Slide 1Starting with a bit of history…Starting with a bit of history…Starting with a bit of history…The cost of variety..Next Step: The Lean EnterpriseWhat is Lean Production?What is Lean Production?Elements of Lean ProductionElements of Lean ProductionProcess Performance MetricsLittle’s LawOne-Piece FlowElements of Lean ProductionElements of Lean ProductionA Kanban ExampleA Kanban ExampleAnother Kanban ExampleElements of Lean ProductionElements of Lean ProductionElements of Lean ProductionOther Elements of Lean ProductionOther Elements of Lean ProductionExample of a Value-Stream Map1BA 341 – Lean OperationsDr. Bogdan BichescuCore Principles of Lean OperationsStarting with a bit of history…In 1955 Japan produced less than 70,000 vehicles, U.S. made 9.2 million that yearIn 1980 Japan’s production exceeded 11 millions, while U.S. achieved just over 8 millionToyota is today the largest car manufacturer, selling ~9 million vehicles, worth ~$245 billionStarting with a bit of history…The Toyota Production System (TPS) was inspired by Henry Ford’s assembly lineHenry Ford’s system created flow from ore to final product:One companyOne locationOne productLong life cyclesUnlimited demandStarting with a bit of history…In the 1920’s General Motors replace Ford as the worlds largest automobile manufacturer by giving the customer a choice: Different product lines: Chevrolet, Pontiac, Oldsmobile, Buick and CadillacDifferent colors, body styles and options Yearly model changesHow did GM accommodate this level of variety?The cost of variety..Think of how General Motor’s differed from Ford in terms of:SchedulingFactory LayoutOrganizationAccountingBatch production sacrifices flow. For example, an aluminum cola can from ore to customer:passes through eight firms, fourteen storage points is picked up and put down 30 times24% of raw material is scrapped somewhere along the wayrequires 319 days to do 3 hours of workNext Step: The Lean Enterprise Taiichi Ohno, the father of TPS and lean production principles, combined Ford’s assembly line idea and supermarket operationsThe goal is to eliminate waste (muda) and to produce only what’s needed on any given day, rather than in anticipation of demand Produce the right part in the right place at the right time (in other words, “just in time” - JIT)What is Lean Production?7What is Lean Production?A set of integrated activities designed toAchieve high-volume production, whileMinimizing waste in the production process, e.g.,Reduce inventories of raw materials, WIP and finished products (overproduction)Reduce defects and rework due to poor qualityReduce waiting due to resource or part unavailabilityReduce unnecessary transportation and motionReduce overprocessing – work that doesn’t add valueElements of Lean ProductionHow much WIP should we have?Inventory (WIP) hides problemsLower Levels of (WIP) Expose ProblemsElements of Lean ProductionEmphasize JIT productionEmploy a Pull production systemHow are WIP and Throughput Time in a Pull system compared to a Push System?Use one-piece flow Move products one unit at a time, if possible, between workstations to improve throughputRequires constant effort to reduce setup timesProcess Performance MetricsThroughput Time (THt) or Turn Around Time (TAT)Total time required to complete one unit of a product or service“The longer an article is in the process of manufacture and the more it is moved about, the greater its ultimate cost.” Henry Ford, 1926Shorter THt  Less Cost  More ProfitFinishStartThroughput TimeLittle’s LawWIP = THt x THr, whereWIP – represents amount of work in processTHt – is the throughput time (i.e., time in system)THr – is the throughput rate Defines the output rate that a process is expected to produce over a period of time (units/time)Represents a measure of process capacityEquals the inverse of the process time of a stationOne-Piece FlowCase 1 – assume that parts are transferred 60 units at a time. What is the average THt?Case 2 – assume that parts are transferred 1 unit at a time. What is the average THt?WIP = 60 unitsStep 1100 units/hrWIP = 60 unitsStep 2100 units/hrWIP = 60 unitsStep 3100 units/hrWIP = 1 unitStep 1100 units/hrWIP = 1 unitStep 2100 units/hrWIP = 1 unitStep 3100 units/hrElements of Lean ProductionUse Kanban Production Control SystemsStorage Part AStorage Part AMachine CenterAssembly LineOnce a kanban (i.e., container) is received, the Machine Center produces a unit to replace the one pulled by the Assembly Line peopleMaterial FlowCard (signal) FlowThe process begins by the Assembly Line people pulling Part A from StorageElements of Lean ProductionDetermining the Number of Kanban cards (containers) neededeach container represents the minimum production lot size and the number of such containers determines directly the amount of WIP in systemK = (Expected demand during lead time + Safety Stock) / Size of the container = (DL+S)/CD = average demand per periodL = lead time to replenish an orderS = safety stock expressed in days (hours, etc.) of demandC = Container sizeA Kanban ExampleHobbs Bakery makes cakes that are shipped to grocery stores. The bakery wants to change to a kanban system. Their data is as follows:Daily demand = 500 cakesProduction lead time = 2 daysSafety stock = 4 hoursWorkday length = 8 hoursContainer size = 250 cakesHow many Kanban cards do they need? 16A Kanban ExampleDemand during Lead Time is:500 cakes/day * 2 days = 1,000 cakes Make sure that the time units match!Safety Stock is4 hours of demand, i.e., 500 cakes/day * (4hrs/ (8hrs/day)) = 500 cakes/day * 0.5 days = 250 cakes (again, note that units must match!)Then, the number of Kanban containers is(1,000 + 250)/250 = 1,250/250 = 5 17Another Kanban ExampleArvin Automotive makes muffler assemblies composed of a muffler and a catalytic converter. The former are made in batches of 10 and the production cell can manufacture a batch in about 4 hours. The muffler assembly process averages about eight assemblies per hour. Management carries a safety stock equivalent to 75 minutes of demandHow many Kanban cards are needed to manage this process?Level Scheduling (Heijunka)Goal: achieve a smooth, stable