5S - Tools for lean manufacturing

Now that we have read the basics of lean manufacturing, I would like to introduce a commonly used lean manufacturing tool-kit: The 5S (Sort, Straighten, Sweep, Standardize, Sustain).

Each of these simple techniques revolves around eliminating waste which is at the heart of lean manufacturing. I will take the example of a junk drawer to explain these concepts:

Sort - This refers to keeping only the absolutely necessary items in the unit and completely eliminating the rest. Open your junk drawer today and rearrange each of the items in it in a systematic order. You'll see how quickly you can find that stapler when you need it. This simple disciplinary principle is also applicable at the macro level i.e. in the manufacturing industry.

Straighten - This refers to deciding the most optimized order in which you need to place these items. So you need to place your bunch of post-it and pen close to each other. If you place them separately, then you may take few extra seconds to fetch them. These few extra seconds in a manufacturing unit can translate to minutes, hours or days and have negative effects on the bottom line.

Sweep - This refers to cleaning the entire unit. Doing this has multiple benefits - reduced wear & tear of equipment, ease of mobility around the plant and better hygiene. Imagine a recruiter's business card having glue all over it and you are no longer able to read their contact details.

Standardize - If you are moving from one house to another or changing drawers, make sure the internal layout of your drawer remains the same so that you don't have to accustom to something new. You just close your eyes and fetch that box of pins. Similarly, standardizing your manufacturing process across all units reduces workers' training costs. Also, if you face a problem in one unit, you know that at some point of time in future, you are bound to face it in other units as well. So you go ahead and apply the fix in all units. Additionally it becomes easier to share best practices as well.

Sustain - Finally, the most important, most difficult and the most boring part - sustaining it, making it a way of life. Fetching something from your junk drawer must come naturally to you. Likewise, sustaining these systemic manufacturing practices are important for you to reap the long term benefits out of the other 4Ses.

If you are successful in applying all these 5 techniques on your junk drawer (manufacturing unit), it will look something like this and stay like this:

References: http://en.wikipedia.org/wiki/5S_(methodology)

John Deere: A Case Study for Lean Manufacutring

John Deere or Deere & Company, is a 176 year old company and arguably an American legacy in the realm of farming equipment and tractors. However, Deere & Co. has far expanded outside of the U.S., creating a global footprint as their factories and sales offices are present in over thirty countries.

After reading "Living in Dell Time"and talking about forecasting and trade-offs the previous week in class, I was curious to find what other companies adopted these models. More importantly, I wanted to find out if other companies adopted these models successfully. It was this question that brought me to John Deere.

I first found an article entitled "Six Keys to a Winning Manufacturing Study", which highlights Deere & Co's manufacturing strategy. The article lists 1) Strong ties to the market, 2) Rigorous financial discipline, 3) Balanced investment approach, 4) Multiple home markets plus export strategy, 5) Labor flexibility, and 6) Lean production, as reasons for Deere & Co's success. It is my intent to focus on the last two points in this post.

During our last class we discussed trading off labor for capital, which John Deere does, but in a modified way. In this case, Deere & Co. employees are unionized under  United Auto Workers. Traditionally, unionization makes utilizing a flexible labor source difficult, but in this case, Deere has modified their relationship with the workers. Deere offers its UAW employees profit shares based on productivity. This allows employees to be receptive to competitive plant closings and openings.

Additionally, Deere has implemented the "Deere Production System" (DPS), which is tailored to Deere's low volume and high quality production requirements. This system was implemented over four years in all of Deere's factories. DPS works similar to Dell in that machinery is not produced until a customer orders it. This has created productivity gains of 8-9% annually for the company.

However, two years after this article was written praising the company's supply chain innovation, another article came out criticizing it. "Low Inventory Angers John Deere Customers" tells a different tale, where customers are breaking with tradition and ordering from other manufacturers due to long wait times. The article claims that John Deere's build-to-order model is not congruent with the strengthening of the farm economy, as parts cannot come in quick enough. According to the article, Deere shrank its inventory 28% in twelve months. As a percentage of sales in the same twelve months, Deere's inventory was only 12.3%, the lowest among the fifteen farm and construction equipment makers.

Deere dealers believe their sales would be higher too, as they claim a lack of inventory and slow shipping times when meeting customer demands. How slow, is slow? One soybean farmer, who harvests in September, would no receive his new equipment until December or January, completely missing the harvest.

