An Introduction to Lean ManufacturingTom Carlin (SYD), Rami Karjian (AT), Kate Mein (MEL)May 2002This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organisation without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion.May 2002020415MEAU1168.P1LeanManufOBJECTIVESIntroduce Lean manufacturing concepts and illustrate application in both manufacturing and service settingsHighlight preliminary diagnostic tools and analysis to help frame opportunitiesProvide a checklist to help identify if Lean improvement opportunities exist at manufacturing and service clients1020415MEAU1168.P1LeanManufOVERVIEWHistory and contextCore Lean operations conceptsApplying the principles (Card game)Applications for manufacturing companies Analytical techniques Case studyApplications for service companies Analytical techniques Case studyChecklists for evaluating lean potential at clientsHow to learn moreTime10 minutes60 minutes40 minutes20 minutes20 minutes15 minutes15 minutes2020415MEAU1168.P1LeanManufWHAT IS LEAN MANUFACTURING?3020415MEAU1168.P1LeanManufJust a shop floor Just a shop floor thingthingLimited to Limited to repetitive assemblyrepetitive assemblyAn improvement An improvement programprogramA menu of tools A menu of tools and techniquesand techniquesLEAN PRODUCTION BASIC DEFINITIONLean is not . . .Lean production is . . .An integrated An integrated system of principles, system of principles, operating practices, operating practices, and elements that and elements that pursues optimum pursues optimum streamlining, streamlining, improved quality and improved quality and waste eliminationwaste elimination4020415MEAU1168.P1LeanManufTHE CREATION OF LEANTHE TOYOTA PRODUCTION SYSTEMTaichii Ohno developed the Toyota production system emphasizing Just-in-time, Autonomation, Pull and regular continuous improvementToyota Motor Company achieved mass production efficiency in a low volume, high diversity environmentCatch up with American automobile industry in 3 years/Context and factorsToyoda father and son pair moved from Toyoda Automated Loom Company to vehiclesDeveloped an automated loom in 1902 as JidokaFaced with small and highly diverse Japanese vehicle market and scarce capital, especially after WWII60 yearsof developmentToyota foundedJIT1933WWII195019601970198019902000TPS as a systemSupplier developmentTransplants5020415MEAU1168.P1LeanManufHighMediumDemand variabilityContinuousServiceDiscrete assemblyHotelsBanks/InsuranceHospitalsAutomotive: all major producersProcess typeConsumer electronicsMetals and miningFocus on process stability and mainte-nanceFocus on value stream and customerPulp and paperFocus on process flow and flexible work systemsAPPLICATION OF LEAN6“LEAN” OPERATIONS CREATE A COMPETITIVE ADVANTAGEValue of USD 100 invested for 5 years, February 2001* Excluding exchange rate fluctuations* Alusuisse, Pechiney, Alcan, Kaiser Alu, and CapralSource:Datastream; McKinsey analysisToyotaJapan Automobile index184155AlcoaAluminum competition*255139Dow ChemicalUS Chemicals index DuPontUS Chemicals indexDomtarUS Basic Industries index228143159139158143Lean operations can be implemented in process industriesEarly adopters can gain a competitive advantage7020415MEAU1168.P1LeanManufOVERVIEWHistory and contextCore Lean operations conceptsApplying the principles (Card game)Applications for manufacturing companies Analytical techniques Case studyApplications for service companies Analytical techniques Case studyChecklists for evaluating lean potential at clientsHow to learn moreTime10 minutes60 minutes40 minutes20 minutes20 minutes15 minutes15 minutes8020415MEAU1168.P1LeanManufLeanProductionAwarenessWaste eliminationVisual management5S workplace organizationRoot cause problem solvingPerformance management (policy deployment/Hoshin Kanri)Employee involvementKaizen activityQuality assuranceMachine stop/human touchPoka YokeLine-stop conceptStandard work instructionsTotal preventative maintenance (TPM)Quality System developmentLevel production (load smoothing)Small lot sizesPlanning techniquesTAKT timeStandardized work sheetsLine balanceJust-in-timeContinuous product flow1-piece flowMulti-process/multi-machineQuick setup (SMED)*FIFO (First in, First out)Visual controlsPull-schedulingKanbanStore (WIP management)ProcessMachine designLine designPlant designCORE LEAN OPERATIONS CONCEPTS* See Appendix for detailed definitions* Single minute exchange of dies9020415MEAU1168.P1LeanManufAnything that waters down value, impedes the flow of products or information, prevents the customer from receiving exactly what they want or leaves you satisfied with anything less than perfection is by definition MUDAOverproductionProducing too much, or producing too soonTransportationAny nonessential transport is wasteInventoryAny more than the minimum to get the job doneWaitingWaiting on parts, waiting for a machine to finish cycleProcessingOverprocessingProcess VariabilityReworkAny repairMotionAny motion that does not add valueIntellectAny failure to fully utilize the time and talents of people8 KINDS OF WASTE MUDAMUDAMUDA10020415MEAU1168.P1LeanManufDaily issues boardHourly production output boardQuality information boardGeneral information boardEXAMPLEVISUAL MANAGEMENT11020415MEAU1168.P1LeanManuf5S WORKPLACE ORGANIZATIONSource:Plant visitPLANT EXAMPLEBefore AfterSortSweep StraightenSanitiseStandardise12020415MEAU1168.P1LeanManufEMPLOYEE INVOLVEMENT Source: M. Imai; KaizenTop ManagementMiddle ManagementSupervisorsWorkersLEANInnovationCIMaintenanceTop ManagementMiddle ManagementSupervisorsWorkersInnovationMaintenanceCONVENTIONALDifferences in conventional and lean approaches to improvement13020415MEAU1168.P1LeanManufLeanProductionAwarenessWaste eliminationVisual management5S workplace organizationRoot cause problem solvingPerformance management (policy deployment/Hoshin Kanri)Employee involvementKaizen activityQuality assuranceMachine stop/human touchPoka