Lean Manufacturing Tool Kit (M – Z)

Lean Manufacturing Tool Kit (M – Z)

Note:  For Tools in the A – L Range, click here.

  • Made-As-Part-Of (MAPO):   A level of the bill of material that is ignored by the MRP system for scheduling.   The subassembly is, as the name implies, made as a part of the next higher level assembly.   It is typically an additional part type classification, similar to “make” or “buy.” (See “Blow-Through”)
  • Maintenance:  Condition-Based:   The concept is to enhance your normal scheduled maintenance with sensory information that provides a “heads-up” that maintenance may now be required.   It involves the monitoring of equipment to provide an early warning that something is out of the normal operating conditions and that maintenance may be required.   This monitoring utilizes vibration sensing, in-line gauging, sound levels, and other such devices.
  • Maintenance Signals:   As inventory is reduced, the need to respond quickly to a “machine down” situation becomes critical.   Flashing lights, horns, pagers, walkie-talkies, cell phones, etc.  should be utilized as needed to assure that your maintenance people are immediately notified.   Make sure that the normal “filler” work being performed by these key individuals is of a nature that it can be interrupted at a moments notice:  e.g.  process improvement projects, PM, etc.
  • Maintenance Work Area Lighting:   Many maintenance operations occur within the dark recesses of the equipment.   Permanent or portable lights can be of great help.   Also, make sure that every maintenance person is provided a high quality, lightweight, hands-free head set light.

    Use portable or permanent lighting to help with on-going maintenance

  • Maintenance:  Modularize & Cascade:   In some capital intense industries, extensive scheduled maintenance periods can cause disruptions in flow, mandate large kanban levels between operations, and cause additional complexity (see the article “Running Steel Lean”).   One obvious solution is to reduce the extent of time required per down period, i.e.  “modularize” the maintenance events.   Instead of doing one 24 hour down period per month, the attempt would be to do one six-hour maintenance each week.   Making this transition will require overcoming many obstacles, not the least of which is resistance to change.   It will generally also require some capital expenditures.   Cascading maintenance means to schedule maintenance on machines in the order that product flows.   Doing so allows the “hole” (depletion of inventory between operations) to flow from machine to machine.
  • Maintenance Operator as Teacher:   We’ve had some excellent results by re-defining the role of the maintenance people to include training.   Ask your skilled maintenance personnel to teach operators to do routine maintenance:  oil, grease, clean, inspect, etc.   This can free up the skilled maintenance people to focus on the difficult infrequent maintenance and on equipment upgrades.
  • Maintenance:  Point of Use Tool Storage:   For common maintenance, involving relatively inexpensive tools, locate the tools directly at the point of use.   Securing such tools with simple clips or other quick-release securing devices can significantly improve efficiency.   In some applications the “tool” can be permanently attached to the machine, i.e.  weld the ratchet onto the nut, switch to wing nuts, etc.   Standardizing hardware can also assist with maintenance.
  • Make / Buy Considerations:     Too often, companies fail to consider the true full cost of procurement.     They also tend to undervalue the loss of control that comes from procured vs. in-house make items.
    This topic is explained in detail in our post “The Hidden Costs of Procurement.”
  • Make to Order:   The strategy of making a customer’s product only after the receipt of an order.   From a lean perspective, this is the ideal.   This strategy eliminates the wastes of carrying finished goods inventory.  Ideally, the product is produced, packed, and loaded immediately onto a truck / railcar just in time for shipment.   No double handling, minimal risk of obsolescence, …

    A brief article discussing the benefits and methodology of making the transition to Make to Order is explained here.  

  • Make to Stock:   The corporate strategy of carrying finished goods inventory in anticipation of an order.   Generally, the intent is to provide quick delivery, i.e.  the marketplace will not wait for the necessary lead time to make to order.   Problems associated with this strategy include the considerable cost of carrying high-dollar, inflexible finished goods inventory.

    The concept is more fully explained in our article “From Make to Stock to Make to Order.”

  • Management By Walking Around (MBWA):   We worked with a client that produced all sorts of labor efficiency / utilization reports for their supervisors.   The only problem was that the report data was, at best, meaningless, and at worst, outright wrong!   It turned out that if the supervisors would spend less time poring over reports, and more time on the shop floor, they would know how, and who is performing!

    As an organization moves toward “Lean”, many of the traditional measurement devices fail to perform accurately or timely enough.   People are cross trained and move back and forth to various jobs.   Operators perform minor maintenance.   Natural work teams work on improvement projects.   Kanbans will cause short term delays, etc.   Measurement often must move from individual performance to team performance.   In some progressive companies, the teams themselves provide input into the individual reviews.   There is, however, no substitute for being “out there” on the shop floor.

  • Management Questions:   It is not sufficient to simply “empower” your workforce.   It is critical that the efforts of your people be focused on real business issues.   Here is a list of some standard Lean Management questions that will help guide the efforts of your people.   Add your own.   Get started today!
      “What Would Keep Us From Doing That TODAY?”
      “What Value does that add?”
      “How could we cut that inventory / lead time in half?”
      “Would you help me help you?”
      “Have you tried that?”
      “What can I do to help?”
      “Why?   Why?   Why?   Why?   Why?
      “How could we do that better / faster / cheaper?”
      “How could we make it impossible for that defect to re-occur?”
      “Is any value being added to that inventory?”
    You will also want to point out that   “Every solution creates new problems.”

  • Master Production Schedule (MPS):   The Master Production Schedule (MPS) is the key driver of the Material Requirements Planning (MRP) portion of an Enterprise Resource Planning (ERP) system.   As the name implies, the MPS is your production completion schedule.   It identifies the products and quantity to be produced and the time bucket in which they are to be completed.   The MRP logic then explodes the requirements and schedules them accordingly.
  • Master Production Schedule (MPS);  Using Negative Numbers for “What-If” Analysis:   Some of the older MRP / ERP software is not capable of “what if” analysis.   One low-cost way to provide such capability is to allow the MPS (Master Production Schedule) to accept negative numbers.   A trial run, un-netted, of a “change only” MPS will show the material and labor changes caused by the proposed change.   E.g.  “what if we were to add 20 widget A’s and make 15 less widget B’s”?   We would schedule only the delta A’s and negative delta B’s in a trial MPS, and “explode requirements” un-netted.   The result would be a netting of any common components and would show the net additional materials and labor needed, as well as identifying any surplus parts that this change would cause.
  • Master Schedule:   See Master Production Schedule (MPS) .
  • Material Requirements Planning (MRP):   A back scheduling, gross to net logic system that calculates material requirements based on the Master Production Schedule, Bill of Material structure, on-hand inventory, scheduled receipts, lead times, lot sizing, safety stock rules, etc.   (See Enterprise Resource Planning, ERP) (See the article “ERP & Lean” for a detailed explanation with illustrations)
  • Measurement & Reward Systems; Performance Against Standard:   The largest productivity improvements come from methods changes, not from increasing the level of effort of the people.   Traditional PAS logic calls for a standard change when ever a process/procedure changes.   Yet, if the “standard” is changed every time there is a method improvement, performance typically will fall!   Why, because people are new at the new method.   They need practice to come down the learning curve.

    This is obviously a negative incentive to change the method.

    In a lean environment, we are always looking for a better way to do things.   Seek a performance measure that encourages process method improvement.   This is best accomplished by comparing current “actual” cost to historical actual cost.   If improvement is what you seek, it is pretty much irrelevant what it “should cost” based on some theoretical “standard”.   What really matters is “is it currently costing me less than last year?   Last month?   Last week?

    Instead of spending time and energy calculating a theoretical “standard,” you will be much further ahead if you focus on finding a better way, and on providing people timely feedback as to how well they are performing.   If you feel compelled to have a performance against standard system, at minimum calculate performance vs. both the current standard and against a fixed standard.   The former measures theoretical level of effort (current standard).   The latter measures their impact on profitability and rewards people for innovation (methods changes) as well as effort.

  • Measurement & Reward Systems; Unit Output Measures:   Many traditional organizations have M&R systems that encourage local optimization, often at the expense of aggregate total company well being.   These will invariably become an impediment to your lean transition efforts.  (See “Optimize the Whole”)

    Unit optimization has another insidious impact.   It adds to complexity.

  • Metal Producers:   Transitioning to “Lean” has some additional complications in capital intense industries like Steel, aluminum, etc.   Equipment is huge and seldom allows the making of traditional cells.   Many batch sizes are large and mandated by the equipment and processes and cannot be substantially reduced.   Equipment maintenance and change-over costs, loading the mill to capacity, labor constraints, etc. further complicate the situation.

    We’ve been working with metal producers since 1989.   As a result, a different approach and a few unique techniques have been developed to cope with these issues.   The results have been dramatic.   To date, we have worked with seven different metal producers, world wide.

    Our industry average return on investment exceeds 90 to 1.

    metal producers where lean manufacturing has been successfully implemented

    • Milk Run   Running a regular circuit for delivery and/or pickup of material.   We have used it very successfully in conjunction with kanban / min-max signaling devices for requirements planning.   A large electric motor manufacturing client of ours ran trucks from their wire mill to a series of motor assembly plants.   The truck driver would radio in the requirements from each plant as he dropped off yesterday’s requirements.   The wire storage racks contained all of the min-max information necessary.

      Milk Runs allow for small, frequent, regular material deliveries / pickups.

    Milk Runs provide a delivery circuit of regular delivery / pickup of material.

    • Mind Storming:   Similar to “Brain Storming” but considerably more efficient.   Instead of a flip chart, ideas are written on 5-9 cards.   As people shout out ideas, they also write a couple key reminder words on a card.   After the ideas stop flowing, the cards are collected and then sorted by the group (subjectively) based upon the estimated potential impact on company well-being, and on ease of implementation.   Any ideas that score high on “Impact”, and “Easy” on implementation difficulty, are rapidly pursued.  (See “Nine Block”)
    • Minimum “Modularized” Down Time Intervals:   This is a technique appropriate for some “assembly line” type operations, i.e. an environment where a failure of any one piece of equipment will shut down the entire line.

      We worked with a steel pipe mill.   Maintenance had been neglected for years, and the line was regularly shut down as one after another problem occurred.   An interim solution was to have each operation develop a list of 2 hr maintenance / reliability projects.   The rule was established:  When any piece of equipment breaks down, the entire line will remain shut-down for at least 2 hrs while everyone works on their area projects.   Within a few months, total line up-time was significantly improved.

    • Minimum Specifications:   Cull out the critical performance characteristics.   Specify these as to the minimum acceptable requirements.   Then loosen or eliminate all other specifications.   This is particularly beneficial during the design phase of a new product.   By specifying only the critical performance attributes, the design team has considerably more room to be creative.   Note that this is also true for your suppliers.   We have found dozens of cases where a non-critical parameter was causing a supplier to quote a high price.   Once these non-critical constraints were relaxed, major cost and quality gains were attained.   (See “Design for Manufacturability” and “Designing to Target Costs”)
    • Minimize The Number of Suppliers:   The cost of a purchased part includes much more than it’s purchase price.   Reliability of delivery, lead time, quality, packaging, freight, response to change requests, delivery location, delivery frequency, etc. are all factors effecting the total cost of purchase.   Find one or two top performing suppliers for each commodity type, and then concentrate your purchasing volume with these suppliers.   Discuss with them your requirements, annual purchase volume, delivery expectations, etc.   Negotiate price based on annual expected purchase volume.   Share information.   Ask for capacity reservation so that lead times remain stable and delivery reliable.   (See “Capacity Reservation” and “Minimum Specifications”)
      Over the years, we have developed an extensive supplier evaluation checklist.   We hope you’ll find it helpful.
    • Min-Max Controls:   Upper and lower trigger points for inventory control.   When the on-hand inventory level reaches a pre-established Minimum, it triggers a replenishment order.   The Maximum sets the upper limit that is allowable for this item.   As an example, we have set the min-max for a particular purchased item at min = 1000 and max = 5000.   A recent pull of this item from stock has dropped our on-hand inventory to 800.   The system (computer or manual) will trigger the buyer to place an order to get our on-hand inventory back up above the minimum of 1000.   He/she is authorized to buy as many as 4200, bringing our projected on-hand balance back up to the max of 5000.   (See “Two Bin System”)
    • Mixed Model Production.   Simplicity saves money, and the simplest scheduling system is First In First Out (FIFO). Strive for the flexibility, both internally and from your suppliers, to produce your products in the sequence that orders are received.   This will require responsive suppliers, flexible manufacturing operations, quick changeovers, and flexible capacity.   (See “SMED” and “Rubber Factory”)
    • Monuments:   A slang term for large, extremely difficult to move, pieces of equipment.   An environment with monuments will typically require some different lean techniques than those used in a standard “widget maker” factory.   (See the article “Running Steel Lean”)
    • Modularize Planned Maintenance:   In “capital intense” industries, planned maintenance often removes critical pieces of equipment from service for multiple shifts or even multiple days at a time.   The disruptive impact of this planned outage can be huge.   This is particularly true when we have reduced the allowable queue between operations, i.e. installed inter-unit kanban controls.

