the best choice in each stage to avoid reworking or prolongation.

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3.2.4 Baselining the Y Data

The team should set baseline for current process in the terms of CTQ’s and CTP’s. A variety of metrics can be used for this purpose, but here we will talk about Sigma Level, and .

Sigma Level is based on a calculation of defects per million opportunities (DPMO). Opportunity is a chance for defect to occur per unit. Then we have:

is the potential capability indicating how well a process could be if were

centered on target.

does take into account the location of the data by considering the

closeness of the mean to the specifications limit.

[

]

3.3 Analyze Phase

In this phase the team determines the root causes of the problems of the

process.

The team must choose the right tools to identify these root causes. The

tools chosen are based on the type of data that were collected and what

the team is trying to determine from the data. The team should use a

combination of graphical and numerical tools. The graphical tools are

important to understand the data characteristics and to ensure that the

statistical analyses are meaningful (e.g., not influenced by outliers). The

numerical (or statistical) analyses ensure that any differences identified in

the graphs are truly significant and not just a function of natural variation.

There are a variety of graphs that can be used to better understand the data in addition to

the Pareto chart presented earlier: histograms, boxplots, dotplots, scatter plots, run charts

and multi-vari charts. Each graph has its own purpose.

Defects per million

Sigma Level

5.4 5.9

8.5 5.8

13 5.7

21 5.6

32 5.5

48 5.4

72 5.3

108 5.2

159 5.1

233 5

337 4.9

483 4.8

687 4.7

968 4.6

1350 4.5

1866 4.4

2555 4.3

3467 4.2

4661 4.1

6210 4

8198 3.9

10724 3.8

13903 3.7

17864 3.6

22750 3.5

28716 3.4

35930 3.3

44565 3.2

54799 3.1

66807 3

80757 2.9

96801 2.8

115070 2.7

135666 2.6

158655 2.5

184060 2.4

241964 2.2

274253 2.1

308538 2

344578 1.9

382089 1.8

420740 1.7

460172 1.6

500000 1.5

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3.3.1 Data distribution

The most common and useful distribution of the data is Normal Distribution. Other

commonly used distributions are exponential, chi-Square, F, Student’s t, Poisson and

binomial. Fitting techniques are applied to find which distribution is appropriate for a

particular set of data.

In many situations, Normal distributions can fit well to our data set. Sometimes a

transformation of our data, like Log or Square of them has this distribution. Using The

Central Limit Theorem also is useful when we deal with average of our samples. Nowadays,

software provides the teams with some tests for determination of data sets’ normality.

3.3.2 Variation

Unfortunately most companies only pay attention to average and neglect variation. A high

variation process brings about lots of cost for company, since they always should inspect

and assess their products and be worry about customer dissatisfaction, while a consistent

process is much more reliable and comfortable.

3.3.3 5 why’s

This technique is usually collocated with Cause & Effect Diagram or Matrix. Via 5 why’s, the

team should ask as much why’s to get to the deepest cause of problem. In the Analyze

phase, it can be used to find the source causes of X variables.

3.3.4 Regression

Regression is also a method to depict causal diagrams. Linear, multi variable, non-linear and

correlations are different types of regressions. Via regression the relationship between

different variables could be identified.

3.4 Improve Phase

Having defined the problem, measured the process‘s current performance and analyzed

them, now the team should provide some solutions and assess them to improve the present

situation.

3.4.1 Design of Experiments

Perhaps the most common approach to assess the options is to investigate one factor at a

time. But It is difficult, if not possible, to draw valid conclusions about the impact of single

factor, while the other variables are not controlled or counted in.

One technique to overcome the above-mentioned difficulty is Design of Experiment. DOE

utilizes the principles of statistics to design experiments to investigate multiple process

variables simultaneously. With DOE techniques, multiple factors are varied and therefore

studied simultaneously, and repeated measurements are typically taken for each

combination of factor level settings. The major steps to perform a DOE are:

Determining which factors to include in the experiment.

Specifying the levels for each factor.

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Determining how much data to collect.

Determining the type of experimental design.

3.4.2 Taguchi Methods

According to Taguchi, most of the quality of products and services are determined at the

design stage, and therefore the production system can affect quality only slightly. Taguchi

has devised a procedure for statistical testing to determine the best combination of product

and process design to make the output relatively independent of normal fluctuations in the

production system.

3.5 Control Phase

As the Six Sigma project proceeds to completion, the focus on the final phase move toward

preparation of procedures for controlling and monitoring the improved process, assuring

the higher level of performance is maintained and previous problems won’t be occurred.

3.5.1 Control chart

Control charts are used to investigate the process variation, finding out whether it is

common cause variation like different labors, or special cause variation like an unskillful

labor. The X axis is time and the Y axis is process performance which has three limits as

Mean, Upper Level (Mean + 3 Standard Deviation) and Lower Level (Mean - 3 Standard

Deviation). All observations are depicted on the chart, and any one which would be less that

LV or more than UL could be considered as special cause variation.

3.5.2 Out of Control Action Plan

An important tool to use with a control chart is an Out-of-Control Action Plan (OCAP). An

OCAP documents how instabilities will be detected and resolved. Below is an example of

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OCAP.

4. DMADV Approach DMADV was developed because of weaknesses of DMAIC for product and process

development. Studies show that the cost of change in preliminary stages of product

development is a fraction of the cost which should be afforded in production stage if a

change would be needed.

There are lots of similarities between DMAIC and DMADV, though the first three stages are

the same. Also, all the mentioned tools are applicable for DMADV. However the deliverables

of DMADV phases are different.

In the Define phase, the emphasis is on understanding the customers and the customers'

needs and wants. The Voice of the Customer is critically important in this phase.

In the Measure phase, the emphasis is on establishing metrics for the project and

developing the X's that are important.

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In the Analyze phase, initial design alternatives are developed.

In the Design phase, an approach is selected from among high level design alternatives

identified during the Analyze phase and an initial implementation plan is developed.

In the Verify phase, the team verifies that the design will meet the requirements.

5. Case Study; Six Sigma at ABB The two main interior parts of a transformer are the windings and the magnetic core. Each winding,

most often made of copper conductors and insulation of cellulose fiber products, is assembled

around the core. Depending on the size of the large transformers in question, the height of a

winding ranges from one to four meters, with the whole transformer ranging in weight from a

couple of tons upward.

A winding is manufactured by skilled operators winding the copper conductor according to a

pattern. The copper conductor is shielded by insulation. The finished winding had always been

considered “unpredictable” in terms of dimensions, because of the cellulose content of the

insulation and its sensitivity to moisture. Therefore, winding dimensions had to be adjusted after

manufacturing. “We have always done this-it is part of our business” was the old saying. A six sigma

improvement project was started.

Measure

Winding height was selected as the result variable, Y, with the parts making up winding height

(copper and insulation) constituting the input variables, X’s.

Analyze

The performance for winding height (Y) was measured and found to be poor, around 100,000 DPMO.

Copper (X1) was found to be good, less than 500 DPMO, whereas insulation (X2) always shows poor

DPMO values and therefore could be pinpointed as the cause of the winding height problem.

Hence, insulation became the focus of interest. Efforts were made to find the poor cause, by

measuring incoming material in much more detail than was done earlier so that accurate predictions

of winding height could be carried out when the windings were being wound. It was found through

the application of improvement tools, that incoming material was a special cause of variation for

winding height.

Improve

Discussions took place with suppliers on possible solutions. Appropriate improvement actions were

then taken by suppliers and ABB, based on facts and figures, for improving incoming material.

Control

The improvements in incoming material were verified by the ABB plants involved and they found

that the number of DPMO for winding height had been reduced dramatically. As a result, the

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winding could now be built to the correct dimension and height measurements without any costly

adjustments after manufacture.

“Before we entered Six Sigma, we never considered winding height adjustments to have

improvement potential”, was the conclusion drawn at the Spanish plant. Winding height has

thereafter been measured continuously and DPMO values reported from all plants.

6. Conclusion Although Six Sigma tools and techniques are not new and some of them are used for years in

industries and companies, the scientific structure which provided by Six Sigma for their application,

causes their effectiveness. Statistical analysis and thorough investigation make the breakthrough

improvements easier, while for slight enhancement Lean Method was developed before. It seems a

combination of Six Sigma and lean can fulfill the companies’ needs which are exerted by global

unstable business. Application of this method, called Lean Six Sigma, is already started by some

companies.

