Lean Manufacturing: Business Bottom-Line Based Book

Preface

About the Author

1 Introduction: Five Stages of Lean Manufacturing 1

1.1 Lean Manufacturing 1

1.2 Industrial Dynamics and Bullwhip Effect 3

1.3 Three Toolboxes for Lean Manufacturing 5

1.3.1 Toolbox 1: From 5S to Kanban 5

1.3.1.1 The 5S System 5

1.3.1.2 Cellular Manufacturing 6

1.3.1.3 Kaizen 7

1.3.1.4 Kanban 7

1.3.2 Toolbox 2: From Lean Metrics to Standard Rate 8

1.3.2.1 Lean Office 8

1.3.2.2 Single Minute Exchange of Die (SMED) 8

1.3.3 Toolbox 3: From Takt Time to Workflow Diagram 8

1.3.3.1 Total Productive Maintenance 10

1.3.3.2 Value Stream Mapping 11

1.4 Let's Play a "Lean" Game: Manufacturing a Gyrocopter 11

1.4.1 Materials, Tools, and Steps for Manufacturing Gyrocopter 12

1.4.2 Establish an Assembly Line for Manufacturing Gyrocopters 13

1.4.3 Develop Cost Function for Manufacturing Gyrocopters 13

1.4.4 Ground Rules and Course for Playing the Lean Manufacturing Game 15

1.4.4.1 Ground Rules 15

1.4.4.2 Course of the Game 16

1.4.4.3 End the Game 17

1.4.5 Bullwhip Effect Typical Results for Playing the Lean Manufacturing Game 17

1.5 Five Stages of Lean Manufacturing: Business Bottom-Line Based 19

2 Put Business Bottom Line First: Tranfer Function for Production Cost 23

2.1 Production Transfer Function 23

2.2 Short-Term vs. Long-Term Production Transfer Functions 24

2.2.1 Lean Manufacturing: Optimize Short-Term Production Transfer Function 24

2.2.2 Six Sigma: Optimize Long-Term Production Transfer Function 24

2.3 Short-Term Transfer Function for Production 25

2.4 Transfer Function for Marginal Cost 27

2.5 The Law of Dininishing Returns: Key to Understanding Lean Manufacturing 29

2.6 Transfer Function for Average Fixed Cost 30

2.7 Transfer Function for Average Variable Cost 32

2.8 Transfer Function for Average Total Cost 33

2.9 Transfer Function for Long-Term Cost Analysis 35

2.10 Goal Tree and Success Analysis: From Goal Setting to Successful Goal Setting 38

3 Understanding the Voice of Customers: The Essential Elements 43

3.1 Voice of Customers: Relentlessly Customer Focused 43

3.2 Voice-of-Customers Capability: Critical Elements 45

3.2.1 Top-Level Leadership and Sponsorship 46

3.2.2 Turn Voice of Custmers into Stories with Business Values 46

3.2.3 Independent but with Traction across the Organisation and Beyond 47

3.2.4 Strategic Asset Informing Policy, Strategy, Operations, and Communications 47

3.2.5 Right Level and Mix of skills and Experience in the Team and Wider Networks 48

3.3 Voice of Customer's Role and Responsibilities 49

3.4 Analyzing Voice of Customers: Law of Demand 50

3.4.1 The Law of Diminishig Marginal Utility 51

3.4.2 The Law of Eque-Marginal Utility per Dollar 51

3.4.3 Condition of Consumer Optimum: Utility Maximization 53

3.5 Maximizing Utility to Customers 53

3.5.1 Use Indifference Curve to Represent Customers' Level of Perference 54

3.5.1.1 Degree of Substitution 54

3.5.1.2 Perfect Substitution 55

3.5.1.3 Perfect Complements 56

3.5.2 Use Budget Line to Reflect Customers' Purchase Power 57

3.5.2.1 Budget Line, Consumption Possibility Line, budget Constraint 57

3.5.2.2 Budget Equation 58

3.5.2.3 Shifts of Budget Line 58

3.5.2.4 A Change in Prices 59

3.5.2.5 A Change in Income 59

3.5.2.6 Cunsumer Optimum 60

3.6 Kano Model: Integrate the Elements for Voice of Customers 61

4 Balance Production and Demand: Value Stream Mapping 63

4.1 What Are Value Stream? 63