YokeLine-stop conceptStandard work instructionsTotal preventative maintenance (TPM)Quality System developmentLevel production (load smoothing)Small lot sizesPlanning techniquesTAKT timeStandardized work sheetsLine balanceJust-in-timeContinuous product flow1-piece flowMulti-process/multi-machineQuick setup (SMED)*FIFO (First in, First out)Visual controlsPull-schedulingKanbanStore (WIP management)ProcessMachine designLine designPlant designCORE LEAN OPERATIONS CONCEPTS* See Appendix for detailed definitions* Single minute exchange of dies14020415MEAU1168.P1LeanManufCONTINUOUS FLOW PROCESSINGWorkers are separated so they cannot assist each other in their workTypically, A,B,C layout is process oriented (pressing, turning, drilling, etc.)Layout leads to complex scheduling and movement of materialAlthough high efficiency of one worker performing one operation, transportation, waiting, and lead times become longDefects affect the whole lotClose proximity of workers facilitates communication and flexibilityProduct lead time is short due to simplified production flowMinimum work-in-process inventory is presentBuild-up of defects is eliminated Ability to use multifunctional workers efficiently is increasedProblem locations are identified easilyStandardized work makes changes easy to implementSource: McKinsey Operations PracticeTraditional functional flow Continuous flow15020415MEAU1168.P1LeanManufPULL SCHEDULINGProduction driven by long-range forecast . . .Production signal is fed to most upstream points and begins with material release . . . Work stations operate on availability of material from upstream operations . . .WIP inventory may fluctuate and even bloat with bottlenecks . . .Control is based on complex MRP type system which schedules material delivery to work station . . .Push . . . . . with other improvements, pull enables production to be directly driven by Customer demand. . . production signal given to final assembly only, where work begins. . . work stations operate only when receiving a demand signal from downstream stations. . . WIP inventory is preset and tightly controlled . . . production is controlled by Kanban or other demand signals. . . Pull16020415MEAU1168.P1LeanManufMULTI-PROCESS AND MULTI-MACHINE CAPABILITYSource: Suzaki: Manufacturing Challenge17020415MEAU1168.P1LeanManufLeanProductionAwarenessWaste eliminationVisual management5S workplace organizationRoot cause problem solvingPerformance management (policy deployment/Hoshin Kanri)Employee involvementKaizen activityQuality assuranceMachine stop/human touchPoka YokeLine-stop conceptStandard work instructionsTotal preventative maintenance (TPM)Quality System developmentLevel production (load smoothing)Small lot sizesPlanning techniquesTAKT timeStandardized work sheetsLine balanceJust-in-timeContinuous product flow1-piece flowMulti-process/multi-machineQuick setup (SMED)*FIFO (First in, First out)Visual controlsPull-schedulingKanbanStore (WIP management)ProcessMachine designLine designPlant designCORE LEAN OPERATIONS CONCEPTS* See Appendix for detailed definitions* Single minute exchange of dies18020415MEAU1168.P1LeanManufIMPACT OF SMALLER LOT SIZESWays to manage demand for 360,000 units (products A, B, C) in 1 monthVolume Thousands120,000 per lotABC120102030DaysCBACBASmaller lot size consistent with just-in-time lean principlesTraditional large lotIncreasing frequency of smaller production lotsBenefitsFaster customer responseEven utilization of specialized machinery and peopleReal time quality feedbackLower inventorySource: McKinsey Operations PracticeVolume Thousands40,000 per lot120102030DaysVolume Thousands4,000 per lot120102030Days19020415MEAU1168.P1LeanManufSTANDARDIZED WORK TAKT TIMEDefinitionTakt time as a component of standardized operations is defined as the production rate or rhythm to produce 1 part based on customer demand. A manufacturing facility with a clearly established takt time will be easy to identify all processes will be linked together and running according to this rhythm Takt time =Total time availableTotal customer demandOnly scheduled management allowances are deducted from available time:BreaksLunchTeam meetingsExample calculation Total time available = 480 minutes 50 minutes (lunch, breaks) Customer demand of 600 units/day= = 43 seconds/ units 20020415MEAU1168.P1LeanManufAPPLICATIONS OF TAKT TIMELINE BALANCETakt time is used to assess manpower requirements for a product and to balance the workload among the operators1. Manpower calculation2. Operation balance table*1 2 3 4 5TimeOperator192116332743 seconds43 seconds30 seconds116 seconds54312TimeOperator433043 * Allocate all wait time to last process, do not distribute wait timeTakt = 43 secondsRequired manpower Total time of work elements (116 sec) Takt time (43 sec)= = 2.721020415MEAU1168.P1LeanManufLeanProductionAwarenessWaste eliminationVisual management5S workplace organizationRoot cause problem solvingPerformance management (policy deployment/Hoshin Kanri)Employee involvementKaizen activityQuality assuranceMachine stop/human touchPoka YokeLine-stop conceptStandard work instructionsTotal preventative maintenance (TPM)Quality System developmentLevel production (load smoothing)Small lot sizesPlanning techniquesTAKT timeStandardized work sheetsLine balanceJust-in-timeContinuous product flow1-piece flowMulti-process/multi-machineQuick setup (SMED)*FIFO (First in, First out)Visual controlsPull-schedulingKanbanStore (WIP management)ProcessMachine designLine designPlant designCORE LEAN OPERATIONS CONCEPTS* See Appendix for detailed definitions* Single minute exchange of dies22020415MEAU1168.P1LeanManufDELIVERING QUALITY THE FIRST TIME THROUGH POKA YOKEBuilt-in quality control at each processLine-stop conceptStandard work instructionsQuality feedback on cause of error is immediateSimilar errors are not seen repeatedlyInspectionScrapReworkShipCBA100% final inspectionNo