7. References

T. McCarty, M. Bremer, L. Daniels, P. Gupta. “The Six Sigma Black Belt Handbook”. McGraw-

Hill. 2004

J. R. Meredith, S. M. Shafer. “Operations Management for MBAs”. John Wiley & Sons. 2010

K. Magnussen, D. Kroslid, B. Bergman. ”Six sigma; The Pragmatic Approach”.

Studentlitteratur. 2003

Pande, P. S., R. P. Neuman, R. R. Cavanagh. “The Six Sigma Way”. McGraw-Hill. 2000

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Chapter 2;

Material

Requirement Planning

(MRP)

17

Table of Contents

Material Requirements Planning (MRP) _____________________________ 18

1. Abstract.............................................................................................................................. 18

2. Introduction: ....................................................................................................................... 18

3. TERMINOLOGY .................................................................................................................... 19

3.1Bill of material .......................................................................................................................................... 19

3.2 Level coding ............................................................................................................................................ 19

3.3 Lead time ................................................................................................................................................ 20

3.4Routing ..................................................................................................................................................... 20

4. Information required for MRP .............................................................................................. 20

5. The General Approach of MRP ............................................................................................. 21

6. The Information provided by MRP ....................................................................................... 22

7. Low-value, Common-usage Items ......................................................................................... 23

8. Pegging ............................................................................................................................... 23

9. Coping with Uncertainty in MRP .......................................................................................... 23

10. Weaknesses of MRP........................................................................................................... 24

11. Example of implementing MRP .......................................................................................... 24

11.1 Identification of problems Suggestions for their solution .................................................. 26

References: ____________________________________________________ 28

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Material Requirements Planning (MRP)

1. Abstract

For manufacturing company to meet customer need for delivery time there are two main

approaches:

Reorder point system

Material requirement planning

In reorder point system companies define a order point, so when the inventory level is less

than order point, replenishment starts. The order point defined based on that the existing

inventory can meet customer demands. Also the order size depends on price, discount,

annual demand etc. It should be mention that behind every reorder point there is an

assumption of a future demand.

In MRP for each end-item a master production schedule is created specified with delivery

times and order quantities from a forecasted demand.

2. Introduction:

Material requirement planning provide a situation to guarantee material availability, which

is used to produce requirements planning on time for internal or external customer.

Monitoring of stocks and specially automatic creation of procurement proposals for

purchasing and production are the basement of MRP.

MRP try to make a optimized balance between

optimizing the service level and

minimizing costs and capital lockup.

MRP would help MRP controllers to do their job as best as possible in field of specifying the

type, quantity, and time of the requirement, in order to calculating when and what quantity

an order proposal has to be created to cover these requirements. since MRP controller

needs al information on stocks, stock reservations, and stocks on order to calculate

quantities, and also needs information on lead times and procurement times to calculate

dates. The MRP controller defines a suitable MRP and lot-sizing procedure for each material

to determine procurement proposals.

Material requirement planning was initially developed without any capacity checks or input

from other department; thus, the production plan was not believable to anyone outside of

production function. Closed loop MRP is an enhancement that includes capacity checks,

which was used iteratively with the master production schedule (MPS) and the component

to generate feasible schedule. Manufacturing resources planning, or MRPII, contains an

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additional enhancement that converts a number of outputs of production planning and

quality control into financial term.

Generally MRP take the master production schedule and extend it into implied detailed

production/ procurement schedule (timing and quantities) of all components and raw

materials. on the other hand it consist of change during time because of cancellation,

delivery time modification, etc; caused by different problems such as change in customer

order size, quality difficulties, and so on.

3. TERMINOLOGY

3.1Bill of material

To understand the exact meaning of demand we should comprehend the method of

calculating the needs in term of components for a product with lots of assemblies and

subassemblies. The bill of material will help us to achieve this goal.

In the so-called definition bill of material shows all of immediate components and their

numbers per unit of the parent for a specific item.

3.2 Level coding

It is describe by levels:

Level 0: A finished product doesn’t use as a component of any other product.

Level 1: A direct component of a level 0 item. (It should be mentioned that level 1 still can

be consider as a finished part, for example a car is a level 0 and a tire is a level 1, so the tire

can be used as component for car or sell dependently).

Level 2: A direct component of a level 1 item. (still can be consider as a component or

finished good)

.

.

.

Level n: A direct component of a level (n-1) item. (still can be consider as a component or

finished good)

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3.3 Lead time

In the manufacturing environment, lead time has the same definition as that of Supply Chain

Management, but it includes the time required to ship the parts from the supplier. The

shipping time is included because the manufacturing company needs to know when the

parts will be available for MRP . It is also possible for lead time to include the time it takes

for a company to process and have the part ready for manufacturing once it has been

received. The time it takes a company to unload a product from a truck, inspect it, and move

it into storage is non-trivial. With tight manufacturing constraints or when a company is

using JIT manufacturing it is important for supply chain to know how long their own internal

processes take.

3.4Routing

It would be necessary for each item to show what is the sequence of production operations

and the standard hours for each operation. The routing will do it.

4. Information required for MRP 1.The master production schedule (MPS) is carried out at the end item level and contains

the production schedule for all end items for each time period out to the planning horizon.

2. The inventory status of each item. Accurate stock status information is essential because

MRP, in contrast with traditional replenishment system, establishes the timing of

replenishments to keep inventories as low as possible.

3. The timing and quantities involved in any outstanding or planned replenishment orders

4. Forecasts of each component, subject to direct customer demand, by time period out to

the planning horizon.

5. All relevant bill of materials and associated codes.

6. All routings

7. Production or procurement lead time for each operation

8. Possible defects (scraps) allowance for each item (for example to assemble 100 of item A,

we need 105 of item B).

level

2

level

1

level

0 customer

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5. The General Approach of MRP

MRP try to solve the problem of traditional replenishment system through attention to

dependent demand of components and by considering erratic nature of the requirement of

the components. Also different components for different items are coordinated to keep

operation flowing even when there is a shortage of one element.

MRP begins with master production schedule that calculate the order release date and

number of goods of all end-items (level 0) on a discrete time basis (normally a one week

period is used). Bill of material show the immediate component items and the quantities per

unit of each parent item. Consequently a time series of requirements will achieve for the

level 1 items.

Then, for each level 1 item, the existing inventory position (number of products on hand and

already on order) is allocated against the gross requirements to produce a modified series of

requirement by time period, known as the net requirement of the end item

Figure 1 Cumulative gross & Net requirement

Figure 1 shows the graphic relationship among the inventory position, cumulative gross

requirements, and cumulative net requirement for a situation in which there are nonzero

gross requirement at the start of period 1,2,4,5 and there is an initial on hand inventory

with a replenishment due at the start of period 3. When the red line is above blue line there

are no positive net requirements; the gap between 2 lines shows the calculated on-hand

inventory. On the other hand when the blue line is above the red line, the gap between

those represent the cumulative net requirement. ‘The next step is to provide appropriate

coverage for the net requirement for the level 1 item under consideration by adjusting

previously scheduled replenishment actions, or by initiating new replenishment actions. In

0

2

4

6

8

10

12

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5

cumulative grossrequirement

replenishment arrival

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other words, net requirement are covered by planned receipt for replenishment lots. When

these are backed off over the lead time, such replenishment actions are then known as

planned order release. Possible adjustments include:

1. Increasing (or decreasing ) a replenishment quantity

2. Advancing (or delaying) an order due date

3. Canceling an order’.

A new action is dependent on the order quantity, the order release date, and the order

receipt date.

For calculating the timing and order size it would be possible to use heuristic methods. But a

very simple and common solution is to cover each net requirement with a separate

replenishment quantity. This is known as lot for lot (LFL) strategy. Also it is suitable for

under situations:

1. The requirement pattern is very erratic; that is, the only requirements are large

occasional quantities.

2. The production operation involved has a very low setup cost, usually the case in an

assembly operation.

When coverage is completed for level 1 item, the bill of materials shows which level 2 items

are used as components. So by using level 2 items it would be possible to indicate the order

release date and quantities of level 1 item. ‘Again any direct external demand for a level 2

item, as s direct component of any level 0 items, must be included to obtain the gross

requirement of that item. These requirements are then netted, covered, and so on.’

The mentioned method, continue to reach raw materials which, in turn, will be covered by

purchasing. Consequently gross requirement, net requirement, planned order receipt, and

planed order releases should be noticed. So, by order, contribute to the gross requirement

of the items immediate components. It is important to notice that the items are processed

by ascending level code order. Clearly computers are very efficient for the step by step

explosion of requirement at the next level implied by each individual-item coverage pattern.

6. The Information provided by MRP

MRP provide wide variety of information which are useful for managers and manufacturers

specially in unreliable environments which customer demand, scrap output, equipment

failures and etc. always are changing. The information includes:

1. Actual and calculated inventory status of every item.

2. Listing of released and planned orders by time period. This is useful for two purposes.

First, in a summery form it is a fed back to the aggregate planning stage of a

23

hierarchical planning system. Second, it is a necessary input for detailed capacity

requirements planning.

3. Rescheduling and cancellation notices. These are useful for both internal and external

production.

7. Low-value, Common-usage Items

In a situation that some items are with low value and lots of use such as bolts, washers and

nuts. In these cases the cost of MRP would be more costly than using a traditional

replenishment system. So it would be logical to use one of those old methods.

8. Pegging

There are some items that are the components of several other items. So using of MRP, will

leads to gross requirement on this item that are generated from a number of sources. In

some cases it is important to find which items generate how much of these requirements.

Particularly if shortage in one item will happen very soon it would be nice to know which

subassemblies, assemblies, finished products, customer orders will affected. To solve this

problem the production plan of an specific item should explode to gain gross requirement

on the next level items, these requirements are “pegged” with an identification of the item

making them. In pegging process there would be a need for more file space and data

processing effort. So this process only should use when the generated information is very

crucial. Even though processing information by computers are cheap now a days but the

cost of data input would be high.

