Getting Lean in Tough Times

Terry Receveur, BS, MBA

Director, Lean

Taconic Farms, Inc.

Dow Jones 1 Year Report (3/9/09)

Unemployment Hits 25 Year High (3/9/09)

Times ARE Tough!

We are in the midst of the toughest economical times

that most of us have ever seen!

Only the organizations that are working smart and

efficiently will survive in this environment!

We MUST become LEAN!

What is “Lean”?

Lean manufacturing or lean production, which is often

known simply as "Lean", is the practice of a theory

of production that considers the expenditure of

resources for any means other than the creation of

value for the presumed customer to be wasteful, and

thus a target for elimination. Lean manufacturing is a

generic process management philosophy derived

mostly from the Toyota Production System (TPS). It

is renowned for its focus on reduction of muda (the

Japanese word for waste) in order to improve overall

customer value. (Wikepedia)

Lean is a disciplined approach that relies on the

individuals who do the work (i.e. care for animals,

sterilize materials, take orders, wash cages, etc.) to

identify the source of waste and provide ideas on how

the operations can be changed to work more

efficiently and deliver more value to our customers

(internal or external).

Only a small fraction of the steps we carry out actually

create the value the customer is willing to pay for, the

rest is muda or non-value adding (NVA).

What is “Lean”?

Lean is NOT a one time event or program!

Lean is a strategic approach to inculcate “continuous

improvement” thinking into the culture of your

organization.

Continuous improvement is attained by utilizing the

Lean tool kit to identify and eliminate non-value

adding activities (waste)!

What is “Lean”?

• Quality– For every non-value adding (NVA) step removed, you remove an opportunity

for an error!

• Customer Satisfaction– Elimination of errors that cause delays, study errors, and missed shipments will

improve the ability to deliver quality products and services to your customers.

• Process Efficiency– Process flows will be mapped, evaluated and improved where appropriate

which will improve operational efficiency and asset utilization.

• Employee Morale and Engagement– Removes organizational barriers.

– Staff creativity and ideas are valued.

• Value Creation– Reduction of NVA activities helps control costs and increases competitive

advantage.

What Can Lean Do For You?

What Can Lean Do For You?

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Value Creation

Lean

• Generally, a 10-15% reduction in direct cost can be realized from a well executed Lean initiative within the 1st 6 months.

• The initial cost reductions are generally perpetual in nature and will repeat year over year.

• A continuous improvement/Lean program should provide @3-5% reduction of direct cost on a annual basis.

• Many Lean programs evolve into Lean Six Sigma.

• The overall long-term benefit is the conversion of the organization into having a “continuous improvement” philosophy.

What Can Lean Do For You?

How Do We Get Lean?

Identify and Eliminate NVA (Waste)

Seven Sources of Waste– Transportation (moving material/product from one place to another)

– Inventory (material/product/information waiting to be processed)

– Motion (excess movement and/or poor ergonomics)

– Waiting (delays caused by shortages, approvals, downtime)

– Over production (producing more than is needed)

– Over processing (adding more value than the customer is paying for)

– Defects/Rework (doing the same job/task more than once)

Note: Another waste is: People (untapped and/or misused resources)

Lean Tool Kit to Identify Waste

Total Productive Maintenance

Process Mapping

Spaghetti Chart

Metric & Incentives

Kanban

Visual Controls

5S

Value Stream Mapping

Standard Work

Line Design

Kaizen Event

Swim Lane Map

Non-Value Added Analysis

Process Mapping

A graphical representation of a process flow identifying

the steps of the process.

Typical Order Fulfillment Process

Customer Places

OrderSend order to

warehouse for picking

Is order

correct?

No

Yes

Call Customer

and make

corrections.

Is

Product

Available?

No

Yes Pick product for order

Does Customer

have other

shipments?

Yes

NoWill product

be available before order

ships?Yes

Place order on hold

until product available

Cancel Order

No Is production

scheduled to

manufacture product?

Can

production manufacture

product in

time for shipping?

No

Yes

No Will Customer accept

backorders?

Yes

Expedite

manufacturing schedule

NoShip Order

Yes

Will Customer

allow

consolidated shipments?

Yes

No

Consolidate Orders

Customer Receives

Order

Order Entry WarehousingSales

Manufacturing

TransportationTypical Order Fulfillment Process

Customer Places

OrderSend order to

warehouse for picking

Is order

correct?

No

Yes

Call Customer

and make

corrections.

Is

Product

Available?

No

Yes Pick product for order

Does Customer

have other

shipments?

Yes

NoWill product

be available before order

ships?Yes

Place order on hold

until product available

Cancel OrderCancel Order

No Is production

scheduled to

manufacture product?

Can

production manufacture

product in

time for shipping?

No

Yes

No Will Customer accept

backorders?

Yes

Expedite

manufacturing schedule

NoShip OrderShip Order

Yes

Will Customer

allow

consolidated shipments?

