Lean Manufacturing
Lean Manufacturing
TOC-Lean-Six Sigma
Way
Workshop Objectives
1.Goal of the
Organization?
Goal of the Organization
What is ultimate
Goal of a
Business
Organization ?
The ultimate Goal of Organization is….
Case Study: Growth of Steel industry
Quality
Speed of delivery
Experiences of customer
(during all transactions)
Cost
The challenges before Management?
Improve QUALITY
Accelerate Speed
(Reduce Lead Time )
Enhance Customer Value
Reduce COST
What’s Global Competitiveness of your
Company’s Products?
Developed by a Physicist
Eliyahu Goldratt
TOC is:
Thinking Tool
Conventional Wisdom
Net profit?
Efficiency?
Utilization?
Return on Investment?
Cash Flow?
“Are you using the right measurements?”
What measurements should we use?
TOC Wisdom
Throughput
Inventory
Operating Expense
Throughput (“T”)
Increasing Throughput ?
Exercise:
What is your Focus Priority & Why?
#2
#3
Chain Analogy
# 1: Decrease OE # 1: Increase T
# 2: Decrease I # 2: Decrease I
# 3: Increase T # 3: Decrease OE
Conventional World Throughput World
TOC Question...
Focus
Follow Through
TOC Summary: Focus
3.LEAN
a new approach to
Cost Reduction
What makes your products Costlier?
Company A : 5%
Profit Margins
Company B : 10%
Selling Price
A B
What do we do in our processes?
Profit
P
Selling Price
makes the
P
Cw Products Costlier?
Ex-Factory Cost
Cw
Ex-Factory Cost
Cp Cp
How to increase the Profit?
P
R e du c e
the Cos P
C/o Waste
Minimize / t
Waste
Eliminate
Waste
Selling Price
W
Cost of Product
Cost of Product
Genesis of Waste
Demystifying the
Business
Process!
Business as a Supply chain
Supply chain:
a link of Business Processes
4. Methods
1. Materials
Products
2. Machines
Resources to design & deliver Services
3. People’s
Knowledge &Time
4.Processes
(Office Procedures)
1.Informatio Services
n
2.Assests
(Office facilities)
Four Basic Operations
3. Men
1.Retention 3.Processing
2.Transportatio 4.Inspectio
1. Materials
n n
Products
2. Machines
In each operation we either Add Value or..
Value
1. Materials
Products
Value:a capability provided to a customer at the right
2.Machines
time at an appropriate price, as defined in each case by
the customer
add value or Generate WASTE
1.Over
1. Overproduction
production
2.Inventory
2. Inventory
3.Defects/rejection/rework
3. Defects/rejection/rework
4.Waiting
4. Waiting
5.Inappropriate
5. InappropriateProcessing
Processing
6.Unnecessary
6. UnnecessaryMotions
Motions
7.Transporting
7. Transporting
8.Untapped
8. Untappedhuman
humanPotential
Potential
Waste
1. Materials
Products
2.Machines
“Muda”: Any business activity that absorbs resources, but adds
no value
Where do you add Value?
3. Men
1.Retention 3.Processing
2.Transportatio 4.Inspectio
1. Materials
n n
Products
2. Machines
What is Muda (Waste)?
233 10 - 15%
World Class
5
4 6210 15 - 20%
Industry
3 66807 1520-- 30%
30% Average
2 308537 30 - 40%
Non
1 690000 > 40% Competitive
How to Reduce Cost?
1. Detect Waste
2. Eliminate Waste
WASTE
3. Prevent Waste
How to improve
Business Performance- the Lean way?
4.Strategy for
Cost Reduction
Initiatives
Case Study
Nippon Autocomp Ltd
Nippon Autocomp Ltd (NAL) is a producer of Fuel
Tank Brackets for leading automobile
manufacturers.
It is operating since 1980, obtained ISO 9001
certificate in year 2002 & commanded a good
market share till year 2005. With the entry of global
players in Indian market, since last few years NAL
started loosing business due to tough competition.
The CEO of company called all
managers, analyzed the situation and
observed that there has been 25%
drop in business during last year and
21% and 18 % in preceding two years.
NAL: Reasons for Business
drop
The CEO of company appointed a committee of HODs to find out
the reasons of business decline and to select an appropriate
Improvement Methodology to enhance the performance in a period
of six months
The committee gone through records of last 3 years, interacted
with clients, and all concerned persons and arrived to a conclusion
that NAL’s business declined mainly due to two reasons:
-Higher cost of production & Longer lead time
The quality of NAL products were acceptable to customers but it’s
prices were 5 – 7 % higher than competitors.The customers
demand a lead time of 10 days, whereas current lead time of NAL
is 30 days
Committee decided to go for Radical Cost Reduction
Intervention
Now your group has been selected as Consulting Team to
facilitate Performance Improvement in NAL, with clear
objective; to reduce cost & lead time within six months
NAL: Process Information
Customer demand: 265 Brackets/day.