9. Coping with Uncertainty in MRP

Obviously the impact of uncertainty on MRP is noticeable. The common idea is that safety

stocks are not efficient in dependent demand circumstances. But what can to do to avoid

shortage and excess inventory is through the adjustment of lead times, by expediting or,

more generally, by shifting priorities of shop and vendor orders.

In uncertain circumstances to stop lots of expediting it is important to consider safety stock

and safety time for dependent demand items. The effect is obvious when multiple

components should assemble to a final item, because most of the components arrive early.

Whybark and Williams (1976) provide considerable qualitative insight concerning four

general sources of uncertainty , these sources are:

1. Supply timing

2. Supply quantity (for example variable yield)

3. Demand timing

4. Demand quantity

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Number (2) and (4) involving quantity uncertainty, so the best solution is safety stock;

whereas safety time is more appropriate for number (1) and (3). Also it should be consider

that in quantitative analysis it would be so complex to determine the exact amount of safety

stock or safety time because the fluctuate of time and demand pattern. Summary guidelines

include the possible use of the following:

1. Safety stock in items with direct external usage

2. Safety stock in items produced by a process with a significantly variable yield

3. Safety stock in items produced at a bottleneck operation

4. Safety stock in certain semi finished items used for a myriad of end-items

5. Safety time in raw materials

Based on experience the common approach is to provide safety stock. Also this method

use for semi finished items and bottlenecks. Based onBazocatt and Shanthikunar (1994)

safety time is usable only when there is accurate forecast of future required shipments over

the lead time.

10. Weaknesses of MRP

Despite brilliant features of MRP it contains some weaknesses:

1. Lead times: to balance lead time, MRP system is given a lead time by the user for

each components

2. Lot sizes

3. Safety stock

4. Incentives for improvement

11. Example of implementing MRP

In Greece MRP has started to implement recently, among different companies Siemens Tele SA Co. As a pioneer in Greece in the field of application of MRP has been selected. The aim was to identify and analyze the practice of MRP use, in the case of Siemens. The major issues addressed were:

the organizational context before and after the implementation

the level of MRP usage,

the problems arising from its use, and

the resulting benefits. An in-depth interview was carried out with the managers of the organization’s departments involved in the design, implementation, and day-today operations of the system. The procedure followed was:

analysis of current situation concerning MRP,

identification of problems - suggestions for their solution,

evaluation of benefits. The annual revenues of Siemens Tele for 1994 amount to 44.700.000 Drs, with additional exports of 26%, and the number of employees comes to 400 (white collar 70, blue collar 330). main characteristics of the internal environment of the organization are the following:

the company-owned facilities since 1971

25

the high quality of the products as a result of the use of the Total Quality Management, based on the international standard IS0 9000,

the continuous training and retraining of personnel, in order to keep it updated on new technologies,

the implementation of new technologies in production planning and control,

the use of contemporary management

the knowhow transfer from the German company

the access and use of the required technical documents via an on-line link with the technical

databank in Siemens AG, Germany. An MRP system was installed 20 years ago in 1974, so an infrastructure of the

system exists. In 1992, Siemens, taking into consideration mostly cost and flexibility

criteria, decided, instead of up- grading the existing software, to adopt a new system.

Suitability of software and hardware is an important issue that has to be taken into

consideration. Software and hardware must fit the requirements of the company A

thorough requirements analysis and selection process took place by Siemens in Greece and

in Germany in order to choose a suitable software and hardware for production

planning and control (PPC). The hardware which is in use is based on a PC

architecture with 486 Dx processors. The planning production manager considers the PC

solution more flexible, demanding less specialized knowledge from users, easy to

maintain, and less costly than mainframes and minis. “PRODSTAR”, a French integrated

PPC system, was selected. Support for this system in Greece is offered by the

supplier’s representative. The factor of supplier’s support, although an important issue

according to Shoulders was not decisive for the system’s acquisition giving as reason the

existing expertise of the personnel. The proposal of the new MRP system was initiated

by the production managers and the German company, and was positively accepted

by the employees due to the familiarity of the previous system. A number of

employees were sent initially to France for training to the vendors and afterwards they

practiced the system in Germany where it was already in use. The official language used for

training as well as the version of the software was German. Linguistic confusion does not

exist, due to the fact that the German language is a prerequisite for employment in

Siemens. One year between installation and final implementation was needed for the

experienced employees to master the system, whereas for the new ones about 2 years. As

mentioned by Anderson et al. and Manthou ,users who comprehend the potentials of the

system, the way they will be affected, and the requirements to run the system

facilitate the transition period and minimize resistance to change. The users of the

system in Siemens feel comfortable with it and they are considered knowledgeable, and in

particular the vendor often uses the Siemens case as a prototype for other customers. Top

management showed a positive attitude towards the transition of the new system,

mainly due to the familiarity of the previous one. There is active participation of

management both from the German and Greek company, as well as common

management policy and continuous communication of the knowhow of every new

26

application. Through active participation, top management can motivate others and achieve

acceptance. Regular meetings between managers and executives of various functional

areas making MRP a high priority project increases participation and reflects

management’s support . In our case regular meetings take place with the managers

of other functional areas, but the responsibility of the operation rests with the

production planning department. Clear goals should be set and MRP should not be

selected in isolation from business strategy. Monitoring daily operational use, data

accuracy, and using performance measures assures attainment of expected benefits

and increases the level of performance For conducting every day operations in

Siemens, there are formal procedures whereas each month, with the use of heuristic

models, the goals for work measurements are set. In the case of variances, exception

reports are produced in order to identify the arising problems. In order to identify the

level of adoption and infusion of the MRP system in our case study, the classification

scheme used by Anderson et al. and slightly altered by Cooper and Zmud was taken

into consideration. MRP users were classified as A, B, C, D, based on how they use

the system. In level A the MRP system is characterized as MRP II and provides

strategic planning. In level B MRP is used for decision making by top management, in

particular for priority and capacity planning. Priority planning characterizes level C, and

order launching level D, which is mainly a data processing system. In our case the

level is characterized between B and C in relation to the extent of infusion and

adoption. Capacity planning is not used and MRP uses only the priority planning. As a

result the MPS is run once a month.

11.1 Identification of problems Suggestions for their solution

In this section problems concerning the MRP use in Siemens are identified, steps

taken by mangers to overcome these problems are explored and criticized, taking into

consideration other experiences. The quality of MRP output depends on the quality of data

input. Therefore the quality of planning is directly proportional to the accuracy and

structure of data held on the system, particularly demand determination, data on

current inventory and bill of material For the demand determination, Siemens gathers

the data from the marketing department in Athens (forecasts and customer orders).

The department of production planning, based on this information, prepares the MPS,

ignoring capacity planning. The absence of capacity planning affects the stability of

MPS, and MPS usually fluctuates, nearly an average of 10% inflated at the end of

production. A major problem emerges because of the character of the main customer

and the process for the order designation. Due to the fact that mainly the customers

belong to the Greek public sector, the orders are given after a bidding, the approval

of which usually takes a long time and depends on external factors (i.e. political,

economic). On the contrary, the required delivery time, after the approval, is very

short. The company follows a three-stage process to get an order: bidding, planning and

27

carrying-out. Due to the limited number of competitors, the practice is to consider the

potential customer order as already approved. The planning process begins by developing a

master schedule that indicates the timing and quantity of required finished items. The end

items are developed using the bill of materials prepared by the German company, and

furthermore material requirements plans are specified showing quantity and timing for

ordering or producing the components. The company takes the risk to order before

the confirmation and is forced to choose excess inventory instead of losing the

customer. The average lead time calculated by Siemens was 1/3 months. The use of the

bill of materials prepared in Germany creates problems, especially when there is a

long time interval between bidding and order approval. In the meantime, the

possibility of changes in code numbers and structure of items is great. In many cases,

bill of materials are outdated because design changes are not incorporated into the

records, leading to parts lists that do not correspond to actual requirements for the

assembly of the finished products. In our opinion the preparation of BOM should take

place in Greece, based on the framework used in Germany and adjusted to the

particular conditions of the Greek environment. The MRP system may be difficult to

implement because it depends heavily on the accuracy of data fed into the system,

particularly data on current inventory, bill of material and master schedules . In our

investigated case, the human factor is considered as the most important aspect for

the accurate and realistic input of data in order to achieve the efficient function of

the system. Day-today problems arise due to oversights of the involved personnel during

the interaction with the system, especially the ones responsible for updating the input

data, the bill of materials and the inventory records. It is not unusual for the firm to

discover that another part is being used without updating the records. Although

Siemens generally accepts the importance of training, it is limited mostly in the

department of production planning and in the middle/top level of management. Train-

ing in relation to the MRP system should involve managers of other departments (i.e.

marketing, sales, finance), as well as personnel involved with updating the inventory

records. This will improve the accuracy of data, and the communication between the

departments in relation to MRP. For its MRP system, Siemens uses as servers in ts NOVELL

network PCs with 486 processors. Although the network exhibits flexible behavior, it

sometimes suffers from slow time-responses and periodically the system hangs-up.

