just in time and lean manufacturing

JIT
Just in time (JIT) is a production strategy that strives to improve a business return on
investment by reducing in-process inventory and associated carrying costs. Just-in-time
production method is also called the Toyota Production System. To meet JIT objectives, the
process relies on signals or Kanban (看板 Kanban?) between different points in the process,
which tell production when to make the next part. Kanban are usually 'tickets' but can be
simple visual signals, such as the presence or absence of a part on a shelf. Implemented
correctly, JIT focuses on continuous improvement and can improve a manufacturing
organization's return on investment, quality, and efficiency. To achieve continuous
improvement key areas of focus could be flow, employee involvement and quality.
Quick notice that stock depletion requires personnel to order new stock is critical to the
inventory reduction at the center of JIT. This saves warehouse space and costs. However,
the complete mechanism for making this work is often misunderstood.
For instance, its effective application cannot be independent of other key components of
a lean manufacturing system or it can "...end up with the opposite of the desired result." In
recent years manufacturers have continued to try to hone forecasting methods such as
applying a trailing 13 week average as a better predictor for JIT planning; however, some
research demonstrates that basing JIT on the presumption of stability is inherently flawed.

Philosophy
The philosophy of JIT is simple: inventory is waste. JIT inventory systems expose hidden
cost of keeping inventory, and are therefore not a simple solution for a company to adopt.
The company must follow an array of new methods to manage the consequences of the
change. The ideas in this way of working come from many different disciplines including
statistics, industrial engineering, production management, and behavioral science. The JIT
inventory philosophy defines how inventory is viewed and how it relates to management.
Inventory is seen as incurring costs, or waste, instead of adding and storing value, contrary
to traditional accounting. This does not mean to say JIT is implemented without an
awareness that removing inventory exposes pre-existing manufacturing issues. This way of
working encourages businesses to eliminate inventory that does not compensate for
manufacturing process issues, and to constantly improve those processes to require less
inventory. Secondly, allowing any stock habituates management to stock keeping.
Management may be tempted to keep stock to hide production problems. These problems
include backups at work centers, machine reliability, process variability, lack of flexibility of
employees and equipment, and inadequate capacity.
In short, the Just-in-Time inventory system focus is having ―the right material, at the right
time, at the right place, and in the exact amount‖-Ryan Grabosky, without the safety net of
inventory. The JIT system has broad implications for implementers.
[edit]Transaction cost approach

JIT reduces inventory in a firm. However, a firm may simply be outsourcing their input
inventory to suppliers, even if those suppliers don't use Just-in-Time (Naj 1993). Newman
(1994) investigated this effect and found that suppliers in Japan charged JIT customers, on
average, a 5% price premium.
[edit]Environmental concerns
During the birth of JIT, multiple daily deliveries were often made by bicycle. Increased scale
has required a move to vans and lorries (trucks). Cusumano (1994) highlighted the potential
and actual problems this causes with regard to gridlock and burning of fossil fuels. This
violates three JIT waste guidelines:

1. Time—wasted in traffic jams
2. Inventory—specifically pipeline (in transport) inventory
3. Scrap—fuel burned while not physically moving
[edit]Price volatility
JIT implicitly assumes a level of input price stability that obviates the need to buy parts in
advance of price rises. Where input prices are expected to rise, storing inventory may be
desirable.
[edit]Quality volatility
JIT implicitly assumes that input parts quality remains constant over time. If not, firms may
hoard high-quality inputs. As with price volatility, a solution is to work with selected suppliers
to help them improve their processes to reduce variation and costs. Longer term price
agreements can then be negotiated and agreed-on quality standards made the responsibility
of the supplier. Fixing up of standards for volatility of quality according to the quality circle
[edit]Demand stability
Karmarker (1989) highlights the importance of relatively stable demand, which helps ensure
efficient capital utilization rates. Karmarker argues that without significantly stable demand,
JIT becomes untenable in high capital cost production.
[edit]Supply stability
In the U.S., the 1992 railway strikes caused General Motors to idle a 75,000-worker plant
because they had no supply.

[edit]JIT implementation design
Based on a diagram modeled after the one used by Hewlett-Packard’s Boise plant to
accomplish its JIT program.

1) F Design Flow Process

– F Redesign/relayout for flow
– L Reduce lot sizes
– O Link operations
– W Balance workstation capacity

– M Preventive maintenance
– S Reduce setup Times

2) Q Total Quality Control

– C worker compliance
– I Automatic inspection
– M quality measures
– M fail-safe methods
– W Worker participation

3) S Stabilize Schedule

– S Level schedule
– W Establish freeze windows
– UC Underutilize Capacity

4) K Kanban Pull System

– D Demand pull
– B Backflush
– L Reduce lot sizes

5) V Work with Vendors

– L Reduce lead time
– D Frequent deliveries
– U Project usage requirements
– Q Quality expectations

6) I Further Reduce Inventory in Other Areas

– S Stores
– T Transit
– C Implement carrousel to reduce motion
waste
– C Implement conveyor belts to reduce
motion waste

7) P Improve Product Design

– P Standard production configuration

– P Standardize and reduce the number of
parts
– P Process design with product design
– Q Quality expectations

[edit]Effects
A surprising effect was that factory response time fell to about a
day. This improved customer satisfaction by providing vehicles
within a day or two of the minimum economic shipping delay.
Also, the factory began building many vehicles to order,
eliminating the risk they would not be sold. This improved the
company's return on equity.
Since assemblers no longer had a choice of which part to use,
every part had to fit perfectly. This caused a quality assurance
crisis, which led to a dramatic improvement in product quality.
Eventually, Toyota redesigned every part of its vehicles to widen
tolerances, while simultaneously implementing careful statistical
controls for quality control. Toyota had to test and train parts
suppliers to assure quality and delivery. In some cases, the
company eliminated multiple suppliers.
When a process or parts quality problem surfaced on the
production line, the entire production line had to be slowed or
even stopped. No inventory meant a line could not operate from
in-process inventory while a production problem was fixed. Many
people in Toyota predicted that the initiative would be
abandoned for this reason. In the first week, line stops occurred
almost hourly. But by the end of the first month, the rate had
fallen to a few line stops per day. After six months, line stops had
so little economic effect that Toyota installed an overhead pull-
line, similar to a bus bell-pull, that let any worker on the line order
a line stop for a process or quality problem. Even with this, line
stops fell to a few per week.
The result was a factory that has been studied worldwide. It has
been widely emulated, but not always with the expected results,
as many firms fail to adopt the full system.[4]
The just-in-time philosophy was also applied to other segments
of the supply chain in several types of industries. In the
commercial sector, it meant eliminating one or all of the
warehouses in the link between a factory and a retail
establishment. Examples in sales, marketing, and customer
service involve applying information systems and mobile

hardware to deliver customer information as needed, and
reducing waste by video conferencing to cut travel time.[5]
[edit]Benefits
Main benefits of JIT include:

 Reduced setup time. Cutting setup time allows the company
to reduce or eliminate inventory for "changeover" time. The
tool used here is SMED (single-minute exchange of dies).
 The flow of goods from warehouse to shelves
improves. Small or individual piece lot sizes reduce lot delay
inventories, which simplifies inventory flow and its
management.
 Employees with multiple skills are used more
efficiently. Having employees trained to work on different
parts of the process allows companies to move workers
where they are needed.
 Production scheduling and work hour consistency
synchronized with demand. If there is no demand for a
product at the time, it is not made. This saves the company
money, either by not having to pay workers overtime or by
having them focus on other work or participate in training.
 Increased emphasis on supplier relationships. A company
without inventory does not want a supply system problem
that creates a part shortage. This makes supplier
relationships extremely important.
 Supplies come in at regular intervals throughout the
production day. Supply is synchronized with production
demand and the optimal amount of inventory is on hand at
any time. When parts move directly from the truck to the
point of assembly, the need for storage facilities is reduced.
 Minimizes storage space needed.
 Smaller chance of inventory breaking/expiring.
[edit]Problems
[edit]Within a JIT system
Just-in-time operation leaves suppliers and downstream
consumers open to supply shocks and large supply or demand
changes. For internal reasons, Ohno saw this as a feature rather
than a bug. He used an analogy of lowering the water level in a
river to expose the rocks to explain how removing inventory
showed where production flow was interrupted. Once barriers
were exposed, they could be removed. Since one of the main
barriers was rework, lowering inventory forced each shop to

improve its own quality or cause a holdup downstream. A key
tool to manage this weakness is production levelling to remove
these variations. Just-in-time is a means to improving
performance of the system, not an end.
Very low stock levels means shipments of the same part can
come in several times per day. This means Toyota is especially
susceptible to flow interruption. For that reason, Toyota uses two
suppliers for most assemblies. As noted in Liker (2003), there
was an exception to this rule that put the entire company at risk
because of the 1997 Aisin fire. However, since Toyota also
makes a point of maintaining high quality relations with its entire
supplier network, several other suppliers immediately took up
production of the Aisin-built parts by using existing capability and
documentation. Thus, a strong, long-term relationship with a few
suppliers is better than short-term, price-based relationships with
many competing suppliers. Toyota uses this long-term
relationship to send Toyota staff to help suppliers improve their
processes. These interventions have been going on for twenty
years and have created a more reliable supply chain, improved
margins for Toyota and suppliers, and lowered prices for
customers. Toyota encourages their suppliers to use JIT with
their own suppliers.
EXAMPLES:

It once took Lifeline Systems at least 30 days to produce and ship its product--
personal-response devices that enable wearers to summon help immediately by
voice in an emergency. "Now, production lead time has been cut to four days,"
says John Giannette, corporate manager of materials and purchasing. "We have
the ability to ship in 24 hours."

Without increasing its 68-member manufacturing work force, the company has
tripled production since 1987. That's when it adopted a manufacturing
infrastructure that integrates .the philosophies and cultures of just-in-time
inventory (JIT), total quality management (TQM), and manufacturing-resource
planning.

"What comes in the back door [in parts and materials] is gone four days after it
gets here," says Giannetto. Lifeline Systems has progressed from a money-losing
firm with gross sales of $19.6 million in 1987 to a profit maker with $38.5 million
of sales in 1991. Profits were about $4 million in 1992.

The increasingly popular just-in-time system keeps inventories to a minimum,
usually no larger than what is needed to support one day of production. The

system's effects are rippling out to businesses everywhere as companies realize
that just-in-time cuts costs and improves quality.

In turn, suppliers doing business with a manufacturer or retailer operating on JIT
must deliver as the customer specifies-- or not at all. Because the system
increases the number of deliveries and decreases the quantifies delivered,
transportation must be faster and more reliable.

JIT manufacturing is a powerful and proven system of producing products efficiently
while keeping costs low. Some of the most successfully companies in the world have
used this philosophy to improve their manufacturing processes and better meet
customer demand.

Just in Time Manufacturing

Just in Time Manufacturing (JIT) refers to a system of manufacturing in which
products are not built until the product is ordered and paid for. Some companies that
have successfully implemented JIT include Toyota, Dell and Harley Davidson.

Toyota

Toyota is considered by many to be the poster child for JIT success. The Toyota
production strategy is highlighted by the fact that raw materials are not brought to the
production floor until an order is received and this product is ready to be built. No
parts are allowed at a node unless they are required for the next node, or they are
part of an assembly for the next node. This philosophy has allowed Toyota to keep a
minimum amount of inventory which means lower costs. This also means that
Toyota can adapt quickly to changes in demand without having to worry about
disposing of expensive inventory.

Important factors to Toyota success:

Small amounts of raw material inventory must be kept at each node in production,
so that production can take place for any product. These parts are then
replenished when they are used.

Accuracy of forecasting is important so the correct amount of raw materials can
be stocked.

Dell

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Dell has also leveraged JIT principles to make its manufacturing process a success.
Dell’s approach to JIT is different in that they leverage their suppliers to achieve the
JIT goal. They are also unique in that Dell is able to provide exceptionally short lead
times to their customers, by forcing their suppliers to carry inventory instead of
carrying it themselves and then demanding (and receiving) short lead times on
components so that products can be simply assembled by Dell quickly and then
shipped to the customer.

Important factors to Dell’s success:

Dependable suppliers with the ability to meet Dell’s demanding lead time
requirements.

A seamless system that allows Dell to transmit its component requirements so
that they will arrive at Dell in time to fulfill its lead times.

A willingness of suppliers to keep inventory on hand allowing Dell to be free of
this responsibility.

Harley Davidson

Harley Davidson’s use of JIT is mostly characterized by its transformation in the late
World War 2 era from an inefficient manufacturer that solved all of its problems with
extra inventory to a nimble manufacturer able to meet demand and provide short
lead times.

Results of Harley Davidson’s JIT implementation:

Inventory levels decreased 75%.

Increased productivity.