      The idea is to re-engineer the maintenance processes to allow them to be done in smaller increments, “modules”.   Thus, instead of scheduling one 24-hour maintenance period to be done every month, we would seek to replace this schedule with one 6-hour down period, each week.   (See “Total Productive maintenance” and “Cascade Planned Maintenance”)

    • Move Equipment:   Plan on a 2nd & 3rd Move:   Continuous improvement means continuous change.   Build flexibility into your re-arrangement on the 1st move:  e.g. Flexible power drops, flexible air connections, light equipment on lockable wheels, equipment on skids, etc.   Encourage and expect a 2nd and 3rd move as your people continually “tweak” the arrangement.
    • Move Some Maintenance People to the Off Shifts to Get “Time on the Machine”.   We were working with a corrugated box plant client.   The production people said that their biggest issue was that the equipment was breaking down due to lack of preventative maintenance, and that equipment upgrades were not getting implemented in a timely manner.   The maintenance crew agreed with the assessment, but complained that they could never get “time on the machine.” It turned out that the maintenance staff was scheduled to work the identical hours that the production people worked (three shifts, 5 days / week).   They couldn’t work on the equipment because the equipment was scheduled for production.  We met with the entire maintenance crew, explained the requirement and logic, and proposed a few alternatives.   The team went off alone, and in a few hours came back with an excellent plan.   They had prepared a twenty four hour by seven day crewing schedule, that was acceptable to all crew members and that was much more cost effective than those that we had recommended.

      By having access to the idle equipment on weekends, an excellent Preventative Maintenance program was implemented, and equipment upgrades were addressed in a timely manner.   Within six months of the change, this issue was no longer a problem and productivity jumped by 20%!

    • Muda:   See “Waste”
    • Multiplier Effect:   Extensive supply chain inventory has the effect of exaggerating demand swings at the lower end of the chain.   This effect is caused by an attempt to adjust “days supply” of inventory at the same time as adjusting for the change in rate of usage.   Example: I have an inventory policy of keeping 4 weeks supply of a component (raw material) on hand.   My demand has been 100 per week.   I now anticipate my demand dropping to 90 per week.   Instead of ordering 90 per week of this component, I would need to order less, so as to adjust my inventory level.   I currently have 400 pieces in inventory (100/week * 4 weeks).   Now I want a 4 weeks supply (4 weeks * 90/week = 360 pieces on hand).   If I “smooth” the inventory reduction over a few weeks, I may change my orders to 80 pieces per week.

      Net result:  Where our company saw a 10% change in demand, our suppliers will see a 20% change in demand!   Thus the “Multiplier”.   The same effect happens when demand increases.   And, the further down the supply chain, the greater the swings.

      You can readily see that the extent of this multiplier is proportional to the amount of inventory in the supply chain, and the number of levels in the chain.

      What can you do about it?   Reduce inventory throughout the supply chain.

      Note:  your customers will carry inventory of your product in proportion to your lead time and your delivery reliability.   Do these things well, and you’ll minimize the multiplier.   You’ll also want to monitor and compare changes in your product’s demand to changes in top level demand.

      Analysis of the recession of the 1970’s showed that while the end demand for steel products fell ~ 10%, the demand on the steel industry (the bottom of the supply chain) fell by over 40%!   Needless to say, a “Lean” supply chain is essential.   Maintaining short lead times, and reliable deliveries to your customers is crucial (see “Boom – Bust Cycle”)

    • Natural Work Teams (NWT’s):   By reducing the inventory between operations, natural work teams will automatically come about.   Inventory elimination and a pull philosophy forces a mutual dependence upon operators.   Inventory reduction may even allow operations to be placed physically next to one-another (a manufacturing “cell”).   In such an environment, a problem at one operation rapidly impacts both the upstream and the downstream operations, forcing operators to communicate and begin acting as a team.

      Note:  We are NOT forming teams for teams sake.   We are squeezing out the inventory, which results in the formation of “teams” whether you want them or not!   It is at this time, when people are closely interdependent, that additional teaming skills training will be needed.   Books like “Zapp” and “Heroz” can be useful training aids.   (See “Training:  Do a Chapter a Week” and “Problem Idea Charts”)

    • Natural Work Teams;   Discretionary Budgets:   One way of providing NWT’s with a sense of empowerment is to provide them with a discretionary spending budget.   The idea is to allow the teams to buy items that they need to improve their performance, and to encourage the NWT’s to try low cost things that may, or may not, work.   The budget is generally $X per month.   No management approval is required for the team to spend their allotment.

      While this discretionary budget can be both an employee motivator and a practical process improvement aid, this is one area that we would NOT advocate “just do it”.   Spend some time.   Think it through.   Establish clearly defined “acceptable uses” for the spending.   Create a “straw man” procedure as to how the team would make spending decisions.   Discuss safety precautions that the teams must consider.
      Some companies have established team accounts at places like Grangers, and allow their teams to place orders against these accounts.   Others provide debit cards.   Remember: It is a whole lot easier to increase the spending limits than it is to decrease.   Start slowly, and then build upon it.   And don’t second-guess valid attempts that did not work out.   These budgets are typically small, and therefore low risk.   It is not at all unusual for the teams to spend several hundred dollars on items that had little or no positive effect, before they eventually hit the project that saved the company tens of thousands of dollars.   The idea is to encourage sensible trial and error!

    • Nesting:   Trim losses can be substantial in some industries.   Paper, corrugated containers, sheet metal processors (service centers, finishing plants), etc. will generally do some form of nesting.
      Nesting is the combining of various production requirements (sales orders, replenishment requirements, etc.) in such a way so as to minimize the trim losses.   There are now some fairly sophisticated software packages that will assist with this function.
      As always, there are trade-offs between minimizing trim losses and maximizing overall company benefit.   For example, nesting is more effective when there is a large selection of items to be produced (i.e. backlog of orders).   Large backlogs tend to extend lead times.   In addition, when we “reach out” to run future orders we will likely incur the costs of carrying the extra inventory until it is due to ship.

      In dozens of our client plants, TOTAL costs went down, dramatically, even though the amount of scrap due to trim losses increased.   This was due to the benefits of shorter lead times and reduced lot sizes.   Bottom line; nesting is an effective tool, but must be used prudently!   Remember, our objective is to optimize the total, not necessarily each individual operation.

      Nesting to reduce side trim

    • Nine Block:   A powerful “mind Storming” idea evaluation technique is generally referred to as a “nine block”.
      Mind storming generates a considerable amount of ideas.   The Nine Block allows the group to easily rank these ideas, subjectively, based on two critical criteria:  How big an impact would this idea have if successfully implemented?   And, How easy would this idea be to implement?
      The ideas that fall in the upper left corner become priorities!

     

    A powerful means to evaluate ideas generated by your employees

    • NPI   (New Product Introduction):   Use a multi-function team to develop and prototype new products.   Engineering, manufacturing, procurement, sales/marketing, etc.   Make sure that adequate time is allotted to “tweaking” after the initial prototypes are produced.

      It has been our experience that NPI has an 80/20 law of its own.   Twenty percent of the time and cost will be required to develop a viable concept.   The remaining eighty percent will be required to bring this concept to a saleable product.   Note that in almost every industry, “time to market” continues to grow in importance.   It IS possible to set deadlines.   And it is critical to set a cut-off on design changes (for the introductory model).   In today’s environment, it is almost always preferable to have “good” product out first, rather than a “great” product out late.

    • Objectives, Strategies, Tactics (O.S.T.):   Top level goals (Objectives) must be supported by 2nd tier Strategies, which are supported by departmental Tactics (goals and measurements).   (See “Goal Curves”)
    • Old Equipment:   In some industries, and some circumstances, old otherwise “obsolete” equipment can be cost effectively used if dedicated to a very limited product line.   The savings come from the lack of any changeover and from a very reliable repeatable process.   This situation is typically practical in environments where excess space is not terribly costly, since the equipment is generally idle for long periods of time.
    • One Up, One Down:   A minimum cross training objective in many World Class companies.   It means that every supervisor / team leader seeks to have all of their employees able to perform their own primary job, plus the preceding and following jobs, at a proficient level.
    • On-Time Completions:   Many companies maintain a respectable delivery performance by carrying substantial amounts of finished goods inventory.   This is true even in “make to order” environments.   They accomplish this by scheduling to a padded completion date:   “We promise shipment for 9/30, but we schedule completion internally for 9/23.”   The logic is that if we happen to have a production hiccup, we can still ship to the customer on-time.

      Needless to say, if we are ever to drive out this resulting finished goods inventory and associated hidden waste, we must measure, set goal curves, and improve performance on on-time completions.   Measure the percentage of completions that occur exactly on the date scheduled.   Then set goal curves to dramatically improve this performance.   On-time completions should become a critical gauge of “company well-being”, and treated accordingly.   Establish a mantra of “on-time, all-the-time”

    • On-Time Delivery:   While it is important to measure your shipping performance, this parameter is of less importance to your customer than on-time delivery.   While it can sometimes be difficult to measure and control, it is, however, a critical factor to consider.   In some industries, such as automotive, on-time delivery is THE critical parameter.   Missing a delivery can idle a production process costing millions of dollars per hour.   If it is not yet critical in your industry, it will be in the future.   Work with your “A” customers to find ways to measure and improve this critical measure of performance.   Monitor you carriers’ performance to stated lead times.   Utilize the tracking systems that most carriers now provide.   Look into using company-owned vehicles in lieu of common carriers, etc.
    • On-Time Shipment, to the Original Promise Date:   I spoke to the president of a steel service center the other day.   He candidly told me “We will not turn down an order.   We promise what the customer wants to hear, then beg forgiveness”.   When I asked what his delivery performance was, he replied, “We ship 95% on time.”   How do you explain the disparity?   Easy.   They kept “revising” their promise date until they finally shipped the order.   Then they measured against their final promise.   I still don’t know why they weren’t 100% on time!   I guess they just got too lazy to re-promise some orders!   Needless to say, the only credible benchmark is the original promise date, unless, of course, the customer initiates the change.

      Beware:   Some companies delude themselves by saying “we talked to the customer, and he said it was OK.”   In actuality, all we’ve really done is reinforced the idea that the customer should ask for his product earlier than he really thinks he’ll need it.   Treat on-time delivery, as measured against the original promise date, as another critical quality parameter.

    • On-Time Shipment to the Request Date:   An additional measurement that some top performing companies track is their delivery performance versus the initial customer request date.   Doing so can identify opportunities:   Can we charge a premium for less than standard lead time?   Can we gain share, or increase prices if we cut our standard lead times to less than the competition?

      Note:   Short lead times are of little value if your delivery performance to your promise is not near perfect.   However, short lead times combined with reliable delivery performance can be a significant competitive advantage.   Caveat:   Prove out that you can perform BEFORE you advertise the capability.