4.2 What Is Value Stream Mapping? 64

4.3 How to Complete Value Stream Mapping 66

4.4 Guidelines for Developing Value Stream Mapping 68

4.5 Kaizen Event Analysis for Value Stream Mapping 71

4.5.1 Purpose 71

4.5.2 Benefits 71

4.5.3 Kaizen Event Analysis Guideline 72

4.6 Business Bottom-Line Analysis of Value Streams 73

4.6.1 Value Stream Measures 74

4.6.2 Traditional Product-Costing Systems: Problems with Overhead 76

4.6.3 Activity-Based Costing (ABC) 77

4.6.4 How Is Activity-Based Costing Different From Traditional Product Costing 79

5 From Lognormal to Cobb-Douglas Distribution: Lean Production Analysis 83

5.1 Technology: The Production Function 83

5.2 Long-Run Production Function 84

5.2.1 Long-Run Production Function 85

5.2.2 Short-Run Production Function 86

5.3 Three Stages of Production 87

5.4 Lognormal Distribution 92

5.5 Cobb-Douglas Production Function 94

5.6 Quantifying Additional Profit from Productivity Gains 96

5.6.1 Could Sell More Products if Produced More 97

5.6.2 Could Not Sell More Products if Produced More 97

5.7 Total Factor Productivity 98

5.7.1 Constant Returns to Scale 98

5.7.2 Assess Total Factor Productivity 99

5.7.3 New Product Development: Demands for Factor Inputs 101

6 Business Cycles and Demand Fluctuations: Time-Critical Analysis and Decision Making 103

6.1 Business Cycles and Demand Fluctuations 103

6.2 Regression Analysis: Understanding Customer Demand Statistically 107

6.2.1 Demand Forecasting on Binary Scale 110

6.2.2 Demand Forecasting on Ordinal Scale 112

6.2.3 Demand Forecasting on Count Scale 113

6.3 What Is Time Series Analysis? 114

6.3.1 Trend 115

6.3.2 Seasonal 117

6.4 Smoothing Techniques 118

6.4.1 Single Exponential Smoothing 119

6.4.2 Double Exponential Smoothing 122

6.4.3 Holt-Winters with an Additive Seasonal Term 123

6.5 Summary 123

7 How Demand Fluctuation and "Exogenous Shocks" Influence the Bottom Line 125

7.1 How to Shockproof Your Company: A Lesson from Frank Lloyd Wright 125

7.2 Business Risk Assessment 129

7.3 Risk Quadrant Chart 130

7.4 Develop a Business Risk Management Plan 136

7.4.1 Why Would You Develop a Risk Management Plan and Risk Mangement Table? 137

7.4.2 When Would You Develop a Risk Management Plan? 137

7.4.3 How Do You Develop a Risk Management Plan? 137

7.4.3.1 Step 1 Idenitify the Risks 138

7.4.3.2 Step 2 Analyze and Evaluate the Risks 138

7.4.3.3 Step 3 How Will You Manage or Treat the Risks? 139

7.4.3.4 Step 4 Monitor and Review Risks 140

7.4.4 Also Remember: Communicate and Consult 141

7.4.5 Who Is Responsible? 141

7.4.6 Who Has Ultimate Accountability? 141

7.4.7 Who Approves the Risk Management Plan? 142

7.5 Risk Assessment Matrix 142

7.5.1 Examples of Application of a Risk Assessement Matrix 143

8 Lean Production: Business Bottom-Line Based 145

8.1 Approach for Identifying Productivity Improvements 145

8.1.1 Process Flow Diagram 145

8.1.2 Inventory and Material Purchases 145

8.1.3 Cellular Manufacturing 146

8.1.4 Material Flow 146

8.1.5 Automation 146

8.1.6 Quick Changeover 146

8.1.7 Quality Control 146

8.1.8 Preventive Maintenance 146

8.2 Quantifying Additional Profit from Productivity Gains 147

8.2.1 Productivity Improvement: Could Sell More Products if Produced More 148

8.2.2 Inventory Cost: Couldn't Sell More Products if Produced More 148

8.3 Case Study of a Gyrocopter Manufacturer: Improving Profitability 149

8.3.1 Productivity Index as a Measure of Profitability 149

8.3.2 Change the Right Things 150

