International Lean Manufacturing Lessons National Localization Indaba Balázs Németh, Phd. Kvalikon Consulting

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1 International Lean Manufacturing Lessons National Localization Indaba Balázs Németh, Phd. Kvalikon Consulting DAC Annual Grand Meeting 5 June 2014

2 Competition 2

3 Competing for Resources (Capital, Raw Material, Energy, HR) Customer Markets Technology Innovation 3

4 Areas of competition Cost Quality Delivery Flexibility Volume 4

5 Flexible adaptation is key Cost Cutting Actions Demand Capacity Waste! 5

6 Sources of Flexibility People People are the most flexible element of the System They are able to handle Exceptions, Changes, Problems Continuously improving and learning Make Decisions Processes Should help to adapt to changes Standardized Processes help to manage General situations Exceptions Should be continuously improved PDCA Cycle, Continuous feedback on performance 6

7 Process Flexibility Supplier Order Quantity Reliability Availability Variety Predictability Changeability Customer Procurement Inbound Logistics Component Production Subcomponent Assembly Assembly Distribution Where is the bottle neck? Which is the Pace Maker (Controlled) Process? Where should be inventory? How much inventory? How much does it cost? To dedicate resources? Not serving your customer? Serve the Customer later? To hold inventory? When do I get the money? 7

8 LEAN - TOYOTA Sources of competitiveness 8

9 Toyota Production System Shigeo Shingo Taichi Ohno All we doing is looking at the timeline from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time by removing non value added wastes. Taichi Ohno 9

10 Lean approach Lead time of order fulfillment Material received Material ordered Lead time of transformation system Product delivered Lead time from order to payment Lead time from cash to cash Order Material payment 10 Payment

11 5 Principles of Lean Management 1. Specify value from the standpoint of the end customer by product family. 2. Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create value. 3. Make the value-creating steps occur in tight sequence so the product will flow smoothly toward the customer. 4. As flow is introduced, let customers pull value from the next upstream activity. 5. Pursue perfection. As value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in which perfect value is created with no waste. Value Value stream Flow Pull Perfection (Daniel Jones, James Womack) 11

12 LEAN modules KAIZEN Waste elimintaion JIT People involvment JIDOKA Built in quality Visual mgmt. STABLE OPERATION Standardization 5S TPM LSM LEAN thinking, culture 12

13 Application of Lean Practices Strategic Goals LEAN Behaviour Practices Values, Principles Processes Standards 13

14 Factors Practices Results Conditions 14

15 Results Performance measure, indicator Revenue (1000 Ft) Finished goods inventory (1000 Ft) Work in process inventory (1000 Ft) Raw materials inventory (1000 Ft) Customer PPM * Delivery reliability (OTD) * Average order fulfillment lead time (hours)* Average manufacturing lead time (hours)* Supplier PPM * OEE (%) * Number of suggestions implemented (suggestion / person / year) Training hours / person / year * Labour turnover (%) * Cost saved by continuous improvement (Kaizen) activities (1000 Ft) Value Trend of the measure in the last 3 years + (improving) - (declining) 0 (stagnating) 15

16 Application Extension Practices Lean methods 0 Not knowm, not applied 1 Initial, Started to implement the concept 2 Seldom, Some signs of application are visible 3 Successful, implemented, effective 4 Excellent, Best Practice 1 Few areas 2 25% of the areas 3 50% of the areas 4 Every area (100%) How long is it applied? Strategic Approach Lean implementation program Value Stream Mapping Lean Audit Supplier Development Pull principle JIT, production scheduling based upon takt time Kanban system One piece flow FIFO inventory management Supermarket Continuous Flow Heijunka Line balancing Synchronized production SMED Zero Defects (JIDOKA) Built in quality, in process quality checks POKA-YOKE SPC FMEA Andon DOE (Design of experiments) 16

17 Practices Lean methods Application Extension 0 Not knowm, not applied 1 Initial, Started to implement the concept 2 Seldom, Some signs of application are visible 0 Not knowm, not applied 1 Initial, Started to implement the concept 2 Seldom, Some signs of application are visible 0 Not knowm, not applied 1 Initial, Started to implement the concept 2 Seldom, Some signs of application are visible How long is it applied? 0 Not knowm, not Systematic Problem Solving, (8D, 7 steps..) Suggestion System 5 Whys? method PDCA cycle Systematic waste reduction Data collection and problem identitfication sheets Kaizen workshops (1 week Kaizen actions) 5S TPM Standard work (SOP) Controlled and documented processes Visual Management Team-work, Quality circles Cellular Manufacturing Cross functional training matrix, multi-skilled employees Empowerment, (eg.: The employee can stop the line..) Operator trainings Continuous improvement (KAIZEN) Basic Stability Flexible workforce, and involvement 17