Harley Davidson’s success with the implementation of JIT had a lot to do with the
fact that when JIT was put into practice, process problems could no longer be hidden
by costly inventory that helped to meet ship dates. The inefficiencies in the
processes were quickly identified and solved.

Lean manufacturing
Lean manufacturing, lean enterprise, 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.

Essentially, lean is centered on preserving value with less work. Lean manufacturing is a 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.[1][2] TPS 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,[3] 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.

Overview
Lean principles come from the Japanese manufacturing industry. The term was first coined
by John Krafcik in a Fall 1988 article, "Triumph of the Lean Production System," published in
the Sloan Management Review and based on his master's thesis at the MIT Sloan School of
Management.[4] Krafcik had been a quality engineer in the Toyota-GM NUMMI joint venture
in California before coming to MIT for MBA studies. Krafcik's research was continued by
the International Motor Vehicle Program (IMVP) at MIT, which produced the international
best-seller book co-authored by Jim Womack, Daniel Jones, and Daniel Roos called The
Machine That Changed the World.[1] A complete historical account of the IMVP and how the
term "lean" was coined is given by Holweg (2007).[2]
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.[5] 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 cannot be achieved. From this perspective, the tools are workarounds adapted to
different situations, which explains any apparent incoherence of the principles above.
[edit]Origins
Also known as the flexible mass production, the TPS has two pillar concepts: Just-in-
time (JIT) or "flow", and "autonomation" (smart automation).[6] Adherents of the Toyota
approach would say that the smooth flowing delivery of value achieves all the other
improvements as side-effects. If production flows perfectly then there is no inventory; if
customer valued features are the only ones produced, then product design is simplified and
effort is only expended on features the customer values. The other of the two TPS pillars is
the very human aspect of autonomation, whereby automation is achieved with a human
touch.[7] The "human touch" here meaning to automate so that the machines/systems are
designed to aid humans in focusing on what the humans do best. This aims, for example, to
give the machines enough intelligence to recognize when they are working abnormally and
flag this for human attention. Thus, in this case, humans would not have to monitor normal
production and only have to focus on abnormal, or fault, conditions.
Lean implementation is therefore focused on getting the right things to the right place at the
right time in the right quantity to achieve perfect work flow, while minimizing waste and being
flexible and able to change. These concepts of flexibility and change are principally required
to allow production leveling, using tools like SMED, but have their analogues in other
processes such as research and development (R&D). The flexibility and ability to change are

within bounds and not open-ended, and therefore often not expensive capability
requirements. More importantly, all of these concepts have to be understood, appreciated,
and embraced by the actual employees who build the products and therefore own the
processes that deliver the value. The cultural and managerial aspects of Lean are possibly
more important than the actual tools or methodologies of production itself. There are many
examples of Lean tool implementation without sustained benefit, and these are often blamed
on weak understanding of Lean throughout the whole organization.
Lean aims to make the work simple enough to understand, do and manage. To achieve
these three goals at once there is a belief held by some that Toyota's mentoring
process,(loosely called Senpaiand Kohai, which is Japanese for senior and junior), is one of
the best ways to foster Lean Thinking up and down the organizational structure. This is the
process undertaken by Toyota as it helps its suppliers improve their own production. The
closest equivalent to Toyota's mentoring process is the concept of "Lean Sensei," which
encourages companies, organizations, and teams to seek outside, third-party experts, who
can provide unbiased advice and coaching, (see Womack et al., Lean Thinking, 1998).
There have been recent attempts to link Lean to Service Management, perhaps one of the
most recent and spectacular of which was London Heathrow Airport's Terminal 5. This
particular case provides a graphic example of how care should be taken in translating
successful practices from one context (production) to another (services), expecting the same
results. In this case the public perception is more of a spectacular failure, than a spectacular
success, resulting in potentially an unfair tainting of the lean manufacturing philosophies.[8]

[edit]A brief history of waste reduction thinking
The avoidance of waste has a long history. In fact many of the concepts now seen as key to
lean have been discovered and rediscovered over the years by others in their search to
reduce waste. Lean builds on their experiences, including learning from their mistakes.
[edit]Pre-20th century

The printer Benjamin Franklin contributed greatly to waste reduction thinking

Most of the basic goals of lean manufacturing are common sense, and documented
examples can be seen as early as Benjamin Franklin. Poor Richard's Almanac says of
wasted time, "He that idly loses 5s. worth of time, loses 5s., and might as prudently throw 5s.
into the river." He added that avoiding unnecessary costs could be more profitable than
increasing sales: "A penny saved is two pence clear. A pin a-day is a groat a-year. Save and
have."
Again Franklin's The Way to Wealth says the following about carrying unnecessary
inventory. "You call them goods; but, if you do not take care, they will prove evils to some of
you. You expect they will be sold cheap, and, perhaps, they may [be bought] for less than
they cost; but, if you have no occasion for them, they must be dear to you. Remember what
Poor Richard says, 'Buy what thou hast no need of, and ere long thou shalt sell thy
necessaries.' In another place he says, 'Many have been ruined by buying good penny
worths'." Henry Ford cited Franklin as a major influence on his own business practices,
which included Just-in-time manufacturing.
The concept of waste being built into jobs and then taken for granted was noticed by motion
efficiency expert Frank Gilbreth, who saw that masons bent over to pick up bricks from the
ground. The bricklayer was therefore lowering and raising his entire upper body to pick up a
2.3 kg (5 lb.) brick, and this inefficiency had been built into the job through long practice.
Introduction of a non-stooping scaffold, which delivered the bricks at waist level, allowed
masons to work about three times as quickly, and with less effort.
[edit]20th century
Frederick Winslow Taylor, the father of scientific management, introduced what are now
called standardization and best practice deployment. In his Principles of Scientific
Management, (1911), Taylor said: "And whenever a workman proposes an improvement, it
should be the policy of the management to make a careful analysis of the new method, and
if necessary conduct a series of experiments to determine accurately the relative merit of the
new suggestion and of the old standard. And whenever the new method is found to be
markedly superior to the old, it should be adopted as the standard for the whole
establishment."
Taylor also warned explicitly against cutting piece rates (or, by implication, cutting wages or
discharging workers) when efficiency improvements reduce the need for raw labor: "…after a
workman has had the price per piece of the work he is doing lowered two or three times as a
result of his having worked harder and increased his output, he is likely entirely to lose sight
of his employer's side of the case and become imbued with a grim determination to have no
more cuts if soldiering [marking time, just doing what he is told] can prevent it."
Shigeo Shingo, the best-known exponent of single minute exchange of die (SMED) and
error-proofing or poka-yoke, cites Principles of Scientific Management as his inspiration.[9]
American industrialists recognized the threat of cheap offshore labor to American workers
during the 1910s, and explicitly stated the goal of what is now called lean manufacturing as a
countermeasure. Henry Towne, past President of the American Society of Mechanical
Engineers, wrote in the Foreword to Frederick Winslow Taylor's Shop Management (1911),

