Flow and Pull Systems

Online Student Guide Flow and Pull Systems OpusWorks 2016, All Rights Reserved 1

Table of Contents LEARNING OBJECTIVES... 4 INTRODUCTION... 4 BENEFITS OF FLOW AND PULL... 5 CLEARING ROADBLOCKS... 5 APPROACH TO CREATING PULL... 6 FLOW OR PULL?... 6 CONTINUOUS FLOW OR PULL?... 6 MEET DEMAND?... 6 TYPES OF PULL SCENARIOS... 6 HOW TO PULL?... 7 KANBAN SYSTEMS... 7 COMMON KANBAN SYSTEMS... 8 TYPES OF KANBAN FIFO... 8 TYPES OF KANBAN - KANBAN SQUARE... 8 TYPES OF KANBAN - CONTAINER KANBAN... 8 TYPES OF KANBAN - SIGNAL KANBAN... 9 2-BIN SYSTEM... 9 TYPES OF KANBAN - KANBAN CARD SYSTEMS... 10 INVENTORY?... 11 INVENTORY CALCULATIONS... 11 CYCLE STOCK... 11 CYCLE STOCK CALCULATION... 12 BUFFER STOCK... 12 SAFETY STOCK... 12 TOTAL INVENTORY... 13 SCHEDULING?... 13 WHERE TO SCHEDULE?... 13 LEVEL & VOLUME?... 14 PRODUCTION LEVELING VOLUME... 14 PRODUCTION LEVELING MIX... 15 LEVELING THE SCHEDULE... 16 SUMMARY... 16 2

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Learning Objectives Upon completion of this course, student will be able to: Define Continuous or One Piece Flow and the introductory aspects of Pull Systems Explain where to implement Pull Systems, discuss how they enable effective flow of information and materials, and identify which tools are best suited for various office and manufacturing environments Explain how to apply Pull Systems in a comprehensive and systematic way Introduction Continuous or One Piece Flow is a Lean technique that focuses on two basic guidelines. First, it focuses on manufacturing components in a cellular environment, where everything needed to process a part or service is available. Second, no parts or services are allowed to proceed to the next process until they are complete and correct. Whereas the batch or large lot production usually leads to overproduction, Continuous Flow supports Lean by focusing on producing "what's needed, when it s needed. Continuous Flow results in fewer opportunities for operator error; improved quality output, without increased staff; and higher overall efficiency, as all required information, material, tools and equipment are in place and available. There are two basic types of manufacturing patterns used to produce products and services, Push Systems and Pull Systems. As you will see, Pull Systems support Lean, whereas Push Systems do not. The example shown here illustrates a Push System. Work is pushed downstream to the next process staging area as it is completed, whether or not the next process center has requested the work or is ready to receive new work. In a Push System, work moves through the system based on a forecast or open capacity, and is not dependent upon actual customer orders. As a result, Push typically results in a buildup of excess inventory between process steps and in finished goods. 4

In addition to the high cost of maintaining inventory, when work-in-process (WIP) has to wait for open capacity in the next process step, the overall cycle time for the product increases. Unlike Push Systems, Pull Systems produce products, services, or items based upon actual customer requests, orders, or consumption. It is different from traditional systems because it does not rely on a production schedule to initiate work. The focus of Pull Systems is to communicate production and delivery instructions from downstream processes to upstream processes. Pull controls the amount of inventory and triggers replenishment based upon consumption or demand. Put in simplest terms, a Pull System means no one from upstream produces a product, service, or item until the downstream customer asks for it. In the example shown here, Process B is the downstream customer for Process A, the supplier. Until Process B signals to Process A that it s ready for work to flow, Process A will not produce any product, service, or item for Process B. Benefits of Flow and Pull Through implementation of Continuous Flow and Pull Systems, organizations can address multiple issues to reduce waste, including wasted time, wasted resources, wasted space, inefficient communication, and poor and/or inconsistent work quality. The cellular environment and one-piece completion process of Continuous Flow enables organizations to identify and eliminate non value-adding activities that were previously hidden. Because few items are in process at any one time, any defect or issue can be quickly detected and addressed. Clearing Roadblocks Organizations pay the price for bottlenecks, process imbalance, and excess WIP and inventory with waste. When these roadblocks are cleared, multiple benefits can be achieved. Continuous Flow and Pull Systems help organizations reduce time spent on non value-adding activities; reduce downtime caused by changeovers and equipment adjustments; reduce the distance material or WIP travel between operations; eliminate the need for inspection or reworking; base equipment usage on cycle time and customer demand; reduce opportunities for operator error; focus efforts on 5