Certainly, a system based on a client/server architecture would be more appropriate,

since it is more flexible and quicker.

28

References: Edvard A. silver, David F.Pyke, Rein Peterson ”Inventory management and production

planning and scheduling”. John Wiley& Sons 1998

Andres Drexl, Alf kimms “Beyond manufacturing resource planning”. Springer 1997

The implementation and use of material requirements planning system in Northern

Greece: A case study, Vassiliki Manthou*, Maro Vlachopoulou, Petros Theodorou

29

Chapter 3;

Lean Production and

Just in Time

30

Table of Contents

ABSTRACT _____________________________________________________ 31

INTRODUCTION _________________________________________________ 31

DEFINITION OF LEAN MANUFACTURING _____________________________ 32

GOALS OF LEAN MANUFACTURING _________________________________ 33

LEAN MANUFACTURING PRINCIPLES & CONCEPTS _____________________ 35

WASTE ________________________________________________________ 39

OVER PRODUCTION ...................................................................................................................... 40

WAITING ...................................................................................................................................... 41

EXCESS INVENTORY ...................................................................................................................... 41

UNNECESSARY TRANSPORTATION ................................................................................................ 42

OVERPROCESSING/INAPPROPRIATE PROCESSING ......................................................................... 42

UNNECESSARY MOVEMENT .......................................................................................................... 42

DEFECTED PRODUCTS ................................................................................................................... 43

UNDERUTILIZATION OF HUMAN RESOURCE .................................................................................. 43

LEAN MANUFACTURING TOOLS AND METHODS _______________________ 44

JUST IN TIME (JIT) ......................................................................................................................... 44

BASIC AND KEY ELEMENTS OF JUST-IN-TIME ................................................................................. 45

BENEFITS OF JIT ............................................................................................................................ 47

JIT PURCHASING ........................................................................................................................... 48

JIT MANUFACTURING ................................................................................................................... 48

JIT DISTRIBUTION ......................................................................................................................... 49

KANBAN METHOD ........................................................................................................................ 49

STANDARDIZATION ...................................................................................................................... 50

TOTAL PRODUCTIVE MAINTENANCE ............................................................................................. 51

WORK CELLS ................................................................................................................................. 52

CASE STUDY ____________________________________________________ 53

SUMMARY _____________________________________________________ 55

REFERENCES ____________________________________________________ 55

31

ABSTRACT

This report begins with and introduction and definition of lean production. Then the

concepts and principles in the lean manufacturing are explained in detail. After that, tools in

the lean manufacturing are investigated. At the end, a summary about research and a case

study about the topic are written, and in the end of the paper references are provided.

INTRODUCTION

Lean manufacturing or lean production, often simply, "Lean," is a production practice that

considers the expenditure of resources for any goal other than the creation of value for the

end customer to be wasteful, and thus a target for elimination. Working from the

perspective of the customer who consumes a product or service, "value" is defined as any

action or process that a customer would be willing to pay for. Basically, lean is centered on

preserving value with less work. Lean manufacturing is a generic process management

philosophy derived mostly from the Toyota Production System (TPS) (hence the term

Toyotism is also prevalent) and identified as "Lean" only in the 1990s. It is renowned for its

focus on reduction of the original Toyota seven wastes to improve overall customer value,

but there are varying perspectives on how this is best achieved. The steady growth of

Toyota, from a small company to the world's largest automaker has focused attention on

how it has achieved this.

Lean manufacturing is a variation on the theme of efficiency based on optimizing flow; it is a

present-day instance of the recurring theme in human history toward increasing efficiency,

decreasing waste, and using empirical methods to decide what matters, rather than

uncritically accepting pre-existing ideas. As such, it is a chapter in the larger narrative that

also includes such ideas as the folk wisdom of thrift, time and motion study, Taylorism, the

Efficiency Movement, and Fordism. Lean manufacturing is often seen as a more refined

version of earlier efficiency efforts, building upon the work of earlier leaders such as Taylor

or Ford, and learning from their mistakes.

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DEFINITION OF LEAN MANUFACTURING

For many, Lean is the set of "tools" that assist in the identification and steady elimination of

waste (muda). As waste is eliminated quality improves while production time and cost are

reduced. Examples of such "tools" are Value Stream Mapping, Five S, Kanban (pull systems),

and poka-yoke (error-proofing).

There is a second approach to Lean Manufacturing, which is promoted by Toyota, in which

the focus is upon improving the "flow" or smoothness of work, thereby steadily eliminating

mura ("unevenness") through the system and not upon 'waste reduction' per se. Techniques

to improve flow include production leveling, "pull" production (by means of kanban) and the

Heijunka box. This is a fundamentally different approach from most improvement

methodologies, which may partially account for its lack of popularity.

The difference between these two approaches is not the goal itself, but rather the prime

approach to achieving it. The implementation of smooth flow exposes quality problems that

already existed, and thus waste reduction naturally happens as a consequence. The

advantage claimed for this approach is that it naturally takes a system-wide perspective,

whereas a waste focus sometimes wrongly assumes this perspective.

Both Lean and TPS can be seen as a loosely connected set of potentially competing

principles whose goal is cost reduction by the elimination of waste. These principles include:

Pull processing, perfect first-time quality, Waste minimization, Continuous improvement,

Flexibility, Building and maintaining a long term relationship with suppliers, Autonomation,

Load leveling and Production flow and Visual control. The disconnected nature of some of

these principles perhaps springs from the fact that the TPS has grown pragmatically since

1948 as it responded to the problems it saw within its own production facilities. Thus what

one sees today is the result of a 'need' driven learning to improve where each step has built

on previous ideas and not something based upon a theoretical framework.

Toyota's view is that the main method of Lean is not the tools, but the reduction of three

types of waste: muda ("non-value-adding work"), muri ("overburden"), and mura

("unevenness"), to expose problems systematically and to use the tools where the ideal

33

cannot be achieved. From this perspective, the tools are workarounds adapted to different

situations, which explains any apparent incoherence of the principles above.

GOALS OF LEAN MANUFACTURING

While the elimination of waste may seem like a simple and clear subject it is noticeable that

waste is often very conservatively identified. This then hugely reduces the potential of such

an aim. The elimination of waste is the goal of Lean, and Toyota defined three broad types

of waste: muda, muri and mura; it should be noted that for many Lean implementations this

list shrinks to the first waste type only with corresponding benefits decrease. To illustrate

the state of this thinking Shigeo Shingo observed that only the last turn of a bolt tightens

it—the rest is just movement. This ever finer clarification of waste is key to establishing

distinctions between value-adding activity, waste and non-value-adding work. Non-value

adding work is waste that must be done under the present work conditions. One key is to

measure, or estimate, the size of these wastes, to demonstrate the effect of the changes

achieved and therefore the movement toward the goal.

The "flow" (or smoothness) based approach aims to achieve JIT, by removing the variation

caused by work scheduling and thereby provide a driver, rationale or target and priorities

for implementation, using a variety of techniques. The effort to achieve JIT exposes many

quality problems that are hidden by buffer stocks; by forcing smooth flow of only value-

adding steps, these problems become visible and must be dealt with explicitly.

Muri is all the unreasonable work that management imposes on workers and machines

because of poor organization, such as carrying heavy weights, moving things around,

dangerous tasks, even working significantly faster than usual. It is pushing a person or a

machine beyond its natural limits. This may simply be asking a greater level of performance

from a process than it can handle without taking shortcuts and informally modifying

decision criteria. Unreasonable work is almost always a cause of multiple variations.

To link these three concepts is simple in TPS and thus Lean. Firstly, muri focuses on the

preparation and planning of the process, or what work can be avoided proactively by design.

Next, mura then focuses on how the work design is implemented and the elimination of

34

fluctuation at the scheduling or operations level, such as quality and volume. Muda is then

discovered after the process is in place and is dealt with reactively. It is seen through

variation in output. It is the role of management to examine the muda, in the processes and

eliminate the deeper causes by considering the connections to the muri and mura of the

system. The muda and mura inconsistencies must be fed back to the muri, or planning,

stage for the next project.

A typical example of the interplay of these wastes is the corporate behavior of "making the

numbers" as the end of a reporting period approaches. Demand is raised to 'make plan,'

increasing (mura), when the "numbers" are low, which causes production to try to squeeze

extra capacity from the process, which causes routines and standards to be modified or

stretched. This stretch and improvisation leads to muri-style waste, which leads to

downtime, mistakes and back flows, and waiting, thus the muda of waiting, correction and

movement.

The original seven muda are:

Transport (moving products that is not actually required to perform the processing)

Inventory (all components, work in process and finished product not being

processed)

Motion (people or equipment moving or walking more than is required to perform

the processing)

Waiting (waiting for the next production step)

Overproduction (production ahead of demand)

Over Processing (resulting from poor tool or product design creating activity)

Defects (the effort involved in inspecting for and fixing defects)

Later an eighth waste was defined by Womack et al. (2003); it was described as

manufacturing goods or services that do not meet customer demand or specifications.