    • “One Perfect Unit” Day:   A full, or partial day is set aside to focus on “perfect quality” at every station:   Standardizing procedures, establishing written sequential inspection criteria, identifying and implementing failsafe devices, clarifying quality standards, implementing visual “quality” boards, etc.
    • One Size Does NOT Fit All:   Various Lean approaches and techniques are effective for various industries and situations.   Kanban controls are an excellent example.   Kanban is an extremely powerful tool.   It is not, however, applicable in some environments (sporadic, infrequent product demand; job shop; engineer to order; etc.).   Too many consultants have one set of tools, and attempt to force their use into inappropriate circumstances.   Think of this article as your tool kit.   You, as the craftsman, must apply the appropriate tool as / when needed.   “If the tool fits, use it”.   (See “Solutions Looking for a Problem” and “Goal Curves”)
    • Operation Checklists:   A pilot goes through his/her pre-flight checklist to make certain that no important parameter is overlooked.   This same logic can and should be applied to equipment start-up procedures, and even between shift hand-offs between crews.   Similar checklists are a basic fundamental of good maintenance procedures.   Such checklists protect the equipment, and are an important safety procedure.
    • Opportunity Capacity:   It can be a significant profit enhancer to reserve some capacity when aggregate demand exceeds capacity.   It is normal in such situations for industry wide lead times to extend, and delivery performance to degrade.   The capability to reliably deliver in short lead time can command significant price premiums.   This situation has occurred repeatedly in the steel industry, and the technique is called “opportunity tons”.
    • Opportunity Signals:   Visual or auditory signals that identify a need, i.e.  more material, or a problem, i.e.  the machine is down.
    • Optimize the Whole, Not Necessarily the Pieces:   A Lean initiative’s primary focus should be on optimizing the entire organization.   As inventory is squeezed from between operations, all units will tend to be operated at the speed, and in the sequence of either customer demand or in such a maner as to optimize a bottleneck operation.   While this will increase the performance and effectiveness of the entire operation, it will generally have a negative impact on some unit efficiencies.

      One of the most difficult obstacles that many companies must overcome is the fact that their current measurement and reward systems target “unit optimization”.   The easiest way to think about this is to picture an automobile assembly line.   Every piece of equipment is paced to the rate of the line, yet most of the equipment could produce considerably more than that pace.   Doing so, however, would require queues of inventory between operations, different crewing schedules, etc.   We could indeed increase the effectiveness of the individual pieces of equipment, but how efficient do you think the total factory would be?

      Note:   There are techniques that can and should be applied to individual units that have been sub-optimized to improve their effectiveness as well.   However, the biggest gains come from the initial phase of optimizing the whole.   Take a look at the cost of complexity that unit optimization brings about.

    • Order – Delivery (O.D.) Cycle:   The elapsed time from the receipt of an order to the delivery of the product is called the O-D cycle.   Needless to say, this is an important parameter in the eyes of most customers.   Measure it and set goals to reduce it.
      Then expand the measurement to include the payables portion, i.e. the “order – payment” (OP) cycle.
      (See “Lead Time:  How to Calculate)
    • Order Entry:  Hours of Operation:   While many companies already operate 24 x 7 customer service departments, those that only have humans on duty during “business hours” need to take a look at their customer-base geography.   The idea is to man your phones during the business hours of your customers.   An east coast company with a substantial amount of customers on the west coast will appear to be rather customer unfriendly if they close at 2:00 PM in the afternoon (Pacific Time)!   Staggering the hours of your customer service people can readily remedy this situation.
    • Order Point (AKA Reorder Point):   A predetermined level of inventory, for a repetitively used item, that triggers a replenishment order.   It is typically calculated as the amount of inventory that we expect to use during the time required to replenish, plus some amount of “safety stock.”   The idea is to refill the bin before it goes empty.   EXAMPLE:  If we, on average, use 10 pieces per week, and we need 3 weeks to replenish the stock, we’d want to order when the on-hand inventory reaches 30 pieces.   This level, however, does not allow for fluctuations in demand, or potential slippage of supply.   In our example, we might look at the historical demand pattern, and the reliability of the replenishment source, and conclude that we’d be comfortable with a 10 piece safety stock level.   Our order point would therefore be 40.   Our in-house inventory control systems would be set up to automatically trigger a replenishment signal when on-hand inventory of this particular SKU hits a level of 40 or less on hand.
      Note that kanban controls can often fulfill this role more effectively.

     

    Replenishment trigger, inventory quantity at which a replenishment order is placed.

    • Order Promising:   It is critical to on-time delivery that order promising be done with consideration of available material and capacity.   The rule is to make “reasonable” promises, then focus on doing all that is required to execute to that promise.   This may mean paying premium freight for delivery of shortage materials, and working any necessary overtime to accomplish the schedule.
      Establish a corporate mantra of “On-Time, All the Time”
    • Organization Chart, Flatten it:   A by-product of a lean operation is the elimination for many non-value adding, typically middle management, tasks.  Self-directing teams, minimized scheduling, simplified accounting, etc. allow the lean organization to eliminate many levels of the typical management pyramid.   Streamlining the organizational structure will reduce cost while improving communication and customer service.
    • Paint:   A coat of white or light colored paint on the ceilings, walls, and floors (even cabinets and equipment) can have a dramatic effect on lighting, as well as employee attitudes and product quality.   It’s difficult to catch a defect if you can’t see it!   It also makes oil leaks more readily detectable.
    • Paper Templates of Equipment used for re-arrangement trials:   With small easy to move equipment, we will typically advocate that only cursory paper layout planning be done.   We’ll come up with a general idea of how & where things should go, then get on the floor and do a lot of trial and error.   However, when equipment is big and/or difficult to move, it makes sense to spend more time planning.   While scale drawings are a good start, there is nothing like “walking” the new layout.   This can be achieved by making full sized cardboard cut-outs of the equipment and then letting the entire team play “paper dolls” until a comfortable mutually agreed upon arrangement has been established.   Mark out the locations on the floor, and then do the real equipment move.
    • Pareto’s Law:   The 80/20 rule is typically applicable in inventory control.   Annual dollar usage, i.e. the quantity of an item used per year, times the unit cost, is ranked in descending order.   In most companies, the top 20% of the items, or SKU’s (stock keeping units), will constitute about 80% of the total annual spending dollars.   In many industries, like electro mechanical assembly, the ratio is more likely to be 90/10.   (See “ABC Inventory Classification”)
    • Pay For Raw Material on “Shipment” Rather Than Receipt:   As the frequency of raw material deliveries increases, the number of receiving transactions also increases.   There are many ways to circumvent this additional transaction cost.   One such way is to pay for your vendor’s material based on the amount of product your company has shipped.   A simple example: We manufacture bicycles.   I shipped 20 bikes, therefore I must have used 40 tires.   Since we have good records of our shipments, and we have complete and accurate bills of material, the computer can readily calculate raw material usage.   Needless to say, such an arrangement requires approval from your vendors, and demands that your inventory turnover be high.   You’ll also have to have very low scrap rates and a good way to collect scrap data.
    • Perpetual Inventory Control:   I’ve got 20 units of item A on hand.   I bring in 10 more units, and use (ship / scrap, etc.) 5 units.   What’s my new on-hand balance? (20 + 10 – 5 = 25 units are left on hand)
      This is an example of what a perpetual inventory system does.   The computer processes incoming and outgoing transactions, typically through MRP / ERP type inventory control software, so as to maintain an on-going, i.e. “perpetual”, accurate inventory balance at all times.
    • Peter Principle:   A common business expression meaning the elevating of a person in responsibility until they reach their “level of incompetency”.   The term was coined by Dr.  Laurence Peter and Raymond Hull in their 1969 book The Peter Principle.

      The typical example is the taking of an excellent technical person (engineer, software programmer, etc.) and promoting them into a management position that requires an entirely different set of skills.   The problem is exasperated by the unwillingness, in many organizations, to correct the situation when an individual is clearly struggling.

      Many innovative companies now provide a corresponding technical path that similarly rewards key individual contributors.   This allows them to continue doing the things that they are equipped to do well, while achieving the financial and status rewards similar to the progression available through the management ranks.

    • Physical Inventory:   As opposed to a perpetual inventory, a physical inventory (PI) is a “go out and count them” process.   In most companies, day to day inventory balances are maintained via perpetual inventory control.   A “physical” is generally done as an event for a specific purpose; e.g. accounting audit, due diligence process, etc.   (See “Cycle Counting”)
    • Physical Inventory:  Thumbnail:   When you find yourself in an “inventory accuracy emergency” this technique can be an effective band-aid.   The idea is to do a thumbnail physical inventory by checking the appearance of the on-hand physical supply vs.  the inventory record.   “That looks like about 100” and the records say 120.   Close enough.   Move on to the next idem.   The idea is to quickly catch the “gotcha’s” that will bite you. Then, go back and do a good physical inventory, and implement all the necessary procedures to maintain on-going accuracy.
    • Physically kitting to find shortages… CREATES shortages:   We’ve all seen it.   The raw material inventory balances in the system are not accurate, so someone comes up with the idea to “pull the parts early to identify the shortages”.   Sounds reasonable.   It isn’t!   Parts, available on one kit, are short on another.   Pulling parts early significantly decreases the odds of being able to make ANYTHING complete!   The only viable option is to fix your inventory accuracy, and put systems in place to keep it that way.   (see “Trial Kitting”)
    • Planning “Percentage” Bills of Material:   Forecasting is generally easier, and more accurate, when done at the product family level.   However, in order to utilize the planning data for material requirements purposes, the forecast must explode down to the specific part level.   One easy way to accomplish this is through the use of a planning BOM.   The planning BOM contains parts and labor requirements that represent the entire family of products, by proportions.   The easiest way to create this bill of material is through the use of percentages.   For example:   Our product family “Adult Men’s Bicycle” is anticipated to sell 22% “Flyer” model, 47% “Clipper” model, and 31% “Off-Road” model.   We would create a percentage planning BOM with these three products as components.   The “quantity per” for each would be the forecast % of the family sales for each product, i.e.  .22 Flyer, .47 Clipper, and .31 Off-Road.   Thus, when we load the forecast into MRP and explode requirements, the resulting component parts and labor forecast will accurately represent this product mix.

    Percentage BOM for planning purposes

    • Plant / Process Tours for All Employees:   An operator had been doing a manual operation; scraping tape residue off a transformer core; for eight years.   His thumb was all buggered up.   We asked where the part went next.   He had no idea.   So, with approval of his supervisor, we walked the process.   You guessed it!   The section that he’d been manually scrapping for all these years, was, at the next operation, cut off and thrown away!

      We are continually amazed at the number of employees that have no idea what is being done in the other areas of the factory.   Take the time to provide a tour for your operators.   You may be surprised at how it increases there caring and awareness of opportunities for improvement.   Note:  This same concept has produced huge benefits when extended to customer and supplier sites.

    • Point of Use Stock and Supplies:   Do you see any non-value adding activities in this familiar process?   Parts are received, the count is verified, a sample is inspected for quality, a transaction is processed, they are moved to another location, another transaction is processed, some of the parts are then withdrawn, and another transaction is done, and the parts are finally moved to the assembly area.

      Wouldn’t it make more sense to put the parts immediately where they can be used for production?   Now, I understand that lots of groundwork must be done to accomplish this logical step.   Just like the Frito Lay delivery guy, let’s get the supplier, where ever practical, to deliver quality parts (we’ve pre-qualified his process), in reasonable batch sizes (we’ve shown him how to cut his set-up times), directly to the point of use.   Transaction costs can be minimized through backflush.

    • Point of Use Tool Storage:   Store any low-cost tools where they are needed.   Put clips on the equipment to hold the screwdriver, wrench, ratchet, etc.  within reach of the maintenance person.   At one plant, we watched the maintenance person spend 20 minutes searching all over the plant to find a set of vernier calipers.   Investing a few hundred dollars in additional tools, combined with clearly defined locations for their storage, saved thousands of dollars, annually, in lost productivity.

      Note:   Many tool supply companies will now furnish “vending machines” that are placed throughout the shop floor and are stocked with commonly used tools and supplies, generally on consignment.   Operators/supervisors are provided with credit-card type keys that record when, what, and by whom, each part has been used.

    • Poka Yoke:   See “Failsafe”
    • Pre-Agreement:   Get agreement in advance.   If …, Then … e.g.  “If we can show that … is the case, then do you agree that we can…?   We had a go-around with a quality engineer.   We had him verify that not one test failure had ever occurred after the initial hour of testing (shake & bake).   Yet, he refused to reduce the test time (8 hours).   It took us months to convene all the right players to override this guy!   (See “Let the Data Decide”)
    • Pre-Meeting Coaching Sessions with the CEO:   Our Rapid Impact process requires that Top Management monitor our lean transition progress via regular TMAC (Top Management Advisory Council) meetings.   One trick that we utilized with great success is to hold a short pre-meeting get-together with the CEO prior to the TMAC.   This provides us an opportunity to “coach” him/her as to where we anticipate resistance.   E.g.  “We are going to suggest … Jim is going to want to “study” it.   We’d encourage you to suggest that we just ‘give it a try’”
    • Preventative Maintenance:   (See “Total Productive Maintenance, TPM”)
    • Price Changes:   In some industries it is standard practice to pre-announce price increases.   Doing so has several consequences, all bad!   As mentioned elsewhere in this website, we are constantly seeking ways to smooth demand .   Pre-announcing a price increase has just the opposite effect.   Orders spike as customers attempt to beat the deadline, and slump afterward.   Customers attempt to “guess” what they’ll need, and then are forced to call in change orders.   All of these actions adversely affect the company.   Our suggestion:  Announce, right now, that the company’s new policy is to no longer “pre-announce” price increases.   Then enforce the policy.
    • “Problem / Idea” charts:   This can be a powerful tool in some environments.   Natural work teams are provided simple flip charts in their work areas.   The chart has a column drawn with the heading:  “Problem/Idea”.   This is used for employees to post any issue.   Two additional columns:  “Responsibility”, and “Promise Date” provide a way for the team, and it’s support people, to keep track of commitments made to resolve such problems.   Every problem is an opportunity.   Make sure that they are posted, and then seek a solution.   This is additionally powerful when combined with “Management by Walking Around”, and unit / area / kanban goal curves.

