Creating Lean Value - From Shop Floor to Executive Suite (Second of a two part article on Optimizing the Value Chain)

     In part one of Optimizing the Value Chain, we discussed how today’s market demands dictate that you maximize value by improving efficiency and productivity in every aspect of your organization’s value stream, not just in your manufacturing operation. We addressed components of your value chain such as logistics, the supply chain, product development and even accounting. Now we turn our attention back to the manufacturing operation and analyze two areas we are often asked about: how best to implement flow when dealing with shared resources; and how and when to implement a kanban system.

Sharing Resources Effectively
Shared resources by definition are resources that produce or process parts for multiple product families. Classic examples would be a fabrication area that makes components for several assembly product families, or a common paint area that is shared by multiple assembly families. Shared resources impact almost all value streams, and they provide unique challenges – and opportunities – for creating and maintaining flow. The benefit of creating flow with shared resources translates to shorter lead times, reduced inventory, better flow management and improved operating results.

Value streams are developed for product families, and product families are identified based on similarities in processes and work content. The conventional approach is to dedicate resources to a product family whenever possible in order to provide opportunities to create continuous one piece flow, thereby keeping waste and inventory to a minimum. However, not all resources can be dedicated to families. Some need to be shared, and by their nature do not allow for continuous flow.

Shared resources are a challenge to creating flow because of their volume and mix of parts. A technique for dealing with shared resources is the powerful concept of “interval” to create opportunities to flow volume with mix.

Interval is defined by how frequently we cycle through the mix of parts produced at the shared resource. As one example, if it takes a single week to provide all the parts needed to be run on the shared resource, we would say the “interval” is one week. The interval could be one shift, one day, one week, one month, etc. The smaller the interval, the shorter lead time and the better flexibility we have at the shared resource and in the value stream. Interval helps us with managing the shared resource and also with First In, First Out (FIFO’s) and Supermarket sizing.

Multiple FIFO lanes, mix indicators (a technique for visually managing the pattern we determine will work best to flow product from multiple FIFO’s through a shared resource), flight schedules (another pattern management technique similar to the airplane flight schedule – from 10:00 - 11:00 AM we always run product group A”), among others are advanced tactics that can be used to facilitate use of interval, FIFO, Kanbans, etc. to create flow through Shared Resources. Some of the areas that need to be evaluated when implementing shared resources include:

• Determining product families when looking at upstream processes
• Dedicating parts to shared resources to simplify paths
• Setting intervals (EPEI) for shared resources
• Understanding branch takt time and average weighted cycle time
• Using FIFO - both single and multiple lane systems - to flow through shared resources
• Using supermarkets when FIFO is not the solution
• Using flight schedules to handle batch processes
• Scheduling and managing the flow through shared resource

Shared resources are often obstacles in both production and business process value streams. In fact, two of the most common challenges typically found in companies implementing lean are 1) value streams which have a large number of parts, often with variability in both assembly times and demand, and 2) shared resources at various points in a value stream which add complexity to managing timely product flow. But, because of the opportunities it offers for creating flow, shared resources should be a high priority for any organization attempting a lean transformation. A company’s ability to successfully address shared resources is often the difference between success and failure in the Lean transformation.

Kanban - “Seeing” Is Believing
Contrary to more traditional "push" methods of production, which are based on an estimated number of expected sales, kanban's visual "pull" system creates greater flexibility on the production floor, such that the organization only produces what is ordered. Kanban is a key technique that determines specific production quantities, and in doing so, facilitates Just In Time production and ordering systems.

A Japanese word that means card, signboard or signal, kanban on a production line means utilizing some form of visual or electronic signal requesting an action that focuses on replenishment. A typical application is where a predetermined quantity of material is kept on-hand, and as consumption occurs, a trigger, or signal, for replenishment occurs. In this way, kanban serves to ultimately eliminate overproduction, a key form of manufacturing waste.

No two kanban systems are identical, and the key to having an effective kanban system begins with understanding the needs of your specific environment and then applying the appropriate kanban techniques to satisfy those needs. What follows are examples of common production problems and proven kanban solutions.

Challenge: Manufacturing response time to customer orders on standard product is not within customer expectations.

Kanban Technique: Finish goods inventory of high volume standard product is maintained and placed on kanban, thereby becoming immediately available.

Challenge: Shipping and material handlings cost are high.

Kanban Technique: Low value purchased parts (“C” Items) coming from the same source of supply are placed on kanban. The kanban lot sizes are increased to accommodate an infrequent signal to the supplier. Upon the scheduled download date, the supplier receives the signal for all triggered kanban items and makes one delivery for all the items. Expensive parts, on the other hand, have frequent deliveries.