18 Conditions, Environment Top management participation 0 - No 1 Few, Little, - Seldom 2- Medium, Stabile, Continuous 3 - Strong, Full, High level Important Conditions External pressure (customer, headquarters) Availability of Human Resources Availability of Financial Resources Lean coordinator Lean champion, top management supporter Lean training program Lean implementation program (project plan..) Supporting organizational structure Lean expert Lean Audit Dedicated leaders to manage Lean Company News paper Management and employee empowerment External consultant support Controlled process, Stabile operations Stabile, solid market (demand), orders Supporting software Partners (Customers, Suppliers) cooperation, participation 18

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20 Application frequency of Lean methods Controlled and documented processes Operator trainings Systematic Problem Solving (8D, 7 steps..) Cross fuctional training, multi-skilled labour Built in Quality Empowerment Teamwork, Quality Circles FMEA PDCA cycle Suggestion System FIFO inventory management 5S Data collection sheets Standard work (SOP) 5 Whys? method Systematic waste elimination Visual Management POKA-YOKE Supplier Development TPM SPC JIT production scheduling Kaizen workshops SMED Value Stream Mapping Kanban System Cellular Manufacturing Synchronized production One piece flow Supermarket Line balancing Lean implementation program Andon Lean Audit Heijunka DOE (Design of experiments) 35,3% 41,2% 47,1% 52,9% 52,9% 52,9% 52,9% 58,8% 58,8% 58,8% 64,7% 64,7% 64,7% 64,7% 70,6% 70,6% 76,5% 76,5% 76,5% 76,5% 82,4% 82,4% 82,4% 82,4% 82,4% 82,4% 82,4% 82,4% 82,4% 88,2% 88,2% 88,2% 88,2% 88,2% 94,1% 94,1% 0,0% 10,0% 20,0% 30,0% 40,0% 50,0% 60,0% 70,0% 80,0% 90,0% 100,0% 20

21 The interrelationship between the use of different methods The application of tools is clustered around two philosophies Lean Management and TQM. At those companies, where the Lean is not applied in a structured way yet, but the TQM philosophy is strongly applied, the Stability, 0 defects, continuous improvement and people involvement - flexible workforce methods are applied on a higher level. At those companies, where the Lean Management is applied in a systematic way, besides the previous 4 areas, the strategic approach, Pull principle, and, Continuous Flow methods are also applied on a higher level. The following methods can be applied effectively independently (without the use of other tools): Supplier Development Systematic Problem Solving, Controlled and documented processes, TPM, operator trainings. 21

22 Correlation of the results (performance measures) and the methods Sales/revenue Inventory turnover Lean implementation program, JIT production scheduling, One-piece flow, FIFO inventory handling, Line balancing, Synchronized production, SMED, POKA-YOKE 5S. Lean implementation program Supplier development, JIT production scheduling, Kanban System One-piece flow Supermarket Line Balancing Synchronized production, SMED, Andon. So, if you want to improve inventory turnover, the methods of the strategic approach, Pull principle and Continuous flow should be applied better. 22

23 Correlation of the results (performance measures) and the methods Delivery reliability Methods of pull principle Kanban One piece flow Supermarket Synchronized production Empowerment Standard work Supplier Development Suggestion system Cellular Manufacturing Lead time Lean implementation program Lean Audit JIT production scheduling FIFO inventory handling Line balancing Systematic problem solving Synchronized production Built in Quality PDCA Cycle 5S Cross functional training Lead time and OTD improvement requires an integrated effort where you first improve basic stability, apply the pull principle, involve people and apply the methods of continuous improvement, and then the continuous flow. 23

24 Correlation of the results (performance measures) and the methods Customer PPM OEE 0 defects concept Built in Quality Poka-Yoke ANDON Continuous improvement (KAIZEN) 5S PDCA cycle Data collection sheets 5 Whys Visual Management JIT production scheduling Systematic Waste elimination 5S Empowerment Standard Work Team work, Quality Circles Suggestion implemented 5S, Visual Management 5 Whys Systematic Problem Solving Kaizen workshops If you want to improve PPM and reduce defects, build a system where people can recognize and eliminate problems 24