"We are justly proud of the high wage rates which prevail throughout our country, and
jealous of any interference with them by the products of the cheaper labor of other countries.
To maintain this condition, to strengthen our control of home markets, and, above all, to
broaden our opportunities in foreign markets where we must compete with the products of
other industrial nations, we should welcome and encourage every influence tending to
increase the efficiency of our productive processes."
[edit]Ford starts the ball rolling
Henry Ford continued this focus on waste while developing his mass assembly
manufacturing system. Charles Buxton Going wrote in 1915:

Ford's success has startled the country, almost the world, financially, industrially,
mechanically. It exhibits in higher degree than most persons would have thought
possible the seemingly contradictory requirements of true efficiency, which are:
constant increase of quality, great increase of pay to the workers, repeated reduction
in cost to the consumer. And with these appears, as at once cause and effect, an
absolutely incredible enlargement of output reaching something like one hundredfold
in less than ten years, and an enormous profit to the manufacturer.[10]
Ford, in My Life and Work (1922),[11] provided a single-paragraph description that
encompasses the entire concept of waste:

I believe that the average farmer puts to a really useful purpose only about 5%. of the
energy he expends.... Not only is everything done by hand, but seldom is a thought
given to a logical arrangement. A farmer doing his chores will walk up and down a
rickety ladder a dozen times. He will carry water for years instead of putting in a few
lengths of pipe. His whole idea, when there is extra work to do, is to hire extra men.
He thinks of putting money into improvements as an expense.... It is waste motion—
waste effort— that makes farm prices high and profits low.
Poor arrangement of the workplace—a major focus of the modern kaizen—and
doing a job inefficiently out of habit—are major forms of waste even in modern
workplaces.
Ford also pointed out how easy it was to overlook material waste. A former
employee, Harry Bennett, wrote:

One day when Mr. Ford and I were together he spotted some rust in the slag that
ballasted the right of way of the D. T. & I [railroad]. This slag had been dumped there
from our own furnaces. 'You know,' Mr. Ford said to me, 'there's iron in that slag. You
make the crane crews who put it out there sort it over, and take it back to the
plant.'[12]
In other words, Ford saw the rust and realized that the steel plant was not
recovering all of the iron.

Ford's early success, however, was not sustainable. As James P. Womack and
Daniel Jones pointed out in "Lean Thinking", what Ford accomplished
represented the "special case" rather than a robust lean solution.[13] The major
challenge that Ford faced was that his methods were built for a steady-state
environment, rather than for the dynamic conditions firms increasingly face
today.[14]Although his rigid, top-down controls made it possible to hold variation
in work activities down to very low levels, his approach did not respond well to
uncertain, dynamic business conditions; they responded particularly badly to the
need for new product innovation. This was made clear by Ford's precipitous
decline when the company was forced to finally introduce a follow-on to the
Model T (seeLean Dynamics).
Design for Manufacture (DFM) also is a Ford concept. Ford said in My Life and
Work (the same reference describes just in time manufacturing very explicitly):

...entirely useless parts [may be]—a shoe, a dress, a house, a piece of machinery, a
railroad, a steamship, an airplane. As we cut out useless parts and simplify
necessary ones, we also cut down the cost of making. ... But also it is to be
remembered that all the parts are designed so that they can be most easily made.
This standardization of parts was central to Ford's concept of mass
production, and the manufacturing "tolerances", or upper and lower
dimensional limits that ensured interchangeability of partsbecame widely
applied across manufacturing. Decades later, the renowned Japanese
quality guru, Genichi Taguchi, demonstrated that this "goal post" method of
measuring was inadequate. He showed that "loss" in capabilities did not
begin only after exceeding these tolerances, but increased as described by
the Taguchi Loss Function at any condition exceeding the nominal condition.
This became an important part of W. Edwards Deming's quality movement of
the 1980s, later helping to develop improved understanding of key areas of
focus such as cycle time variation in improving manufacturing quality and
efficiencies in aerospace and other industries.
While Ford is renowned for his production line it is often not recognized how
much effort he put into removing the fitters' work to make the production line
possible. Until Ford, a car's components always had to be fitted or reshaped
by a skilled engineer at the point of use, so that they would connect properly.
By enforcing very strict specification and quality criteria on component
manufacture, he eliminated this work almost entirely, reducing manufacturing
effort by between 60-90%.[15] However, Ford's mass production system failed
to incorporate the notion of "pull production" and thus often suffered from
over-production.
[edit]Toyota develops TPS
Toyota's development of ideas that later became Lean may have started at
the turn of the 20th century with Sakichi Toyoda, in a textile factory with

looms that stopped themselves when a thread broke, this became the seed
of autonomation and Jidoka. Toyota's journey with JIT may have started
back in 1934 when it moved from textiles to produce its first car. Kiichiro
Toyoda, founder of Toyota, directed the engine casting work and discovered
many problems in their manufacture. He decided he must stop the repairing
of poor quality by intense study of each stage of the process. In 1936, when
Toyota won its first truck contract with the Japanese government, his
processes hit new problems and he developed the "Kaizen" improvement
teams.
Levels of demand in the Post War economy of Japan were low and the focus
of mass production on lowest cost per item via economies of scale therefore
had little application. Having visited and seen supermarkets in the USA,
Taiichi Ohno recognised the scheduling of work should not be driven by
sales or production targets but by actual sales. Given the financial situation
during this period, over-production had to be avoided and thus the notion of
Pull (build to order rather than target driven Push) came to underpin
production scheduling.
It was with Taiichi Ohno at Toyota that these themes came together. He built
on the already existing internal schools of thought and spread their breadth
and use into what has now become the Toyota Production System (TPS). It
is principally from the TPS, but now including many other sources, that Lean
production is developing. Norman Bodek wrote the following in his foreword
to a reprint of Ford's Today and Tomorrow:

I was first introduced to the concepts of just-in-time (JIT) and the Toyota production
system in 1980. Subsequently I had the opportunity to witness its actual application
at Toyota on one of our numerous Japanese study missions. There I met Mr. Taiichi
Ohno, the system's creator. When bombarded with questions from our group on what
inspired his thinking, he just laughed and said he learned it all from Henry Ford's
book." The scale, rigor and continuous learning aspects of TPS have made it a core
concept of Lean.
[edit]Types of waste
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.[16] 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
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
behaviour 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 are 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)[17]
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)[18]
Some of these definitions may seem rather idealistic, but this tough
definition is seen as important and they drove the success of 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.[19] Breakthroughs
in SMED and other process changing techniques rely upon clear
identification of where untapped opportunities may lie if the processing
assumptions are challenged.

