Chapter 14

Lean Operations

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reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
 Learning Objectives (1 of 2)
You should be able to:
14.1 Explain the terms lean operations and JIT
14.2 Describe the main characteristics of lean
systems
14.3 List the five principles of the way lean
system function
14.4 List some of the benefits and some of the
risks of lean operations
14.5 Describe the Toyota Production System
(TPS)
14.6 List the three goals of a lean system and
explain its importance of each
© McGraw-Hill Education. 14-2
 Learning Objectives (2 of 2)
14.7 List the eight wastes according to lean
philosophy
14.8 Identify and briefly discuss the four
building blocks of a lean production
system
14.9 Describe key lean improvement tools
14.10 Outline considerations for successful
conversion from a traditional system to a
lean system
14.11 Describe some of the obstacles to lean
success

© McGraw-Hill Education. 14-3

 Lean Operations
• Lean operation
– A flexible system of operation that uses
considerably less resources than a traditional
system
 Tend to achieve
o Greater productivity
o Lower costs
o Shorter cycle times
o Higher quality
• Just-in-Time
– A highly coordinated processing system in which
goods move through the system, and services are
performed, just as they are needed
Learning Objective 14.1

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 Lean System Characteristics
• A number of characteristics are commonly
found in lean systems:
– Waste reduction
– Continuous improvement
– Use of teams
– Work cells
– Visual controls
– High quality
– Minimal inventory
– Output only to match demand
– Quick changeovers
– Small lot sizes
– Lean culture
Learning Objective 14.2

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 Lean System Principles
• Five principles embody the way lean
systems function:
1. Identify customer values
2. Focus on processes that create value
3. Eliminate waste to create “flow”
4. Produce only according to customer demand
5. Strive for perfection

Learning Objective 14.3

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 Benefits & Risks of Lean Systems
• Key benefits
– Reduced waste
– Lower costs
– Increased quality
– Reduced cycle time
– Increased flexibility
– Increased productivity
• Critical risks
– Increased stress on workers
– Fewer resources available if problems occur
– Supply chain disruptions can halt operations

Learning Objective 14.4

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 Lean Operations: The Beginning
• Lean operations began as lean manufacturing,
also known as JIT in the mid-1900s
• Developed by Taiichi Ohno and Shigeo Ohno
of Toyota
– Focus was on eliminating all waste from every
aspect of the process
 Waste is viewed as anything that interferes
with, or does not add value to, the process of
producing automobiles

Learning Objective 14.5

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 Lean: Ultimate Goal
• The ultimate goal:
– Achieve a balanced system–
 One that achieves a smooth, rapid flow of
materials and/or work through the system

Learning Objective 14.6

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 Lean: Supporting Goals
• The degree to which lean’s ultimate goal is
achieved depends upon how well its
supporting goals are achieved:
1. Eliminate disruptions
2. Make the system flexible
3. Eliminate waste, especially excess inventory

Learning Objective 14.6

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 Waste
• Waste
– Represents unproductive resources
– Eight sources of waste in lean systems:
1. Excess inventory
2. Overproduction
3. Waiting time
4. Unnecessary transporting
5. Processing waste
6. Inefficient work methods
7. Product defects
8. Underused people

Learning Objective 14.7

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 Kaizen (1 of 2)
• The kaizen philosophy for attacking waste is
based upon these ideas:
1. Waste is the enemy, and to eliminate waste it is
necessary to get the hands dirty
2. Improvement should be done gradually and
continuously; the goal is not big improvements
done intermittently
3. Everyone should be involved
4. Kaizen is built on a cheap strategy, and it does not
require spending great sums on technology or
consultants
5. It can be applied everywhere

Learning Objective 14.7

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 Kaizen (2 of 2)
6. It is supported by a visual system
7. It focuses attention where value is created
8. It is process oriented
9. It stresses that the main effort for improvement
should come from new thinking and a new work
style
10.The essence of organizational learning is to learn
while doing

Learning Objective 14.7

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 Lean: Building Blocks
• Product design
• Process design
• Personnel/organizational elements
• Manufacturing planning and control

Learning Objective 14.8

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 Building Blocks: Product Design
• Four elements of product design important for
lean systems:
1. Standard parts
2. Modular design
3. Highly capable systems with quality built in
4. Concurrent engineering