quality feedback to operators on defectsExtra rework operations requiredHigh cost, since defects are detected at higher value-added levelTraditional mass production methodShipCBALean production approach to quality(no defect passed to next stage of process)Eliminates costly rework and drives up worker accountability for qualitySource: McKinsey Operations Practice23STANDARDIZED WORK ANALYSIS SHEETNo.Work elementElement timeHand workWalking1Load raw material on fixture1Operation nameDate:Signature:Cycle time:TAKT time:* FootnoteSource:SourcesProcessnameSTANDARDIZED WORK COMBINATION TABLEDateSectionTAKT timeNo. neededper shiftOperation time (unit: sec.)Engine No. 465Assembly-Sta #13/11/9868153TAKT timeManualAutoWaitPart # &nameStandardization Key element to achieve consistent quality and improvement in the work process. Once standards are established they must be revised quickly to reflect all improvement activities.Standards include: Safety/training Equipment operation/ maintenance Quality: material, components, and work operationsPurpose Assists operators staying on best work practicesTraining of new operators Reduces wasteful activitySystematically allows line rebalancingDocuments a public record showing dates of improvements Provides a stable foundation for continuous improvementSTANDARD OPERATION SHEETSIGNDATETEAM LEADERSDepartment:Operation number:Operation:Area:Prepared by:Page _ of _NO.OPERATION SEQUENCEKEY POINTILLUSTRATIONS SAFETY CHECKSUPERVISORSAlign paper in fixture by sliding bottom edge into corner 1st, followed by top edgeHold firmly in bottom left corner by applying pressure down and towards left side of fixtureVisually check for gaps between fixture and paperWhile continuing pressure with 1 hand, place ruler across paperAlign top edge of ruler with fixture horizontal indicatorsApply firm pressure on rule, releasing pressure with other handDraw line using top edge of ruler, using level, even consistency across pageApply pressure to bottom edge of paper before releasing ruler pressureAlign left edge of ruler with vertical fixture indicatorsApply pressure to ruler, releasing pressure with other handDraw line using left edge of ruler, using level, even consistency down pageFold segment by folding long over and aligning with opposite long edgeUse 1 hand to hold edges aligned before applying pressureApply pressure and crease segment down middleLOAD PAPER IN FIXTURE*ALIGN PAPER IN FIXTUREMARK PAPER IN 4 EQUAL SEGMENTS*DRAW A HORIZONTAL LINEDRAW A VERTICAL LINECUT PAPER INTO 4 EQUAL SEGMENTS*CUT ALONG LINE DISSECTION 8.5 INCH SEGMENT1.2.3.4.RECORD OF CHANGEDATE SUP.T/LCONTENT OF CHANGE CLASS.NO.Source:Ohno: “Toyota Production System”STANDARDIZED WORK INSTRUCTIONS24020415MEAU1168.P1LeanManufTOTAL PREVENTATIVE MAINTENANCE TPMFocusMaximize cash by running assets into the groundProvide rapid response for breakdownsMinimize unscheduled maintenance downtimeOptimize use of preventive/predictive maintenance “avoid over maintenance”Preempt failures by removing root causes/ defects in a cost-effective manner; continue to employ equipment-specific strategiesKey skillsRisksMaintenance performanceDo not fix itFix it when it breaksFix it before it breaksUse equipment-specific strategies to optimize cost/ benefit of planned maintenanceEliminate the sources of defectsWorld-class maintenanceStaticDynamicMaintaining short-term output (pieces/tonnage)Some maintenance investment could have high return in added lifePerforming expert repairsProviding quick repair mechanisms (eg, fast swap outs)Higher cost with lower total productivity Complexity of managing unpredictable workloadsPlanning/schedulingAdhering to planning/ schedulingMaintaining equipment historiesPreventing/predictingOver maintenance (eg, too frequent preventive routines)Identifying when to use time-based/ usage-based, condition-based, or breakdown maintenance on an equipment-specific levelPotential maintenance cost benefit not offsetting resources required to develop strategiesProviding cross-functional process/product improvement, especially engineeringCoordinating with suppliers/vendorsRoot cause problem solvingPotential benefit not offsetting resources required25020415MEAU1168.P1LeanManufOVERVIEWHistory and contextCore Lean operations conceptsApplying the principles (Card game)Applications for manufacturing companies Analytical techniques Case studyApplications for service companies Analytical techniques Case studyChecklists for evaluating lean potential at clientsHow to learn moreTime10 minutes60 minutes40 minutes20 minutes20 minutes15 minutes15 minutes26020415MEAU1168.P1LeanManufLEAN SIMULATION “CARD GAME” OVERVIEWRound1234Participant rolesRoleSr. writer #1*Sr. writer #2Sr. writer #3Jr. writer #1Jr. writer #2Dealer / Inspector* Tip : Assign the likely fastest writer to be Sr. Writer #1 because they may be underutilized in first 3 roundsActivityBaseline batchContinuous flowBalanced stationsMulti-functional workersKey improvement leverIncreased utilization, reduced errorsBalancing to bottleneckBalancing workload/increased utilization, in-process error detection, incentivesActivityWrite phraseWrite phraseWrite “RESPECTED”Write AREWrite TO BE“Dealer/ QACards (all suits)Queen/Jack (4 decks ea.)Aces/King (4 decks ea.)10 (4 decks ea.)Number of cards323216Card assignment27020415MEAU1168.P1LeanManufAll six participants sit around one table, with the Sr. Writers (3) sitting on one side of the table, and the Jr. writers (2) sitting centered on the other side, and QA at one headEach Sr. and Jr. writer has a bell, which they ring once per second when they are not workingSr. Writers #1 and #2 have an instruction sheet that outlines which phrase they write, and a stack of blank Post-It notes on which to write themEach player writes with a blue pen. In each round the moderator will introduce a red pen to indicate errors At the end of each round, document (1) the number