Many others have added the "waste of unused human talent" to the original seven wastes.

These wastes were not originally a part of the seven deadly wastes defined by Taiichi Ohno

in TPS, but were found to be useful additions in practice. For a complete listing of the "old"

and "new" wastes see Bicheno and Holweg (2009). Some of these definitions may seem

35

rather idealistic, but this tough definition is seen as important and they drove the success of

Toyota Production System (TPS). The clear identification of non-value-adding work, as

distinct from wasted work, is critical to identifying the assumptions behind the current work

process and to challenging them in due course.

LEAN MANUFACTURING PRINCIPLES & CONCEPTS

Lean manufacturing defines the value of a product or a service with the customer point of

view. Customers do not mind how hard you work or what is the technology you used to

create the product or service you are selling to them. They will evaluate your product or the

service by looking at how well this is going to fulfill their requirements.

Customers do not need to pay for the quality defects you have removed from your

production lines. They also do not need to pay for the huge amounts of Over-Head costs you

have back in your facility. They will pay for the fulfillment of their requirements with the

product or service you are providing to them.

When any manufactures produce a good quality product it will cost them much low than

producing a low quality one, since all the costs related to maintain the quality checks,

replace the damages should be saved. However, in the today’s markets they refer to the

better quality among the lower quality ones. The quality is not embedded from the

36

manufacturing. Quality products are chosen among the average or bad quality products.

Therefore it is obvious that the customers will define the value differently to the

manufacturer. It does not matter much how valuable the product or service to the

manufacturer. What does matter is how valuable they are for the customer.

The obvious wastes in the organization are product with defects, bundle of waste papers, a

light turned on unnecessarily or even a person taking a private call from the office

telephone. These wastes are just includes the 30% of total waste in an organization. Even

the best lean manufacturers have hidden or yet to be discovered wastes at least 70% of

their resources.

Knowing the scale of the wastes, it is worthy to know exactly what a waste is according to

lean manufacturing. In lean manufacturing, the wastes are defined as anything which does

not add value to the end product. Customers do not mind how much it costs you to repair

damage, cost for your huge stocks and stores or other over heads.

There are some unavoidable wastes due to some reasons such as technical concerns or

financial concerns. However, most of the wastes are avoidable. Most of them are avoidable

with very little effort, if you can see them as wastes.

When you identify the wastes and categorize them in to avoidable and unavoidable,

someone have to think about removing the wastes from the system. Lean manufacturing

always talks about removing, not minimizing. These two words have very different

meanings. Whenever you talk about minimizing, it implies that there are wastes in the

system in different quantity. However, what lean manufacturing does is, aims to remove the

wastes from the system.

Every problem in the system has a cause for it. Sometimes there can be more than one root

cause for a problem. One root cause can even contribute to more than one problem. For

example if you have frequent machine breakdowns, the root cause for this might be low

skilled maintenance people. To overcome this problem the organization should improve the

skills of the workers with teaching and training rather than firing the maintenance workers.

This method is the principle of lean manufacturing problem solving strategy.

37

When you clearly understand the problems and their causes, then it is the time to find out

the solutions. There are many ways that you can find solutions in lean manufacturing. Lean

manufacturing solutions are more often very simple and effective. This kind of problem

solving requires people who can think different and in a creative way.

When you find the solution to the problem, then it is the time to implement the solution,

and to make sure that you achieve your objectives.

Problems are solved in this way over and over again. This is the cyclic concept of lean

manufacturing. Also lean manufacturing believes that each and every activity is

interconnected. Therefore, an advancement in one place will increase the system as a

whole. This cycle of identifying, finding root causes, finding solutions and implementing will

go on. This process will continuous until there are no wastes to be removed. However, this

cycle will never end in real manufacturing systems. One must have increments in total

productivity every day. Lean manufacturing give priority to the simple, small, continuous

improvement, rather than big innovations. There is enough room to absorb big

advancements in the system. However, the priority is to set for the continuous

improvement. These improvements might be very simple as adjusting the height of a seat or

changing the position of the tools which you use frequently. Every simple improvement will

improve the system as a whole. Lean manufacturing is the way of never ending continuous

improvement. This is also known as the “Kaizen” in lean manufacturing.

Team building is one of the most important aspects of lean manufacturing. Lean

manufacturing treats the organization as a single unit. Therefore departmental thinking will

not be good in lean manufacturing. This is applicable to individuals working in the

organization. They are lead to the ultimate objective of the organization, with various job

functions. They are made into teams sometimes cross functional teams to accomplish the

objectives of the organization.

Every job has to be supported by many other people. Therefore no organization can succeed

if the workers are only concentrated about themselves, and play individually. This is why

almost all the organizations are trying to build the team working culture in their

organization. Good team means better future. So it is crucial to learn the art of team

building to survive in today’s tough, competitive world.

38

If someone is not a good team member, she will not change overnight and will not become

good team members. Top management must set the goals and must communicate these

goals with their subordinates. Even setting the goals after talking to subordinates will help

immensely in achieving them. After setting the goals you have to guide and lead people to

achieve these goals and objectives. Therefore leadership is immensely important in lean

manufacturing. Lean manufacturing is something much to do with hearts and minds of the

people, rather than the equipments and capital. Therefore managing and leading the human

resource has paramount importance.

When your organization is in the changing phase from conventional manufacturing to lean

manufacturing, there could be big resistance to change from the people. Not only floor level

workers, but also the management may give you tons of negative inputs regarding the

change. This is known as the resistance to change, and this is because of the human nature.

If the organization can manage this and it will be able to drive out the fear from the hearts

of the people and will be able to get best out from the change.

When organization is changed from conventional to lean manufacturing, people tend to

relax and go flat. So in order to refresh them continuously and getting best out of them, the

organization has to motivate them continuously. It should understand the requirements of

the people, and talk to their requirements and fulfill them. All the individuals love to be on

their own and get direct credit for their work. In a team working environment there is a

strong possibility of talented people get de-motivated. So it is very necessary to give some

attention to individuals with very high talents. Maslow’s need hierarchy is one way to

understand the requirement of the people better. According to this hierarchy people have

an order of requirements where only when the lower a level need is satisfied they will look

into higher level needs. For example, a human being will not look to satisfy their esteem

needs until their basic requirements like food, water and shelter is satisfied. Actually it is an

art and a science not only to motivate others but also motivating yourself.

After setting up the facility to fulfill the lean manufacturing requirements, there are many

ways to understand whether the facility is working according to the way it intended.

However, one direct reflection of the effectiveness is the amount of inventory maintained.

Every imperfection in the system creates the requirement for the inventory. For example, if

a machine stops working, the facility should has high inventory in order not to stop whole

39

manufacturing process. Although inventory itself a waste, but it is a valuable reflection of

the problems that the system has. No WIP means no problems in the system.

What really does matter is being productive. No waste means that the organization is

productive. However, there are still some ways to increase the productivity further. One

important lesson that lean manufacturing teaches is that the fact “Being busy is not good

enough”. Meanwhile the organization should be productive. Not productive individually, but

being productive collectively as an organization. It doesn’t matter how productive the

system is as an individual or as a department, what counts at the end is how productive the

system is as an organization.

With no work in progress (WIP) and with really productive work place, the organization

must always target to become the ideal factory described in the lean manufacturing.

WASTE

Waste is defined as anything that does not add value to the final product. The wastes can be

in any part of manufacturing process in many different forms. For the ease of understanding

these and due to many other similarities, these wastes are categorized into 7+1 categories.

Following are these waste categories.

Over production

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Waiting

Excess Inventory

Transportation

Inappropriate processing

Excess motion or ergonomic problems

Defected products

Underutilization of employees

Although there are different groups of wastes, each one of these are interconnected.

Therefore, one change will affect the total system.

OVER PRODUCTION

The word over production can be used to describe a type of waste which is in most of the

places and it’s never thought as a waste. This is producing more than what is needed or

before getting the order. This can be applied to the bigger picture or in more localized

sense.

In the bigger picture, this is equivalent to create a product or a service before it is actually

required. Lean manufacturing always trust on the pulling rather than pushing. This means

that every product or a service must be pulled from the process immediately after that.

Therefore a product or a service must be pulled by the customer. In much more simpler

way, customer must have the real requirement for the product or the service being

produced. If you produce the goods without any stimulation from the market, then either

you will have to store the product within the work area until there is a demand for the

product in the market or the organization has to create the market’s stimulation with

advertising campaigns which means extra cost for the company. This method is known as

push system.

Still the organization can’t guarantee that this will be able to sell the products without

wastes. In the smaller picture, the word over production might mean producing a part of a

product before it is required by the assembly line or the process after that. For example,

there is no point of making more receivers than the phones intended to be produced. The

extra amount will be a waste.

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Over production accounts for many wastes. One is the waste due to unnecessary parts. This

also will make the WIP higher. Flow will not be smoother. This obviously leads to low quality

products and defects as quality problems are hidden in the WIP maintained due to over

production.