Yes

No

Consolidate Orders

Customer Receives

Order

Order Entry WarehousingSales

Manufacturing

Transportation

Identifies NVA

• For each activity, step, or task in the process, classify it as:

– Customer Value Add

– Business Value Add

– Non-Value Add

• Brainstorm ways to:

– Eliminate Non-Value Add activities (typically 80+% of the Cycle Time reduction

opportunity)

– Optimize Customer Value Add activities

– Reduce Business Value Add activities

Value Add

Contribute toCustomer Needs?

Non Value Add

Contribute to theBusiness Owners?

Business Value Add

Necessary toProduce Output?

Activity/Task

No

Yes No

Yes Yes No

Optimize Reduce EliminateTypically the largest contributor to process cycle time is non-value add activities, while the smallest contributor is Customer Value Add activities

Process Mapping

The primary goal is to reduce cycle time while improving

quality by reducing complexity!

Swim Lane Map

Use for large, complex processes when:

• Multiple departments/functions are involved, including outside the organization..

• Sequence and time of processes is important (as in cycle time reduction).

• Can show information and service flows if needed.

• Top lane is typically process customer.

Value Stream Mapping (VSM)

VSM is a road map for an organization’s Lean journey and is used to analyze the flow of materials and information currently required to bring a product or service to a consumer. At Toyota, where the technique originated, it is known as "Material and Information Flow Mapping. The primary difference between Process Mapping is the added element of the timeline.

Identifies NVA

Value Stream Mapping (VSM)

A graphical aid used to detail the actual physical flow and distances involved in a work process. Processes that have not been streamlined frequently are poorly laid out with work/product taking a path through the work area that looks like a mass of cooked spaghetti!

– create a scale map of a work station or work process.

– draw a line from the initial point of work to the next step, then the third step, and so on until the work/product exits the work area

– Examine the resulting chart for areas where improvements can be made

– physically relocate work steps so that work/product does not backtrack at any point and proceeds in a linear fashion.

Spaghetti Chart

Identifies Wasted Motion or Transportation

Spaghetti Chart

Purchasing

Accounting

Scheduling

ChemicalWarehouse

VP Conference Room

General Office Staff

Sales

CustomerService

Conf RoomL

ogistics

Bathroom

1

2

5

9

8

76

3

4

11

14

1312

10

5S Explained

5S is a targeted list of activities that promotes organization and efficiency in the workplace.

5S is a process and method for creating and maintaining an organized, clean, and high performance workplace

5S enables anyone to distinguish between normal and abnormal conditions at a glance

5S is the foundation for continuous improvement, zero defects, cost reduction, and a more productive work space

5S is a systematic way to improve the workplace, our processes and our products through employee involvement

5S Overview

Sort

–Clearly distinguish needed items from unneeded items and

eliminate the latter

Set In Order (also known as Simplify)

–Keep needed items in the correct place to allow for easy and

immediate retrieval

Shine

–Keep the work space orderly and clean

Standardize

–Standardized cleanup. This is the condition we support

when we maintain the first three pillars

Sustain (also known as Self-Discipline)

–Make a habit of maintaining established procedures

5S is a process and method for creating and maintaining an organized, clean, safe, and high performance workplace.

Visual Controls

• The intent of a visual work place is that the whole environment is

set-up with signs, labels, color-coded markings, etc. such that

anyone unfamiliar with the process can, in a matter of minutes,

know what is going on, understand the process, and know what is

being done correctly and what is out of place.

• Shop floor teams are often involved in devising and implementing

these tools through 5S and other improvement activities.

• Visual controls describe workplace safety, production throughput,

material flow, quality metrics, or other information.

• Visual controls supply the feedback to an area.

Visual Controls

Overtime Hours

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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Plan

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Ca

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Avg.

Linear

(Group

Avg.)

Standard Work

Pre-determined sequence of tasks for

the best way to get the job done in

the amount of time available

while ensuring the job is done

right the first time, every time.

• Defines the most efficient

methods to produce product using

available equipment, people, and

material.

• Depicts the key process points,

operator procedures, production

sequence, safety issues, and

quality checks.http://www.gatlineducation.com/leandemo/rulestandardwork.htm

Line Design

A process of mocking up and designing the work area to identify

and eliminate NVA.

• Strategic placement of equipment, materials, and people to

maximize work flow.

Single Piece Flow

A manufacturing philosophy or concept which supports the

movement of product from one workstation to the next, one

piece at a time, without allowing inventory to build up in

between.

• It keeps WIP at the lowest possible level.

• It encourages work balance, better quality and a host of

internal improvements.

Kanban

The Japanese word kanban is a common everyday term meaning

“signboard” or “billboard”.

Kanban is a signaling system to trigger action. As its name

suggests, kanban historically uses cards to signal the need for

an item. However, other devices such as plastic markers

(kanban squares) or balls (often golf balls) or an empty part-

transport trolley or floor location can also be used to trigger

the movement, production, or supply of a unit in a factory.

A central element to JIT system.

Kaizen Event

A combination of two Japanese words Kai (change) and Zen (good, for the better). Usually defined as "continuous improvement."

A time-sensitive, rapid-deployment methodology that employs a focused, team-based approach to small but non-ending incremental improvements.– Gathers operators, managers, and owners of a process in one place.