     

    Accountability, Problem - Idea chart, responsibility, action items, due dates, who by when

     

    • Product focused layouts:   Many traditional industries are arranged in “process focused” layouts, i.e.  all lathes are in one area, all presses in another, etc.   As we attempt to squeeze out interdepartmental inventory, it soon becomes apparent that a “product focus” makes more sense.   E.g.  to arrange the various kinds and quantities of equipment together so as to cost effectively produce a specific product or family of products.  (See “Cellular Manufacturing”)
    • Product Structure Types:   Most companies / product lines fall into one of the classical product configurations:   The Pyramid, The Inverted Pyramid, or The Hourglass.
      The Inverted Pyramid is most often found in raw material processing type industries, like steel making, injection molding, etc.   Here, a small number of raw materials (e.g.  iron ore, plastic resins) can be used to make a wide variety of products.

      Small number of basic components / raw materials can make a wide variety of finished products.

      The pyramid is typical of electronic assemblies where a large number of component parts are used to make up a few products.

      Large number of raw components can make a wide variety of finished goods.

      The Hourglass configuration is found where a large number of component parts make up a limited number of subassemblies.   These subassemblies can be configured into a wide variety of finished products (flavors).

      large number of components, small number of subassemblies, large number of final products.

    • Profit Impact of Driving Down Inventory.   Inventory reduction generates cash and improves operating performance.   However, due to labor variance, and/or under absorption of overhead, accounting profits can actually go down, temporarily, during these periods of rapid inventory reduction.   Also, a significant reduction of inventory can expose LIFO / FIFO layers in the inventory accounting system.   The impact of this may cause accounting profitability to go in either direction.   It is important that the CFO be tasked to provide a proforma of the impact on accounting profits that will occur if the targeted inventory reductions take place.   Once this has been done, get approval from the board to go ahead.   (See the article “Transitioning to Lean”)
    • Program Du Jour:   A slang term for the syndrome of some companies to constantly change the corporate focus.   It is often the fad of the moment:   A new book comes out on “work teams”, so that becomes the drive, then another comes out on “six sigma”, and the emphasis changes.   The only consistency is that little or nothing seems to get accomplished.
    • Prune the Customer Base (All Customers are NOT Equal):   It is a useful exercise to evaluate your customers for margins, volumes, and a somewhat less tangible “hassle” factor.   Most companies find that a “normal curve” exists.   A few customers are quite profitable.   The majority of customers are moderately profitable.   And a few customers are just not worth continuing to do business with.   Raise their prices to the point that you are now willing to keep them as a customer, or just get rid of them.   (See “Activity Based Costing”)
    • Pull vs.  Push:   In a “Pull” philosophy, the next operation is considered a customer.   As such, it is reasonable to ship a product to a customer only when it is requested, i.e.  only when it is needed.   In a “Push” environment, product is delivered to the next operation based on schedule, or simply availability, whether the next operation needs it or not.   A pull philosophy is seen as superior for a number of reasons.   Pull minimizes WIP inventory build up and thereby keeps congestion down and assures short lead times.

      Push systems have a tendency to constipate the system, adding to WIP and necessitating expediting.   (See “Kanban Controls”)

    • Pull Systems:   Utilize the Pull Philosophy.   This is generally accomplished via kanban controls.   The same pull philosophy can be extended as far up and down stream as your suppliers and customers allow.   Visualize a chain of events triggered by the end user.   He/she removes a product from the retail shelf, which causes the supplier to generate a replacement, which initiates demand for one more set of component parts, etc.   (See the article “Taking the Mystique out of Kanban Systems”)
    • Purchase Price Variance, PPV:     A measurement tool often used to evaluate buyers.     The idea is to reward purchasing people for procuring material at favorable prices (compared to standards or historical purchase prices).

      While the idea of PPV is quite appealing, it has a major shortcoming.    It ignores all of the other costs associated with a purchased item:     Transaction costs,   Freight,   De-trashing (getting rid of packaging material),   Receiving,   Incoming inspection,   Stocking,   Record keeping,   Pulling the material from stock,   Shrinkage etc.

      A higher priced product that is vendor managed, delivers directly and frequently to the point of use, just in time, with perfect quality, and re-usable packaging, etc.  may be a far better bargain.

      In most cases, we suggest replacing PPV with a measurement that includes the “Total Cost of Purchase”.

      • Put Time Limits on Discrepant Material Resolution:   Discrepant material is in limbo.   You can’t count on it, yet if you order replacement and then the discrepant material is released as OK, you’ll have excess inventory.   And, un-dispositioned held material adds to complexity.

        Establish turn-around targets for “time to disposition”.   Measure it.   Push to assure that all functions required to make such disposition are available as close to 24 – 7 as feasible.   You can’t have your operations waiting on material that may, or may not, be available for production.

        One effective technique is to require that all discrepant material remains within the kanban allotment, i.e.  if you are allowed 20 pieces between operations, and 5 are on hold (discrepant), then only 15 “good” pieces are allowed in the kanban.   This will add operating pressure for quick discrepancy resolution.

      • Quantity Discount:   See “Column Pricing”
      • Quick Changeover Tooling:   There is a large complement of tooling and equipment now available that has been designed to simplify and speed up typical set-up operations.   Quick clamping devices, slotted holes, ¼ turn bolts, hydraulic systems, etc.   Pickup catalogues and/or search the web.   There is no sense in re-inventing the wheel!
      • Raw & In-Process (RIP) Inventory:   Traditional manufacturing accounting separates inventory into three groupings:  Raw Material, Work in Process (WIP), and Finished Goods.   Work orders generate kits with pick lists.   The kits are picked and the entire job is “released” to Work In Process.   This transaction relieves the raw material parts from “raw” and puts the job in WIP.   When the job is finished, the job is closed and the inventory value is transferred, eventually, into Finished Goods.   As lead times and lot sizes are reduced, and raw material is stored at or near the point of use, WIP becomes small enough to eliminate it as a separate category of inventory.   Products are back-flushed upon completion, thereby relieving the raw material inventory.   The accounting categories are thus RIP and Finished Goods.   Many of the non-value activities of processing “pick lists” and issuing transactions are thereby eliminated.
      • Receive at Night:   There are several advantages to receiving incoming material at night.   It often makes it easier for the shipping companies (traffic is lighter) and very often truck drivers must wait overnight before being able to unload.   It also allows the received material to be entered in the system so all material shows for planning purposes during normal business hours.
      • Red, Yellow, Green:   In many batch environments, there are certain high-use products where it is more economical to process the entire batch rather than process just the quantity required for the order.   An example is the blanking of sheet metal parts from a coil of steel.   If the product/s being blanked are high volume runners, completing the entire coil may make good economic sense (in many circumstances, there are very real capital limitations to SMED).   On the other end of the spectrum, there are low-usage products that should NOT be processed ahead.   This scenario is particularly true in the steel service center business.

        A cursory study of each product’s historical demand, cost of processing, and cost of carrying the additional inventory can lead to simple decision rules.   The various products are coded.   Green:  Cut up the entire coil.   Red:  Cut only what is needed, then put the unused portion of the coil back into stock.   Yellow:  Use your discretion.

      • Reduce Set-up / Change-over costs to allow further lot size reduction.   The basic rule is “Make just what the customer wants, just when he wants it.”   Any additional production is waste and adds to inventory.   The ideal is lot size of one.   Historically we determined the lot size based on the change-over costs.   A better direction is to determine the right lot size based on customer demand, then drive down your change-over costs, where possible, to allow such.

        Also see SMED:  Single Minute Exchange of Dies”

      • Remove doors wherever they’re not essential:   We want product to flow, ideally, without interruption, through the entire process.   Walls, doors, fences, separate buildings, etc. inhibit this flow.   I toured a plant recently, where many of the departments were in separate rooms.   Unless separate rooms are needed for process constraints, e.g.  environmental controls, or security, a good 1st step to improve flow and communication is to remove the doors.   The next obvious step is to remove all unnecessary walls as well.
      • Rent Space at Your Customer’s Site:   I visited a blow-mold bottle maker a few years ago.   Their process was highly automated, with minimal WIP.   Palletized bottles were shrink-wrapped to protect them from dirt and dust.   They had a large warehouse full of palletized bottles and a tremendous amount of shipping, with trucks continually departing.   When asked for my recommendations, I said, “You are storing and transporting … AIR!”

        I suggested that they rent some space at their primary customer’s site (this customer used 80+% of their volume), cut a hole in the wall, and deliver bottles directly to the bottling line.
        The result:   No pallets.   No shrink-wrap.   No storage.   No transportation.   And a customer for life.

      • Reorder Point:   See “Order Point.”
      • Replenishment System:   A mechanism to simply and reliably re-order and obtain parts or services when needed.   Replenishment system is a general term for specific mechanisms such as the two-bin system, kanban controls, min-max, etc.   As the name implies, the idea is extremely simple:   replenish what gets used.   Note that such systems have limited applicability in job shop, one-of-a-kind environments.   Kanban systems are explained in detail here.
      • Reserve Capacity for “A” Customers:   Your critical few top customers should expect, and receive, short fixed lead times and reliable delivery, no matter what your backlog position may be.   In times of super heated demand, this can still be accomplished by closely working with your “A” customers to reserve adequate capacity to handle their actual (realistic) demand.   Lead times for “B” and “C” customers may float in and out.   Not so with your “A” customers.   Provide them with short fixed lead times, even in a hot market, and you’ll have a customer for life.

        Note:  while lead times may float for the B’s & C’s, reliability cannot.   Credibility is paramount.   Say what you’ll do, then do what you say.

      • Reserve Capacity for “Pillage & Plunder”:   In times of scarce supply and excessive demand, it may make sense to reserve additional capacity beyond that required for your “A” customers.   In such markets there is often an ability to attain a significant price premium for quick delivery.   Note:  if the “hot” order does not come in, simply pull some of the backlog ahead, i.e.  capacity is not lost.
      • Resource Restriction: can be used to force innovation and process improvement.   Take away a person.   Challenge the team to make the schedule without them.   Squeeze the space.   Challenge engineering to find a suitable substitute for expensive supplies / materials.   Necessity is the mother of invention.
      • Results, or Lack Thereof:   “We’ve been funding a Lean Transition effort for over three years.   We’ve generated lots of activity and trained the heck out of people, but the results just aren’t there.” said the division president of a large corporation.   He wasn’t alone.   It is a theme we hear repeated over and over.

        What SHOULD you expect from a lean transition?   Large, tangible corporate-wide results.
        If you are dissatisfied with your lean progress, give us a call.   It won’t cost you a dime, and I guarantee that you will find the discussion “Value Adding”.

      • Returnable / Reusable Packaging:   In some industries, packaging and the cost of “de-trashing” i.e.  getting rid of the packaging, can be a major expense item for you and your customer.   Work with your “A” customer/s to find ways to reduce or eliminate the expendables:  Use standardized, nesting, returnable shipping containers, pallets, fold-flat returnable plastic containers, etc.   Also look for dual function packaging, e.g.  packaging that can be used as part or all of the end-item packaging, e.g.  use the same box to ship the picture tube that the customer (assembly plant) will use to ship the finished TV;   Or the packaging becomes a part of the final product, etc.
      • RIP:   See “Raw & In Process” Inventory.
      • Roaming Around Other Departments / Functions:   A very astute boss of mine advised that I allocate a certain percentage of time, each week, to “roaming around” the company.   The awareness of the “big picture” that doing so provided, was invaluable.   Take the time to understand what the other organizations do within the company.   Get a good overview of how the various pieces fit together.   Doing so will pay for itself many times over, both in terms of providing more value to the company, and in advancing your career.
      • Rocks & Water Analogy:   Consider your company as a ship sailing across a pond.   Under the water are dangerous rocks.   However, as long as the water is high enough, there is no need to worry about these rocks.   In this analogy, the rocks represent problems that cost the company in terms of productivity, customer service, and quality.
        The water represents inventory.
        As in this analogy, corporations can continue to operate while “hiding” a myriad of problems beneath a blanket of inventory.
      • If we begin to drain some of the water from our pond, some of these rocks will be exposed.   We will then have to remove them so that our ship can continue to sail.   The same occurs in our factories as we begin to reduce the inventory.   Lot size / set-up time, vendor reliability, lack of flexibility, un-reliable processes, etc.  will slowly be exposed as the inventory is reduced.   Fixing these “rocks” reduces cost and improves quality and customer service.

