Lean Thinking

by Daniel T Jones

  five whys —Taiichi Ohno’s practice of asking “why” five times whenever a problem was encountered, in order to identify the root cause of the problem so that effective countermeasures could be developed and implemented.

  flow —The progressive achievement of tasks along the value stream so that a product proceeds from design to launch, order to delivery, and raw materials into the hands of the customer with no stoppages, scrap, or backflows.

  greenfield —A new design or production facility where best-practice, lean methods can be put in place from the outset. Contrast with brownfield.

  heijunka —The creation of a “level schedule” by sequencing orders in a repetitive pattern and smoothing the day-to-day variations in total orders to correspond to longer-term demand. For example, if customers during a week order 200 of Product A, 200 of Product B, and 400 of Product C in batches of 200, 200, and 400 respectively, level scheduling would sequence these products to run in the progression A, C, B, C, A, C, B, C, A, C…. Similarly, if customer orders totaling 1,000 products per week arrive in batches of 200 products on day one, 400 on day two, zero on day three, 100 on day four, and 100 on day five, the level schedule would produce 100 per day, and in the sequence A, C, A, B. … Some type of level scheduling is unavoidable at every producer, mass or lean, unless the firm and all of its suppliers have infinite capacity and zero changeover times. However, lean producers tend to create excess capacity over time as they free up resources and to work steadily at reducing changeover times so the short-term discrepancy between the heijunka schedule and actual demand is steadily minimized, aided by level selling.

  hoshin kanri —A strategic decision-making tool for a firm’s executive team that focuses resources on the critical initiatives necessary to accomplish the business objectives of the firm. By using visual matrix diagrams similar to those employed for quality function deployment, three to five key objectives are selected while all others are clearly deselected. The selected objectives are translated into specific projects and deployed down to the implementation level in the firm. Hoshin kanri unifies and aligns resources and establishes clearly measurable targets against which progress toward the key objectives is measured on a regular basis. Also called policy-deployment .

  jidoka —See autonomation .

  Just-in-Time —A system for producing and delivering the right items at the right time in the right amounts. Just-in-Time approaches just-on-time when upstream activities occur minutes or seconds before downstream activities, so single-piece flow is possible. The key elements of Just-in-Time are flow, pull, standard work (with standard in-process inventories), and takt time.

  kaikaku —Radical improvement of an activity to eliminate muda, for example by reorganizing processing operations for a product so that instead of traveling to and from isolated “process villages,” the product proceeds through the operations in single-piece flow in one short space. Also called breakthrough kaizen, flow kaizen, and system kaizen.

  kaizen —Continuous, incremental improvement of an activity to create more value with less muda. Also called point kaizen and process kaizen.

  kanban —A small card attached to boxes of parts that regulates pull in the Toyota Production System by signaling upstream production and delivery.

  keiretsu —A grouping of Japanese firms through historic associations and equity interlocks such that each firm maintains its operational independence but establishes permanent relations with other firms in its group. Some keiretsu, such as Sumitomo and Mitsui, are horizontal, involving firms in different industries. Other keiretsu, such as the Toyota Group, are vertical, involving firms up- and downstream from a “system integrator” firm that is usually a final assembler.

  lead time —The total time a customer must wait to receive a product after placing an order. When a scheduling and production system are running at or below capacity, lead time and throughput time are the same. When demand exceeds the capacity of a system, there is additional waiting time before the start of scheduling and production, and lead time exceeds throughput time. See throughput time.

  level selling —A system of customer relations that attempts to eliminate surges in demand caused by the selling system itself (for example, due to quarterly or monthly sales targets) and that strives to create long-term relations with customers so that future purchases can be anticipated by the production system.

  Material Requirements Planning (MRP) —A computerized system used to determine the quantity and timing requirements for materials used in a production operation. MRP systems use a master production schedule, a bill of materials listing every item needed for each product to be made, and information on current inventories of these items in order to schedule the production and delivery of the necessary items. Manufacturing Resource Planning (often called MRP II ) expands MRP to include capacity planning tools, a financial interface to translate operations planning into financial terms, and a simulation tool to assess alternative production plans.

  meister —A production group leader in a German manufacturing firm.

  milk run —A routing of a supply or delivery vehicle to make multiple pickups or drop-offs at different locations.

  mittelstand —Mid-sized and usually family-controlled German manufacturing firms that have been the backbone of the postwar export economy.

  monument —Any design, scheduling, or production technology with scale requirements necessitating that designs, order, and products be brought to the machine to wait in a queue for processing. Contrast with right-sized tool.