Ex factory Price of Bracket : Rs.3000 per piece
Plant operation 5 days/week, 8 Hrs/day, 50 weeks/yr
Main Raw Material (for one Bracket): Steel plate ( 6mm
ThickX500mmX1000 mm) Weight: 30Kg, Cost Rs.900
Process yield: Stamping- 95%, Welding- 90%, Deburring-
99%, Assembly-98%, Overall:Finished product to Input
-60% (by weight). Loss in form of scrap, trims, defectives.
Industry Benchmark of overall yield:95%
Inventory: Raw Material-10 days, Stamping-5425 pcs,
Welding-1400 pcs, Deburring -1225, Assembled : 0
NAL Process Data
Activities/Steps Deliverables
1.
2.
3.
4.
5.
6.
Radical Cost Reduction
Intervention Schedule
Activity 1 2 3 4 5 6
Months
1.
2.
3.
4.
5.
6.
Strategy to
Reduce Cost & improve
Delivery
Steps Deliverables
Activity 1 2 3 4 5 6
Month Month Month Month Month Month
2. Constraint Diagnosis
3. Project Selection
5. Solution Development
6. Implement Solution
Enhancing Global Competitiveness
TOC-Lean-Six Sigma
Way
5.Change
Management
The Law of Mind
1. What to change ?
(identification of problems)
2. What should be the content
of change? (developing
solutions)
3. How to make change
happen? (implementation of
solution)
4. How to sustain the change?
(cultural transformation)
Change Management - Overview
Change Objective Tool Activity
Management
What to change? Identification of TOC- Lean: Detection of
Constraints? Diagnosis, VSM Waste
What should be Detailed Lean -Six Sigma: Identification of
the content of investigation & Define- Measure- root-cause of
change? solution Analyze waste
development
Making change Implementing Lean -Six Sigma: Elimination of
happen! solutions Improve root-cause of
Waste
How to sustain Holding the gain Lean -Six Sigma: Prevention of
change? Control waste
Enhancing Global Competitiveness
TOC-Lean-Six Sigma
Way
6.What to Change?
Select
Cost Reduction (or Quality
or Delivery Improvement)
Projects
Cost Reduction Projects
Cost reduction is a change management activity
The very first step of change management is to discover
“What to Change”?
Change has to be done project-by-project
How to select cost reduction project has to be a scientific and
objective activity.
Criteria for selection of project is “that one, which is impacting
maximum on bottom-line”
Such projects can be identified through a unique diagnostic
workshop based on the principles of “Theory of Constraints
(TOC) and Lean”
We have to begin cost reduction activity through
“Constraint Diagnosis”
Waste are symptoms of Problems
1.Over
Overproduction
production
1.
2.Inventory
Inventory
2.
3.Defects
Defects
3.
4. Unnecessary Motions
4. Unnecessary Motions
5.Inappropriate
InappropriateProcessing
Processing
5.
6.Waiting
Waiting
6.
7.Transporting
Transporting
7.
Raw 8.Untapped
UntappedHuman
HumanPotential
Potential
Product
8.
Materials s
Information Services
What Causes Waste?
1.Over
Overproduction
production
1.
2.Inventory
Inventory
2.
Retenti Processin 3.3.Defects
Defects
on g 4.Unnecessary
4. UnnecessaryMotions
Motions
5.Inappropriate
InappropriateProcessing
Processing
5.
6.Waiting
Waiting
6.
7.Transporting
Transporting
Raw Transportati Inspecti
7.
8. Untapped Human Potential
Materials on on 8. Untapped Human Potential
Produ
cts
Constraints
Constraints cannot be
perceived as good or bad
There cannot be a constraint-
free world.
Constraints are Facts of Life
Constraints are opportunities
for improvement
Packaging
Cutting Fabrication Assembly Finishing
Shipping
Supplier Constraint
Customer
Packaging
Cutting Fabrication Assembly Finishing
Shipping
7.Constraint
Diagnosis
Areas of constraints resulting to waste?
Manufacturing Process:
W W W W
Micro level Process Map
Identify the waste generated at each process/process step
W W W W
W W W
How to identify Waste?
Process-1 Process-2 Process-3 Process-4
Type of
Waste
Material
Machine
Method
Men
Managmt.
Quality
Safety
Identify the source of data
Sources of data:
Production report
Quality performance reports
Cost sheets
Customer complaints
Audit reports
Breakdown reports
Maintenance records
Warranty claims
Shipping documents
Customer orders
………………………
Data collection plan
Process:_________________________________________
Waste Unit of Quantity Economic Priority
Measurement ( per Annum) Value
Selection of projects
Process:_________________________________________
Process:_________________________________________
8.Value Stream
Mapping
Value Stream Mapping
=4
=1 2 Days
2 Days
3 Days C/T=1 sec C/T=39 sec C/T=17 sec C/T=48 sec
C/O= 4C/O
hrs C/O= 11 min C/O=C/O0 min C/O= 5 min
C/O C/T
Rel.= 98% Rel.= 99% Rel.= 80% Rel.= 100%
FPY = 95% FPY = 90% FPY = 99% FPY = 98%
3 days 2 days 2 days 7 days
1 sec 90 Sec
91 sec
Project Selection
Selected Process:
Description
Process Map
Waste Generated
Quantity of Waste
(per year)
Economic Impact of
Waste
(per year)
Selected Project