increasing quality output without increasing staff; and provide a high efficiency structure, where all required information, materials, tools, and equipment are available and in place. Approach to Creating Pull When implementing Continuous Flow and Pull in an operation, organizations should ask the following questions to guide them through the transformation: 1) Can we create Continuous Flow, or is Pull needed? 2) How will we fulfill customer demand? 3) What type of Pull System is needed, and how will we signal Pull? 4) How much inventory is required? 5) Where is our scheduling point? 6) How will we level the volume and mix of work? Flow or Pull? Continuous Flow or Pull? Total Continuous Flow is an ideal state and may not be realistically possible, from end to end. However, the goal is to strive for Continuous Flow wherever possible. In reality, organizations often work toward this goal by creating pockets of Continuous Flow between groups of operations or process steps. These pockets, called loops, are then connected together with Pull Systems. Meet Demand? Types of Pull Scenarios To determine where Continuous Flow is possible and where Pull is needed, organizations must first decide how they will fulfill customer demand. Will they make the product to order, will they make standard stock items that will be held in finished goods inventory, or will they need a hybrid approach that leverages components of each? Make-to-order fulfillment is best suited for customized products that will vary for each customer. Most office processes also fall into this category, as it is typically not possible to produce services in advance of the specific customer request. Common examples of items or processes that are made to order are invoice processing, service request processing, or items that are custom fabrications. 6

Make-to-stock fulfillment is best suited for items that are standard off the shelf products. Typically, these types of items or services have shorter lead times, but are not generally applicable to the office or service environment. Examples of items that are made to stock are music CDs, ready-made clothing available in department stores, and internal replacement parts for cars, appliances, or other equipment. Hybrid fulfillment, a mix of make-to-order and make-to-stock, is the realistic approach in most situations. Most products and services are made with some common components that require a certain level of stock, but they usually require some level of customization as well. Think about the visible parts of common products like cars or appliances. An auto parts manufacturer, for example, will make basic replacement parts to stock, but in order to match the color to each customer s car, the part will be painted to order. Similarly, a sandwich shop might make fresh bread and cookies to stock each day, but each sandwich will be made to order, according to the customer s specifications. How to Pull? Kanban Systems You have just learned how organizations determine where product can flow and which approach to use to fulfill customer demand. Now let s look at how organizations decide which types of Pull Systems to use and how they will signal Pull to upstream processes. Kanban, a Japanese word that means card, is a common term used with Pull Systems. Kanban refers to the signal given to upstream processes to let them know more work product is required. The two most common types of kanbans in use today are the withdrawal, or transport kanban, and the production kanban. The withdrawal kanban is used to indicate when one container of parts is to be moved to a production line or supermarket. It authorizes withdrawal from the upstream operation to the production operation. A production kanban is used to indicate when one or more containers or parts should be produced. It authorizes the upstream operation to produce the number or parts indicated on the card. This can include a regular production kanban or spike production kanbans to authorize production for a temporary increase in demand. 7

Common Kanban Systems In practice, there are many types of signals that can be utilized to pull product through operations or process steps. Common types include FIFO, Kanban Square, Container Kanban, Signal Kanban, 1-Card System, and 2- Card System. Next, we ll describe each of these Kanban types in detail. Types of Kanban FIFO FIFO stands for First In First Out. It is a method of sequencing and queuing work where the first piece placed into the storage area is the first piece removed by the next process step. The FIFO storage areas are referred to as lanes and may be set to accommodate a specific number of items. If the lane is full, the upstream process does not produce more work until the lane has a specific number of open spots. Types of Kanban - Kanban Square Kanban Squares are areas designated to contain a specific item, usually by a painted square on the shop floor. An empty square location signals the need to replenish the item, and only the amount that is missing will be replenished. This method is often used for large items that need to be moved with a fork truck, although it may be applied to other types of items as well. For example, a work bench can be marked with squares to represent smaller items, such as electronic sub-assemblies, that are being produced and staged for final assembly. A variation of Kanban Square systems are often used for managing office supplies in a supply cabinet. For example, pens may be purchased only when the previous box has been removed from the supply cabinet, leaving an open location on the shelf. Types of Kanban - Container Kanban Container Kanban systems utilize dedicated containers to signal when and what needs to be produced. Empty containers that are returned to the supplier or upstream process authorize the production of a specific quantity and part. Containers are marked with the item number, supplier and user locations, and the quantity that 8