[edit]Lean implementation develops from TPS
The discipline required to implement Lean and the disciplines it seems to
require are so often counter-cultural that they have made successful
implementation of Lean a major challenge. Some[20] would say that it
was a major challenge in its manufacturing 'heartland' as well.
Implementations under the Lean label are numerous and whether they
are Lean and whether any success or failure can be laid at Lean's door
is often debatable. Individual examples of success and failure exist in
almost all spheres of business and activity and therefore cannot be taken
as indications of whether Lean is particularly applicable to a specific
sector of activity. It seems clear from the "successes" that no sector is
immune from beneficial possibility.[citation needed]
Lean is about more than just cutting costs in the factory.[21] One crucial
insight is that most costs are assigned when a product is designed,
(see Genichi Taguchi). Often an engineer will specify familiar, safe

materials and processes rather than inexpensive, efficient ones. This
reduces project risk, that is, the cost to the engineer, while increasing
financial risks, and decreasing profits. Good organizations develop and
review checklists to review product designs.
Companies must often look beyond the shop-floor to find opportunities
for improving overall company cost and performance. At the system
engineering level, requirements are reviewed with marketing
and customer representatives to eliminate those requirements that are
costly. Shared modules may be developed, such as multipurpose power
supplies or shared mechanical components or fasteners. Requirements
are assigned to the cheapest discipline. For example, adjustments may
be moved into software, and measurements away from a mechanical
solution to an electronic solution. Another approach is to choose
connection or power-transport methods that are cheap or that used
standardized components that become available in a competitive market.
[edit]An example program
In summary, an example of a lean implementation program could be:

With a muri or flow based
With a tools-based approach
approach (as used in the TPS with
suppliers[22]).
 Senior
management to
 Sort out as many of the
agree and discuss
visible quality problems as
their lean vision
you can, as well as
 Management
downtime and other
brainstorm to identify
instability problems, and
project leader and set
get the internal scrap
objectives
acknowledged and its
 Communicate plan management started.
and vision to the
 Make the flow of parts
workforce
through the system or
 Ask for volunteers to
process as continuous as
form the Lean
possible
Implementation team
using workcellsand market
(5-7 works best, all
locations where necessary
from different
and avoiding variations in
departments)
the operators work cycle
 Appoint members of
 Introduce standard work
the Lean
and stabilize the work pace

Manufacturing through the system
Implementation  Start pulling work through
Team the system, look at the
 Train the production scheduling and
Implementation move toward daily orders
Team in the various with kanban cards
lean tools - make a  Even out the production
point of trying to visit flow by reducing batch
other non competing sizes, increase delivery
businesses that have frequency internally and if
implemented lean possible externally, level
 Select a Pilot Project internal demand
to implement – 5S is  Improve exposed quality
a good place to start issues using the tools
 Run the pilot for 2–3  Remove some people (or
months - evaluate, increase quotas) and go
review and learn from through this work again
your mistakes (the Oh No !! moment)
 Roll out pilot to other
factory areas
 Evaluate results,
encourage feedback
 Stabilize the positive
results by teaching
supervisors how to
train the new
standards you've
developed with TWI
methodology
(Training Within
Industry)
 Once you are
satisfied that you
have a habitual
program, consider
introducing the next
lean tool. Select the

one that gives you
the biggest return for
your business.
[edit]Lean leadership
The role of the leaders within the organization is the fundamental
element of sustaining the progress of lean thinking. Experienced kaizen
members at Toyota, for example, often bring up the concepts
ofSenpai, Kohai, and Sensei, because they strongly feel that transferring
of Toyota culture down and across Toyota can only happen when more
experienced Toyota Sensei continuously coach and guide the less
experienced lean champions.
One of the dislocative effects of Lean is in the area of key performance
indicators (KPI). The KPIs by which a plant/facility are judged will often
be driving behaviour, because the KPIs themselves assume a particular
approach to the work being done. This can be an issue where, for
example a truly Lean, Fixed Repeating Schedule (FRS) and JIT
approach is adopted, because these KPIs will no longer reflect
performance, as the assumptions on which they are based become
invalid. It is a key leadership challenge to manage the impact of this KPI
chaos within the organization.
Similarly, commonly used accounting systems developed to
support mass production are no longer appropriate for companies
pursuing Lean. Lean Accounting provides truly Lean approaches to
business management and financial reporting.
After formulating the guiding principles of its lean manufacturing
approach in the Toyota Production System (TPS), Toyota formalized in
2001 the basis of its lean management: the key managerial values and
attitudes needed to sustain continuous improvement in the long run.
These core management principles are articulated around the twin pillars
of Continuous Improvement (relentless elimination of waste) and
Respect for People (engagement in long term relationships based on
continuous improvement and mutual trust).
This formalization stems from problem solving. As Toyota expanded
beyond its home base for the past 20 years, it hit the same problems in
getting TPS properly applied that other western companies have had in
copying TPS. Like any other problem, it has been working on trying a
series of countermeasures to solve this particular concern. These
countermeasures have focused on culture: how people behave, which is
the most difficult challenge of all. Without the proper behavioral
principles and values, TPS can be totally misapplied and fail to deliver
results. As with TPS, the values had originally been passed down in a

master-disciple manner, from boss to subordinate, without any written
statement on the way. Just as with TPS, it was internally argued that
formalizing the values would stifle them and lead to further
misunderstanding. However, as Toyota veterans eventually wrote down
the basic principles of TPS, Toyota set to put the Toyota Way into writing
to educate new joiners.[23]
Continuous Improvement breaks down into three basic principles:

1. Challenge: Having a long term vision of the challenges one
needs to face to realize one's ambition (what we need to learn
rather than what we want to do and then having the spirit to face
that challenge). To do so, we have to challenge ourselves every
day to see if we are achieving our goals.
2. Kaizen: Good enough never is, no process can ever be thought
perfect, so operations must be improved continuously, striving
for innovation and evolution.
3. Genchi Genbutsu: Going to the source to see the facts for
oneself and make the right decisions, create consensus, and
make sure goals are attained at the best possible speed.
Respect For People is less known outside of Toyota, and essentially
involves two defining principles:

1. Respect: Taking every stakeholders' problems seriously, and
making every effort to build mutual trust. Taking responsibility for
other people reaching their objectives.
2. Teamwork: This is about developing individuals through team
problem-solving. The idea is to develop and engage people
through their contribution to team performance. Shop floor
teams, the whole site as team, and team Toyota at the outset.
[edit]Differences from TPS
Whilst Lean is seen by many as a generalization of the Toyota
Production System into other industries and contexts there are some
acknowledged differences that seem to have developed in
implementation.