  muda —Any activity that consumes resources but creates no value.

  multi-machine working —Training of employees to operate and maintain different types of production equipment. Multi-machine working is essential to creating production cells where each worker utilizes many machines.

  open-book management —A situation in which all financial information relevant to design, scheduling, and production tasks is shared with all employees of the firm, and with suppliers and distributors up and down the value stream.

  operation —An activity or activities performed on a product by a single machine. Contrast with process.

  perfection —The complete elimination of muda so that all activities along a value stream create value.

  poka-yoke —A mistake-proofing device or procedure to prevent a defect during order-taking or manufacture. An order-taking example is a screen for order input developed from traditional ordering patterns that questions orders falling outside the pattern. The suspect orders are then examined, often leading to discovery of inputting errors or buying based on misinformation. A manufacturing example is a set of photocells in parts containers along an assembly line to prevent components from progressing to the next stage with missing parts. The poka-yoke in this case is designed to stop the movement of the component to the next station if the light beam has not been broken by the operator’s hand in each bin containing a part for the product under assembly at that moment. A poka-yoke is sometimes also called a baka-yoke.

  policy deployment —See hoshin kanri.

  process —A series of individual operations required to create a design, completed order, or product.

  processing time —The time a product is actually being worked on in design or production and the time an order is actually being processed. Typically, processing time is a small fraction of throughput time and lead time.

  process villages —The practice of grouping machines or activities by type of operation performed; for example, grinding machines or order-entry. Contrast with cells.

  product family —A range of related products that can be produced interchangeably in a production cell. The term is often analogous to “plat-forms.”

  production smoothing —See heijunka.

  pull —A system of cascading production and delivery instructions from downstream to upstream activities in which nothing is produced by the upstream supplier until the downstream customer signals a need. The opposite of push. See also kanban.r />
  Quality Function Deployment (QFD) —A visual decision-making procedure for multi-skilled project teams which develops a common understanding of the voice of the customer and a consensus on the final engineering specifications of the product that has the commitment of the entire team. QFD integrates the perspectives of team members from different disciplines, ensures that their efforts are focused on resolving key trade-offs in a consistent manner against measurable performance targets for the product, and deploys these decisions through successive levels of detail. The use of QFD eliminates expensive backflows and rework as projects near launch.

  queue time —The time a product spends in a line awaiting the next design, order-processing, or fabrication step.

  right-sized tool —A design, scheduling, or production device that can be fitted directly into the flow of products within a product family so that production no longer requires unnecessary transport and waiting. Contrast with monument.

  sensei —A personal teacher with a mastery of a body of knowledge, in this book lean thinking and techniques.

  seven muda —Taiichi Ohno’s original enumeration of the wastes commonly found in physical production. These are overproduction ahead of demand, waiting for the next processing step, unnecessary transport of materials (for example, between process villages or facilities), overprocessing of parts due to poor tool and product design, inventories more than the absolute minimum, unnecessary movement by employees during the course of their work (looking for parts, tools, prints, help, etcetera), and production of defective parts.

  shusa —A strong team leader in the Toyota product development system. (Literally, however, a level of supervisor, like katcho or honcho. )

  Single Minute Exchange of Dies (SMED) —A series of techniques pioneered by Shigeo Shingo for changeovers of production machinery in less than ten minutes. One-touch setup is the term applied when changeovers require less than a minute. Obviously, the long-term objective is always zero setup, in which changeovers are instantaneous and do not interfere in any way with continuous flow.

  single-piece flow —A situation in which products proceed, one complete product at a time, through various operations in design, order-taking, and production, without interruptions, backflows, or scrap. Contrast with batch-and-queue.

  spaghetti chart —A map of the path taken by a specific product as it travels down the value stream in a mass-production organization, so-called because the product’s route typically looks like a plate of spaghetti.

  standard costing —A management accounting system which allocates costs to products based on the number of machine hours and labor hours available to a production department during a given period of time. Standard cost systems encourage managers to make unneeded products or the wrong mix of products in order to minimize their cost-per-product by fully utilizing machines and labor. Contrast with activity-based costing.

  standard work —A precise description of each work activity specifying cycle time, takt time, the work sequence of specific tasks, and the minimum inventory of parts on hand needed to conduct the activity.

  takt time —The available production time divided by the rate of customer demand. For example, if customers demand 240 widgets per day and the factory operates 480 minutes per day, takt time is two minutes; if customers want two new products designed per month, takt time is two weeks. Takt time sets the pace of production to match the rate of customer demand and becomes the heartbeat of any lean system.

  target cost —The development and production cost which a product cannot exceed if the customer is to be satisfied with the value of the product while the manufacturer obtains an acceptable return on its investment.

  throughput time —The time required for a product to proceed from concept to launch, order to delivery, or raw materials into the hands of the customer. This includes both processing and queue time. Contrast with processing time and lead time .