Challenge: There are hundreds (or thousands) of part numbers on kanban and the projected demand patterns are not linear.

Kanban Technique: The kanban lot sizes are automatically recalculated utilizing the standard kanban formula. The routine, however, has the capability to look for non-linear demand and adjust the calculated kanban lot sizes accordingly in order to advert a potential stockout.

Challenge: There are hundreds (or thousands) of part numbers on kanban and the suppliers are located throughout North America and the world.

Kanban Technique: The triggered signal to the suppliers is electronically communicated. This eliminates the non-value added activities of phoning and faxing and is a more reliable process.

Challenge: Supplier components are extremely large and expensive. The supplier is located a short distance from the OEM. Kanban Technique: The OEM employs a broadcast methodology with the supplier to minimize inventory at the point of use. Here, the OEM sends a signal to the supplier just prior to the need and the supplier deliveries on time at the point of use.

A well designed kanban system can provide what is needed, when needed, in appropriate quantities, while significantly lowering inventory, shortages, non-value-added activities, and total overall costs. Customer on-time deliveries are dramatically improved, while the overall quality of life for the organization is enhanced immensely, permitting concentration on strategic matters rather than continuously compensating for an ineffective replenishment system. With proper kanban design and implementation, the system will, at a minimum, match any competitor and, in application, appear to perpetuate itself without effort.

Conversely, the symptoms of an improperly designed kanban system typically are high inventory levels coupled with shortages, hot lists, increased total costs, and late customer orders. This is a direct result of not tailoring the kanban system to meet the needs of the environment it is intended to serve. High inventory levels are normally due to high safety stock settings compensating for the misgivings of the kanban system design. Also, hot lists emerge due to the lack of credibility of the triggering process, even though it may be generally known that there is often plenty of material left in all the other untriggered containers.

Implementation
Equally important to the design of the kanban system is how it is implemented. Regardless of how effectively the kanban system is designed, an improperly implemented kanban system can create immediate and long-term issues. For example, an immediate issue will occur if the lower level items are placed on kanban, while the final product is being batched. An example of a long term issue would be placing items on kanban that have erratic demand patterns or placing suppliers on kanban who have a history of quality and delivery issues. There is a prescribed methodology to implementing kanban internally and externally to a plant, which when followed ensures that the key fundamentals have been addressed. These include acquiring executive support; forming cross functional teams; cost/benefit analyses, assessing demand patterns used both in selecting part numbers for kanban and determining appropriate safety stock settings, and how to gauge if the kanban system is performing as designed.

Key Benefits
To newcomers, kanban may look like nothing more than a pure production method, having little to do with the surrounding environment. This could not be further from reality. The kanban concept takes form on the shop floor, in close interaction between the work force and management, and even involves both internal and external customers. Furthermore, it represents an efficient tool to continuously rationalize the production process and find the source of problems, since the circulation of kanban will stop if there is a production problem on line, it is easy to both spot and correct the problem instantaneously. There are a number of significant advantages in implementing an effective kanban system over a traditional push system. For example, kanban…

• is a simple and understandable process
• provides quick and precise information
• offers lower costs associated with the transfer of information
• provides quick response to changes
• limits over-capacity in processes
• avoids overproduction
• minimizes waste
• maintains control
• delegates responsibility to line workers

Kanban has been shown to be an extremely effective lean methodology that significantly reduces shortages, operating costs and inventory. When it is designed for the environment intended and properly implemented, it has elevated staff from performing tasks that augment an improperly designed production system to that of having a more strategic role that requires less hands-on to make it work.

Implementing flow effectively when dealing with shared resources, and understanding how and when to apply a kanban system can go a long way toward creating and sustaining a true lean environment in your production process. Often the difference between success and failure in the Lean transformation is recognizing how to best manage each methodology for your specific operational requirements.

Productivity Inc. wishes to thank contributors to this article…

Mr. Gene Burk, Senior Associate, Duggan and Associates. Mr. Burk is an experienced practitioner and instructor in Value Stream Mapping. He specializes in facilitating organizations in advanced topics such as Creating Mixed Model Value Streams and Creating Flow through Shared Resources.

Mr. Raymond Louis, Senior Executive, Replenishment Technology Group. Mr. Louis is an experienced practitioner and instructor in designing supply systems. He is author if several books including his latest Custom Kanban: Designing the System to Meet the Needs of Your Environment, scheduled for release September 2006 from Productivity Press.

