Lean Operations and Concepts Principles of Operations Management, Tenth Edition, Global Edition

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Copyright © 2017 Pearson Education, Ltd.
PowerPoint presentation to accompany
Heizer, Render, Munson
Operations Management, Twelfth Edition, Global Edition
Principles of Operations Management, Tenth Edition, Global Edition
PowerPoint slides by Jeff Heyl
Lean Operations
16

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

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► One of the largest vehicle
manufacturers in the world with annual
sales of over 9 million vehicles
► Success due to two techniques, JIT and
TPS
► Continual problem solving is central to
JIT
► Eliminating excess inventory makes
problems immediately evident

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

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TPS Elements

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

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

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Lean Operations
▶ Lean operations supply the customer
with exactly what the customer wants
when the customer wants it, without
waste, through continuous
improvement
▶ Driven by “pulling” customer orders

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

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

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

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

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

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

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▶ Sort/segregate – when in doubt, throw it
out
▶ Simplify/straighten – methods analysis
tools
▶ Shine/sweep – clean daily
▶ Standardize – remove variations from
processes
▶ Sustain/self-discipline – review work and
recognize progress
The 5Ss
Two additional Ss
► Safety – built in good practices
► Support/maintenance – reduce
variability and unplanned
downtime

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Remove Variability
▶ Variability is any deviation from the
optimum process
▶ Lean systems require managers to
reduce variability caused by both
internal and external factors
▶ Inventory hides variability
▶ Less variability results in less waste

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

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▶ Poor processes resulting in improper
quantities, late, or non-conforming
units
▶ Inadequate maintenance
▶ Unknown customer demands
▶ Incomplete or inaccurate drawings,
specifications, or bills of material
Sources of Variability
Both JIT and inventory
reduction are effective tools in
identifying causes of variability

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

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Improve Throughput
▶ The rate at which units move through a
process
▶ The time between the arrival of raw
materials and the shipping of the
finished order is called manufacturing
cycle time
▶ A pull system increases throughput

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

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Lean and Just-In-Time
▶ Powerful strategy for improving operations
▶ Materials arrive where they
are needed only when they
are needed
▶ Identifying problems and
driving out waste reduces
costs and variability and
improves throughput
▶ Requires a meaningful
buyer-supplier relationship

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JIT and Competitive
Advantage
Figure 16.1

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JIT and Competitive
Advantage
Figure 16.1
WHICH RESULTS IN:
Rapid throughput frees assets
Quality improvement reduces waste
Cost reduction adds pricing flexibility
Variability reduction
Rework reduction
WHICH WINS ORDERS BY:
Faster response to the
customer at lower cost
and higher quality –
A Competitive Advantage

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JIT Partnerships
Figure 16.2

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

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Lean Layout
▶ Reduce waste due to movement
TABLE 16.1
LEAN LAYOUT TACTICS
Build work cells for families of products
Include a large number operations in a small area
Minimize distance
Design little space for inventory
Improve employee communication
Use poka-yoke devices
Build flexible or movable equipment
Cross-train workers to add flexibility

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

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

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

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

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

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Reduce Variability
Inventory level
Process
downtime
Scrap
Setup
time
Late deliveries
Quality
problems
Figure 16.3

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Inventory
level
Reduce Variability
Figure 16.3
Process
downtime
Scrap
Setup
time
Late deliveries
Quality
problems

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Inventory
level
Reduce Variability
Figure 16.3
Process
downtime
removed
No scrap
Setup
time
reduced
No late
deliveries
Quality
problems
removed

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

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Reduce Lot Sizes
Figure 16.4
200 –
100 –
Inventory
Time
Q2 When average order size = 100
average inventory is 50
Q1 When average order size = 200
average inventory is 100

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Reduce Lot Sizes
▶ Ideal situation is to have lot sizes of one
pulled from one process to the next
▶ Often not feasible
▶ Can use EOQ analysis to calculate
desired setup time
▶ Two key changes necessary
▶ Improve material handling
▶ Reduce setup time