  Total Productive Maintenance (TPM) —A series of methods, originally pioneered by Nippondenso (a member of the Toyota group), to ensure that every machine in a production process is always able to perform its required tasks so that production is never interrupted.

  transparency —See visual control.

  turn-back analysis —Examination of the flow of a product through a set of production operations to see how often it is sent backwards for rework or scrap.

  value —A capability provided to a customer at the right time at an appropriate price, as defined in each case by the customer.

  value stream —The specific activities required to design, order, and provide a specific product, from concept to launch, order to delivery, and raw materials into the hands of the customer.

  value stream mapping —Identification of all the specific activities occurring along a value stream for a product or product family.

  visual control —The placement in plain view of all tools, parts, production activities, and indicators of production system performance, so the status of the system can be understood at a glance by everyone involved. Used synonymously with transparency.

  Notes

  Preface: From Lean Production to Lean Enterprise

  Introduction: Lean Thinking versus Muda

  Readers may also wonder if the value stream concept is the same for services as for physical goods. Contrasting airline services with personal computers makes it clear that it is: The problem-solving task for the computer company is the design of the product and its operating system to a cost target while for the airline it’s decisions on where to fly using what type of equipment at what frequency with what accompanying passenger services; the information management task for the computer company consists of taking orders and following them through to delivery while for the airline it’s the reservation system and the operating schedule; and the physical transformation task for the computer company consists of physically making the product and writing the code for the operating system, which has its analogue at the airline in flying specific airplanes over specific routes while performing specific maintenance activities to support daily operations.

  1: Value

  His proportion of door-to-door travel time actually spent moving on eighteen trips was as follows:

  Flying via a hub in Europe (4 trips)

  55%

  Flying direct in Europe from Birmingham airport (10 trips)

  65%

  Flying intercontinental via a hub (2 trips)

  69%

  Flying intercontinental direct (2 trips)

  78%

  Ohno therefore stated that the existing oligopolistic car companies in the West could price backward in the seller’s market of that time by taking their costs and adding their profits to determine prices. (His famous formula was: Cost + Profits = Price.) He, however, had to price forward by taking both the need for minimum profits and an upper limit on prices as fixed, then to reduce his costs through the relentless application of lean techniques until he achieved a cost permitting both an acceptable price and adequate profits to fund new product development initiatives. This gave the alternative formula of: Price – Profits = Costs, where both Price and Profits were determined by external forces, leaving the “target cost” as the only item under the control of the producer.

  By contrast, most enterprises adopting lean thinking today are roughly comparable in scale to their competitors and the opening of the global economy has made markets almost everywhere highly price competitive. Thus the real issue is how to take major whacks out of costs in comparison with competitors to gain competitive advantage.

  2: The Value Stream

  3: Flow

  4: Pull

  5: Perfection

  7: A Harder Case

  8: The Acid Test

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omplex blades, installed immediately behind the combustor in the hottest area of the engine, approximately 1,000 holes are laser-drilled in each blade to permit high-pressure cold air to be pushed through the blade from inside to outside to create a laminar boundary on the blade surface. This keeps the hot gases a few molecules away from the ceramically treated surface of the blade, a critical feat because the temperature of the gases is higher than the melting point of the blade.

  9: Lean Thinking versus German Technik

  10: Mighty Toyota; Tiny Showa

  11: An Action Plan

  12: A Channel for the Stream; a Valley for the Channel

  13: Dreaming About Perfection

  14: The Steady Advance of Lean Thinking

  For example, Schonberger reports that Toyota’s inventory turns have fallen substantially between the 1960s and the 1990s and takes this to mean that Toyota has stopped improving. However, from our visits to individual Toyota plants, we know that this cannot be the case at the plant level. What has happened instead is that Toyota has rapidly globalized both its markets and its manufacturing operations, with the result that large amounts of parts (including service parts) and whole vehicles are now being shipped long distances between continents. (What’s more, because Toyota has bought out most of its regional distributors around the world, a much larger fraction of its finished vehicles now show up in its total inventory calculation.) This is bad in the sense that it increases global inventories—an important issue we return to in Chapter 15 —but it should not be taken to mean that plant-level and country-level manufacturing performance is less lean. Indeed, we believe that just the opposite is the case.