of people, (2) the total number of successfully completed cards, and (3) the cycle time for one card (monitored by the moderator), (4) the WIP, (5) the total errors, and (6) the total “score”, and (7) score per personLEAN SIMULATION “CARD GAME” OVERALL SETUPJr.Writer #2Jr.Writer #1Sr.Writer #3Sr.Writer #2Sr.Writer #1Dealer/QA28020415MEAU1168.P1LeanManufROUND 1 BASELINE BATCH PROCESSINGTime5 minutesSetupBefore starting, place cards by value/suit batches face-up in front of the Sr. Writers #1 and #2At the start, Sr. Writers #1 and #2 will take their batches (e.g., Sr. writer #1 takes all queens and jacks of all suits)They will look-up their words, write it on the Post-It notes, and attach to the cards, by batches according to value and suit (e.g., all 4 queens of diamond form a batch)Pass on to Jr. writer #1 (write ARE), by batchPass on to Jr. writer #2 (write TO BE), by batchPass to Sr. writer #3 by value by batch, who writes RESPECTED“No WIP allowed (in scoring, WIP counts as “-1”, successful cards as “+1” and error cards as “0”). DO NOT REVEAL THE SCORING SYSTEM UNTIL THE ROUND IS OVERDebriefCheck how players “felt” (eg rushed, annoyed by bells ringing)Discuss scoring were players frustrated not knowing the scoring system (most employees dont)What would you change (“batch processing system”)29020415MEAU1168.P1LeanManufROUND 2 CONTINUOUS FLOWTime5 minutesSetupWriters no longer batch work, as units are completed they arepassed on to next operationAll other processes remain the sameExpectedImpactIncrease in productivityDecrease in errorsDecrease in WIPKey LeverIncreases utilization of downstream processesLess units tied up in WIPDebriefReview differences from Round 1 (eg less ringing)Review scoring (probably not huge differences intotal production from Round 1, but big difference in scoreReview takt time concept before removing operator for Round 330020415MEAU1168.P1LeanManufROUND 3 BALANCED STATIONSTime5 minutesSetupJr. writer No.2 exits, Jr. writer No.1 writes ARE TO BEAll other steps the sameExpectedImpactSame productivity with decreased resourcesKey LeverPRESIDENTSr. Writer #1 + #299AREJr. Writer #1TO BEJr. Writer #2RESPECTED Sr. Writer #331020415MEAU1168.P1LeanManufROUND 4 MULTIFUNCTIONAL WORKERSTime5 minutesSetupPlace two piles of cards face up in front of two Sr. writers (#1 and #2), they are no longer constrained by valueGive new instructions to Sr. writers (#1 and #2) based on suitAdd incentive for the highest output (use different color pen to help measure)Jr. writers can also detect errorsAll other processes the sameImpactSlight increase in productivity impact of incentivesImproved quality scoreKey LeverSr. writer was previously underutilized is now fully utilizedReduced complexity in jobs of Senior Writers #1 and #2In-process error catching32020415MEAU1168.P1LeanManufLEAN SIMULATION INSTRUCTIONS (ROUND 1)Role : Sr. Writer #1Take all QUEENS and JACKS from Person #6 (Dealer)By batch of card type / suit, look up on the instruction sheet the word you will write by combination of color and card type (e.g., MONARCHY CHIEFTAN)Write the word on the index card (all caps, legible), repeat for all cards in the batch (of the same suit) and pass it to Jr. writer #1Repeat for subsequent batchesRing the bell once per second when you are not busy33020415MEAU1168.P1LeanManufINSTRUCTION SHEET FOR SENIOR WRITER #1VALUEQUEENQUEENJACKJACKQUEENQUEENJACKJACKSUITWORDDIAMONDSCLUBSSPADESCLUBSHEARTSSPADESDIAMONDSHEARTSPRESIDENT PRIME MINCHIEFTAIN MONARCHYMONARCHY CHIEFTAINCHIEFTAIN MONARCHYPRIME MIN PRESIDENTMONARCHY CHIEFTAINPRESIDENT PRIME MINPRIME MIN PRESIDENT34020415MEAU1168.P1LeanManufLEAN SIMULATION INSTRUCTIONS (ROUND 1)Role : Sr. writer #2Take all ACES and KINGS and 10s from Person #6 (Dealer) By batch of card type / suit, look up the word you will write by combination of suit and card type (e.g., MONARCHY CHIEFTAN)Write the word on the index card (all caps, legible), repeat for all cards in the batch (of the same color) and pass it to Jr. writer #1Repeat for subsequent batchesRing the bell once per second when you are not busy35020415MEAU1168.P1LeanManufINSTRUCTION SHEET FOR SENIOR WRITER #2VALUEKINGACE10ACE10KINGACEACE10KING10KINGWORDCLUBSHEARTSDIAMONDSSPADESHEARTSDIAMONDSCLUBSDIAMONDSCLUBSHEARTSSPADESSPADESCHIEFTAIN MONARCHYPRIME MIN PRESIDENTPRESIDENT PRIME MINMONARCHY CHIEFTAINPRIME MIN PRESIDENTPRESIDENT PRIME MINCHIEFTAIN MONARCHYPRESIDENT PRIME MINCHIEFTAIN MONARCHYPRIME MIN PRESIDENTMONARCHY CHIEFTAINMONARCHY CHIEFTAINSUIT36020415MEAU1168.P1LeanManufSIMPLIFIED INSTRUCTION SHEET FOR SENIOR WRITER #1 AND #2 TO BE GIVEN BEFORE ROUND #4SUITWORDDIAMONDSCLUBSSPADESHEARTSPRESIDENT PRIME MINCHIEFTAIN MONARCHYMONARCHY CHIEFTAINPRIME MIN PRESIDENT37020415MEAU1168.P1LeanManufLEAN SIMULATION INSTRUCTIONS (ROUND 1)Role : Sr. writer #3Receive cards from Junior Writer #2 When a batch returns to you from Jr. writer #2, write RESPECTED (all caps, legible) and place in the completed pile (finished goods). Do this the entire batch before proceeding to the next oneRing the bell once per second when you are not busy38020415MEAU1168.P1LeanManufLEAN SIMULATION INSTRUCTIONS (ROUND 1)Role : Jr. writer #1Receive batches of cards from the Sr. writersBy batch of card type / color, write the word ARE (all caps, legible) on each cardRepeat for all cards within the batch, and pass them to Jr. writer #2Ring the bell one per second when you are not busy39020415MEAU1168.P1LeanManufLEAN SIMULATION INSTRUCTIONS (ROUND 1)Role : Jr. writer #2Receive batches of cards from Jr. writer #1By batch of card type / suit, write the word TO BE (all caps, legible) on each cardRepeat for all cards within the batchForward all batches to Senior Writer #3Ring the bell once per second when you are not busy40020415MEAU1168.P1LeanManufLEAN SIMULATION INSTRUCTIONS (ROUND 1)Role : Person #6 (Dealer / Inspector)At the beginning of the round, pass out cards by batch (ie hand out all cards sorted by batch) to the writersAces : Sr. writer #2Kings : Sr. writer #2Queens : Sr. writer #1Jacks : Sr. writer #110s : Sr. writer #2Inspect cards that are completed by each writer by Senior Writer #3 (by batch) for quality errors (RED PEN). Call out red pen when you inspect a batch with quality errors.Time how long it takes a card to go from start to end (cycle time) and coach the writers on whether to continue releasing batches (remember, WIP scores “-1” per card!)41020415MEAU1168.P1LeanManufOVERVIEWHistory and contextCore Lean operations conceptsApplying the principles (Card game)Applications for manufacturing companies Analytical techniques Case studyApplications for service companies Analytical techniques Case studyChecklists for evaluating lean potential at clientsHow to learn moreTime10 minutes60 minutes40 minutes20 minutes20 minutes15 minutes15 minutes42020415MEAU1168.P1LeanManufCustomer serviceMRPMaster schedulerForecastChange based onNo partsProduction problemsShop flow schedulerAlgorithmSchedule integrity is low so shipments do not resemble what is producedHigh inventory is used to buffer against changes in scheduleDifficult for shop floor to allocate resourcesTotal value added: 329”Total NVA: 16 daysCustomerLocal suppliersShipping3 daysShipping frequency7 daysFinal assembly160”22 daysPadsCanopies10 daysMaterial from local supplierCartonsFastenersLabelsInstruction books, etc.HandlesMoldingCasting 76”Base 78”1 day1 day91”52”26”5 days5 days5 daysHarness assemblyBase assemblyCastingassemblyAsia28 daysCartsDetermined by customersOEE 65%MexicoTake-aways78”1 day99”5 days160”7 days3 daysMaterialFlowSecondsEXAMPLEOrdersEDIPhoneFaxSales managersShipping orders“DISGUISED CLIENT EXAMPLEMACRO VALUE STREAMMAP MATERIAL, TIME AND INFORMATION FLOWS43OEE CHARTS OVERALL EQUIPMENT EFFICIENCYMEASURE EQUIPMENT PERFORMANCEGross time availableAvailable timeRun timeOn stream timeProduction time of prime productNon-sched-uled timeSetupsBreak-downsTurn-downSmall stopsStart-up lossesOff-gradeWorld-class OEE 85-90% in process industryEquipment availabilityEquipment performanceProcess qualityActivities to reduce lossesChange over reduction (SMED)Preven-tive main-tenanceTPMStand-ardized opera-tionsVisual controls5S and visual controlProblem solvingStandard proceduresVariability reductionPotential areas for loss reduction/variability elimination44020415MEAU1168.P1LeanManufLABOR PRODUCTIVITY: CHART MAINTENANCEMEASURE PREPARATION VS REPAIR TIMERepair(Wrench time)Percentage of total hoursTotalBreakdown of time spent during PM Mechanic shiftTravelMachine checkBreakTrash detailGather-ing partsSafety meetingLooking for toolsMaking hosesIdle timeFork-liftCLIENT EXAMPLE45020415MEAU1168.P1LeanManufLABOR VALUE-ADDED CHARTMEASURE VALUE ADDED VS NON-VALUE ADDED TIME FOR OPERATIONSValue addedSeconds/pieceDISGUISED EXAMPLE45.0%Heatbond/check bond/clean glueCleanLayout parts 69.0%Load onto trayDry partsLoad 10 pieces Check outer diameterRun testerUnload90.8%413GlueGlue sits Walk to get glue and walk backCheck paperworkPull off pins Non-value added (%):100% =Line up partsCheck paperwork 1.9 3.643.6 7.3%29.110.9 3.67816.5% 6.338.538.521615.7%17.611.1 7.7 5.841.2Movers, not builders46020415MEAU1168.P1LeanManufREDUCING CHANGEOVER TIMESTHE SMED* APPROACHMEASURE INDIVIDUAL ELEMENTS OF CHANGEOVER TIME1. Measure total changeover timeStepsDuring machine shutdown lost production time2. Identify internal and external elements3. Convert internal elements into external elements by performing some operations before / after machine shutdown4. Reduce internal elements5. Reduce external elements6. Standardize and institutionalize the new procedureExternal to (before / after) machine shutdown* SMED single minute exchange of dieSTime 47020415MEAU1168.P1LeanManufALCOAS LEAN TRANSFORMATION PROCESSSource: Alcoas website; annual reportsAlcoa Business System (ABS)Management system for productivity improvementsCovers all activities across the supply chain, from raw materials to end customerIntegrated use of management tools, production process controls, quality systems, technology, and human resource developmentAlcoa Production System (APS)Manufacturing standard part of ABSSystematic operations approach with specific tools, processes, and actions applied to eliminate waste and make for use and not for inventory3-year cost savings goal of USD 1 billion achieved through APSAdditional USD 1 billion savings targeted for 20032000PaybackJanuary 1997, initiated a 9-month APS pilot at LaFayette plant, Indiana During 1997, all business unit presidents and plant managers visited LaFayette for 24 weeks training in APSAgreement with local unions to link compen-sation to APS perform-ance and that no jobs will be lost through APS1997Pilot plantABS/APS rolled out globally across companyABS used to rapidly integrate new acquisitions, eg, Alumax and later Reynolds Analysts and reporters given a 2-day crash course in ABS/ APSDetailed plant targets and performance continuously published to analysts Roll-out phase19981999Before 1997Years of study and consulting with Toyota and other expertsAlcoa Business System (ABS) and Alcoa Production System (APS) codifiedDesign systemCASE STUDY48020415MEAU1168.P1LeanManufALCOAS LEAN TRANSFORMATION RESULTS* CAGR: Compounded annual growth rateSource: Alcoas annual reports; McKinsey Metals Practice; team analysis RevenuesUSD billions19961997199819992000Annual growth rate* 15%Capital expenditures/salesPercent35% reduction since 1996Net incomeUSD billions19961997199819992000Annual growth rate* 30%CASE STUDY49020415MEAU1168.P1LeanManuf* Alcoas quarterly net income adjusted for special itemsSource: Alcoas quarterly reports; London Metal Exchange LEAN OPERATIONS HAVE HELPED ALCOA BREAK OUT OF THE ALUMINUM PRICE CYCLEAlcoas performance vs. aluminum prices, Q1 1982Q1 20010.40.60.81.01.21.4Aluminum spot priceUSD/poundAdjusted net