should be provided in the container. Containers are often used to replenish parts or supplies from a central storage or warehouse location. Containers can also be used with external suppliers, both to ease the ordering process and also to reduce the need for disposable packaging. Types of Kanban - Signal Kanban Signal Kanban are typically used to schedule large batch processes by triggering the production of a predetermined number of items when a reorder point is reached. This type of Kanban accommodates the use of processes that can only be run in large batches by allowing actual demand to schedule when they run. The reorder point is set based on how long the batch process will take to run, and how much material will be needed without running out. For office supplies a signal may be used to reorder items that must be purchased in bulk. For example, printer paper may be reordered when three reams are left in the supply cabinet. A visual marker in the cabinet at the reorder level is a great visual cue that helps ensure that the order will be placed at the appropriate time. 2-Bin System One form of a kanban system is called a two-bin system. Here, two containers of parts are stored within the consuming operation or cell, usually right at the work station. The operator uses parts from the first container. When it is empty the materials handler moves it to the supplying operation and replaces it with a full container. The full container is then delivered to the consuming operation. The empty container in the supplying operation kanban signals that another bin or parts needs to be produced. 9

Types of Kanban - Kanban Card Systems Kanban Card systems utilize cards to initiate production and to order and move parts to the next operation. Card systems are very effective when operations are too far apart to use other visual methods (like Kanban Squares), or when the product does not allow the efficient use of a container system. Many times, Card systems are used to pull materials from external plants or to order items from an external supplier. There are many variations of Kanban Card systems, including 1-Card and 2-Card systems. All Card systems, however, follow the same fundamental principles. Before Operation 2 starts work on the container (or other unit) of parts, the Card is removed and returned to Operation 1. The Card is the instruction for the upstream operations to make the quantity and type of part identified on the Card. When the appropriate quantity is complete, the parts are moved to the downstream operations. Let s take a look at examples of 1-Card and 2-Card systems. In a Production Card system, Cards are removed from the incoming work at Operation 2 and placed in the Kanban Post. Periodically the Cards are returned to Operation 1 to indicate which parts are required. Once Operation 1 has produced the required parts, the Card is attached to the container and moved to the Supermarket. This is an example of a 1-Card Kanban system. In a Withdrawal Card system, the Cards removed at the beginning of Operation 2 are placed in the Kanban Post and periodically delivered to the Supermarket. The Cards indicate that the Supermarket needs to send more parts to Operation 2. To complete the Withdrawal system, a second Card is added to the system. When the Supermarket sends parts to Operation 2, it also sends production Cards to Operation 1. Operation 1 then replenishes the items, attaches the Card to the container, and sends the items to the Supermarket. This example of a 2-Card system is most effective when Operation 1 and Operation 2 are in different plant 10

locations, or when Operation 1 is a supplier. Inventory? Inventory Calculations Pull Systems require an investment in inventory, finished goods, or work in process. Although inventory is one of the Eight Wastes that we are trying to eliminate, 100% make-to-order, with zero lead time and stable, predictable demand is unrealistic. Some level of inventory is required to reduce other wastes of waiting (due to parts shortages), excess transport, overtime, and expediting. Therefore, calculation of the appropriate amount of inventory is an important step when developing Pull. The amount of inventory required for a Pull System is dependent upon the following variables: capability of the processes, number of process steps, container size, customer demand, and cycle time. To calculate the required inventory, organizations use the equation: Cycle Stock plus Buffer Stock plus Safety Stock equals Inventory. Cycle Stock Before we calculate cycle stock let s define some terms: The average daily demand is the average production required to meet customer demand. The cycle time is how long it takes to produce an item. The cycle interval is how long before the item will be produced again. In other words if you are producing product A and want to calculate cycle stock for product B, how long will it take to be back in full production for product B? Replenishment lead time is the sum of the cycle time plus the cycle interval. Cycle stock is the product of the average daily demand and the lead time required for replenishing each day's usage. Replenishment lead time is a combination of the cycle time (or how long it takes to produce the item) and the interval (or how long before the item will be produced again). 11

Cycle Stock Calculation Let s look at an example of the cycle stock calculation. In this example, the average daily demand is 134 units. Also, the cycle time is two days and the cycle interval is three days. Replenishment time is equal to the cycle time plus the cycle interval, or five days. The cycle stock is equal to the average daily demand of 134 units times the lead time replenishment of five days, which equals 670 units. Buffer Stock Buffer stock is the amount of inventory required to cover customer induced variation, or surges in demand before the next replenishment. It is an estimate of an additional percentage of cycle stock that should cover most surges. The mean variation can be estimated by using the standard deviation in actual historic customer demand, or by calculating a simple average demand variation, which we will illustrate. The buffer stock is then 8% of the cycle stock, or 54 units. Safety Stock Safety stock is the amount of additional inventory required to cover other sources of variation in the process. In this case, we will use it to cover normal production The demand per week has a mean of 134 units and a maximum of 145. The percent buffer equals the maximum minus the mean divided by the mean, or 8%. 12