This brings me to my question, are there some industries that are not compatible with lean manufacturing? More specifically, is lean manufacturing the correct business model for companies whose sales are regional and seasonal?  Or should these companies stick to more traditional methods of production, anticipating the need for tractors and farm equipment in the early spring? After all, feeding people and entire nations is an important issue--one that should not be left lost in a supply chain.



Sources:

1)http://www.strategy-business.com/article/li00077?pg=all
2) http://www.businessweek.com/magazine/content/10_18/b4176029906771.htm
 Image from:
http://www.equipmentworld.com/john-deere-sees-record-q3-income-of-997-billion-despite-11-decrease-in-construction-sales/

How much can you set free your supply chain management?

In this week, we are talking about lean manufacturing and therefore I learned a few interesting concepts. For example, “Push” and “Pull”. "Push type" means Make to Stock in which the production is not based on actual demand. "Pull type" means Make To Order in which the production is based on actual demand. Supply chain models of "Push type" and "Pull type" are opposite in terms of a demand and supply relationship. "Push type" is represented by "Make to Stock" (MTS) in which the production is not based on actual demand and "Pull type" is represented by "Make To Order" (MTO) in which the production is based on actual demand.

As technology increase, the supply chain management is transforming from the traditional "Push type" to modern "Pull type". Pull-type supply chain management is based on the demand side such as Just-in-Time (JIT) and CRP (Continuous Replenishment Program) or actual demand assigned to later processes. Therefore, unlike the Push-type method it is not based on demand forecast. In this way, inventory could be kept to a minimum amount and products can be supplied with short lead times and at high speed. [1]

Basically in my understanding, the core idea of this new lean thinking concept is about flexibility. It emphasis on how quick a company could react to the changeable market and customer demand and what techniques this company could use to achieve its goal. Especially in a high pace industry, for example, fashion this ability of quick react is like the water to a person that could decide the company’s fate of death.

In an article I read online called “Zara Clothing Retail Model Based on Lean Inventories and Market Flexibility Could Change the Future of Manufacturing”, the author points out that with shorter lead times, Zara can ship fewer pieces, in a greater variety of styles, more often and they can more easily cancel lines that don't sell as well, avoiding inventory backlogs. The fact is because Zara only takes less than two weeks for a skirt to get from Zara's design team in Spain to a Zara store in Qatar or Paris or Tokyo, as much as 12 times faster than the competitors, who are dealing with a complex global network just to make a simple shirt, in a process that could take up to eight months from the design stage to the store. [2]

However, in management, loose in one side means tight on the other. The success of Zara is due to their strict controlling on all the steps of manufacturing clothes: from design to fabric to manufacturing, distribution and sales so that they can cut costs and make huge gains in speed and flexibility.

Similar to Toyota’s case, Zara also has a rule to require all work to be highly specified as to content, sequence, timing and outcome. For instance, each of the sale person and manager in every store is required to constantly talking to its customers and listening to their feedback. [3] They need to zap orders on customized handheld computers over the Internet to Zara headquarters based on what they see selling. What is more, they draw upon customer comments, or even their idea of new styles that a customer might like to wear or could be copied to Zara’s stores. While stores provide valuable front-line data, headquarters plays a major role in directing instore operations. Software is used to schedule staff based on each store’s forecasted sales volume, with locations staffing up, say at peak times such as lunch or early evening. The firm claims these more flexible schedules have shaved staff work hours by two percent. This constant refinement of operations throughout the firm’s value chain has helped reverse a prior trend of costs rising faster than sales. [4]

Nevertheless, it is said that freedom never comes free in this high competitive society. Other costs will be gained to meet this need. For example, Zara need to invest on its technology to achieve this quick point-to-point communication. The question for a company to consider when they trying to choose their strategy is whether the benefits outweigh additional cost and reform risks? After all, the lead manufactory may not be suitable for everyone. What kind of companies or industries do you think that are not suitable then? Can you think of any?

Reference:

[1] Imaoka, Zenjiro. "Understand Supply Chain Management through 100 Word." Push-Pull Manufacturing. KOUGYOUCHOUSAKAI. Web. 21 Feb. 2012. <http://www.lean-manufacturing-japan.com/scm-terminology/push-pull-manufacturing.html>.

