Lecture 7

Lean Manufacturing
Strategy

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Interrelationship between corporate
goals & manufacturing strategy
•  Corporate goals are the focus of corporate
strategy.
•  Corporate strategy influences manufacturing
strategy.
•  Manufacturing strategy defines the long-term
capability of the factory.
•  The factory s capabilities , in turn, help shape the
corporate goals.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Blue Ribbon Panel on Global Manufacturing
Objective: To define manufacturing strategies that could
guide global manufacturers into new millennium.
Recommendations:
1) Companies should focus on lean methods of
manufacturing & continuous improvement practices.
2) Single-piece flow is the optimal manufacturing method
for meeting future customer demand.
3) Customers (internal & external) should pull product
through the value stream.
4) Lean manufacturing is the best hope for a common global
language of manufacturing.
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 Focus of lean manufacturing is customer
•  What is most important to the customer?
•  Satisfying the customer is the only way the factory can
succeed.
•  Satisfying the customer is what the business is all
about.
•  If the customer is not satisfied, it does not matter how
efficient the operation is,how good the quality is, or
how short the lead time is.
•  Establishing a manufacturing strategy requires first
understanding the corporate goals, from the perspective
of satisfying the customer.
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 How to evaluate a factory?
Step 1: Before developing a manufacturing
strategy, it is important to observe
objectively how a factory is running.
Step 2: The most critical observation is to
check for WIP inventory in the plant.
Step 3: Ask the question; why does the factory
keep excess inventory?
Step 4: Evaluate the following causes:
a) Is the equipment too unreliable?
b) Are setup times too long?
c) Is production scheduled in large batches?
d) Is there any other reason for keeping large excess inventory.
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
Observational tools used to assess the factory
1) Production flow diagram is used to identify all non-
value-added steps in the production.
2) Value stream mapping is used to probe deeper and
identify production anomalies such as;
a) Work-in-process inventory
b) Nonfunctional equipment
c) Wasted operator motion
d) Poor layout
e) Long setup times
f) Large batches or lot sizes
g) Uneven workload

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Example of lean manufacturing strategy
Name of the company: Batchmore Mfg. Co.
Competitive strategy: Speedy delivery & quick
response to the changing customer demand.
Specific corporate goals:
•  Shorter order-to-delivery time (lead time)
•  High customer service (99% orders shipped on time)
•  Flexibility to produce different items
•  Respond quickly to changing customer demand
•  Lower investment in inventory (Low WIP)
•  Higher profit
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 Results of factory assessment
•  Chronic equipment problem
•  Frequent downtime
•  Long setup times
•  Low machine utilization
•  Large amount of WIP everywhere
•  Current MRP system scheduling large lot
sizes.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Following manufacturing initiatives (strategies)
were discussed by the management

1) Create quality assurance dept.

2) Kaizen event to reduce setup times.
3) Improve maintenance policy on equipment (shut down
every two weeks for maintenance).
4) Improve MRP scheduling system.
5) Immediate reduction of WIP.
6) Immediate reduction in lot size (batch size).

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Analysis of lean manufacturing strategies
1) Create quality assurance dept.
Analysis: There is no mention of quality problems.
2) Kaizen event to reduce setup times.
Analysis: Setup time reduction is not justified unless capacity
utilization is high. Assessment shows low utilization.
3) Improve maintenance policy.
Analysis: This will increase lead time and decrease the ability to
respond to changing customer demand.
4) Improve MRP scheduling system.
Analysis: It is a push system & does not support corp. goal.
5) Immediate reduction of WIP.
Analysis: Reducing inventory without making other improvements
will increase lead time & lower customer service.
6) Immediate reduction in lot size (batch size).
Analysis: Smaller lot size will lower variability, inventory, cycle time,
production cost and customer lead time.
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 The importance of cycle time
•  This is the most important single lean
manufacturing strategy with maximum
competitive advantage.
•  Short cycle time can help both customer lead time
and manufacturing WIP.
•  There are 3 critical elements of cycle time:
1) Queue time and waiting time
2) Cycle time is affected by WIP for a given throughput
3) Variance of cycle time

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Strategies to reduce cycle time
1) Queue time and waiting time: Cycle time can be reduced by
lowering processing time, setup time, travel time, waiting for
material handler time, queue time etc.
2) Cycle time is affected by WIP for a given throughput:
Cycle time can be reduced by identifying areas with large
accumulation of WIP and taking actions on the root cause.
3) Variance of cycle time: Cycle time can be reduced by
analyzing the difference between the shortest and longest cycle
time (variance) and taking actions to reduce the variance.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Strategies to reduce cycle time
& customer lead time
1) Analyze the cause of high WIP inventory.
2) Reduce the non-value-added waiting time.
3) Synchronize production processes
throughout the value stream & group them in
manufacturing cell.
4) Schedule steady and balanced workflow by
releasing small orders more frequently.
5) Reduce variability throughout the Value
stream.
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 Strategy # 1
Analyze the cause of high WIP inventory
Causes of high inventory
1) Setup time is too long.
2) Production is scheduled in large batches.
3) The production equipment breaks down frequently.
4) Frequent changes in shop orders.
5) Frequent shortages of component parts.
6) Departments working at different shifts.
7) The next process is working at a slower rate.
8) The next process is working on a different order.
9) The factory is not making what the customer wants.
10) Absenteeism of specialized workers.
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 Inventory can hide problems

When the water level (inventory) is high, then the rocks

(problems) are hidden. By reducing the water level (inventory),
the rocks (problems) can be exposed and addressed.
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 5 steps to reduce inventory

1) Look for excess inventory.