1. Seeking profit is a relentless focus for Toyota exemplified by
the profit maximization principle (Price – Cost = Profit) and the
need, therefore, to practice systematic cost reduction (through
TPS or otherwise) to realize benefit. Lean implementations can
tend to de-emphasise this key measure and thus become fixated
with the implementation of improvement concepts of "flow" or
"pull". However, the emergence of the "value curve analysis"

promises to directly tie lean improvements to bottom-line
performance measuments.20
2. Tool orientation is a tendency in many programs to elevate
mere tools (standardized work, value stream mapping, visual
control, etc.) to an unhealthy status beyond their pragmatic
intent. The tools are just different ways to work around certain
types of problems but they do not solve them for you or always
highlight the underlying cause of many types of problems. The
tools employed at Toyota are often used to expose particular
problems that are then dealt with, as each tool's limitations or
blindspots are perhaps better understood. So, for
example, Value Stream Mappingfocuses upon material and
information flow problems (a title built into the Toyota title for this
activity) but is not strong on Metrics, Man or Method. Internally
they well know the limits of the tool and understood that it was
never intended as the best way to see and analyze every waste
or every problem related to quality, downtime, personnel
development, cross training related issues, capacity bottlenecks,
or anything to do with profits, safety, metrics or morale, etc. No
one tool can do all of that. For surfacing these issues other tools
are much more widely and effectively used.
3. Management technique rather than change agents has been
a principle in Toyota from the early 1950s when they started
emphasizing the development of the production manager's and
supervisors' skills set in guiding natural work teams and did not
rely upon staff-level change agents to drive improvements. This
can manifest itself as a "Push" implementation of Lean rather
than "Pull" by the team itself. This area of skills development is
not that of the change agent specialist, but that of the natural
operations work team leader. Although less prestigious than the
TPS specialists, development of work team supervisors in
Toyota is considered an equally, if not more important, topic
merely because there are tens of thousands of these individuals.
Specifically, it is these manufacturing leaders that are the main
focus of training efforts in Toyota since they lead the daily work
areas, and they directly and dramatically affect quality, cost,
productivity, safety, and morale of the team environment. In
many companies implementing Lean the reverse set of priorities
is true. Emphasis is put on developing the specialist, while the
supervisor skill level is expected to somehow develop over time
on its own.
[edit]Lean services

Main article: Lean services
Lean, as a concept or brand, has captured the imagination of many in
different spheres of activity. Examples of these from many sectors are
listed below.
Lean principles have been successfully applied to call center services to
improve live agent call handling. By combining Agent-assisted
Automation and Lean's waste reduction practices, a company reduced
handle time, reduced between agent variability, reduced accent barriers,
and attained near perfect process adherence.[24]
Lean principles have also found application in software application
development and maintenance and other areas of information
technology (IT).[25] More generally, the use of Lean in IT has become
known as Lean IT.
A study conducted on behalf of the Scottish Executive, by Warwick
University, in 2005/06 found that Lean methods were applicable to the
public sector, but that most results had been achieved using a much
more restricted range of techniques than Lean provides.[26]
A study completed in 2010 identified that Lean was beginning to embed
in Higher Education in the UK (see Lean Higher Education). [27]
The challenge in moving Lean to services is the lack of widely available
reference implementations to allow people to see how directly applying
lean manufacturing tools and practices can work and the impact it does
have. This makes it more difficult to build the level of belief seen as
necessary for strong implementation. However, some research does
relate widely recognized examples of success in retail and even airlines
to the underlying principles of lean.[14] Despite this, it remains the case
that the direct manufacturing examples of 'techniques' or 'tools' need to
be better 'translated' into a service context to support the more
prominent approaches of implementation, which has not yet received the
level of work or publicity that would give starting points for implementors.
The upshot of this is that each implementation often 'feels its way' along
as must the early industrial engineers of Toyota. This places huge
importance upon sponsorship to encourage and protect these
experimental developments.

[edit]Lean goals and strategy
The espoused goals of Lean manufacturing systems differ between
various authors. While some maintain an internal focus, e.g. to increase
profit for the organization,[28] others claim that improvements should be
done for the sake of the customer[29]
Some commonly mentioned goals are:

 Improve quality: To stay competitive in today's marketplace, a
company must understand its customers' wants and needs and
design processes to meet their expectations and requirements.

 Eliminate waste: Waste is any activity that consumes time,
resources, or space but does not add any value to the product or
service. See Types of waste, above.
Taking the first letter of each waste, the acronym "TIM WOOD" is
formed. This is a common way to remember the wastes. The other
alternative name that can used to remember is "DOT WIMP".

 Reduce time: Reducing the time it takes to finish an activity from
start to finish is one of the most effective ways to eliminate waste
and lower costs.

 Reduce total costs: To minimize cost, a company must produce only
to customer demand. Overproduction increases a company’s
inventory costs because of storage needs.
The strategic elements of Lean can be quite complex, and comprise
multiple elements. Four different notions of Lean have been identified:[30]

1. Lean as a fixed state or goal (Being Lean)
2. Lean as a continuous change process (Becoming Lean)
3. Lean as a set of tools or methods (Doing Lean/Toolbox Lean)
4. Lean as a philosophy (Lean thinking)
[edit]Steps to achieve lean systems
The following steps should be implemented to create the ideal lean
manufacturing system:[31]:

1. Design a simple manufacturing system
2. Recognize that there is always room for improvement
3. Continuously improve the lean manufacturing system design
[edit]Design a simple manufacturing system
A fundamental principle of lean manufacturing is demand-based flow
manufacturing. In this type of production setting, inventory is only pulled
through each production center when it is needed to meet a customer's
order. The benefits of this goal include:[31]

 decreased cycle time
 less inventory
 increased productivity
 increased capital equipment utilization