[2] "Zara Clothing Retail Model Based on Lean Inventories and Market Flexibility Could Change the Future of Manufacturing." AllBusiness.com. Dun & Bradstreet. Web. 21 Feb. 2012. <http://www.allbusiness.com/construction/4266194-1.html>.

[3] Ho, Matthew. "Lean Fashion—Zara." 25 Apr. 2011. Web. 21 Feb. 2012. <http://inspiredworlds.com/2011/04/25/lean-fashion-zara/>.

[4] Devangshu, Dutta. "Retail @the Spend of Fashion." Third Eye Sight, 2002. Web. 31 Jan. 2012. <http://thirdeyesight.in/articles/ImagesFashion_Zara_Part_I.pdf>

Kanban – Just in Time Production

While reading articles on Toyota’s Production System I came across the term Kanban. Kanban is derived from the combination of two Japanese works, “Kan” meaning visual and “ban” meaning card or board. Kanban is a process relating to lean and just in time production, it is a scheduling system that helps determine what to produce, when to produce and how much to produce. Kanban maintains inventory levels by sending visual signals for production and delivery of new shipment as material is consumed.  The signals are tracked through the replenishment cycle and bring extraordinary visibility to suppliers and buyer.

The Kanban system was developed by Toyota after they observed how supermarkets operated in United States. Toyota observed that the supermarkets only stocked items that they believed they could sell, and the customers only took what they needed. Toyota decided to adapt this process in the production system, considering themselves as customers of their suppliers and their suppliers as stores. Toyota would go to its suppliers and only get what it needed, and the suppliers would then restock.

Taiichi Ohno of Toyota defined six rules for effective implementation of Kanban.

Toyota's six rules 1

• Do not send defective products to the subsequent process
• The subsequent process comes to withdraw only what is needed
• Produce only the exact quantity withdrawn by the subsequent process
• Level the production
• Kanban is a means to fine tuning
• Stabilize and rationalize the process

Kanban uses the rate of demand to control the rate of production, passing demand from the end user through the supply chain. Boeing’s assembly line for its aeroplanes adapts a similar approach, where the speed of the assembly line is influenced by the customer demand. This approach is often referred to as the pull system, where the supply or production is determined according to the demand of the customers.

 Traditional Manual Kanban card

Auto Generated Kanban card 2

Traditionally Kanban cards were paper cards that would be sent to notify the supplier to restock. The manual Kanban have now been replaced by electronic Kanban systems, where signals are automatically sent to suppliers as resources are consumed. Kanban have now even been implemented into Enterprise Resource Planning Systems such as SAP ERP and Microsoft Dynamics.

ERP based Kanban board 6

References

1. http://en.wikipedia.org/wiki/Kanban

2. youtube.com

3. http://tpslean.com/leantools/kanban.htm

4. http://www.velaction.com/lean-information

5. http://www.kanban.labelprinter.com/index.php

6. http://targetprocess.com/userguides/guides/user-guide/kanban_board.png

Lean Manufacturing in Low-Volume Businesses

The latest podcast (.mp3) in a series on lean manufacturing by the Rexroth Bosch Group focuses specifically on applying lean manufacturing techniques to the aerospace supply chain.

When most people think of lean manufacturing, they generally think of high-volume industries where the work requires a lot of repetition. In a field such as aerospace, however, the work is by and large customized, and orders for parts can be on the order of the tens or dozens, rather than tens of thousands. In such a low-volume business, often with much smaller-scale suppliers, it isn't immediately apparent that lean manufacturing techniques would necessarily be applicable.

While low-volume industries do require a great deal of customization, on the podcast Richard Rahn speaks about looking for commonalities among parts supplied and between processes. He talks about an assembly process that would more resemble putting together "Legos" than the traditional "job shop". But this type of a change would mean that manufacturers are much more dependent on their suppliers within the supply chain.

Most importantly, he mentions that the idea of lean manufacturing should be thought of, not as a process, but more as a philosophy. With that in mind, even low-volume industries like aerospace can take full advantage of the competitive advantages and cost savings that lean manufacturing provides.

The Lean Podcast Library
Episode 17: Lean Transformation in the Aerospace Supply Chain

Questions: given the source of this podcast and its expert (a company that devises lean marketing products for businesses) do you buy into the proscribed applications for low-volume businesses? If some lean manufacturing techniques can be used in a low-volume business, do you think the effects would be significant, or is it merely a way to affect the margins?