        Note:   A company-wide inventory reduction process serves to “optimize the Whole plant.”

        See the analogy below.

      • Root Cause Analysis:   The process of researching a problem / defect to discover the real underlying cause.   The real Root Cause is easiest to uncover when the defect / problem is discovered and research immediately after it occurs.   Time is the enemy of identification:  the “trail rapidly gets cold”.   (see “Five Whys” and the article “Total Quality Lean” ).
      • Rope – Off Customer-Required F/G’s to Prove That They Are Not Necessary:   Some companies are contractually required by their customer to maintain a certain level of finished goods on hand.  This “safety stock” is meant to protect the customer in situations where the supplier misses a production schedule.   Once lead times are reduced and on-time completion performance improved, these safety stocks my no longer be required.   At one client site, we invited the customer to witness the inventory being held in his account.   We recorder the lot numbers, and then “taped off” the entire inventory (several pallets) with the bright yellow police tape.   We asked for agreement that if we could continue to ship at 100% performance, without breaking into this buffer, we be allowed to eliminate the buffer requirement.   A compromise was reached that allowed our client (the supplier) to cut the safety stock requirement in half with each month of successful on-tine delivery.   The requirement was eventually eliminated.
      • Rope Off Freed-Up Space: or it will refill.   Space, freed up via the lean transition process, is a valuable asset that upper management can use for new products, acquisitions, sub-lease, plant consolidation, distribution warehouse.  etc.   Do not let this asset slip away.   We have gone so far as to use yellow “Police” tape to cordon off the area.   Post large notes stating that written approval from the plant manager is required to store anything in the area.

        Nature abhors a vacuum.   Take aggressive steps to preserve the empty space or it will rapidly refill!

      • Rough Cut Capacity Requirements Planning, e.g.  Rough Cut CRP:   A detailed Capacity Requirements Plan (CRP) uses all detailed production schedules generated from MRP, i.e.  the build schedules for all levels of the bills of material.

        Rough Cut CRP uses the Master Production Schedule (MPS) to calculate labor requirements.   The typical rough cut CRP algorithm uses the MRP / ERP system master schedule plus a rolled-up bill of labor to calculate future labor requirements.

        As an example, the MPS calls for us to build 20 men’s 26” bicycles in period four.   The labor requirements for period four would be 20 times the rolled up bill of labor (which would include all fabrication, subassembly, final assembly, test, and pack labor requirements for a men’s 26” bike.)

        To be reasonably accurate, Rough Cut CRP requires flat bills of material, short lead times, small lot sizes, and little or no safety stock requirements, and works best in “make to order” environments.   It is generally adequately accurate in a lean organization.   (See Capacity Requirements Planning, CRP).  !

      • Rubber Factory:   Build flexibility into your capacity.   Use part-timers, overtime, cross training, move people between departments, etc.   While it a very worthwhile effort to attempt to smooth production , quick response will, at times, demand some level of flexible capacity.

        Our article, The Rubber Factory, details this powerful technique.   (See “Counter Cyclic Products”)

      • “Rule” or “Exceptions”?   In most discussions as to why a lean initiative “can’t be done”, it is the exception that is used to justify things.   Look at frequency and percentages as well as the “facts” given;   e.g.  “We’ve got long lead time items from China” (on 1% of the parts!).   One of the nice things about the Lean techniques is that they do not need to be used universally.   Select the appropriate techniques and then use them only where appropriate.   (See “Figures Don’t Lie, But Liars Figure”)
      • Safety “bag”:   For small component users, a very simple form of replenishment signal is to place a quantity of components (sufficient to cover on-going operations during the replenishment cycle) in a separate bag that includes a replenishment kanban card.   The instructions on the card advises to “use these parts last” and to order more once the bag of parts has been opened.   The card can even contain the necessary reorder information.   The card is provided to procurement, or the supplier, for order placement.   (See “Faxban”)
      • Safety Stock:   Be Cautious.   In many MRP programs, Safety Stock is treated like a priority item, triggering expedite messages.   Doing so can cause credibility issues with the system’s recommendations and lead to second guessing, or worse.   (See the article “ERP & Lean”)
      • Salary Increase Matrix:   This is a powerful tool that can be used to help your company make rational and reasonably consistent salary adjustments.   The logic is straight forward.   The intent is to rapidly move your excellent performers to the appropriate range of pay for their current job description.

        A salary Increase Matrix is easy to explain to your employees and is generally seen as fair.

        How to fairly provide salary increases based on performance and position within the salary range

        The management team agrees on the matrix parameters, i.e.  how to pay your people based upon their job performance and their current level of pay.   Then the emphasis changes to accurately and consistently evaluating the performance of your people.

        As an example, Slim is an outstanding employee (A performer) and is currently being paid in the first quartile of his salary range.   The matrix suggests that Slim receive a substantial increase (10-15%) in his pay.   The logic is that an outstanding performer should be paid in the upper part of the salary range.

        Similarly, Mark is an average performer (C rating) but is being paid in the top quartile of his job pay range.   The matrix suggests that he is currently being overpaid for his contribution, and his salary should be adjusted accordingly.

      • “Same As Except” Method of Estimating:   This is an excellent way to quickly, and often more accurately, estimate the cost for a new product.   When faced with the need for a quick cost estimate, begin with a similar existing item with a known cost.   Then add & subtract for estimated differences.   This method is almost always faster than a bottoms-up estimate, and often more accurate.
      • Schedule Accountability, By Shift:   Delivery performance demands that the schedule be accomplished in all areas of the organization.   Start with schedule completion each day.   This will then lead you to measure & improve on-time schedule accomplishment by shift.

        You will soon, however, run into a problem.   The typical multi-shift operation has shifts that are “back to back”,   i.e.  one shift ends at the same time that the next shift begins.   If your process allows, it can be a significant benefit to stagger the shifts, thereby leaving a gap between shifts for recovery, repairs, and preventative maintenance; e.g.  1st shift runs 7:00 AM – 3:30 PM, 2nd shift runs 7:00 PM – 3:30 AM (3.5 hr gap).   Each shift can then be held accountable to make the schedule, exactly, before going home.   Instill a discipline:   “ The shift ends when the schedule is done”.   (See “On-Time Completions”)

      • Schedule Adherence;  Order Entry:   In most manufacturing companies, the majority of orders come into the company during day shift.   Yet, to ensure a short lead-time, we’d like to be able to produce these orders on 2nd and 3rd shifts.   This requirement results in a philosophy of “The day ends when all orders have been entered into the system and are available for production”.   Stagger the hours of your order entry people.   Get agreement that the last person on duty will stay until every order is in the system (same day).   As you continue to shorten your response times, making this change will become more important.   (See “Order Entry:  Hours of Operation”)
      • Schedule Randomizer:   In some industries, it is still accepted practice to promise shipment “week of”.   Obviously, this is NOT a world class practice!   Be that as it may, until scheduling practices change, weekly schedules can cause a problem with the MRP back-scheduling algorithms when lead times are dramatically reduced.   A case in point:   We worked with a steel company that scheduled all of their shipments for Friday of the promise week.   The operations planning department had no good scheduling tools to provide credible “day of the week” completions.   As we reduced the lead time, and began holding operations accountable for on-time schedule completions at the individual operation level, unrealistic schedules began to appear.   Since many products had similar routings, and everything was scheduled to complete on Friday, workload “lumps” appeared at various operations.

        A quick and easy fix was to apply a simple randomizer to the internal completion date.   This smoothed the completions over the promise week, and provided producible schedules.   The customer continued to receive a “week of” promise date, but internally the operating and scheduling people were measured to the completion day.   Needless to say, the next obvious step is to begin providing daily ship date promises to the customer.   So far, however, we haven’t been able to win that battle!

      • Scheduling Function:   Hours of Operation:   We were working with a large corrugated box producer.   They had customers clambering for next day delivery.   We had streamlined the production operations to allow for extremely rapid turnaround.   However, orders were received until 5:00 PM, yet the scheduler for the corrugator went home at 3:30.   With some work-shift schedule changes, and some cross training, the problem was overcome.   It was necessary to overlap the scheduling function beyond the end of 1st shift so that all of today’s orders could be entered into the schedule and be available for production TODAY.

        A similar problem arose at a steel finishing plant.   Standard practice was for production scheduling to be done on weekdays, day shift only.   However, production operations ran 24 x 7.   Needless to say, as the internal lead times were reduced, it became unrealistic to attempt to schedule production that far in advance.   The schedulers agreed on new work schedules.   Schedulers were also provided with PC’s and the ability to access the scheduling software at home.   This allowed for critical schedule changes to be made electronically from the schedulers home, if needed, 24 x 7.

        Additional scheduling pattern options are discussed in our article “Alternate Crewing Schedules”, and our blog re.   multiple shifts.

      • Scheduling:   Upstream & Downstream From a Bottleneck:   In many industries, there exist true bottleneck operations.   If the upstream and/or downstream operations are NOT true bottlenecks, i.e.  have excess capacity, then the objective is to use only one schedule; that which optimizes the bottleneck; for ALL operations.   The same scheduling sequence (also called a “line up”) used for the bottleneck, is applied to as many up & down stream operations as feasible.   The end result is a Lean environment while still optimizing the bottleneck operation.
      • Sequential Inspection:   Have each operator check the product for quality before proceeding with their own operations.

        Here’s an easy first step in establishing sequential inspection.   Have every operator write down the items that they could possibly mess up.   Pass this list to the next operator as his/her checklist.   Run for a week or two, adding to and correcting the list.   Then formalize (print up, add color photos, etc.) and post at each work-station.

      • Sequential Pull:   Many kanban systems are “product specific”,  i.e.  the kanban tells you what to make, when to make it, and how many to make.   However, a more streamlined form of kanban, applicable in many industries, is “sequential pull”.   In this system, the kanban signal is generic;   it tells you “when” to move or make a part, but does not tell you what to make.   A schedule, or “line up” tells you the specific item to move or make.

        The automobile assembly line and associated feeder lines are set up in this fashion.   By “pulling” the correct parts in the correct sequence, a complete final assembly is produced with minimal WIP inventory, just in time.   Note, that while this is by far the most efficient form of pull system, it requires a considerable amount of pre-work.   Quality and reliability of all processes must be truly world class, as any defect or line disruption can throw off the sequencing.   (See “Kanban”)

      • Set-Up Person;  New Role as Teacher:   Some companies have “high skill” set-up operators that are on-call to perform change-overs on the production equipment.   This often causes delays, while production operators wait for the change-over expert to get to their operation.   We’ve had some huge successes by re-framing the set-up person’s job to include simplifying the change-over, and training operators to do their own change-overs, or at least aid in the change-over.   Transition your “set-up” people into trainers and SMED experts (simplify the change-overs, document the procedures).   Teach operators how to do their own change over.   Then elevate the responsibilities of the set-up person to include process improvement.
      • Shadow Boards:   Help people put things back where they go by creating a shadow board.   By putting the outline of the tool on a board, or in a drawer, where the tool is supposed to be located, the location for a tool becomes obvious.   Combining the outline with color-coding can be even more effective.  

        (See “5S / Area Organization”)

      • Sharing Equipment / Work Stations:   We visited a transformer plant and noticed that more than ½ of the arbor winding equipment was un-manned.   When we asked why, we were told that the 2nd shift operators all had their own equipment, and that no operator could continue the work of another.   Winding was considered “art,” not science.  The addition of standard methods, checklists, and a 5 minute shift overlap, allowed space, equipment, and WIP inventory to be cut in half.
      • Shop Floor Control:   This term is generally used to denote software & hardware systems that are used to track, reschedule, and prioritize products that are currently in production.   Many companies have spent a considerable amount of time & money installing shop floor control systems, and, in some industries they are an absolute necessity.   Too often, however, they simply mask a host of underlying problems:   If schedules are credible, and on-time completion rates are high, there is little need to track, reschedule, or prioritize items in WIP.