[edit]There is always room for improvement
The core of lean is founded on the concept of continuous product and
process improvement and the elimination of non-value added activities.
"The Value adding activities are simply only those things the customer is
willing to pay for, everything else is waste, and should be eliminated,
simplified, reduced, or integrated" (Rizzardo, 2003). Improving the flow
of material through new ideal system layouts at the customer's required
rate would reduce waste in material movement and inventory.[31]
[edit]Continuously improve
A continuous improvement mindset is essential to reach a company's
goals. The term "continuous improvement" means incremental
improvement of products, processes, or services over time, with the goal
of reducing waste to improve workplace functionality, customer service,
or product performance (Suzaki, 1987).
Stephen Shortell (Professor of Health Services Management and
Organisational Behaviour – Berkeley University, California) states:-
"For improvement to flourish it must be carefully cultivated in a rich soil
bed (a receptive organisation), given constant attention (sustained
leadership), assured the right amounts of light (training and support) and
water (measurement and data) and protected from damaging."
[edit]Measure
Overall equipment effectiveness (OEE) is a set of performance metrics
that fit well in a Lean environment.

[edit]Implementation pitfalls
One criticism of lean perennially heard among rank-and-file workers is
that lean practitioners may easily focus too much on the tools and
methodologies of lean, and fail to focus on the philosophy and culture of
lean. The implication of this for lean implementers is that adequate
command of the subject is needed in order to avoid failed
implementations.

How a Small Business Can Use Lean
Manufacturing
By Mike Hart

―Lean manufacturing‖ is a style of manufacturing, originally invented by Toyota, where the
objective is to eliminate all wasteful processes that impede your efficiency. Progress is
gauged by a reduction in inventory and WIP relative to sales.

Lean manufacturing is primarily a management philosophy rather than a specific set of
software features. Lean principles can be applied to any manufacturing software package.

Many of the lean manufacturing resources on the web are from consulting firms that help
companies implement lean manufacturing programs. Among these firms you will find
several blogs and books on the subject.

My company is the developer of DBA Manufacturing, a software package for small
businesses. We find that lean manufacturing principles make eminent good sense for small
companies and strive to present those principles in our documentation and video training
courses.

To me, lean manufacturing makes common sense and is intuitively practiced by small
companies. Many job shops, for example, keep inventory to an absolute minimum by only
purchasing material when jobs materialize. This is a simple form of lean manufacturing.

Essentially, lean manufacturing is about reducing inventory. ―Inventory‖ encompasses stock
on hand as well as work in process. In general, the more inventory that is required per unit
of sales, the less efficient a company is. Conversely, the more sales that are supported per
unit of inventory, the more efficient a company is.

Excessive inventory is used to mask inefficient practices. Ordering material earlier than
necessary and in larger quantities than needed ties up scarce working capital and storage
space. Companies that use manual purchasing instead of MRP typically over stock, yet are
still plagued by chronic shortages and high expediting costs.

Excessive work in process causes many problems. Releasing too many jobs at once with
larger run sizes than necessary clogs up work centers, aisles, and storage areas, requiring
extra material handling. Extra handling and large run sizes amplify the effects of quality
problems and complicate work center scheduling. Favored jobs get expedited at the
expense of other jobs and late deliveries are the norm.

So ―getting lean‖ is all about reducing inventory. The steps you must take to reduce
inventory will make your company more efficient. And it’s easy to judge your progress over
time because you simply compare your inventory and WIP levels against your sales.

There are five basic steps you can take to get lean.

1. Use Manufacturing Software

It is not practical to implement lean manufacturing practices without manufacturing
software. You will need a manufacturing software package that includes the core functions
of inventory, bills of material, routings, sales orders, MRP, jobs, and purchasing.

2. Reduce Run Sizes

Reduce your job quantities to the smallest run sizes possible, even if doing so requires many
more setups. Small run sizes are easier to schedule, require less material handling, improve
product quality, and shorten production times. The efficiency gains far outweigh the extra
setup time.

3. Pull jobs through the shop

Release jobs to the shop only when the shop has open capacity for the next job. By doing
so, you ―pull‖ jobs through the shop instead of ―pushing‖ jobs onto the shop. Let each job

wait its turn. Releasing jobs properly keeps WIP to a minimum and will dramatically shorten
the time it takes to get jobs through the shop.

4. Use MRP

MRP is essentially a time-phased shortage list. Use MRP to generate POs instead of
manual purchasing. Gradually tighten your reorder levels and lead times over time so that
you get as close to ―just in time‖ receiving as you can.

5. Practice Continuous Improvement

Establish a ―continuous improvement‖ program where you formally meet with supervisors
and workers on a regular basis to review progress and discuss new ideas for process
improvement.

Lean manufacturing is counter-intuitive to most people. Having extra stock on hand,
minimizing the number of setups, and starting jobs as early as possible seem like good
practices and are done with the best of intentions, but they are deadly harmful to your overall
efficiency.

So if you want to complete jobs quickly and on time with high quality, keep your inventory
and WIP to a minimum, which forces you to adopt efficient practices. Get lean.

What changes can employees expect as a result of a Lean transformation?
One of the goals of Lean is to move decision making closest to the customer, or in other
words, as close as possible to the physical product or service, since this is what the
customer receives. Since the individual operator is the closest human to the product, the
goal becomes to move decision making to this level. Consequently, the first and
immediate change that employees notice is that they have more significant input in the
production methods of their work area. This empowerment often motivates team
members to accomplish unexpected level of performance both for their own
development as well as the company's productivity gains.

Naturally, employee empowerment is much more comprehensive than management
simply stating that moving forward employees will be empowered. It involves setting
guidelines and boundaries, rolling out the process in a deliberate and well
communicated manner, and making adjustments when appropriate. Gembutsu works
with upper management to ensure that this cultural shift towards lean does not
jeopardize company morale or productivity.

EXAMPLE OF LEAN MANUFACTURING SYSTEM:
GOING LEAN

percentage of companies responding "yes" to the survey question: Is your company implementing lean operating
principles?

Industry segment '08 '09

Industrial equipment 61% 65%

Food and beverage 45% 52%

Metal fabrication 68% 68%

Transportation equipment 42% 70%

Building materials 51% 55%

Plastics 65% 64%

Electronics 61% 67%

Chemicals 55% 59%

Printing, publishing 55% 51%

Medical devices 61% 87%

Total 56% 61%
A couple of years ago, Sealy, the world's top mattress maker, pieced together beds in a sort of stutter
step. Today, it's a ballet.