Learning Objective 14.8

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 Building Blocks: Process Design
• Eight aspects of process design that are
important for lean systems:
1. Small lot sizes
2. Setup time reduction
3. Manufacturing cells
4. Quality improvement
5. Production flexibility
6. A balanced system
7. Little inventory storage
8. Fail-safe methods
Learning Objective 14.8

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 Process Design: Small Lot Sizes
• In the lean philosophy, the ideal lot size is one
• Benefits of small lot size
– Reduced in-process inventory
 Lower carrying costs
 Less storage space is necessary
– Inspection and rework costs are less when problems
with quality do occur
– Permits greater flexibility in scheduling
– Less inventory to ‘work off’ before implementing
product improvements
– Increased visibility of problems
– Increased ease of balancing operations

Learning Objective 14.8

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 Process Design: Setup Time
Reduction
• Small lot sizes and changing product mixes
require frequent setups
• Unless these are quick and relatively
inexpensive, they can be prohibitive
• Setup time reduction requires deliberate
improvement efforts
– Single-minute exchange of die (SMED)
 A system for reducing changeover time
– Group technology may be used to reduce setup time
by capitalizing on similarities in recurring operations

Learning Objective 14.8

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Process Design: Manufacturing Cells
• One characteristic of lean production
systems is multiple manufacturing cells
• Benefits include
– Reduced changeover times
– High equipment utilization
– Ease of cross-training workers

Learning Objective 14.8

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Process Design: Quality Improvement
• Quality defects during the process can
disrupt the orderly flow of work
• Autonomation (jidoka)
– Automatic detection of defects during
production
 Two mechanisms are employed
1. One for detecting defects when they occur
2. Another for stopping production to correct the
cause of the defects

Learning Objective 14.8

© McGraw-Hill Education. 14-20

 Process Design: Work Flexibility
• Guidelines for increasing flexibility
1. Reduce downtime due to changeovers by reducing
changeover time
2. Use preventive maintenance on key equipment to
reduce breakdowns and downtime
3. Cross-train workers so they can help when
bottlenecks occur or other workers are absent
4. Use many small units of capacity; many small cells
make it easier to shift capacity temporarily and to
add or subtract capacity
5. Use off-line buffers. Store infrequently used safety
stock away from the production area
6. Reserve capacity for important customers
Learning Objective 14.8

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 Process Design: Balanced System
• Takt time
– The cycle time needed to match customer demand
for final product
– Sometimes referred to as the heartbeat of a lean
system
 Takt time is often set for a work shift
 Procedure:
1. Determine the net time available per shift
2. If there is more than one shift per day, multiply the net
time by the number of shifts
3. Compute the takt time by dividing the net available time
by demand

Learning Objective 14.8

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 Process Design: Inventory Storage
• Lean systems are designed to minimize
inventory storage
– Inventories are buffers that tend to cover up
recurring problems that are never resolved
 Partly because they are not obvious
 Partly because the presence of inventory
makes them seem less serious

Learning Objective 14.8

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 Process Design: Fail-Safe Methods
• Poka-yoke (Fail-safing)
– Building safeguards into a process to reduce
or eliminate the potential for errors during a
process
 Examples:
o Electric breakers
o Seatbelt fastener warnings
o ATMs that signal if a card is left in a machine
o Designing parts that can only be assembled in
the correct position

Learning Objective 14.8

© McGraw-Hill Education. 14-24

 Building Blocks:
Personnel/Organizational
• Five personnel/organizational elements
that are important for lean systems:
– Workers as assets
– Cross-trained workers
– Continuous improvement
– Cost accounting
– Leadership/project management

Learning Objective 14.8

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 Personnel/Organizational:
Workers as Assets
• Workers as assets
– Well-trained and motivated workers are the
heart of the lean system
 They are given greater authority to make
decisions, but more is expected of them

Learning Objective 14.8

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 Personnel/Organizational:
Cross-Trained Workers
• Cross-trained workers
– Workers are trained to perform several parts
of a process and operate a variety of
machines
 Facilitates flexibility
 Helps in line balancing

Learning Objective 14.8

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 Personnel/Organizational:
Continuous Improvement
• Continuous improvement
– Workers in lean systems have greater
responsibility for quality, and they are
expected to be involved in problem solving
and continuous improvement
– Lean workers receive training in
 Statistical process control
 Quality improvement
 Problem solving

Learning Objective 14.8

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 Personnel/Organizational:
Cost Accounting
• Cost accounting
– Activity-based costing
 Allocation of overhead to specific jobs based on
their percentage of activities