        However, when lead times are excessive; lot sizes are too large; schedules are un-realistic (poor capacity planning and/or shop loading discipline); and accountability is lacking, SFC systems will be seen as a necessary solution.   NOTE:   They will NOT solve the problem.

        In most industries, if Lean is done correctly, the need for SFC is greatly reduced or eliminated, and, in the few industries that truly do require SFC systems, their credibility will be greatly enhanced by a lean initiative.   The “ cost of complexity” caused by these underlying drivers can be substantial.

      • Shorten Lead Times by Adding Shifts:   Here’s a quiz:   Our product requires four operations to be performed, in sequence.   We’ve got four operators, each performing a different operation.   Each operation takes 8 hrs to perform.   There is only one shift.   What’s the minimum lead-time?   Right:   4 days.   On day 1, operation 1 is completed.   On day 2 operation 2 is completed, etc.

        What happens to WIP inventory levels and lead times if we were to move 2 of our operators to the 2nd shift?   Operation 1 is done on day one, 1st shift.   However, operation 2 now can also be performed on day one, on the 2nd shift.   Same with operations 3 & 4.   The lead-time and WIP inventory levels are cut in half.

        Note:   we did NOT increase capacity.   Four operators still produce 1 completed unit each day.   However, by manning more of the available hours, we are able to keep the product flowing, thereby cutting inventory, space requirements, and lead times accordingly.   We used 8 hour operations for illustration purposes.   Moving a portion of your capacity to the off shifts will have the same impact regardless of the work content.

        For more information on this powerful technique, check out Making the Case for Multiple Shifts.

      • Show Me:   We were working in a traditional assembly plant and were about to re-arrange some equipment.   I asked that the wiring be left flexible so that future minor equipment moves could readily be accomplished.   However, the maintenance man assured me that this was not allowable “per the code”.   I politely asked him to please show me where the code said this.   I waited a few hours, then sought him out.   As I had expected, he could not find any such prohibition in the code.

        Many constraints are perceived, habit, or hear say.   Require the letter of the law be shown.   Don’t be afraid to challenge convention.   All too often, it’s being done that way because “it’s always been done that way”!

      • Side-Loading Trucks:   The problem with the typical rear opening truck is that only a small amount of product can be reached at any time, and that the product flow is LIFO:  Last In First Out.   A lean environment requires frequent deliveries of material to the point of use.   Thus, a side loading truck, combined with modified receiving capabilities along the entire periphery of the plant, provides a more fitting arrangement.   Material can be accessed along the entire length of the truck, allowing material to be stored and unloaded where and when needed.
      • Silence is Acceptance:   A culture of continuous improvement demands on-going change.   It is difficult to make rapid progress if approvals are required for every action taken.   Institute a procedure that encourages teams to “notify” people of actions they intend to take.   The onus is then on those notified to “raise a flag” of concern.   “Speak now, or forever hold your peace!”   (See “ Just Do It!”)
      • “Similar To” BOMs (Bills Of Material):   If you do not have a final design, load the BOM for a similar product into your MRP.   Then evolve it as product definition firms up.   The “similar to” item is treated like the “same as, except” item discussed elsewhere.   Schedule the anticipated demand in your master schedule, and then use the system to warn you of long lead item requirements, reserve capacity, project cash flow, etc.   (See “Same as, Except”)
      • Single Handle:   Once an item is in the hands of an operator, try to do as many value-adding operations as make sense.   Much time is wasted picking up, putting down, and conveying material.   If practical, arrange operations that require different small pieces of equipment in a U shaped arrangement.   The operator swivels his/her chair or “walks” the item through each operation before putting it down.   (See “U-Shaped Cells”)
      • Situational Approach:   Just Do It vs In-Depth Study:   While we are advocates of the “Just Do It” philosophy, there are indeed situations that warrant a more studied approach to a Lean transition.   If the area of concern is a bottleneck, if the intended action has a potential impact on personnel policies or could stimulate union organization efforts, if the intended action could cause a significant / life threatening impact on the company (i.e.  “drilling below the water line”), if the action risks anyone’s safety, then a more cautious studied approach is justifiable.
      • Six Sigma:   A powerful analytical method for quality or process problem discovery and resolution.   Due to the amount of training required to become proficient, six sigma is often utilized by training a small elite group of internal experts (black belts).   Six Sigma is a rigorous situation analysis process.   It is quite powerful for determining and resolving a complex process / quality problem.  It is not, however, a general overall business improvement methodology.   Do NOT attempt to use it as such.   (See the article “Is Six Sigma Right For Your Company?”)
      • Slippery Floors:   Here’s a rather radical idea.   We worked with one company that made pillows.   The product shipped in large, relatively light-weight (about 40 pounds) but cumbersome boxes.   In discussing alternatives with a safety expert, the decision was made to try “slippery” floors and equip all operators with rubber soled “deck shoes”.   The boxes were then slid to the shipping area.   This was clearly seen as a superior alternative to lifting each box to put it on a conveyor or other conveyance device (risk of back injury).   Another major advantage:  there were no conveyors blocking routes;   No wheeled vehicles to take up space, “deadheaded” back to where needed, or stored.
      • Small lot, JIT deliveries, to the point of use:   Receiving transactions, incoming inspection, moving parts to a stockroom, recording transactions, picking parts, etc.  are all non-value adding functions.   One solution is to evolve to frequent vendor delivery directly to the point of use, bypassing receiving, incoming inspection, and the raw material stockroom.   It is important to recall the many pre-requisites required to reach this objective.   Vendor quality must be sufficient to bypass incoming inspection (see “vendor certification”).   An alternate method must be put in place to assure vendor part count delivered (see “backflush”).   A simple trigger must be put in place to notify the vendor when it is time to deliver (see “replenishment system”).   And, you’ll need a simple means to get the vendor paid (backflush, line operator sign off, bar codes, fixed quantity parts containers, point of sale terminals, etc.)
        It may also be wise to re-investigate your make-buy policies .   Additional flexibity and responsiveness can often be gained by moving processes in-house where you have greater control.
      • Small, Flexible Machines, Multiple Copies:   There are several advantages to having multiple small machines vs.  one large “mega-machine.”   If the mega-machine is down, all production stops.   If one of the small machines is down, partial production can continue.   The mega-machine runs one product at a time.   Several small machines can run several different products at the same time.   Mega-machines generally have extensive set-up costs (change-over between products).   Smaller machines are usually less complex and lend themselves to quick set-up.   Plus, with several copies of the same small machine, it is often possible to leave one machine set-up on a key product all the time, i.e.  eliminate change over all together!

        Small machines often are simpler than the mega-machine and therefore more reliable and easier to fix.   Mega-machines generally have a fixed output rate and crewing requirements.   It’s either on or off.   Multiple small machines, in contrast, can be crewed to provide variable rates of output.   Note that doing so also keeps the labor costs in line with the actual volume required.

        Note:   If your operation is not already running 24 x 7, you may be able to attain many of these same benefits by increasing the available hours of operation.   This concept is further explained in the articles “Making a Case for Muliple Shifts”, “Alternate Crewing Schedules” and “The Rubber factory”.

      • SMED:  Single Minute Exchange of Dies:   As we reduce inventory, the lot size “rock” will generally appear.   In order to further reduce inventory, we will need to reduce production lot sizes and thereby increase the number of changeovers.   This will cause changeover costs to increase.   As a result, set-up / changeover costs must be reduced.   SMED is a proven set of techniques that allow one to reduce changeover costs.   There are entire books written on the subject.

        The typical process is to form a team involving the equipment operators, set-up people, maintenance, and an outsider or two.   A standard changeover is then video taped.   The team reviews the tape, identifying and challenging all elements.   “Can it be done while the machine is running?   Can it be done better, faster, cheaper?   Do we need all off these screws/nuts?   Can we use quick clamping devices?”   Etc.

        In areas where no previous set-up reduction efforts have been taken, it is quite typical to reduce the changeover times by 50%-75% with little capital outlay.   (See “Quick Change Tooling”)

      •  

        single minute exchange of dies

      • “Solutions Looking For a Problem”… Beware:   We see all too many “lean transitions” begin with this unfocused approach.   “Let’s do a 5S”;   “Let’s re-layout this area”;   “Let’s blitz the stockroom”;   etc.” All too often:   1) The considerable amount of activity and expense involved creates local excitement, but has little or no effect on bottom line results, and/or   2) The effort must be completely un-done when it is discovered that:   the process blitzed should be eliminated;  the area 5S’ed should be re-located;   the re-laid out area must be moved to fit with the overall plan for product flow, etc.

        The problem is not that these endeavors are necessarily wrong.   And it is certainly correct that people will learn from the effort.   The point is that there is a more efficient and effective way of focusing the efforts.

        If you wish to generate cash, reduce lead times, and prioritize your efforts in the most effective manor, use inventory / cycle time reduction to drive the process.   Reducing inventory generates cash.   It also highlights that next “rock” that must be attacked.

        The Hands-On Group’s “Rapid Impact” process utilizes an inventory reduction goal, along with an on-time delivery goal, to drive the improvement process.   As you progress toward these simultaneous objectives, problems will appear.   Kanban installation, SMED initiatives, 5S blitzes, NWT’s, Vendor workshops, Cross training, Manufacturing cells, etc.  are used as & when needed to fix these problems.   The process of driving inventory out of the system acts to prioritize your specific actions.   The specific “tools,” found in this article, are then used to achieve this inventory delta objective.   And, the cash generated through the inventory reduction process will typically more than fund the cost of the transition.

        Lean is about eliminating waste.   Doesn’t it make sense to use a “lean” transition process as well?

      • Source Inspection:   Incoming inspection is a non-value adding activity.   Doing source inspection is a stopgap measure, used until your supplier can install process controls that assure a quality product.   Typical steps include:   Eliminate incoming inspection by imposing source inspection (by your own people at the vendor’s site, by 3rd party folks, or by “certifying one of the vendors people).   Note that the additional expense of doing this inspection is best if it is incurred by the vendor.   Doing so provides an additional incentive for the supplier to implement adequate process controls so as to eliminate this additional expense.   The final step is to move to process control verification, and thereby eliminate both the source inspection and incoming inspection requirements.
      • Staggered Crewing:   refers to a crewing pattern in which not all employees are working the same days/week, e.g.  Joe works Monday – Thursday (10 hours per day), Suzy works Tues – Friday, etc.   The primary purpose of such crewing patterns is to allow greater utilization of the full work-week.   Doing so allows for shorter lead times, reduced space and inventory, and increased equipment and tooling flexibility.   For more detail, check out the articles A case for multiple shifts and Alternate Crewing Patterns.
      • Standardize Parts, Equipment, and Processes.   We worked with a well-respected company making a high volume electro-mechanical product.   After forming a natural work team, one of the operators suggested standardizing the screws for this product.   Further investigation showed that 16 different screw types and/or lengths were required for this one level of assembly!   The natural work team worked with a design engineer, and in two weeks reduced the complexity down to 2 different screws.

        Standardizing reduces procurement costs, complexity, and opportunity for error.   Standardizing equipment reduces spare parts requirements and improves maintenance know-how.   Standardizing processes aids in employee rotation and cross training/flexibility.   And, the impact on quality is obvious.   (See “Value Engineering”)

      • Standard Work:   Generally speaking, there IS a best way to do things.   Involve the people in the evaluation process, document the “best” way, and then teach your people how to do it that way.   Expect that their performance may fall off during the change process until the new method has been fully learned.   (See “Let the Data Decide”)
      • Station Controls (Zone Controls):   A centralized location that provides all necessary information, tools, and supplies required by the work area.   This might include quality charts, go/no-go gauges, measuring devices, clip board and calculator, photos / samples illustrating quality criteria, production cost data, on-time completion data, vacation schedules, goal curves and status, area layout diagram, tooling and supply catalogs, etc.
      • Statistical Process Control (SPC):   A powerful analytic technique for process control, involving the frequent measurement of various product attributes to detect if the production process is drifting out of control.   It involves, as well, the analysis of process capability to verify that the current equipment is capable of holding the desired tolerances.