losses. It is estimated based on actual production throughput and is added to both cycle and buffer stock. In our example the process yield is 85% so we will add 15% to the cycle stock plus the buffer stock. This gives us 109 units for safety stock. Total Inventory The total inventory is the sum of the cycle stock plus the buffer stock plus the safety stock, or 833 units. When looking at ways to reduce inventory, the components that go into these calculations can be a good place to start. For example, to reduce cycle stock, a team could look at waste reduction to reduce cycle time and changeover reduction to reduce the cycle time interval. Reduction in the buffer stock can be accomplished by better forecasting of customer demand and workload balancing. Safety stock can be reduced by quality improvements to reduce variation and production losses. Scheduling? Where to Schedule? You have just learned how organizations can create various Pull Systems to connect loops of Continuous Flow throughout the Value Stream. Next, organizations need to determine one point within the Value Stream where a work operation should be scheduled. This one operational point is called the Pacemaker. The Pacemaker operation is the only operation that is given a manufacturing schedule. Ideally, the Pacemaker will receive the production schedule directly from the customer, in the form of orders. In other words, the customer Pulls from the Pacemaker, and the subsequent upstream processes respond to the Pull of the Pacemaker. All processes that follow the Pacemaker should Continuously Flow to the customer. The process step where the product is customized is often a good choice as the Pacemaker operation. Selecting the customization step as the Pacemaker operation allows for a Supermarket of standard items that can be customized and delivered to the customer when they place the order. The Pacemaker operation is not the same as a bottleneck. A bottleneck (or constraint) in a value stream is the resource that requires the longest cycle time and sets the pace for the entire process. The bottleneck may need to increase capacity to meet the demand of the Pacemaker. 13

Level & Volume? Production Leveling Volume To sustain Continuous Flow and produce according to customer demand, an organization must reach a smooth and predictable rate of production. Heijunka is a Lean term that refers to the even leveling, over time, of production volume (quantity of product) and mix (type of product). Fluctuations in customer demand occur throughout the supply chain, but speeding up or slowing down production to meet demand can cause waste. For example, when customer orders increase, larger than normal production quantities are released and expedited to meet the higher demands. If production continues at this higher level, but customer orders decrease, the operation will be flooded with excess inventory. This type of response to fluctuating customer demand can result in increased worker overtime (when demand increases) or idle time (when demand decreases). Additionally, variable production schedules can be stressful on both equipment and people. A more level production volume eases these complications. Production volume is leveled by computing a simple periodic average of the actual recent demand. Depending on the volatility of the industry, these averages are taken weekly or monthly. Once the average is calculated for the period, production levels are set at a steady level and adjusted periodically, as needed. At any particular point, the averaged production level may slightly exceed or fall short of actual demand, but will quickly recover without introducing demand variation into the operation. 14

Production Leveling Mix You ve just learned how organizations can level out their production volume over time. Now let s look at the second component of Heijunka: how organizations can level their production mix over time. Operations that require long setup or run times are often scheduled to run in long batches. Producing large batches of the same product, however, usually results in long cycle times, increased inventory and work in progress, and more opportunities for defects. For example, if an organization were to map out a traditional batch production schedule for three separate items, they would schedule each item to run a large batch, one after the other, each with a long cycle time. Customers waiting for products to run may lose patience and find another supplier. Additionally, because batch scheduling results in long gaps between product runs, it requires more inventory to cover demand between the runs. Any defects found in production will also have to be sorted and purged from stock. Scheduling an even mix of smaller product runs is critical to avoiding these impacts. By rearranging the order in which products are run, many of these issues are avoided or minimized. A more level production mix greatly reduces the time between product runs, which in turn reduces the inventory required and lessens the impact of defects on the operation. 15

Leveling the Schedule Let s look at an example of leveling the schedule. In this case there are five products, labeled A through E and Other products which have varying demands and lower volume requirements. Although it would ideal to produce every part every day the reality is that changeover times may continue to be a factor. In this process products C, D and E have changeover requirements which prevent them from being produced every day. Here is an example of a leveled schedule which takes the changeover restrictions into consideration. When working with actual demands and process variation the numbers won t work out as evenly as this example but the intent is to get as close as possible to a balance. Also, you will encounter many obstacles that will prevent adherence to the schedule. These problems will need to be identified and corrected using problem solving techniques. Summary In this module, you have learned that there are many advantages to implementing a Pull System in a manufacturing process. Pull Systems reduce the amount of inventory without creating parts shortages; decrease the amount of floor space required; decrease lead time for customers by reducing the cycle time within a production process; and improve quality. In summary, Pull Systems can be characterized as, the right item and the right quantity, at the right location at the right time. 16