For more information on the topics covered in this article, please call us at 800.966.5423, or e-mail lean@productivityinc.com

Innovation: Where is your next product coming from? (Part II)

The value of innovation is undeniable and profound. Creating a highly sought after product or inventing a process that allows your company to bring its products to market cheaper, faster, or with more quality than your competitors is life sustaining. It is the “leg up” that can catapult a company to the forefront of its industry and keep it there for years.

So how can a company fan the flames of innovation and harvest the fruit resulting from the outpouring of creativity? To best facilitate innovation it is incumbent that all available resources are used and a structure is put in place to support the most efficient mining of those resources. In other words, companies need to apply lean principles to their research and development efforts. Lean is synonymous with the elimination of waste and in this context waste would be the failure to fully and efficiently utilize all of the company’s available resources.

To this end, some companies have begun to redefine and expand what constitutes “available resources” and in so doing are finding their competitive advantage in unique and creative ways.

When Lego decided to update its languishing robot kit Mindstorms, it looked outside the company and tapped obsessed power users. Four users well known for their product acumen from participation in user groups and Brickfest (Lego’s annual users’ conference where users show off their latest and most sophisticated Lego creations) were asked to take part in the product’s redesign from the very beginning of the process. Their payment?, a few Lego crane sets and Mindstorm NXT prototypes. The four even flew to Lego’s Denmark headquarters on their own dime just for the thrill of having the opportunity to impact the update of a product they had come to love. Lego continues to mine the enthusiasm and creativity of their users through their “Lego Factory” where a user can download free design software from Lego’s site and design their own Lego creation. The user then uploads their design and Lego sells them a packet complete with all the parts (and assembly plans) necessary to make their new creation. It even posts the plans online for other customers to order. Now that’s thinking outside the box; getting customers to design their own products, make those products available to other customers and automate the process to the point where little or no input is required from the company? Brilliant!

Inclusive participation has always been an integral part of successful Lean implementations. Now with the Internet reaching a level of maturity, the possibilities for expanding participation has increased exponentially in ways never before possible.

“Crowdsourcing” is a term recently coined by Wired magazine writer Jeff Howe and editor Mark Robinson and it refers to the use of every day people who are willing to give their spare time to create content, solve problems, or even do corporate R&D for little or no money. These individuals have no relationship to the companies using them aside from a personal interest in the work or product and the desire to participate. Aside from minimal economic rewards which are often absent completely, the primary motivation seems to be the satisfaction of solving some problem or creating something of value. This phenomenon has spawned such products as the open source operating system Linux, the explosively expansive online encyclopedia Wikipedia, and networks like InnoCentive, a network of 90,000 scientists who make themselves available to corporations for the purpose of solving problems. Companies such as Eli Lilly (who helped fund the project), Boeing, DuPont and Proctor and Gamble have started to use the InnoCentive network to solve scientific problems they have been unable to solve internally.

In the June issue of Wired magazine, contributing editor Jeff Howe reports in his article “The Rise of Crowdsourcing” how one ad hoc engineer was able to solve a problem submitted to InnoCentive by Colgate-Palmolive, who’s own scientists were unable find a way to inject powdered fluoride into toothpaste tubes without it dispersing into the air. Ed Melcarek, an engineer, tinkerer, and one of the 90,000 InnoCentive “solvers” had a solution before he even finished reading the problem; electrically charge the fluoride powder while grounding the tube. The positively charged powder would be attracted to the tube, avoiding excessive dispersion.

The ability of an “outsider” to solve a problem in an area they are not directly familiar with is a phenomenon that every manufacturer who has ever run a Kaizen event should be familiar with. It is often the employees who are not directly involved with the process under evaluation who are best able to present solutions unimagined by the employees who have been fettered by their closeness to the process and the history of how “things have always been done.” It is for that very reason that companies should always include the widest range of employees in these kinds of events.

Innovative products, product designs, and the processes which produce them are themselves dependent upon innovative thinking and creative resource utilization. The challenge is not to succumb to the weight of competitive pressures and turn to the comfort of what has worked in the past but to stay focused on the Lean principles which can unlock and focus the full passion and enthusiasm of the creative resources at your disposal. The full and efficient utilization of these resources can’t help but bring you the competitive advantage you seek. And with a universe of possibilities, it still takes just one good idea to change the game, the rules, the results and your future.