income*USD millions-100010020030040019901985198219952000Initiated Alcoa Production SystemCASE STUDY50020415MEAU1168.P1LeanManufOVERVIEWHistory and contextCore Lean operations conceptsApplying the principles (Card game)Applications for manufacturing companies Analytical techniques Case studyApplications for service companies Analytical techniques Case studyChecklists for evaluating lean potential at clientsHow to learn moreTime10 minutes60 minutes40 minutes20 minutes20 minutes15 minutes15 minutes51020415MEAU1168.P1LeanManufMOVEMENTS OF CHECK IN PROCESSING CENTERFOLLOW MOVEMENT OF ENTIRE PROCESS BETWEEN DEPARTMENTSFloor plan layout* For in clearing work that is out of balanceSource: Internal interviews, observationsReconcilementBlockingCash-letter dispatchSorter roomReject repairMail and courier182543b763a3c52020415MEAU1168.P1LeanManufPROCESS FLOW MAP: MAP PROCESS FLOWS, CAPACITY AND AVERAGE TAKT TIME1 Based on 6.4 working hours/day (380 minutes)2 Based on 35 applications per day3 Entry 10 minutes underwriter support = 32 minutes4 Average underwriting time = 80 minutes 5 Policy assembly, post issue follow-up, and final placement = 22 minutes8337 + (1)115241111Capacity1Applications/dayPeople (indirect)TAKT time2Minutes/application6954 + (4)11_ 5222 + (5)11Steps for issuing insurance policiesThe new business process is almost linear, but has excess capacity and numerous handoffsFront endUnderwriterBack endAccountingRisk assessmentPrepare/issue policyPMSI(attending physician statement)Para Med(age/amount medical tests)AgentDeliver policyIssue checkData entry file management3-4 timesPhysical transferElectronic transferSystem53020415MEAU1168.P1LeanManufTIME BUILDUP IN CHECK PROCESSING* : MEASURE WORK AND WAIT TIMES AT EACH PROCESS STEPIndex (percent)* Arriving at 6:20 a.m.Source:McKinsey Operations PracticeWait timeWork timePrep/ blockingCapture/sortCode line completion StripEncodeBalanceEncodeTotal15.010.06.014.030.013.0100.014.932.095.84.212.01.027.03.00.413.65.80.20.200.131.810.0CASE EXAMPLE54020415MEAU1168.P1LeanManufCHECKS HANDLED MULTIPLE TIMES THROUGH PROCESSMEASURE NO. OF TOUCHESNumber of touches* This figure can range depending on whether an item rejects and on final destination Source: Team observationNumber of peopleDeliveryBlock/ prepCapture/sortReject repairBalance/importCash letter dispatchTotal touches11132210Ten different people handle each check. Some handle items multiple times, leading to 21 total touches for each item55020415MEAU1168.P1LeanManufVolumeErrors and rework Critical pathCOST BREAKDOWN BY TYPE OF WORK FOR CHECK PROCESSINGCALCULATE REWORK BY VOLUME AND COSTPercentTotal end-to-end costTotal back-office cost3Source: McKinsey Operations Practice56CAPACITY REVIEWMAP CUSTOMER DEMANDSource: Internal company dataVolume during weekApplications each dayVolume during monthApplications each weekVolume during year Applications each month (normalized) to 4 weeks15% high-10% lowWeeks00DISGUISED CLIENT EXAMPLE57020415MEAU1168.P1LeanManufTYPICAL OPERATIONS ANALYSES PERFORMED TO RAPIDLY ASSESS POTENTIALAnalysisDescriptionProcess flow chart1Top level description of end-to-end process flow and customer interactionsSpaghetti chart2Trace physical flow of work in a site to identify multiple hand-offs, reconfiguration opportunitiesBenchmarking analysis3External and internal performance benchmarks and trend analysisBottleneck/inventory analysis4Analysis for closely observing operations and discovering lost capacity to allow for additional sales, revenue, etcLoad balancing5Check customer demands, available capacity, and input patterns to define the optimal configurationList of value drivers6Assess each value driver and its importance according to managers to identify any misperceptions and ensure the proper focusProcess standardisation7Limited customer choices, especially ones that are not salient, often improves customer satisfaction, by reducing complexity and increasing qualityDe-layering analysis8A rigorous accounting of managements structure and size identifying hidden managers and unnecessary expensesTurnover analysis9Understanding the learning curves of individual process functions to help manage labour, training, and recruiting costsComplexity analysisUnderstanding true costs of complex customer analyses1058020415MEAU1168.P1LeanManufEXAMPLES OF IMPACT FROM APPLYING LEAN PRODUCTION IN BANK OPERATIONSSource: McKinsey engagement experience59020415MEAU1168.P1LeanManufOVERVIEWHistory and contextCore Lean operations conceptsApplying the principles (Card game)Applications for manufacturing companies Analytical techniques Case studyApplications for service companies Analytical techniques Case studyChecklists for evaluating lean potential at clientsHow to learn moreTime10 minutes60 minutes40 minutes20 minutes20 minutes15 minutes15 minutes60020415MEAU1168.P1LeanManufCHECKLIST FOR LEAN OPPORTUNITY IN MANUFACTURING SETTINGSConceptWhat to look for at your clientAwarenessA clustered or messy manufacturing floorPiles of inventory before machinesMultiple picking and put down of materialsLack of employee suggestion boxes of ways to easily contributeJITLarge preference by operations for long runsLong equipment change over timesLarge order backlogs and/or long lead times between order and receiptSizeable storage/warehouse areasOperators standing around and watching machinesLevel productionAbsence of standard operating procedure in the vicinity of the operationsSome employees working hard while others dont appear to be doing anythingQuality assuranceDedicated rework areasAbsence of statistical process control charts posted on machinesAbsence of quality metrics or performance posted around the plant61020415MEAU1168.P1LeanManufCHECKLIST FOR LEAN OPPORTUNITY IN SERVICE OPERATIONSConceptWhat to look for at your clientAwarenessPresence of paper inventory (staging areas, extensive files, queues, stacks of paper)Long transport distances