        In our experience, a similar but much simpler procedure is often adequate:   Divide the tolerance by 4.   Consider the middle two bands around nominal as green.   The outer bands are yellow.   Outside of tolerance is red.   Set up your SPC control charts and actions accordingly.   (See “Six Sigma”)

      •  

        Statistical Process Control (SPC) example chart uses the part tolerance limits

      • Steal with Pride:     Many of the tools and techniques mentioned in this article originated from previous clients.     We have utilized them and/or modified them as required to serve in other applications.

        The point is that it is not necessary to develop all the needed “tricks” by yourself.     Take advantage of the wealth of knowledge already out there.    Attend professional society meetings.

        Send your people to workshops and seminars.

        Participate in plant tours where available.

        One distinct advantage of using experienced consultants is this transference of knowledge capability:     The ability to “steal with pride” non-proprietary tools that can be similarly deployed at other companies and in other industries.     Our 25 years of consulting experience at over 100 client sites has provided us a depth of understanding that is difficult to attain solely from books and seminars.

      • Stockroom Location Systems:   There are many methods for deciding where to put parts within a stockroom, and there are plusses & minuses for each.   A few of the common methods are listed here:   Stocking by Commodity Type will put all resisters in one location, heat sinks in another, etc.   Stocking by Part Number places each part in the correct sequence based on it’s part number.   And Random stocking assigns the location after the part has been put up (first available opening).

        The advantages of commodity and part number methods include ease of training and ease of finding lost parts.   The disadvantages are the poor use of space, and the difficulty in adding new part numbers.   Random location systems maximize the use of the “cube” (warehouse space) but have no logical pattern and depend heavily on correct input of location data into the system.   Most effective warehouses use combinations of the above.   As an example, small parts might be placed in standardized bins in part number order.   A card is then inserted in the bin identifying the location of any “over stock” that would not fit in the bin.   Large or awkward parts are stored in random locations.

      • Stock Rotation:   Methods to assure that “old” stock (inventory) is used/sold prior to newer material.   The ideal stock rotation method is First In, First Out (FIFO) .   Back loading, gravity feeding, flow racks are an example technique to assure stock rotation.
        gravity feed conveyor

      • Stop the line.   Fix the problem:   If you truly seek a quality process, this technique is a must.   The intent is to attempt to permanently fix the process.   Stop the line, identify the root cause, and either fix it, or make certain that a clear responsibility and due date has been assigned (“Who?” “By When?”) to fix the problem, before continuing operation.   Note that the schedule must still be completed on time.   Therefore, a stop of the line will often require overtime.   The company’s willingness to incur this short-term cost to assure a long-term fix sends a clear message to the workforce regarding the commitment to a quality process.

        Walk the talk.

        Caveat:   As processes are linked to one-another via kanbans or other means, this task becomes considerably more difficult to enforce.   Stopping one area, will soon lead to stopping upstream and downstream areas as well.   There will be a temptation to exceed the kanbans and only work overtime in the affected area.   Occasionally this may be justified.   However, be very cautious as to the message being sent to the troops.   Each exception makes the next exception a little easier, and can rapidly lead to a loss of discipline.   (See “failsafe”)   (See “One Perfect Unit Day”)

      • Supermarket:   A central area to draw parts and/or subassemblies.   Supply of parts to the supermarket is typically kanban controlled.   This method is utilized in circumstances that make sequential pull impractical such as the need for immediate off-the-shelf delivery.
      • Supplier Development:   Few companies can become truly world class without the assistance of world-class suppliers.   The typical process involves   1) Evaluate your current suppliers.   2) Eliminate the obvious poor performers.   The typical goal is to have no more than 1 or 2 suppliers for each commodity type.   3) Hold a “supplier day” kickoff meeting.   Explain what the company is trying to achieve, and your expectations of your suppliers.   Establish key measurements and set goal curves for your key suppliers.   4) Assist in supplier training where necessary.   5) Measure all suppliers (lead time, on-time delivery, quality, etc.) and provide on-going feedback.   6) Take corrective actions as / when needed.

        Phase two:   Work with all key suppliers to reduce or eliminate the non-value adding activities typically associated with procurement:   Product packaging, freight costs, receiving transactions, incoming inspection, stocking, accounts payable, record keeping, etc.

        One of our clients posted all vendor performance charts right in the lobby for all to see.

        For additional information, see our article “Lean Supplier Development.”

      • Supply Chain:   The total sequence of process steps and supplier companies involved in the production and sale of an end item.   Most products have multiple supply chains:   one or more for each major commodity used in the final product:   e.g. sheet metal, electronics, hardware, etc.
        Needless to say, every company’s total product cost, quality, and delivery performance is a summation of both their internal operational excellence, as well as that of their entire supply chain.   For this reason, world class companies go through an extensive selection process when choosing their critical suppliers.
        Some industries, such as automotive, have evolved to the point that it is literally one company’s supply chain vs. another’s.
        A complimentary strategy is Vertical Integration:   It can substantially streamline your supply chain IF you can pull it off.   This topic is substantive and will be discussed further in an upcoming article.   Suffice it to say that autonomy, measurements, proprietary processes, the threat of unionization, etc. are all critical considerations.

        Supply Chain Example

      • Takt Time:   This concept is based on the idea of leveling production for efficient use of your resources.   The sales requirement is divided by the planned work hours to arrive at a required rate of production, e.g.  we need to produce one automobile every 60 seconds.   All operations are then targeted to achieve this production rate.   This approach has considerable practical application in industries where demand is level (e.g.   government contracts) or where the company is running at maximum capacity.

        However, it has been our experience that this concept, while a worthy objective, is not very practical in many industries.   With very few exceptions, customers do NOT buy linearly, i.e.  the “takt time” is constantly changing.   This problem has been alleviated in some industries (automotive, etc.) by artificially flattening “demand.”   They accomplish this by establishing a production schedule for some fixed period of time (a week, a month).   Needless to say, if actual demand is varying, and our production schedule is fixed, we must depend on finished goods inventory to take up the difference.   This clearly violates the “PULL” concept of making something only when the customer requests it.   As we shorten lead times and become more responsive to actual customer demand, the concept of takt time becomes less relevant.   Instead, the emphasis needs to be put on flexibility and agility.   (See “Rubber factory” and the post of the same name)

      • Target Costing:   A design / marketing approach whereby the design team is provided cost and feature tradeoffs.   Cost targets are set for the various new product performance levels desired.   The challenge is for the design team to provide viable new product configurations and production methods that will allow the product to be produced at or below the targets set.
      • Teachable Moment:   People learn best when they have a pressing need to know.   Education and training is much more effective when done at a time when people can immediately use the information.   The Lean transition, when correctly done, lends itself to this efficient form of training.   By reducing the inventory throughout the system, problems that were previously hidden will now become painfully apparent.   The ideal time to teach the applicable technique to overcome such a problem is when this problem has become the obstacle.   This is the “teachable moment” when your training will be most effective.   Teach the concepts and technique/s, then immediately go out and apply them.   Learn and do.
      • Teams for Teams Sake.   A large transformer plant had spent a sizable amount of time and money training employees and forming teams.   The teams worried about lots of important issues, like what radio station to pipe into the plant!   When we asked the general manager, “what results have you attained?”   Dead silence!   They had spent a heap of money, and 18 months of time, forming teams and teaching their employees ‘teaming skills’.   What they had NOT done, was create an environment where teaming skills were REQUIRED!   A Lean transition process removes the inventory that hides waste.   This inventory reduction process does two things:   1) It removes the buffer (inventory) that separates operations and thereby forces inter-dependence.   And 2) It exposes meaningful problems that the natural work teams need to address.   Employees are forced to communicate and coordinate like never before.   Teaming efforts become focused on the problems that the inventory reduction process surfaces.

        The point is:   Don’t form teams just to form teams.   Drive out the inventory, and natural work teams will automatically occur.   Teach the teaming skills as/when the need arises.   Not before.   This issue and others are discussed in more depth in our article “How to Screw Up a Lean Transition.”

        (Also see “Teachable Moment”)

      • Test a New Layout By Removing Excess WIP:   Rather than wait until the level of WIP can be worked down to the target levels, we have found it practical, in some applications, to remove the WIP, test out the new process, and then slowly feed back the WIP to remove it from the system.
      • Thank You Note in the Local Newspaper:   A client of ours ran into a serious procurement problem.
        However, their key supplier was able to jump through some hoops and bail our client out of their jam.   As a way to show their appreciation, our client placed a large “Thank You” ad in the local newspaper in the supplier’s hometown.   Needless to say, it was warmly received by all.

        When a salesman from the supplier called our client to say thanks, he was told “Wait ‘til you see the ad we have if you screw up!”

        Remember:   Companies don’t do things; people do.   A little appreciation can go a long way in achieving sustainable world-class performance.

      • Theory of Constraints:   The idea is to focus all efforts on improving the output of the bottleneck.   And as such, it is a simple, fundamental, and powerful concept.   As an example, we were working with a steel mill client that had a true bottleneck at its cold mill.   The first thing we did was to “optimize” the cold mill rolling schedule (the sequence in which the various coils of steel would be rolled).   We then pushed that identical schedule, to the extent possible, upon all upstream and downstream operations.   This schedule reduced the efficiency of some non-bottleneck operations, but increased overall efficiency of the mill, while still allowing steel to flow rapidly through the entire process.

        Like so many other good tools, this one is also subject to abuse.   TOC becomes pretty trivial in environments that are not truly capacity constrained.   The constraint, per the literature, is now lack of sales.   Not much of a revelation!   (See “Bottleneck”, “Optimize the Whole” and “Scheduling:  Upstream & Downstream From a Bottleneck”).

      • Theory X / Theory Y:   Two contrasting management theories / philosophies based on the 1960’s work of author Douglas McGregor.   Theory X believes that people don’t want to work and will avoid it unless forced (the “cattle prod” approach!).   Theory Y says that people have an innate desire to achieve and will seek responsibility if the environment is supportive.

        We have been working with companies since 1988, and we’ve seen both extremes.   We have seen companies abuse Theory Y:   They provided no guidance as to what the company needs to achieve, no time frames for achievement, and no accountabilities.   And, we’ve worked in companies that were so Theory X that people were afraid to make any decision, and would wait for specific direction for the most mundane of tasks.

        Theory Y does not absolve management of their responsibility to set direction and provide clear objectives and accountabilities.   And, Theory Y is situational:   Responsibility must be doled out as the group / individual has grown to accept and handle it.   In most organizations, the best balance has proven to be:   “Management decides what needs to be done.   Employees are provided considerable latitude in HOW those objectives are to be achieved.”

      • Time Lapse Video:   One of our clients had traffic flow problems in their facility.   We mounted a video camera near the ceiling where it could see just about the entire shop floor, set it on time lapse, and let it run for a full shift.   The next day, it took less than an hour of watch the tape to clearly identify the issues, and generate a list of solutions.
      • Top Management Advisory Council, TMAC:   A Lean transition impacts all areas of the company, and as such, the effort is best led by top management.   The TMAC is top management’s forum for monitoring and controlling the lean transition process.   Team members typically include the CEO and his/her staff.   The TMAC reviews the progress that has been made vs.  the goals that they have set.   We recommend that these review meetings be incorporated into the normal weekly staff meetings.   This regular meeting, along with the appropriate presentation of the goal curves and “actuals” provides the control mechanism needed for top management to truly steer the lean transformation process.   (See “Goal Curves” and “Cause and Corrective Action”)
      • Total Cost of Purchase:     A measurement of purchased items that, in addition to the suppliers’ price, includes the associated “hidden” costs:     Transaction costs,   Freight,   De-trashing (getting rid of packaging material),   Receiving,   Incoming inspection,   Stocking,   Record keeping,   Pulling the material from stock,   Shrinkage,   etc.

        In general, Total Cost of Purchase is a far superior measurement than standard PPV (Purchase Price Variance).     Lean Manufacturing focuses on reducing the Total Cost.