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Setup Time Example
D = Annual demand = 400,000 units
d = Daily demand = 400,000/250 = 1,600 per day
p = Daily production rate = 4,000 units
Qp = EOQ desired = 400
H = Holding cost = $20 per unit
S = Setup cost (to be determined)
Setup time = $2.40/($30/hour) = 0.08 hr = 4.8 minutes

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Reduce Setup Costs
▶ High setup costs encourage large lot
sizes
▶ Reducing setup costs reduces lot size
and reduces average inventory
▶ Setup time can be reduced through
preparation prior to shutdown and
changeover

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Lower Setup Costs
Figure 16.5
Sum of ordering and
holding costs
Holding cost
Setup cost curve (S1)
T1
S1
T2
S2
Cost
Lot size
Setup cost curve (S2)

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Reduce Setup Costs Figure 16.6
90 min —
60 min —
40 min —
25 min —
15 min —
13 min —
—
Use one-touch system to eliminate
adjustments (save 10 minutes)
Training operators and standardizing work
procedures (save 2 minutes)
Step 4
Step 5
Initial Setup Time
Step 2
Move material closer and
improve material handling
(save 20 minutes)
Step 1
Separate setup into preparation and actual setup,
doing as much as possible while the
machine/process is operating
(save 30 minutes)
Step 3
Standardize and
improve tooling
(save 15 minutes)
Repeat cycle until subminute setup
is achieved
Step 6

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Lean Scheduling
▶ Schedules must be communicated
inside and outside the organization
▶ Level schedules
▶ Process frequent small batches
▶ Freezing the schedule helps stability
▶ Kanban
▶ Signals used in a pull system

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Lean Scheduling
▶ Better scheduling improves performance
TABLE 16.3
LEAN SCHEDULING TACTICS
Make level schedules
Use kanbans
Communicate schedules to suppliers
Freeze part of the schedule
Perform to schedule
Seek one-piece-make and one-piece-move
Eliminate waste
Produce in small lots
Make each operation produce a perfect part

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

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Scheduling Small Lots
A B C
A A
A
B B B B B C
JIT Level Material-Use Approach
A C
A A
A B B B B B C C
B B B B
A A
Large-Lot Approach
Time
Figure 16.7

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

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Signal marker hanging on post
for part Z405 shows that
production should start for that
part. The post is located so that
workers in normal locations can
easily see it.
Signal marker on stack of boxes
Part numbers mark location of
specific part
Kanban
Figure 16.8

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

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Kanban
Kanban
Kanban
Final
assembly
Work
cell
Kanban
Material/Parts
Supplier
Finished
goods
Customer
order

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

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

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The Number of Kanban Cards
or Containers
▶ Need to know the lead time needed
to produce a container of parts
▶ Need to know the amount of safety
stock needed
Number of kanbans
(containers)
Demand during Safety
lead time + stock
Size of container
=

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Number of Kanbans Example
Daily demand = 500 cakes
Production lead time = 2 days
(Wait time +
Material handling time +
Processing time)
Safety stock = 1/2 day
Container size = 250 cakes
Demand during lead time = 2 days x 500 cakes = 1,000
Safety stock = ½ x Daily demand = 250
Number of kanbans = = 5
1,000 + 250
250

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

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

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Lean Quality Tactics
TABLE 16.4
LEAN QUALITY TACTICS
Use statistical process control
Empower employees
Build fail-safe methods (poka-yoke, checklists, etc.)
Expose poor quality with small lots
Provide immediate feedback

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Toyota Production System
▶ Continuous improvement
▶ Build an organizational culture and value system
that stresses improvement of all processes, kaizen
▶ Part of everyone’s job
▶ Respect for people
▶ People are treated as
knowledge workers
▶ Engage mental and
physical capabilities
▶ Empower employees

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▶ Processes and standard work practice
▶ Work shall be completely specified as to content,
sequence, timing, and outcome
▶ Internal and external customer-supplier
connections are direct
▶ Material and service flows must be simple and
directly linked to the people or machinery involved
▶ Process improvement must be made in
accordance with the scientific method at the
lowest possible level of the organization

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

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

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

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

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

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

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