for paper to travel (different departments, floors, buildings)Absence of any type of posted production volume or efficiency metricSimilar processing methods for exceptions and standard paperworkJITLong lead times in any service application (eg between order and delivery)Organisation by function (eg data entry, underwriting, account balances)Lack of cross-training in employees (Ill enter information but the underwriter looks at all medical information)Level productionPaperwork (applications, checks, etc) being delivered in batches or at periodic times of daySome employees working very hard while others look like they are doing nothingSimilar shift (eg 8.00am4.00pm) every day, especially if you hear Monday is our hardest dayQuality assuranceHigh rework rates on any type of paperworkAbsence of any posted/published quality metricFinger pointing at the quality of any department or groupNumerous forms or logs involved in a process62020415MEAU1168.P1LeanManufOVERVIEWHistory and contextCore Lean operations conceptsApplying the principles (Card game)Applications for manufacturing companies Analytical techniques Case studyApplications for service companies Analytical techniques Case studyChecklists for evaluating lean potential at clientsHow to learn moreTime10 minutes60 minutes40 minutes20 minutes20 minutes15 minutes15 minutes63020415MEAU1168.P1LeanManufTYPICAL LEAN STUDYSource: McKinseyCreate model area(1016 weeks)Gradually apply lean tools across whole model areaTrain in additional toolsCreate plant-wide excitementInstitutionalize work methods in model areaLean assessment(24 weeks)Analyze performance Prioritize improvement areas and select model areaSet plant and model area targets based on customer needs and financial demandsSelect team leaders and lean expertsDesign model area(46 weeks)Make roadmap of implementationSet up continuous improvement groupsDetail and visualize targets and establish follow-up system for model areaTrain experts and model area employees in basic problem-solving toolsand selected lean toolsImplement selected tools to achieve quick impactMap material, time and information flowsOEE analysesLabour productivity analyses (value add vs. non-value add task)SMED change-over time analysesDevelop communication material and communicateRoll-out across plantRoll out area by area to cover whole plantTrain all employeesDetail targets and establish follow-up system64020415MEAU1168.P1LeanManufPRACTICAL USES FOR LEAN TOOLS Diagnostics for existing and potential clientsOperational improvement studiesPMM studiesContinuous improvement studies * 65020415MEAU1168.P1LeanManufKEY CONTACTSMANUFACTURINGMelissa McCoy, MMP Practice Manager, +1 404 335 3778Lean expertsJulian McCarthy (CLE), Assembly, C&PG, Pharmaceuticals, Chemicals: +1 216 274 43 47David Beaumont (CLE), Assembly, Pulp and Paper, C&PG, Petroleum, Chemicals: +1 216 274 4607Art Smalley (LA), Assembly, M&M, Petroleum Pulp and Paper: +1 949 737 7413Lisa Lowie (ATL), Dairy, Ca&PG, Assembly, Pulp and Paper: +1 409 335 350966020415MEAU1168.P1LeanManufKEY CONTACTSSERVICE OPERATIONSSheri Weinstein, Service Strategy and Operations Practice Manager, +1 312 551 3825Lean expertsMohan Girihardas (Atlanta)FIG, Telecom, HealthcareAshley Joseph (Charlotte)FIG, Healthcare, Retail: +1 704 954 5192Celia Huber (Pittsburgh)FIG, +1 412 804 274767020415MEAU1168.P1LeanManufGLOSSARY OF LEAN OPERATIONS CONCEPTS68020415MEAU1168.P1LeanManufAWARENESS: ELEMENTS/DESCRIPTION/BENEFITSElements8 kinds of wasteVisual management5-S principleDescriptionBenefitsFramework used to identify and attack the different categories of waste (overproduction, waiting, transportation, processing, inventory, motion, rework, people utilization)An easy method to exercise control of the plant and provide quick visual feedback (e.g., information displays (Andon) showing job training, checklists, production, setup, or visual controls for standard operations, storage, functions)Toyota housekeeping system based on: Sifting (organization), Sorting (arrangements), Sweeping (cleaning), Spic-and-span (hygiene), strict (discipline) Drives continuous improvement mind-set Identifies elements that increase cost without adding value (waste) Provides signal when abnormal conditions exist quickly Visual control forces all employees to get out into plant on regular basis Simplifies instructions for operations Sense of achievement Provides an effective way to identify and control problems and waste Reinforces discipline on shop floor69020415MEAU1168.P1LeanManufAWARENESS: ELEMENTS/DESCRIPTION/BENEFITS (CONTINUED)ElementsDescriptionBenefitsRoot cause problem solvingPerformance Management Sense of urgency Customer satisfaction Quality, time Cost/financial performance Cause/effect linkageWhen a problem occurs, Why? is repeated 5 times: a method to uncover the root cause of the problemConstant communication Sense of urgency Change is normal, the ability to respond is best insurance of successTotal organizational commitment to meet or exceed the needs of all customersTotal commitment to avoid waste in terms of PPM and throughput timeTotal commitment to continuously increase productivity and reduce costsKnowledge of business goals and the effect of improved operationsEnsures identification of root causeDrives constant focus of entire organization to achieve resultsFocuses operation on quality, cost, delivery standards set by customerDrives towards zero defect goalEncourages performance leading to high asset turnover rateEmployees understand need to improve70020415MEAU1168.P1LeanManufAWARENESS: ELEMENTS/DESCRIPTION/BENEFITS (CONTINUED)ElementsDescriptionBenefitsEmployee involvement Teams Work cells Hiring training recognitionKaizen activityA logical grouping of people that share and perform tasks with a broad set of responsibility (scheduling, quality, hiring, etc.)Natural productive groupings of people and machinery that produce