WAITING

In conventional batch processing, some studies show that 90% of the time goods are waiting

to be processed. Some even say this is higher as 99%. Even a single minute lost in waiting

can not be recovered in the process there after. Analyze how long the products are waiting

against the time used for processing them. This is one big contributory factor for the higher

lead times. This simply means that you take 100 hours or more to complete work which

worth only 10 hours. Ninety hours or more is waste and added to the lead time. No waiting

means you can deliver the goods within 10 days which actually took 100 days earlier. When

the organization eliminates this waste it can gain high flexibility to produce more or

different products. Also the company can compete with the changing market demands and

reacts to the changes quickly, even before the competitors think about it. This will also

reduce the WIP and other related problems. Also considerable savings on the production

space and reduction in work in capital can be achieved. Among the cause of this problem is

due to the high volume machinery, unawareness of the people, and conventional thinking of

the people play leading roles.

EXCESS INVENTORY

Excess inventory is a direct result of over production and waiting. Every imperfection in the

system will create a requirement for the work in process. Therefore excess inventory is the

outcome of the wastes in the system. Excess inventory is also the cause of many other

serious wastes. It blocks money in the form of not finished products. It also reduces the

flexibility of the production facility by increasing the change over time between different

styles. It hides quality damages and will only be revealed when a considerable damage is

done. Higher inventory also requires larger floor space. This will also affect the appearance

of the work place in an inefficient way. Therefore if the companies want to achieve lean

production, they have to focus on to design a manufacturing system where there is no

requirement and cause for inventory.

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UNNECESSARY TRANSPORTATION

No matter how well you do transporting, it does not add value to the end product.

Therefore simply transportation is one of the wastes that have to be eliminated from the

production system. This accounts for the quality defects, maintenance of a higher WIP, and

additional cost of transporting the goods. Transportation often caused by poor work place

organization.

Inflexibility of the layout plays a big role here. This can be avoided with carefully redesigning

of the layouts.

OVERPROCESSING/INAPPROPRIATE PROCESSING

This is the usage of incorrect tools for the processes. This does not mean that the

organization should use complicated or expensive tools for the processes. It is about using

the correct tool for the correct process. Low cost automation is one program where Toyota

found to be really effective. Developing such tools can be done with the aid of workers,

because they know the process, and they work more than anyone. Then this will become a

very good way of motivating people. The enemy for this system is the mindset of the people

who work in the organization. People naturally think like best equipment for the job is

expensive and complex. By changing the mindset of the people with education and training,

the company can eliminate this type of wastes. Also create a culture of continuous

improvement; people will always look for the better ways of doing things, which creates

opportunity for these kinds of innovations.

UNNECESSARY MOVEMENT

This waste is often overlooked. When performing a certain task people have to repeat their

motions again and again. Although we do not realize, in many places people will have to

move, bend or reach to collect some part or to reach a machine. If a time study can be done

to check the percentage of the time for these unnecessary movements, it can be seen that it

is actually very high than the expected. Even the other ergonomic conditions like correct

lighting, tool arrangement, and work process management are essential to achieve a good

productivity from the people with poor conditions are not good for the health of the worker

obviously. Also this will waste large amounts of time. Workplaces will become very untidy,

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and workers will get tired easily. The reason for this is poor workplace organization. To

overcome this problem, a detailed study has to be carried out about working conditions.

Then the organization has to rearrange the work place to eliminate these problems. Even

some simple equipment change like from normal chairs to movable and adjustable chairs

will solve some problems. However, some problems will need very good workplace

engineering to overcome.

DEFECTED PRODUCTS

All of the wastes lead to another waste which is defected products and extremely costly. In

the case of services, this is the poor quality of the service. Defects call for higher inspection

and related costs. If a defect is found, the organization will have to remove it. The raw

materials, time, effort and the money put in this product will become a waste. Even worst, if

this defected product goes to the customer, the organization will lose the reputation and

trust. Also there is a risk of claims. In the long run this will be a big cost for the organization.

Damage in a single dollar product can create millions of dollars of lost to the organization.

All the above wastes, poor raw material, mistakes of the workers, problems in the system,

machinery problems and much more accounts for this problem. So removing this from the

system is long time task. Making the system defect proofed, getting good quality raw

material, educating people and visual controlling (kanban signals) are among the solutions

for this.

UNDERUTILIZATION OF HUMAN RESOURCE

The eighth waste is the most important of all. However, it is not considered as a waste in

most of the companies. Using human resources in full potential, an organization can easily

remove the most important waste of all.

Every worker, even the people do the most routine job in the organization will have

something to contribute to the organization other than their muscle power. The

organization should care about their employees and let them contribute to value adding

process of the organization.

What lean manufacturing tries to do is to get ideas from all level of the people in the

organization and to use them for the betterment of the organization. Therefore not making

the full use of the human resource is a waste.

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Most of the times, the human talents are deteriorated because they are not identified by

the decision makers. Decision makers do not have the mind set to manage human resource

productively. Also most of the organizations do not have a proper system to use the talents

of the people. They also do not have a good motivation and rewarding system for the

talents. If people are not being rewarded, they will not come out with their full potential.

Overcoming this problem is a very long term task. However, even some simple techniques

can give a company good results. An organization can simply keep a suggestion box and ask

people to put their ideas into it to regarding the productivity improvement. Motivate them

with some cash or with recognition. Organizations will have a potential of saving lot of

money. More than that people will get motivated and will have a chain effect.

LEAN MANUFACTURING TOOLS AND METHODS

JUST IN TIME (JIT)

Just-in-time (JIT) production, which is the main tool of lean production, turns traditional

manufacturing thinking on its head. It is that much interconnected with lean manufacturing

and is the backbone of the lean manufacturing. Actually, the concept first developed with

the Ford and Toyota production systems and after that it was implemented to the lean

manufacturing. JIT processes focus on producing exactly the amount required at exactly the

time the customers require it rather than producing goods and supplying customers from

stock.

JIT is a strategy used in the business manufacturing process to reduce costs by reducing the

in process inventory level. Just in time is generally a ‘pull’ system of production so the actual

orders provide a signal for when a product should be manufactured and demand pull

enables firm to produce only what is required in the correct quantity and at the correct time

which leads the reduction of inventory and storage costs. This means that stock levels of

raw materials, components, work in progress and finished goods can be kept to a minimum.

This requires a carefully planned scheduling, production leveling and one piece flow of

resources through the production process.

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In addition, suppliers are delivered right to the production line only when they are needed.

For example, a car manufacturing plant might receive exactly the right number and type of

tires for one day’s production, and the supplier would be expected to deliver them to the

correct part of the production line within a very narrow time slot. As a result of these, JIT is

the respond to an actual demand and it requires a rapid transmission of demand to know

the exact number of products to produce in a certain period and a flexible and fast one

piece flow production system to respond quick changes in demands and technology. When

the principles of JIT are completed, wastes of production would be decreased to the

minimum level and this also leads to a low cost high quality products.

Main goal of JIT production is to reduce the cost of production with meeting the customer

demand. This can be done by having required amount of production resources, reduction of

overproduction and decreasing the stored inventory. The second goal of JIT is the

improvement of quality. This can be done by visual monitoring, standardization and

compact one piece flow production processes. To reach the success in lean manufacturing,

JIT, automation, creative thinking and flexible work force are crucial.

BASIC AND KEY ELEMENTS OF JUST-IN-TIME

The success in manufacturing companies to reach just-in-time and lean production is begin

with the creation of a continuous flow in the core of manufacture and service processes. It

provides shorter elapsed time from raw material to finished goods, higher quality with low

cost and shorter delivery time. Also, one piece flow contributes companies to cut out the

wastes such as overproduction, unnecessary movement or waiting and the percentage of

truly value added work of the people increases. In one piece flow, the production process is

triggered by the orders of the customer and the raw materials are needed for the processes.

Raw materials flow to the supplier plants and the workers complete each task and assembly

immediately. When the order is accomplished, it flows directly to the customer and this

whole process should take very short lead and delivery time. This system can be achieved by

using small lots, having the tasks close to each other and keeping the material flow

continuous without any interruption and without producing large batches of products which

will sit and wait long time in the store. Moreover, to achieve a success in one piece flow, the

‘takt time’, time is needed to finish each task in the flow, should be determined. All the

tasks in the one piece flow should be done interrelated to each other and accomplished at

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the exact time that it should be done, neither faster nor slower. By this system, the defects

or errors can be found much faster and easier which lead to a high quality in products.

Errors and defects can be resolved when they exist and continuous improvement of the one

piece flow production can be achieved.

In addition to that, companies should have uniform production schedules with short setup

time and flexible work force and close supplier ties. Companies would like to complete the

customer orders in the possible shortest time; however, this would not be the best way to

achieve just-in-time production due to long setup time and inflexible production flow and

resource allocation. The customer demands can sometimes be not predictable and actual.

As a result of that, some periods of production there can be over work force and sometimes

there can be underutilization of sources. To avoid this unbalance production, demand

schedule of a specific time period should be determined and the production have to be

leveled by both volume and product mix. This will lead to a more flexible production flow

that the companies can adopt easily to demand changes or new products in the market.