Featured Event

11th Annual Lean Management Conference
October 30-November 3, 2006
Arlington, Virginia

Driving the Enterprise in a Borderless Economy: Lean Six Sigma, TPM

Today’s Lean organizations know it is not enough to concentrate only on the production floor if they are to keep up with – or exceed – the competition. Indeed, companies have begun applying Lean methods to virtually every aspect of their value chain - upstream and downstream, inside and outside the organization. And this enterprise wide implementation of Lean is having a dramatic impact on manufacturing and non-manufacturing processes alike with positive results on overall profitability.

We have designed our 11th Annual Lean Management Conference to provide the insights and tools you need to ensure your Lean journey is positioned for long term success and competitive advantage as you drive your enterprise in today’s borderless economy!

This year’s conference has a new format, integrating four-hour knowledge transfer modules with one-hour case study presentations. This allows you to build a curriculum that best fits your specific training needs. The four hour modules offer a deep dive into various aspects of Lean, Six-Sigma and TPM, while the case studies provide a glimpse into various organizations’ successful implementation of the tools. This combination creates a powerful learning environment that will allow you to use the knowledge you gain upon returning to your facility.

Lean Practitioner Certificate Level I and Level II Participate in the entire event (all five days) and you will be eligible for the Lean Practitioner Certificate. Level I and Level II sessions are available. Level I sessions offer the fundamentals of implementation; those techniques you should master when your program is just getting started. Level II sessions provide more advanced methodologies required as your program matures. Click here for complete details

A Maintenance Miracle
An Autonomous Maintenance Kaizen Event
August 22-25, 2006
Springdale, Arkansas
Host Plant: Rockline Industries

Properly implemented, AM eliminates the causes of 40%-60% of unplanned downtime, freeing up skilled trades for more specialized activities. During this 4 day kaizen event learn the steps necessary to involve operators in maintaining their own equipment through daily inspections, lubrications, parts replacement, simple repairs, detecting abnormalities and precision checks. The result is a restoration of equipment to its ideal state, establishment of basic conditions for maintaining it, and preventing equipment deterioration. Participants will learn how AM is developed to support Lean manufacturing and how it maximizes equipment effectiveness. At the host facility, in teams, participants get to apply the methods learned to the work environment. Click here for additional details on this program including a typical agenda.

Workshops include:

• Creating a Culture Change through the 5S's
• Lean Flow in an Administrative Environment
• Value Stream Management
• An Integrated Approach to TPM and Six-Sigma

Today’s best practice requires an organization to establish flow in both manufacturing and administrative functions, while at the same time maintaining a high level of equipment reliability and creating a culture capable of sustaining the gains achieved. In this workshop series, gain insights and the tools needed to ensure these vital elements are in place and positioned for success. Click here to learn more about these events.

Lean Tool Awareness Certificate Program
December 4-8, 2006
Columbus, Ohio

Modules include;

• Planning and Implementing Lean
• Value Stream Management
• CEDAC – Team Based Problem Solving
• Visual Workplace (half-day)
• Achieving Quick Changeover (half-day)
• Lean Enterprise: A Financial Perspective (half-day)

Co-developed by Productivity Inc. and the Fisher College of Business at The Ohio State University, The Lean Tool Awareness Certificate program is a one week, fully accredited program that focuses on providing the knowledge base needed to understand and take part in the Lean transformation efforts in your organization. Earn 4 CEUs.

Click here for additional details on the program.

A Workshop Series on Optimizing the Value Chain
December 11-14, 2006
Tampa, Florida

Workshops include:

• Lean Supply Chain and Lean Logistics
• Value Stream Mapping, Shared Resources
• Lean Performance Measurement
• Lean Accounting for Lean Manufacturing
• How to Design and Implement a Kanban System
• Applying Lean and Six-Sigma to Product Development

Historically organizations have begun their Lean efforts solely on the production floor. Today, organizations are finding that such a narrow focus is not enough to get them into the game and playing at a level equal to the competition. More and more, organizations are realizing it is vital to consider the total value chain in their quest to improve and compete. In this new workshop series, we offer workshops that expand Lean implementation beyond the production floor with a focus upstream and downstream, both internal and external to the organization. Click here to learn more about these workshops

Productivity Inc. delivers today's leading performance improvement tools and methodologies to enhance rapid, ongoing, measurable results. Whether you need one day of on-site consultation or facilitation of a total improvement strategy, Productivity can accelerate your pursuit of Lean Manufacturing and TPM in the US, Canada, Europe, Asia, Mexico...anywhere in the world.

Call us today and allow us the opportunity to work with you in your multi-cultural Lean environment.