2) Understand that it is there to protect the factory
from a problem.
3) Find the underlying cause of the problem.
4) Solve the root cause of the problem.
5) Lower the inventory level.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Strategy # 2
Reduce the non-value-added waiting time
•  Make a distinction between production lot size
and transfer lot size.
•  Reduce the transfer lot size as small as the
factory can handle.
•  Establish a cap or maximum amount of WIP
allowed in the system.
•  Establish a pull production control system.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Strategy # 3
Synchronize production
•  Avoid overbuilding an item just because the
production is running well.
•  Spread production evenly throughout the
month & avoid end of the month production
rush.
•  Synchronize production processes by
grouping them into manufacturing cells.
•  Develop the concept of single-piece flow
system with pull production control.
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 Strategy # 4
Schedule steady and balanced workflow
•  Keep workload as steady as possible.
•  Schedule small orders through the plant.
•  Load factory resources as even as possible.
•  Release orders frequently in small lot sizes.
•  Establish production routing based on product family
(value stream), because similar products require
similar processing & simplified setups.
•  Strive for steady workload & balanced workflow by
working on bottlenecks (constraining operations).
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 Strategy # 5
Reduce variability throughout the Value stream
•  Install JIT practices.
•  Focus on the internal & external sources of
variability such as equipment downtime, long
setups, late deliveries from supplies, lot size
from suppliers, production lot size etc.
•  Eliminate or reduce variability.
•  When variability is unavoidable, learn to adapt
to it and minimize its negative effects.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Examples of not-so-lean manufacturing
4 wheels represent: customer, production, inventory & quality

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Example of lean manufacturing

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Before implementation of lean manufacturing

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

After implementation of lean manufacturing

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Work content time gap

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 5S & Visual Control
are also critical to
lean manufacturing strategy

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 5 Elements of 5S
•  Sort
•  Straighten
•  Shine
•  Standardize
•  Sustain

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Sort
•  When in doubt, move it out
•  Prepare red tags
•  Attach red tags to unneeded items
•  Remove red-tagged items to dinosaur
burial ground
•  Evaluate / disposition of red-tagged items

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Straighten
Make it obvious where things belong
1.  Lines
•  Divider lines
•  Outlines
•  Limit lines (height, minimum/maximum)
•  Arrows show direction
2.  Labels
•  Color coding
•  Item location
3.  Signs
•  Equipment related information
•  Show location, type, quantity, etc.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Shine
•  Clean everything, inside and out
•  Inspect through cleaning
•  Prevent dirt, and contamination from
reoccurring

Result of above actions

Fewer breakdowns
Greater safety
Product quality
More satisfying work environment
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 Standardize
•  Establish guidelines for the team 5-S conditions

•  Make the standards and 5-S guidelines visual

•  Maintain and monitor those conditions

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Sustain

Determine the methods your team will use to

maintain adherence to the standards

5-S concept training

5-S communication board
Before and after photos
One point lesson
Visual standards and procedures
Daily 5-minute 5-S activities
Weekly 5-S application
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 Before 5S implementation

•  To eliminate the wastes that result from uncontrolled processes.

•  To gain control on equipment, material & inventory placement and position.
•  Apply Control Techniques to Eliminate Erosion of Improvements.
•  Standardize Improvements for Maintenance of Critical Process Parameters.

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

After 5S implementation
•  Clear, shiny aisles
•  Color-coded areas
•  No work in process

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

 Workplace Observation
•  Clearly define target area
•  Identify purpose and function of target area
•  Develop area map
•  Show material, people, equipment flow
•  Perform scan diagnostic
•  Photograph problem areas
•  Develop a project display board (area)

Copyright 2006 © by Dr. Govind Bharwani, Wright State University

Visual Factory Implementation
•  Develop a map identifying the access ways (aisles,
entrances, walkways etc.) and the action areas.
•  Perform any necessary realignment of walkways, aisles,
entrances.
•  Assign an address to each of the major action areas.
•  Mark off the walkways, aisles & entrances from the action
areas
•  Apply flow-direction arrows to aisles & walkways
•  Perform any necessary realignment of action areas.
•  Mark-off the inventory locations
•  Mark-off equipment/machine locations
•  Mark-off storage locations (cabinets, shelves, tables)
•  Color-code the floors and respective action areas
Copyright 2006 © by Dr. Govind Bharwani, Wright State University
 The key to
lean manufacturing strategy
is
small lot leveled mixed model
production

Copyright 2006 © by Dr. Govind Bharwani, Wright State University