Companies can easily setup the production lines in a short time and produce what the

customer wants with the required quality at the right time. Also, leveled production makes

suppliers work easier as they get orders uniformly and at similar volume. Furthermore, this

will lead workers to focus on the product and customer demands as they are not forced to

work over. Leveled pull system one piece flow will reduce the risk of unsold goods, so the

cost of production and the lead time will be shortened and the quality of the products will

reach to high levels.

In Just-In-Time production, there should be flexibility of resources. Company should train

multifunctional workers and use machines that can be modified and used in general

purposes. Also, the operators have to teach workers the new tasks and improve the

operations by creative thinking and value added work for standardizing the processes and

continuous improvement. Companies also have to use cellular layouts which means that a

group of dissimilar machines in a cell produces family parts while the processes flows in one

direction through the cells. Cycle time and setup times should be adjusted and short and the

workers in each cell should cross trained. Operators have to row the workers in terms of

having the same speed in all cells to achieve a flow without stoppage and interruption.

Moreover there should be a system to stop the production when there is a problem for

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example a worker experiencing some difficulty can turn on the warning lights and the

operator should check the problem while the other cells assists to the situation.

Furthermore, a system called Kanban System should be used in just-in-time production. It is

a pull system where the production or movement of the next batch of material is not

started until the signal is received at the next station. The customer demands materials in

the quantity needed which triggers the start of the production in the company. So, the

Kanban system is based on visibility and the signals to control of production in order to

produce or stop the operation. While manufacturing the products, companies should use

small lot production which requires small space and lower capital investment. Processes will

be close to each other which eliminate the unnecessary movement and transportation of

the materials. Detection of problems would become easier and processes would be more

dependent to each other which increase the quality. In just-in-time system, the inventory

should be reduced to the minimum level because inventory hides the problems and increase

the inventory caused problems which mean that it is crucial to reduce inventory for

continuous improvement. Also, for continuous improvement, carrying and handling costs

should be reduced and visual control of production should be used to address the root

cause of the problems. Finally, setup time is the enemy for achieving success in just-in-time

as it increases the lead time. To reduce it, desired settings should be preset, quick fasteners

or locator pins can be used, tools can be eliminated, misalignments have to be prevented

and the movement should be reduced.

BENEFITS OF JIT

-Reduced Inventory

-Lower Cost

-Improved Quality

-Shorter Lead Time

-Great Flexibility

-Product Variety

-Increased Productivity

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-Better Use of Human Resources

-Reduced Space Requirements

-Increased Capacity

-Better Scheduling and Control of Processes

-Better Relations with Suppliers

JIT PURCHASING

Purchasing is done when the goods are actually required by the customers. There is not any

need for large stocks because purchasing can be done in small batches continuously. This

allows production to run smoothly and will also lead a reduction of costs due to storage and

minimization of the degrading of the goods. By using this method in purchasing, it would be

easier to monitor quality defects and correct them if there are any in the subsequent

batches and the shorter lead-times can be achieved in the production.

However, to achieve this, there are some problems to overcome. First of all, the supplier

base of the organization should be manageable. Then they have to agree to produce in small

batches and send them in short periods which mean that the minimum order quantity

issues must be solved. The supplier must be able to adjust to the changes fast and also must

be able to keep the correct quality from batch to the other. When the relationship with the

supplier is achieved to that level both parties would benefit mutually.

JIT MANUFACTURING

It is one of the most problematic issues in lean manufacturing techniques. This requires very

comprehensive internal coordination and planning. The items are produced only when they

are required by the process following it and there is not any stock maintained. This will

reduce the costs due to work in process and reduce the cycle time of the product and

therefore will improve the flexibility of the system immensely. This will also reduce the lead

time considerably. Quality defects will be much lower since work in process is very low.

Most of the time, it requires a radical change in the organization such as work will change

from the conventional departmental thinking to the new team thinking or manufacturing

will change from the line system to the module or work cell based manufacturing. Every

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problem will cause the system to stop since there is not a work in process to work with and

all the problems hidden in the work in process will be revealed with visual monitoring. In

achieving JIT manufacturing, companies also has to deal with the human side of the

problem. People do not like to change if there is not any motivation and they can bring

negative approach and contribution to the production process. To overcome this, workers

should feel themselves as the part of the company and are contributed to create value

added work to the tasks and continuous improvement. Also, their participation in the

process has to be taken into account and they should be educated and motivated to

understand every single activity in the process.

JIT DISTRIBUTION

Apart from these, there can be serious problems about transporting the goods. Since there

will not be much of a stock to rely on, every load of goods is very important for smooth

production run and any delay will be costly. To achieve a smooth production without any

delays in production and to distribute the goods in small batches to the buyers in

continuous basis, it is very important to have integrated logistic system which is the basis of

the JIT distribution. Without an integrated logistic system, any of the lean objectives might

not be achieve success. Most often this function is given to a third party logistic company

who will take care of JIT distribution and on time, uninterrupted data exchange is very vital

while having a third party logistic company. Therefore it would be better to use an

electronic data interchange. It is also necessary to automate data transfer function to avoid

any delays and mistakes in duplication.

KANBAN METHOD

Kanban method is one of the most popular tools in lean manufacturing. This is a simple

concept to apply and understand and very effective. Kanban mainly focus on the reduction

of overproduction and contribution to the one piece process flow. There are mainly two

types of Kanban technique. They are;

-Withdrawal Kanban

-Production Kanban

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Withdrawal Kanban method is the most common type, which is actually a request from the

former process with some signals or marking with cards. This specifies the quantity of the

succeeding process and triggered the latter process to begin. In production Kanban method,

the amount of products to be made is specified and that amount is produced in the latter

process with the goods created in the former process. This might take a form of a simple

card which has the details of the product, quantity and the storage location of that

particular product. This even may be a sophisticated electronic data exchange process.

STANDARDIZATION

One of the main problems that are faced by any lean manufacturer in the initial stage is

preventing the line stoppages. The main reason for this is the non-standardized production

processes. Therefore any lean manufacturer has to make the processes, tooling and

arrangements standard to achieve the goals of lean manufacturing. Instead of having many

tools and many different adjustments, it is very useful to have narrow range of adjustments

and tools which matches these precisely. Also there should be a good workplace

arrangement so that it will be very easy to take and replace what exactly the workers need

without even searching. This will save a lot of time and prevent problems about defects and

quality.

In a standardized production process, the workers should follow very detailed standardized

procedures that touch every aspect of the organization. In the workplace, there should be a

place for everything and everything should be in its place. Also, waste should be eliminated

to continuous improvement and increasing productivity. There should be a strict discipline

about time, cost, quality, safety, tools and procedures.

One of the most important standardization of tools and processes used in lean

manufacturing is the concept of 5S. This is the most common and effective method used in

industry and its principles are very simple to apply and understand. be well known even to

the people who are not even lean manufacturers. The 5S are;

-Seiri

-Seiton

-Seiso

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-Seiketsu

-Shitsuke

Seiri refers to the sorting items according to their importance of use and discarding the

items which are not useful. In the micro picture you can use this concept to clean the

workplace and keeping only the necessary things on the workstation. In broader picture you

will see this as identification and removing all the unnecessary processes in the production

organization.

Seiton refers to the arranging of the selected items in a well organized and meaningful

manner. This is like keeping the tools used frequently near to the worker. This is equivalent

to rearranging the work process so that work will be much more efficient. This will be

beneficial in making a workplace which is error-proofed, that is there is very little or no

room for easy and damaging mistakes to occur.

Seiso refers to keeping the workplace clean. This means that having a continuous process of

identification and removal of wastes in processes.

Seiketsu is continuously following the above three rules to achieve a well organized and

standardized work place.

Shitsuke is training and motivating the people to follow these 5S practices simply as a part

of their daily life. This is crucial for any organization since everyone should have the

discipline to achieve the objective of the organization. It is also very important to make this

process self driven so that there will not be any extra effort is required from the workers.

TOTAL PRODUCTIVE MAINTENANCE

Maintenance function is a crucial approach which ensures smooth running of a production

facility. In lean manufacturing, one machine breakdown will cause severe results both in a

cost and quality manner since it can hold the entire production flow as there is not any work

in process to consume in the time of the machine breakdown. Therefore it is very important

to have a correct maintenance process to become a lean manufacturer. Total Productive

Maintenance has three main modus. These are;

-Preventive Maintenance

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-Corrective Maintenance

-Maintenance Prevention

Preventive maintenance is the continuous control over the machines and tools and

prevention of major maintenance. Regular checkups are planned and carried over. Each

operator and every worker in that specific work station is responsible to work the machines

in the right method, control and clean in order to prevent any problems to occur.

Corrective maintenance contributes the continuity of the production process and focuses

on increasing the productivity by solving the problems in the work stations immediately and

provides the smooth continuity of processes while there is a problem at a specific task of

the whole processes. The corrective maintenance can vary from very simple to very complex

methods and problem solving. People who are working with the tools or machinery might

be able to understand and fix most of the simple problems while a team of specially trained

people might be required to do the complex jobs.