a completed end product as part of a production lineHiring, training, and recognition support development of a lean-capable work forceThrough improvement teams, individual suggestions and engineering meetings employees work to solve performance problems Drives responsibility down to the lowest possible level Sense of ownership Enhances problem solving effectiveness Facilitates skill improvements Improves performance accountability Facilitates 1-piece flow Assures consistency at all levels of waste elimination and continuous improvement Higher-quality work force Builds capability and tradition for constant improvement in all areas71020415MEAU1168.P1LeanManufJUST-IN-TIME: ELEMENTS/DESCRIPTION/BENEFITSElementsDescriptionBenefitsOne-piece flowMultiprocess/multimachine handlingQuick set up(SMED)FIFO orderingDedicated flowpathsCell/line layoutEach process produces and conveys only 1 piece/step corresponding to the single unit coming out of the assembly lineAdaptation by workers to handle multiple machines and production tasks; based on sales rate or TAKT timeContinuous reduction of machine setup times by redesign and improvement of machine equipment (often in combination with setup responsibility in teams) to realize small lot productionProduction occurs in First-In-First-Out order from start to finish; no leapfroggingItem specific machine/line set upSetting process line up in most efficient manner (eg u-shaped or fishbone principle(subprocesses feed into main process) Problems in quality or machine performance can be caught quickly Lead-time reduction Flexible manpower line Operator skills increase Creates flexible work cells which can adjust to volume Ensures higher manpower utilization Allows for small lot size Lead-time reduction Easier to respond to work priority changes Minimizes inventory obsolescence Identifies quality problems quicklyBeneficial if line composed of multiple smaller machinesFacilitates communication and multiskilling72020415MEAU1168.P1LeanManufJUST-IN-TIME: ELEMENTS/DESCRIPTION/BENEFITS (Continued)ElementsDescriptionBenefitsKanban (card-based ordering system that signals and controls material movement)Store (WIPmanagement)An information system which facilitates pull schedulingWIP and material management with clearly marked places for holding Reduces scheduling intensity Controls inventory Efficient tracking and control of materials 73020415MEAU1168.P1LeanManufLEVEL PRODUCTION: ELEMENTS/DESCRIPTION/BENEFITSElementsDescriptionBenefitsTAKT timeStandardized work sheetsCustomer demand and scheduled production time are used to determine TAKT time needed (seconds per unit). Based on cycle time and TAKT time, human resource requirements within work cells and production line are determined which will be reflected on the standardized work sheetsProduce a standard for combination of work based on cycle time, work procedure, and stock on hand. Production relies on 1) a standard work chart, 2) work combination table, and 3) production capacity sheetHelps balance the pace of production with the pace of sales. Creates proper rhythmProvides Visible management tool for gauging quality/safety Provides fundamental information for raising productivity74020415MEAU1168.P1LeanManufLEVEL PRODUCTION HEIJUNKA: ELEMENTS/DESCRIPTION/BENEFITSElementsDescriptionBenefitsOEE/capacity analysisLoad smoothing/ HeijunkaLine balancingDemand segmentationComplexity reductionAnalysis of the overall equipment efficiency and identification of causes of non-productive timeThe fundamental premise for the elimination of waste and effective Lean Production. Daily production output, in terms of volume and type variations, is equalized to match average demandBalancing the production of parallel linesGrouping demand of types of product into smaller groups but large enough to be efficientRemoving unnecessary tasks and complex processes from the systemQuick identification of areas for improvement and opportunities for load balancing Increases overall efficiency and utilization by eliminating the peaks and valleys of output Facilitates rapid adaptation to demand changesReduce waste by allowing the rate limiting step set the paceLower inventoryBetter equipment utilisationBetter equipment utilisation75020415MEAU1168.P1LeanManufQUALITY ASSURANCE: ELEMENTS/ DESCRIPTION/BENEFITSElementsDescriptionBenefitsStandard work instructionsSafetyTotal Preventative MaintenanceJidoka (Autonomoation)Document current work processes as a standard benchmarkContinuously improve safety of equipment, work cells, and production linePreventative maintenance seeking zero machine failure based on high employee involvement. Maintenance is done in off shiftMachine designed to stop automatically once a defective part is producedStable cost, quality, and performance expectationsMakes safety a clear priority leading to lower accidents and higher productivityPreventative maintenance sharply reduces safety and downtime problemsPrevents production of non-specification products immediately76020415MEAU1168.P1LeanManufQUALITY ASSURANCE: ELEMENTS/DESCRIPTION/ BENEFITS (Continued)ElementsDescriptionBenefitsPoka YokeLine stop conceptStatistical tools6 sigmaA mistake-proofing system which prevents errors and defects with fail-safe devices. Quality issues are evaluated dailyEmpower front-line operators to stop machines or entire production line if a problem occursTools to analyse and display real time statisticsFocus on defect reduction to within 6 standard deviations of the technical specification Low cost, 100% inspection before error occurs. I will accept, make, and pass no defects Support teamwork (humanity) by giving operators this authority Support a sense of urgency and commitment to solve problems quicklyReal time feedback on performance and quality standardsCulture of quality control and defect eliminationVariance reduction and process stabilisation77020415MEAU1168.P1LeanManuf