Learning Objective 14.8

© McGraw-Hill Education. 14-29

Personnel/Organizational: Leadership
• Leadership/project management
– Managers are expected to be leaders and
facilitators, not order givers
– Lean systems encourage two-way
communication between workers and managers

Learning Objective 14.8

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 Building Blocks: MPC
• Seven elements of manufacturing
planning and control (MPC) are
particularly important for lean system:
1. Level loading
2. Pull systems
3. Visual systems
4. Limited work-in-process (WIP)
5. Close vendor relationships
6. Reduced transaction processing
7. Preventive maintenance and housekeeping
Learning Objective 14.8

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 MPC: Level Loading
• Lean systems place a strong emphasis on
achieving stable, level daily mix schedules
– MPS – developed to provide level capacity
loading
– Mixed model scheduling
 Three issues need to be resolved
o What is the appropriate product sequence to use?
o How many times should the sequence be repeated
daily?
o How many units of each model should be
produced in each cycle?

Learning Objective 14.8

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 MPC: Pull Systems
• Push system
– Work is pushed to the next station as it is
completed
• Pull system
– A workstation pulls output from the preceding
workstation as it is needed
– Output of the final operation is pulled by
customer demand or the master schedule
– Pull systems are not appropriate for all
operations
 Large variations in volume, product mix, or
product design will undermine the system
Learning Objective 14.8

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 MPC: Visual Systems
• Kanban
– Card or other device that communicates demand for
work or materials from the preceding station
 Kanban is the Japanese word meaning “signal” or
“visible record”
– Paperless production control system
– Authority to pull, or produce, comes from a
downstream process
– Two main types of kanbans:
1. Production kanban (p-kanban): signals the need to
produce parts
2. Conveyance kanban (c-kanban): signals the need to
deliver parts to the next work center

Learning Objective 14.8

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 MPC: Limited WIP
• Benefits of lower WIP
– Lower carrying costs
– Increased flexibility
– Aids scheduling
– Saves costs of scrap and rework if there are
design changes
– Lower cycle-time variability

Learning Objective 14.8

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 MPC: Close Vendor Relationships
• Lean systems typically have close
relationships with vendors
– They are expected to provide frequent,
small deliveries of high-quality goods
• A key feature of many lean systems is
the relatively small number of
suppliers used

Learning Objective 14.8

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 MPC: Reduced Transaction
Processing
• Lean systems seek to reduce costs
associated with the ‘hidden factory’:
– Logistical transactions
– Balancing transactions
– Quality transactions
– Change transactions

Learning Objective 14.8

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 Preventive Maintenance and
Housekeeping
• Preventive maintenance
– Maintaining equipment in good operating
condition and replacing parts that have a
tendency to fail before they actually do fail
• Housekeeping
– Maintaining a workplace that is clean and free
of unnecessary materials

Learning Objective 14.8

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 Lean Tools: Value Stream Mapping
• Value stream mapping
– A visual tool to systematically examine the
flows of materials and information
 Its purpose is to help identify waste and
opportunities for improvement
 Data collected:
o Times
o Distances traveled
o Mistakes
o Inefficient work methods
o Waiting times
o Information flows

Learning Objective 14.9

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 Lean Tools: 5W2H & Six Sigma
• 5W2H
– A method of asking questions about a process that
includes what, why, where, when, who, how, and
how much
• Lean and Six Sigma
– Lean and Six Sigma can be viewed as two
complementary approaches to process improvement
 Lean focuses on eliminating non-value-added activity
to maximize process velocity
 Six Sigma seeks to eliminate process variation
 Together the two approaches can achieve process
flow and quality

Learning Objective 14.9

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 Transitioning to Lean Systems
1. Make sure top management is committed and
that they know what will be required
2. Decide which parts will need the most effort to
convert
3. Obtain support and cooperation of workers
4. Begin by trying to reduce setup times while
maintaining the current system
5. Gradually convert operations, begin at the end
and work backwards
6. Convert suppliers to JIT
7. Prepare for obstacles

Learning Objective 14.10

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 Obstacles to Conversion
1. Management may not be fully committed or
willing to devote the necessary resources to
conversion
2. Workers/management may not be
cooperative
3. It can be difficult to change the
organizational culture to one consistent with
the lean philosophy
4. Suppliers may resist

Learning Objective 14.11

© McGraw-Hill Education. 14-42

 End of Presentation

© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No
reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. 14-43