– Maps the existing process (using a deployment flowchart, in most cases)

– Improves on the existing process

– Solicits buy-in from all parties related to the process

Kaizen Events are an extremely efficient way to quickly improve a process.

Poka Yoke

A Japanese word for mistake proofing, literally translated means,

“to avoid inadvertent errors”.

A means of providing a visual or other signal to indicate a

characteristic state. It is a method of preventing errors by

putting limits on how an operation can be performed in order

to force the correct completion of the operation.

Example: The inability to remove a car key from the ignition

switch of an automobile if the automatic transmission is not

first put in the "Park" position, so that the driver cannot leave

the car in an unsafe parking condition where the wheels are not

locked against movement.

Total Productive Maintenance

TPM brings maintenance into focus as a necessary and vitally important part of the business. It is no longer regarded as a non-profit activity. Down time for maintenance is scheduled as a part of the manufacturing day and, in some cases, as an integral part of the manufacturing process. The goal is to hold emergency and unscheduled maintenance to a minimum.

Non-Value Added Analysis

The process used to identify steps in a process for which the customer is willing to pay, and those for which the customer is unwilling to pay

• All processes are made up of three types of activities:

1.Customer Value Added

2.Business Value Added

3.Non-Value Added

• The objective of non-value added analysis is to:

– Eliminate the hidden costs that do not add value to the customer

– Reduce unnecessary process complexity, and thus errors

– Reduce the process cycle time

– Increase capacity by better utilizing resources

Customer Value Add (CVA) Definition

• Any activity in a process that is essential to deliver a service

to the customer

– Must be performed to meet customer needs

– Adds form or feature to the service

• Enhances service quality, enables on time or more

competitive delivery, or has a positive impact on price

competition

• Those tasks which the customer would be willing to pay for if

they knew you were doing it (i.e., has value to the customer)

• Customer Value Add activities should be optimized

Business Value Add (BVA) Definition

• Activities that allow greater effectiveness in a process.

• Activities that are required by the business but add no real

value from a customer standpoint (obtain the order, provide a

bill, safety activities, regulatory compliance activities).

• Questions that can be asked to determine Business Value Add

activities:

– Does this task reduce owner financial risk?

– Does this task support financial reporting requirements?

– Would the process break down if this task were removed?

– Is this task required by law or regulation?

• Business Value Add activities should be questioned and,

where possible, reduced.

How Do I Start a Lean Journey?

• Create a Lean strategic plan

• Engage outside support/consultant if internal knowledge is not

available

• Gain Senior level support

– You must have support from the highest level!

• Assign an individual owner of the Lean initiative

• Create a Site Lean Team (Site Lean Sponsor, Lean

Practitioner, Functional Area Representatives)

• Develop a strong training and implementation plan

• Reward Lean/continuous improvement behavior

• Develop the culture

Lean Implementation Logistics

Rapid Lean when done correctly can be beneficial. However, proper

preparation is critical to success.

Action Responsibility

Make Formal Announcement and

Kick-off

CEO, President and Vice President

Identify Site Lean Team Sr. Management with Corporate Lean

Owner

Conduct Site Lean Team Training Internal Trainer/Owner or Outside

Provider

Complete Lean Overview Training

(ALL Employees)

Internal Trainer or Outside Provider

Conduct Task Interview Sessions Site Lean Team

Begin Site Lean Implementation Site Lean Team

Operationalize Lean Process Site Lean Team

eLearning – Online eLearning. Simply perform a Google search for Lean

Manufacturing and the information is limitless.

Leader Led – Outside provider comes to your site.

Local University – Most universities now have courses in Lean.

Professional Organization Offsite Training Session/Seminar – There are

many offerings held throughout the country.

Web Based Training – Online interactive training course. The American

Society for Quality is an industry recognized expert in providing training

in Lean and Six Sigma.

Books, Journals, Professional Organizations – There are many great

books, journals, and organizations that provide Lean information.

Lean Training/Learning Options

Title Author

Lean for Dummies Bruce Williams

The Toyota Way Jeff Liker

What is Lean Six Sigma? Mike George, Dave Rowlands, & Bill

Kastle

The Lean Manufacturing Pocket

Handbook

Kenneth W. Dailey

Creating a Lean Culture David Mann

The Lean Pocket Guide XL MCS Media, Don Tapping

The Lean Six Sigma Pocket

Toolbook

Mike George, Dave Rowlands, Mark

Price, John Maxey

Understanding Variation – The Key

to Managing Chaos

Donald J. Wheeler

Lean Reading List

Specifically, Lean will:

•Develop leaders in breakthrough technologies to meet stretch goals

of producing better products and services delivered faster and at

lower cost;

•Improve communication and teamwork through a common set of

tools and techniques. You create a common language;

•Achieve total customer satisfaction resulting in;

•Removal of wasteful/non value-added activities;

•Decreased defects and cycle time, and increased first-pass

yields;

•Increased market share and improved profit margin;

•Ultimately, generating business growth.

Summary

Questions?