Maintenance prevention is another key for lean manufacturing. This is the process where

the decisions are made in order to prevent stoppages and provide maintenance. This

process might include decisions like purchasing correct tools or machinery for the work

stations, training people to effective usage of tools and machines and forming trained teams

to solve the maintenance problems in a short time.

WORK CELLS

Work cell concept is another concept developed with the JIT. Work place is arranged in to a

cell which is in the shape of English letter “U”. In a work cell there will be 3-12 people

depending on the job task performed by this cell. There will be many cells which will

complete the total product by working together. People who are in this cell are multi-skilled

and can perform multiple tasks according to the requirement. One of the main advantages

of the work cell is the less movement and less transportation. Also this will reduce the over

production considerably. This will also give very high flexibility to the entire production

system since changing from one product to another is very easy. Sometimes it may require

changing one work cell to produce a completely new product. Team working culture is very

important in a process like this. Therefore good leadership skill is required. Every

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performance is measured in the team basis. Therefore motivation must be there for all the

people working in the cell to work for a common objective.

CASE STUDY

Copper Kettle Catering (CKC) is a full-service catering company that provides services

ranging from box lunches for picnics or luncheon meetings to large wedding, dinner, or

office parties. Established as a lunch delivery service for offices in 1972 by Wayne and Janet

Williams, CKC has grown to be one of the largest catering businesses in Raleigh, North

Carolina. The Williamses divide customer demand into two categories: deliver only and

deliver and serve.

The deliver-only side of the business provides drop-off of boxed meals consisting of a

sandwich, salad, dessert, and fruit. The menu for this service is limited to six sandwich

selections, three salads or potato chips, and a brownie or fruit bar. Grapes and an orange

slice are included with every meal, and iced tea can be ordered to accompany the meals.

The overall level of demand for this service throughout the year is fairly constant, although

the mix of menu items delivered varies. The planning horizon for this segment of the

business is short: Customers usually call no more than a day ahead of time. CKC requires

customers to call deliver-only orders in by 10:00 A.M. to guarantee delivery the same day.

The deliver-and-serve side of the business focuses on catering large parties, dinners, and

weddings. The extensive range of menu items includes a full selection of hors d’oeuvres,

entrées, beverages, and special-request items. The demand for these services is much more

seasonal, with heavier demands occurring in the late spring–early summer for weddings and

the late fall–early winter for holiday parties. However, this segment also has a longer

planning horizon. Customers book dates and choose menu items weeks or months ahead of

time. Copper Kettle Company’s food preparation facilities support both operations. The

physical facilities layout resembles that of a job shop. There are five major work areas: a

stove–oven area for hot food preparation, a cold area for salad preparation, an hors

d’oeuvre preparation area, a sandwich preparation area, and an assembly area where

deliver-only orders are boxed and deliver-and-serve orders are assembled and trayed. Three

walk-in coolers store foods requiring refrigeration, and a large pantry houses nonperishable

goods. Space limitations and the risk of spoilage limit the amount of raw materials and

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prepared food items that can be carried in inventory at any one time. CKC purchases

desserts from outside vendors. Some deliver the desserts to CKC; others require CKC to send

someone to pick up desserts at their facilities.

The scheduling of orders is a two-stage process. Each Monday, the Williamses develop the

schedule of deliver-and-serve orders to be processed each day. CKC typically has multiple

deliver-and-serve orders to fill each day of the week. This level of demand allows a certain

efficiency in preparation of multiple orders. The deliver-only orders are scheduled day to

day owing to the short-order lead times. CKC sometimes runs out of ingredients for deliver-

only menu items because of the limited inventory space.

Wayne and Janet Williams have 10 full-time employees: two cooks and eight food

preparation workers, who also work as servers for the deliver-and-serve orders. In periods

of high demand, the Williamses hire additional part-time servers. The position of cook is

specialized and requires a high degree of training and skill. The rest of the employees are

flexible and move between tasks as needed.

The business environment for catering is competitive. The competitive priorities are high-

quality food, delivery reliability, flexibility, and cost—in that order. “The quality of the food

and its preparation is paramount,” states Wayne Williams. “Caterers with poor-quality food

will not stay in business long.” Quality is measured by both freshness and taste. Delivery

reliability encompasses both on-time delivery and the time required to respond to customer

orders (in effect, the order lead time). Flexibility focuses on both the range of catering

requests that a company can satisfy and menu variety.

Recently, CKC has begun to feel the competitive pressures of increasingly demanding

customers and several new specialty caterers. Customers are demanding more menu

flexibility and faster response times. Small specialty caterers have entered the market and

have targeted specific well-defined market segments. One example is a small caterer called

Lunches-R-US, which located a facility in the middle of a large office complex to serve the

lunch trade and competes with CKC on cost.

Wayne and Janet Williams have been impressed by the concepts of just-in-time operating

systems, especially the ideas of increasing flexibility, reducing lead times, and lowering

costs. They sound like what CKC needs to do to remain competitive. But the Williamses

wonder whether JIT concepts and practices are transferable to a service business.

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SUMMARY

Lean production management, tools and techniques have applied by the most of the

companies; however, very low portion of these manufacturers have reached the success.

The main reason to that is companies only focus on the process part and it is not possible to

reach success at lean production without determination of philosophy, encouraging people

and improving problem solving terminologies. Industries should design a simple

manufacturing system, recognize all the possibilities for improvement and continuously

improve the lean manufacturing design. Improving the flow of material through new ideal

system layouts at the customer's required rate and continuous improvement mindset is also

essential to reach lean production. The most important idea to realize is that even the best

manufacturing design and flow is not the perfect lean system and there are always things to

improve to compete with the lean system.

REFERENCES

K r a j e w s k i , L . J . , & R i t z m a n , L . P . ( 2 0 0 2 ) . O p e r a t i o n s m a n a g e m e n t :

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B l a c k , J . R . ( 2 0 0 8 ) . L e a n p r o d u c t i o n : i m p l e m e n t i n g a w o r l d c l a s s

s y s t e m . R e t r i e v e d f r o m

h t t p : / / b o o k s . g o o g l e . c o m . t r / b o o k s ? i d = 8 k 1 h X l v W x 7 k C & p g = P A 1 & l p g = P A

1 & d q = l e a n + p r o d u c t i o n & s o u r c e = b l & o t s = - G m i Q - i p 8 -

& s i g = k c E m y y N A q r 0 A 4 s W Q 5 l p 6 i S p N y s E & h l = t r & e i = C m b m T L y c J 8 W h O r X n

3 L Q K & s a = X & o i = b o o k _ r e s u l t & c t = r e s u l t & r e s n u m = 1 4 & v e d = 0 C H w Q 6 A E w

D Q # v = o n e p a g e & q & f = f a l s e

B a d u r d e e n , A . ( 2 0 0 7 ) . L e a n m a n u f a c t u r i n g b a s i c s . R e t r i e v e d f r o m

h t t p : / / w w w . l e a n m a n u f a c t u r i n g c o n c e p t s . c o m

L e a n m a n u f a c t u r i n g . ( 2 0 1 0 , N o v e m b e r 1 9 ) . R e t r i e v e d f r o m

h t t p : / / e n . w i k i p e d i a . o r g / w i k i / L e a n _ m a n u f a c t u r i n g

L e a n m a n u f a c t u r i n g . ( n . d . ) . R e t r i e v e d f r o m

h t t p : / / e n . w i k i p e d i a . o r g / w i k i / L e a n _ m a n u f a c t u r i n g

56

W h a t i s l e a n p r o d u c t i o n ? . ( 2 0 0 2 , M a r c h 1 4 ) . R e t r i e v e d f r o m

h t t p : / / s e a r c h m a n u f a c t u r i n g e r p . t e c h t a r g e t . c o m / d e f i n i t i o n / l e a n -

p r o d u c t i o n

J u s t - i n - t i m e _ ( b u s i n e s s ) . ( 2 0 1 0 , N o v e m b e r 8 ) . R e t r i e v e d f r o m

h t t p : / / e n . w i k i p e d i a . o r g / w i k i / J u s t - i n - t i m e _ ( b u s i n e s s )

J u s t i n t i m e p r o d u c t i o n . ( n . d . ) . R e t r i e v e d f r o m

h t t p : / / t u t o r 2 u . n e t / b u s i n e s s / p r o d u c t i o n / j u s t - i n - t i m e . h t m l

J u s t - i n - t i m e p r o d u c t i o n . ( n . d . ) . R e t r i e v e d f r o m

h t t p : / / w w w . u o g u e l p h . c a / ~ d s p a r l i n / j i t . h t m

J u s t - i n - t i m e p r o d u c t i o n . ( n . d . ) . R e t r i e v e d f r o m

h t t p : / / w w w . b u s i n e s s l i n k . g o v . u k / b d o t g / a c t i o n / d e t a i l ? r . s = s c & r . l 1 = 1 0 7

3 8 5 8 7 9 6 & r . l c = e n & r . l 3 = 1 0 7 4 4 0 4 5 8 0 & r . l 2 = 1 0 7 4 2 9 9 7 8 1 & t y p e = R E S O U R C

E S & i t e m I d = 1 0 7 4 4 0 5 9 6 5