        • Total Productive Maintenance (TPM):   AKA Preventative Maintenance, Scheduled Maintenance.   The concept of preventing equipment failure or downtime by doing all necessary lubrication, parts replacement, etc.  as and when needed, i.e.  prior to failure.   There is an entire discipline related to this subject, and multiple excellent books that expand on the details.  
        • Total Quality:   Form, fit, and function are no longer sufficient criteria for “quality”.   A quality product is just the beginning.   It must be the right product, complete, and with all the requested options.   It must also have reliability, cosmetic appeal, attractive packaging, ship with the correct paperwork, to the right location, to the attention of the appropriate person, at the right time.   The order should ship complete.   The billing should go to the correct address, and have the correct price and terms.   Today, the term “quality” must be expanded to encompass all aspects of the process that effect overall customer satisfaction.  
          For a more in-depth discussion of the linkages between “Lean Manufacturing” and “Total Quality” see our article Total Quality Lean.
          (See “Inventory & Quality”)
        • Total Quality Lean:   The philosophy and set of Lean techniques that are fundamental to World Class quality performance.   Lean methodology minimizes inventory, and thereby, lead times throughout the value stream.   Minimal inventory means minimal defects when a process problem does occur.   Minimum lead times also mean that a defect will be quickly discovered, thereby aiding in identifying the root cause.   A more thorough explanation can be found in the article ”Total Quality Lean”

          Multiple Lean techniques provide additional robustness to the entire quality process:  Sequential inspection, failsafe devices, stop the line / fix the problem, etc.

        • Total Quality Management (TQM):   Systems / methodologies used to assure that internal and external processes will provide “Total Quality”.   (See “Total Quality”)
        • Training:  Do a Chapter a Week: There is an incredible amount of Lean and related information available today in the public domain.   The problem is no longer availability, it is getting the time and commitment to read and absorb such information.   One simple, yet powerful technique is to ask people to “swallow the elephant” by reading one chapter each week.   Select some good books / articles and schedule a regular weekly discussion session to talk about the week’s assignment.   Use targeted questions, e.g.  “How is this concept applicable to our environment?”   A variation of this approach is to provide audiotapes / CD’s of the material.   This allows employees to “read” the assignment while in the car during the commute to work.
        • Trial Kitting:   A software routine, provided in most MRP / ERP systems.   It is a very useful tool.   The idea is for the computer to, on paper, “pull” the parts for all scheduled assemblies, to see what kits can be pulled “complete” and what parts shortages affect the other assemblies.   Typically, the software will identify shortages, by assembly, and show the promise dates for each shortage.   It allows management to see what can actually be build from the existing on-hand inventory without having to physically pull parts.
        • Two-Bin System:   A simple form of kanban control.   Parts or assemblies are kept in two bins (or bags, or boxes, etc.)   When one bin empties, it signals the need to buy or make more.   The 2nd bin provides parts to cover demand during the replenishment cycle.   (see “Replenishment System”)     Note:  There is a simple but powerful graphic demonstration of a two-bin system available on our sister site, tpslean.com.
        • Under-Capacity Planning:   The general rule is to never book the plant to 100% of demonstrated capacity (24 x 7).   Some reserve capacity is needed to assure delivery performance.   On-time delivery must be considered an absolute requirement.   Reserve some capacity for the unforeseen happenstance.   Pull work forward if needed so that there is no capacity lost if things go well.   (See “”Opportunity Capacity”)
        • Unit of Measure:   An inventory control term that designates what kind of measurement is being used for each item (SKU).   Typical Units of Measure include “each” or “piece” meaning a count of the number of individual parts / units;   Units of length (feet, meters, etc.);   Volume Measures such as gallons, liters, etc.;   Weight, such as pounds, tons, etc.
          A Unit of Measure is designated for every part / Stock Keeping Unit (SKU) and is generally found on the Part Master File in a company’s ERP system.

          • Unit Optimization:   A measurement and reward system that encourages “optimization” of individual operating units / departments.

            The typical measurement is the unit cost (or labor hours per piece) required to get a product through each production unit.   Management and operators are measured and rewarded for producing product through their department at the lowest processing cost.   In the metal producing industries it is commonly referred to as “Tons per Hour.”

            Using a “unit optimization” reward system is almost always an obstacle to overall company optimization and inhibits the successful transistion to a Lean Operating Environment.   The reasons are fully explained in our post “How to Optimize your Entire Plant.”   This is one of the measurements that you’ll likely want to get rid of.

          • U shaped cells:   Removing the cues from between operations allows equipment to be located next to one another.   Arranging such equipment in a U shaped cell provides several advantages.   Product begins and ends on the same aisle.   The shape enhances communication.   And, a U shaped cell minimizes travel distance, i.e.  one operator can “walk” the product through the cell if / when needed.   NOTE:   There is an illustration of a U shaped cell at “Cellular Manufacturing”.   (Also see “Single Piece Flow”)
          • Value Add:   Those process steps that the customer would be willing to pay for.   Most production steps are value adding.   Non-value adding steps are things that do not alter the fit, form, or function of the product.   Examples of non-value adding activities include receiving, inspections, transaction processing, transportation, de-trashing, product movement, storage, etc.   One objective of Lean is the reduction / elimination of all non-value activities.   (See “Waste”)
          • Value Engineering:   An engineering effort focused on improving existing products.   The term is generally used to denote a focus on cost take-out while retaining product functionality.
          • Value Engineering:   Providing the Time and Resources.   We worked with several Engineer-to-Order clients.   In each we heard a similar theme:   “We don’t have time to do any value engineering” and in the very next breath we hear “We always keep a backlog of engineering work to assure are engineers are efficient”.

            Think of the engineering workload as a sine wave with peaks and valleys.   Most companies staff the engineering department to handle the average workload.   Backlog buffers the peaks and valleys so all engineers are pretty much constantly doing design engineering.   If, however, you man at a level closer to the peak load, backlogs can be kept low (quicker turn around of designs) and the “idle time” can be used for value engineering, product enhancement, new product development, etc.

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            Staffing engineering closer to peak demand allows time for value engineering

          • Value Stream:   The entire chain of participants, from basic raw material to the ultimate consumer.   It involves suppliers, customers, wholesalers/distributors, retailers, and transportation steps.   Since the ultimate consumer price is a function of the cumulative costs of the entire value stream, streamlining it becomes critical.   In many industries, the competitive environment has boiled down to one industry leader’s value stream vs. another.

            On a more narrow perspective, “value stream” is also used to denote the entire stream of activities required to move a product through the internal processes and activities within a company.

          • Value Stream Mapping:   The process of flow-charting all activities required to move a product through the value stream.   The focus is then on identifying and removing/reducing the non-value adding activities.
          • Vendor Certification:   The process of validating that a supplier has put in place all necessary process controls required to assure that their products will arrive “fit for use” at the customer’s site.   The purpose is two fold:  verify quality so that incoming inspection can be eliminated, and assist your suppliers with process control thereby reducing costs and increasing reliability.

            (See “Source Inspection”)

            Here is a vendor checklist to help start the process.

          • Vendor Stocking Programs:   Have the suppliers provide components without the need of the customer to place an order.   This powerful technique can effectively remove/reduce several categories of non-value adding activities:   requirements planning, procurement, receiving, receiving inspection, stocking, etc.   We have had several clients gain 100% of a new customer’s business while charging higher prices!   They did this by eliminating many of the customers procurement costs, thereby reducing the “total cost of purchase” for their new customer.
          • Vertical Integration:   Combining several, typically separate, processing steps within a company.   For example, many electro-mechanical assembly companies will buy their fabricated parts and/or electronic subassemblies, from outside suppliers.   A vertically integrated company would produce such component parts in-house, either at the same facility, or at a separate location.

            Vertical Integration Example for an appliance
            The advantages can include the elimination of the supplier’s profit, reduced packaging and transportation costs, spreading of overhead, etc.   From a purely lean point of view, vertical integration can accomplish the elimination of a considerable amount of non-value adding activities.
            There are, however, many disadvantages that must be considered.   These include the likely need for expanded areas of expertise (loss of focus), a possible lack of process and patent rights, introduction of internal transfer pricing and associated accounting ramifications, and the increased risk of being targeted for unionization.

          • Video Kanban:   How do you get the replenishment signal to a distant supplying department?   Using cheap TV cameras and monitors can greatly enhance a simple traditional kanban system.   Position the camera and monitors such that your fork truck driver can see the kanbans as well as any comments/notes via flip chart or white board.
          • Visible Data:   Keep all pertinent data clearly visible at the work area:   schedule, quality criteria, inventory lever vs.  goal, on-time completions vs. goal, cross training matrix, notes from the previous shift, tolerances, work instructions, sample boards, etc.   (See “Problem / Idea Charts”)
          • Volume Discount:   See “Column Pricing”
          • Wall of Fame:   Employee recognition is a powerful motivator.   One of our clients posted photos of the various work teams, their names, and short story of their successes on a corkboard in the cafeteria where all could see it.
          • Walkie-Talkies for maintenance operators:   On large pieces of equipment, it is often essential for the maintenance operators to communicate sight unseen (for both efficiency and safety).   Hands-free walkie-talkie sets can be a helpful tool.
          • Walk the Talk:   What you say will be of far less impact than what you do.   Your people will watch you closely to see if you really are willing to do as you say.   There will be incidents where making an exception to the principles may make good business sense.   However, make sure you weigh the impact on perceptions when making any such decision.
          • Walk to the Work Station:   This technique works well for infrequently built assemblies.   Workstations are set up with all parts needed to produce one or more various sub-assemblies.   Kanban signals are used to indicate when a sub-assembly needs to be replaced.   Then an operator walks to the station and produces it.
          • War Room / Strategy Room:   We try to equip at least one meeting room with the typical tools needed for productive team meetings.   This includes things like plant layouts, goal curves with current status, computer/s with access to the company data base and the internet, telephone with speaker, flip charts, white boards, plenty of markers, masking tape, note pads and pencils, scissors, and a projector.

            Ideally, this room is dedicated to the lean improvement process so that the charts, notes, layouts, etc. can remain on the walls between meetings.

          • Waste:   Anything that does not add value, from the customer’s perspective.   Ask the questions:  “Would the customer pay extra for us to do this?”   “Would the customer care if we eliminated this activity?”   Constantly push to minimize / eliminate all non-value adding activities from the entire value stream.   Note that there are likely going to be certain activities that still must be done that do not add value.   (See “Value Add”)
          • What Would You Do If You Were In Charge?   I recall, early in my career, complaining to my boss about how this and that were screwed up.   He asked this question.   “What would you do if you were in charge?” I told him several things that I’d change.   Then he said… “So why don’t you change them?   Go see the appropriate people.   Take the time to present your case.”   All good advice.   (See “90% of Authority is Assumed”)
          • Who, By When.   Make this a mandatory meeting procedure.   Try not to leave an item of discussion without attaining:   Who? Is to do something, and:     By When? Is it to be done.   Record each commitment.   Follow-up.   Enforce Accountability.   NOTE:   There is an illustration of a simple visual recording device at “Problem – Idea Chart.” (Also see “Doneness Criteria”)
          • Work In Process / Work In Progress (WIP):   The total inventory inside a manufacturing company is typically divided into three major components:   Raw Material, Work In Process (WIP), and Finished Goods.   WIP, the Work In Process portion, is that material that has begun work, i.e.  it is “in process” of being transformed from raw material into a finished product.   During the WIP process, the product (or job) will acquire labor (and shop overhead) in addition to the value of the raw material.

            In practice, WIP is the designation of material that has been issued to the shop floor (often in the form of a kit).  It is no longer considered WIP when it is completed and “closed” to finished goods.

            From a Lean perspective, WIP is extremely important.   It is the area over which we have the most control.   The amount of Work in Process directly affects the time required to get a product through all manufacturing processes (lead time).   It hides defects and delays their discovery.   It adds complexity.   And it hides scheduling and process problems.

            Pressure to reduce WIP can be used to force a culture of continuous improvement..

          • Workplace Layout.   Utilize all 3 dimensions.   Some companies have effectively used pallet racking over the workstation as a place to store point of use inventory.   Take the time to look above and below work areas for needed storage.
          • World Class Manufacturing:   A general term encompassing “lean” and all associated disciplines to describe “best in class” performance in all areas.   I’d highly recommend Richard Schonberger’s classic book “World Class Manufacturing”
          • Zero Defects:   A quality initiative based on fail-safeing all processes.   The premise is that all defects are related to flaws in the process, and that it is theoretically possible to create processes robust enough to literally eliminate defects.   (See “Fail Safe”)
          • Zero Inventory:   An earlier name for “Lean Manufacturing.”   See the excellent book “Zero Inventory” by Bob Hall.
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            Note:  For Tools in the A – L Range, click here.

            “As a company, we need to be faster in all kinds of ways–faster to decide, faster to choose, faster to act….   We need to take more risks, act on less perfect information.”

            Worth Magazine 2000/02

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