25 The frequency of finding the conditions important Availability of Human Resources Top management participation Partners (Customers, Suppliers) cooperation, participation Availability of Financial Resources Stabile, solid market (demand), orders Dedicated leaders to manage Lean Supporting softw are Management and employee empow erment Controlled process, Stabile operations Supporting organizational culture Lean training program Lean expert Lean champion, top management supporter External pressure (customer, headquarters) Company New s paper Lean implementation program (project plan..) Lean Audit Lean coordinator External consultant support 25,0% 31,3% 31,3% 37,5% 37,5% 56,3% 56,3% 50,0% 50,0% 50,0% 43,8% 43,8% 43,8% 62,5% 68,8% 75,0% 75,0% 81,3% 81,3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Conditions 25

26 The conditions considered to be the most important at those firms, who are on a higher level in application of Lean methods. Management Participation * Availability of Human Resources * Availability of Financial Resources * Lean coordinator Lean champion, top management supporter Lean training program * - indicates the 5 most important Supporting organizational culture conditions Lean expert Dedicated leaders to manage Lean * Empowered employees Stable, secure market (demand), orders Partners (Customers, Suppliers) cooperation, participation * 26

27 Preconditions of Lean management implementation At the most successful companies in Lean implementation the following preconditions are prevalent Lean implementation program, Lean coordinator, Lean training program, Strong top management support and participation External pressure (customer, headquarters) Sound organizational background Availability of human and financial resources Empowered leaders and employees Contribution of Lean expert Stabile and controlled processes Supplier development Appropriate organizational culture 27

28 Lean implementation program 5.0 Transformation process - Gemba Kaizen Actions 5.1 Layout Optimization 5.2 Continuous Flow 5.3 Pull System 5.4 JIDOKA 0 deffects 4.0 Create Basic Stability 4M 3.0 Lean infrastructure (organization) 2.0 Lean Strategy and Vision (Future Value Stream) 1.0 Lean Philosophy and Culture 28

29 Lean implementation steps Gain Top Management commitment Introduce and train the Lean philosophy and methods Case for Change Prepare Lean implementation program Prepare the organization for Lean implementation (OD program) Build strong foundation (Create Basic Stability, 5S, standard work, visual control) Prepare Current State Map of the Value Streams Identify improvement points and opportunities (Bottlenecks) Set up Kaizen System, involve and empower people Proceed step by step (pilot project, Kaizen workshops) Follow the 5 Lean principles (while improving the pilot areas)! Continuously improve the System Involve the Suppliers 29

30 Lean Assessment, Value Stream Mapping LEAN AUDIT category results Management support, conditions 3 Pull system, continuous flow 4,00 2,70 3,00 3 2,43 2,00 2,70 3 Production - Effectiveness 0 deffects, Built in Quality 3 2,50 1,00 0,00 1,20 3 Visual Control Flexible, motivated workforce 3 2,14 0,56 1,94 2,13 3 Standard work 30 PDCA, corrective actions, improvement 3 Actual score 3 Disciline, Transparency Goal

31 Elements of effective Kaizen mechanism Problem centric good sheperd approach Lean, Kaizen knowledge, methods, coordination Empowerment decisions, resources Accountability, Recognition Goals, expectatio ons, Standards Identify the problem Problem Finding Implementation Evaluating analysis solution PDCA The results Standards,process ses, practice Data collection Problem catalogue Failure cards Brain storming Value Stream Mapping Kaizen workshop, 7 QC tools 5 Why? 7 MUDA, 3MU, 4M.. Structured problem solving Kaizen diary Monitoring Lean KPIs SPS Audit Layered Audit 31

32 Sources of competitiveness Innovation Good Products (Market in) Strong Company Culture Excellent Processes Quality of and Access to Resources (HR, Financial, Natural, Technical) 32

33 Conclusions, Learnings Strategic Focus Improve processes Competency Development (Improve people capabilities) People Involvement Systematic Approach Learning by Doing (Kaizen) Knowledge (Best Practice) Sharing SDCA PDCA Cycle 33

34 Further Information Kvalikon Consulting Ltd. Budapest, HU-1125 Istenhegyi út 63/B Telephone: (+36-1) , Web: 34