OM/U4 Topic 4 Lean Management and Just in Time Production
Lean management is an approach to running an organization that supports the concept of continuous improvement, a long-term approach to work that systematically seeks to achieve small, incremental changes in processes in order to improve efficiency and quality.
Lean management seeks to eliminate any waste of time, effort or money by identifying each step in a business process and then revising or cutting out steps that do not create value. The philosophy has its roots in manufacturing.
Guiding principles for lean management include:-
(1) Defining value from the standpoint of the end customer.
(2) Identifying each step in a business process and eliminating those steps that do not create value.
(3) Making the value-creating steps occur in tight sequence.
(4) Repeating the first three steps on a continuous basis until all waste has been eliminated.
The Lean Management Tools
Many elements within the concept of the lean manufacturing stand out and each of these presents a particular method:
- Kanban (pull systems)
- Value Stream Mapping
- Poka-yoke (error-proofing)
- Elimination of Time Batching
- Total Productive Maintenance
- Mixed Model Processing
- Single Point Scheduling
- Rank Order Clustering
- Multi-process Handling
- Redesigning Working Cells
- Control Charts (for checking mura)
Some of these methods claim to be an independent manufacturing concept (such as kaizen and kanban).
One way to cope with wastes and effectively increase profitability is a 5s. The name of this method uses a list of five words, which all start with the letter “S”: straighten, sort, standardize, shine, and sustain. It is translation from original Japanese words: seiton, seiri, seiketsu, seiso, and shitsuke. These words describe ways of workspace organisation for achieving the most effectiveness and efficiency. It include identifying and storing of the used items, maintaining the items and area, and sustaining the new order.
The 5 Steps are as follows:
Sort: Sort out and separate what is needed and not needed within the area.
Straighten: Arrange items that are needed so that they are ready and easy to use. Clearly identify locations for all items so that anyone can find them and return them once the task is completed.
Shine: Clean the workplace and equipment on a regular basis in order to maintain standards and identify defects.
Standardise: Revisit the first three of the 5S on a frequent basis and confirm the condition of the Gemba using standard procedures.
Sustain: Keep to the rules in order to maintain the standard and continuously improve every day.
The other way to waste reduction was a kanban. In 1952, Taiichi Ohno invented a kanban system at Toyota, as a system to improve and maintain a high level of production.
Kanban became an effective tool to support running a production system as a whole, and an excellent way to promote improvement. One of the main benefits of kanban system is to establish an upper limit to the work in progress inventory, avoiding overloading of the manufacturing system. The concept of “to do” – “doing” – “done” became the cornerstone of many online tools used for managing projects and control workflows. Kanbanchi is one of such tools that supports kanban methodology.
Value Stream Mapping
Value stream mapping is a method of lean management which is applicable for almost any value chain. It is used for analysing the current stage and designing of its further stages for the series of events that take a service or product from the beginning through to the client. This method can be used also in:
- Supply Chain
- Service Related Industries
- Software Development
- Product Development
- Administrative or Office Processes
Sigma is a mathematical term that measures a process deviation from perfection. Like Kaizen, Six Sigma is a management philosophy focused on making continuous improvements and bringing improvements into various processes. It was first introduced in 1986 by Bill Smith at Motorola.
Unlike Kaizen, which has the primary goal of increasing efficiency of all aspects of processes, Six Sigma focuses on improving quality of the final product by finding and eliminating causes of defects. Six Sigma uses more statistical analyses than Kaizen and aims for as close to zero defects as possible. A sigma rating describes the maturity of a manufacturing process by indicating its percentage or yield of defect-free products it creates. Organizations need to determine an appropriate sigma level for each of their most important processes and strive to achieve these.
The Six Sigma concept asserts:
- Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management.
- Manufacturing and business processes have characteristics that can be measured, analyzed, controlled and improved.
- Continuous efforts to achieve stable and predictable process results (i.e., reduce process variation) are of vital importance to business success.
JUST IN TIME PRODUCTION
Just in Time (JIT), as the name suggests, is a management philosophy that calls for the production of what the customer wants, when they want it, in the quantities requested, where they want it, without it being delayed in inventory.
So instead of building large stocks of what you think the customer might want you only make exactly what the customer actually asks for when they ask for it. This allows you to concentrate your resources on only fulfilling what you are going to be paid for rather than building for stock.
How does JIT differ from traditional manufacturing?
In traditional manufacturing we try to predict what the customer will want and we will create a forecast (or guess) against which we will produce our products. We will also try to produce those products in large batches as the belief is that will make machines and processes more efficient, especially if those machines require a long time to setup. This will typically result in long lead times through our processes, huge amounts of Work In Process (WIP) stocks and also large quantities of finished goods stocks that have
not yet been ordered by our customers. This is what many now call “Just in Case” manufacturing.
If the customer does order something that is not in our current stocks they will either have to wait many weeks or even months for the product to be manufactured or work will be hurried through the system by progress chasers causing a huge amount of disruption to the production schedule.
These systems are often run by Manufacturing Resource Planning (MRP2) programs that will try to schedule each and every process within the facility. These software packages will seek to control every step and everything requires careful and often complex planning.
A Just in Time system on the other hand will seek to use simple visual tools known as Kanbans to pull production through the processes according to what the customer actually takes. It massively reduces the amount of stock held and will reduce lead times by a significant amount, often from weeks to just a few hours or days.
The benefits of a JIT system
The following are some of the many benefits that you could gain through the implementation of just in time:-
(1) Reduction in the order to payment timeline; cash, as they say is king in business. Many businesses will suffer with cash flow problems as they will often have to purchase large amounts of raw materials prior to manufacturing and subsequent payment by the customer. Often this gap is many months. Through implementing JIT you are able to considerably reduce that time period.
(2) Reduction in Inventory costs; one of the main aims with any JIT implementation is to improve stock turns and the amount of stock being held. Personal experience has seen reductions of more than 90% stock in some industries. Along with the reduction in the stock come many other associated benefits.
(3) Reduction in space required; by removing large amounts of stock from the system and moving processes closer together we will often see a significant reduction in the amount of floor space being used. Results from 100’s of projects run within companies in the UK through the Manufacturing Advisory Service saw average reductions of 33% for simple 5 day implementation projects.
(4) Reduction in handling equipment and other costs; if you don’t have to move large batches there is less need for complex machinery to move them and all of the associated labour and training.
(5)Lead time reductions; one of the most significantly impacted areas is that of the time it takes for products to flow through the process. Instead of weeks or months most JIT implementations result in lead times of hours or a few days.
(6)Reduced planning complexity; the use of simple pull systems such as Kanban, even with your suppliers, can significantly reduce the need for any form of complex planning. With many implementations the only planning is the final shipping process.
(7)Improved Quality; the removal of large batch manufacturing and reduction in handling often results in significant quality improvements; often in the region of 25% or more.
(8)Productivity increases; to achieve JIT there are many hurdles that must be overcome with regards to how the process will flow. These will often result in productivity improvements of 25% upwards.
(9)Problems are highlighted quicker; often this is cited as being a negative aspect of JIT in that any problems will often have an immediate impact on your whole production process. However this is the perfect way to ensure that problems are highlighted and solved immediately when they occur.
(10)Employee empowerment; one requirement of JIT as with most other aspects of Lean manufacturing is that employees are heavily involved in the design and application of your system.