At a plant here recently, two workers place rectangles of foam, fiber and cloth on a springboard with
the dexterity of sandwich makers, briskly firing spray guns to glue the layers to each other and staple
guns to bolt the cloth to the metal.

As they slide their handiwork onto a table, a "taper" just a few feet away grabs it and places it under
the rat-tat-tat of a sewing machine that stitches the top panel to the rest of the unit. Within five
minutes, a queen-size mattress is formed.

Previously, workers churned out dozens of unfinished mattresses at a time, loading them onto a
conveyor. The taper, about 40 feet away, had to pick through 4-foot-high piles of them. Mattresses,
which took up precious floor space, were sometimes damaged from rubbing against one another.

Sealy is among thousands of manufacturers that have remained profitable during the recession by
using a practice called lean manufacturing to become more cost-efficient. It entails making each
widget in an uninterrupted flow, rather than as part of unfinished batches; producing only what
customers order; and ruthlessly chopping billions of dollars in inventory.

"The big advantage is less material handling, less movement and less dirt on the product," says Mike
Hofmann, Sealy's executive vice president of operations. "They're only working on one bed at a time."

In the short term, as manufacturers slash inventories and reduce their workforces, the recovery could
be slowed or delayed, experts say. Many, such as Sealy, are scaling back through attrition and cutting
temporary staff rather than resorting to layoffs.

Yet industrywide, some jobs will be lost permanently as manufacturers use their new cost efficiencies
to wring more output from fewer employees, says Cliff Waldman, an economist at the Manufacturers
Alliance, which does research for the industry. But by allowing U.S. manufacturers to better compete
against low-cost rivals abroad, the maneuvers are helping them maintain profits and ultimately hire
employees, economists say.

"Our response to the cost pressures brought about by globalization is … to produce cheaper and
more efficiently," Waldman says. "It's survival."

Manufacturing productivity, or output per labor hour, rose 4.9% in the second quarter, the highest
since early 2005. A big portion of the gains can be traced to lean-manufacturing techniques, says
economist Brian Bethune of IHS Global Insight.

They were pioneered by Toyota in the late 1980s as a way to reduce waste and eliminate steps that
don't provide value to customers. While a growing number of companies have adopted the practices
through the years, the number of converts has grown substantially during the economic downturn,

Waldman says. Sixty-one percent of manufacturers said they have adopted lean practices or plan to
do so this year, according to a spring survey by RSM McGladrey.

Faced with mandates to cut costs, most are scrambling to make the changes in a few months instead
of over a year or two as they were before the recession, says Anand Sharma, CEO of TBM
Consulting. He estimates only 15% of manufacturers are applying lean policies extensively.

They're responding to a brutal climate. Manufacturers have cut production more than 14% since the
recession began, even after a sharp rebound since June. They've eliminated 2 million jobs during the
slump, more than any other sector.

Driving the lean movement is an urgent need to pare inventory, executives say. With revenue down
and tight-fisted banks reluctant to lend, the makers no longer can afford to tie up hundreds of millions
of dollars in raw materials that languish in factories for weeks or months.

"Inventory is evil," says Drew Greenblatt, CEO of Marlin Steel Wire in Baltimore. By trimming, "You
find a big pile of cash."

The trend toward leaner stockpiles could dampen the early stages of a recovery, Bethune says. That's
because economists expect the upturn's initial phase to be driven by a need to replenish depleted
inventories, or at least draw them down slower.

Sealy launched its lean strategy about five years ago but has intensified it during the recession,
Hofmannsays. It's paying off. Net sales fell 14% in the third quarter to $349 million from a year earlier.
Yet earnings rose to $12.1 million from $10.9 million, and gross profit margin edged up to 41.8% from
40.5%.

EXAMPLE 2: More aerospace and defense suppliers are using lean manufacturing
processes to reduce costs and increase business, said Bill Lewandowski, vice
president of supplier management for the Aerospace Industries Association
(AIA).

"More than 90 percent of the top 50 percent of suppliers have lean programs,
and 50 percent of all aerospace and defense subcontractors use lean,"
Lewandowski told The DAILY Sept. 27.

This is an increase over a figure stated by a Government Electronics and
Information Technology Association (GEIA) report released earlier this year,
which said that "while 50-60 percent of defense and aerospace prime contractors
use lean principles and practices, only 10-15 percent of subcontractors do"
(DAILY, April 15).

Lean techniques include minimizing inventory or parts and using more modeling
and simulation.

A major advantage for suppliers using lean manufacturing is that it takes the
waste out of their manufacturing process, decreasing the floor space they use to
make products and leaving space for expansion.

"They go after different products and they increase sales," Lewandowski said.

For example, DynaBil Industries of Coxsackie, N.Y., which builds titanium parts
for military and commercial aircraft, was able to increase its business by 40
percent due to lean manufacturing, he said.

"After 9/11, our revenues dropped to $13 to $14 million from $17.5 million. For
2004, we are projecting revenues to reach $16 million. We were able to do this
by using lean," DynaBil President Hugh Quigley told The DAILY.

The company also supplied all the titanium on the U.S. Army's RAH-66
Comanche helicopter, which the Army killed earlier this year (DAILY, Feb. 24).

"We lost about $3 million worth of work this year because of its cancellation, but
have gained that back and a little more in other military programs, like from the
increased activity on the Black Hawk program and new work from Boeing
Integrated Defense Systems and Lockheed Martin Aeronautics," he said.

"When 9/11 hit, we didn't layoff anyone. Instead, we used that period to train
our employees in lean, so when the upturn hits, which is now, we are ready to
go. As we get new work, we are wowing our customers by turning it around
quickly," he said. "We also decreased our footprint by about 20 percent."

Before 9/11, DynaBil was 70 percent commercial and 30 percent defense
business. Today, 55 percent of the company's revenues come from the defense
industry while 45 percent comes from commercial, Quigley said.

Efforts from the new Lean Aerospace Initiative (LAI), a consortium focused on
increasing the value of aerospace business practices - led by the Massachusetts
Institute of Technology, U.S. government organizations, defense and aerospace
companies and organized labor - is filtering down to suppliers, Lewandowski
said.

"The LAI itself doesn't include smaller suppliers; they do studies of larger primes
and put out tools companies can use to implement. But this information gets
filtered down through Department of Commerce Manufacturing Extension
Programs [MEPs] and large AIA member companies that have supplier quality
managers," he said.

just in time and lean manufacturing

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