8.3.3 Green Manufacturing: Maintaining the Value of Gyrocopter Products 151

8.3.4 Reduce Changeover Time on the Gyrocopter Assembly Processes 151

8.3.4.1 Estimated Savings Reduce Changeover Time 152

8.3.4.2 Estimated Implementation Cost 154

8.3.4.3 Estimated Simple Payback 154

8.3.4.4 Recommendation 154

8.4 Implement Cellular Manufacturing 154

8.4.1 How to Incorporate Cellular Manufacturing 155

8.4.2 Benefits of Cellular Manufaturing 156

8.5 Example of Cellular Manufacturing: Organize Gyrocopter Production Equipment into Cells to Reduce Inventory and Process Time 157

8.5.1 Estimated Savings 159

8.5.2 Estimated Implementation Cost 159

8.5.3 Estimated Simple Payback 160

8.6 Example of Gyrocopter Manufacturing: Eliminate Intermediate Spooling Operation 160

8.6.1 Estimated Savings 160

8.6.1.1 Increased Output 160

8.6.1.2 Labor Savings 161

8.6.1.3 Reduction of WIP Inventory 162

8.6.1.4 Other Savings 162

8.6.1.5 Total Cost Savings 162

8.6.2 Estimated Implementation Cost 162

8.6.3 Simple Payback 163

9 Manage Production and Inventory Costs 165

9.1 Theory of Constraints: "The Drum Is a Bottleneck" 165

9.2 Identifying and Exploring Constraints 166

9.3 The Five Focusing Steps and the Continuous Improvement Goal 167

9.4 The General Application of Theory of Constraints to Operations: Drum-Buffer-Rope Approach 168

9.5 Plant Types for Operations 171

9.6 The Thinking Processes for Implementing Theory of Constraints 172

9.7 Learning as Actively Addressing Constraints 173

9.8 Learning to Negotiate the Meaning of Constraints 175

9.9 Accounting Systems for Lean Manufacturing 176

9.9.1 Minimal Path Sets 177

9.9.2 Socratic Method 178

9.10 Case Study: Marion Gyrocopter Corporation (MGC) 180

9.10.1 What Is the Problem? 180

9.10.2 How Do You Know? 180

9.10.3 What Is Our Recommendation? 180

9.10.4 How to Change? 180

9.10.5 What Is Your Expected Result? 181

9.11 Conclusion about the Case Study 183

10 Kanban: Align Manufacturing Flow with Demand Pull 185

10.1 Kanban-Based Systems 185

10.2 Why Use Kanban? 188

10.3 How Kanban Works 189

10.4 The Rules for Kanban 190

10.5 Steps for Implementing Kanban 191

10.6 Types of Kanban 193

10.6.1 Dual-Card Kanban 193

10.6.2 Single-Card Kanban 193

10.7 Kanban Development 193

10.8 Kanban Design to Achieve Manufacturing System Objectives 194

10.8.1 Unit Cost Coupled with Operation-Focused Engineering 195

10.8.2 The Manufacturing System Design Decomposition 196

10.9 Kanban Card Calculation 200

10.10 Summary 203

11 Jidoka: Implement Lean Manufacturing with Automation 205

11.1 What Is Jidoka? 205

11.2 Ladder Logic: A Tool to Implement Jidoka 206

11.3 Boolean Functions for Ladder Logic 210

11.4 Implement Jidoka Using Ladder Logic 213

11.4.1 Logic Operations in Ladder Diagrams 213

11.4.2 Implementation of Ladder Diagrams 216

11.5 Additional Functionality for Manufacturing Autonomation 216

12 Pull System, One-Piece Flow, and Single Minute Exchange of Die (SMED) 221

12.1 Establish a Pull System 221

12.1.1 What Is a Push System? 221

12.1.2 What Is a Pull System? 222

12.2 Why Use Pull Systems and One-Piece Flow? 222

12.3 Overcome Barriers: Two Old Beliefs 223

12.3.1 Inventory Protects 223

12.3.2 Large Batches Reduce Changeover Time 224

12.3.3 Invetory Hides Problems 224

12.3.4 Reduce Changeover Time by Reducing Changeover Time 224

12.4 Single Minute Exchange of Die (SMED) 225

12.5 How to Implement Single Minute Exchange of Die (SMED) 227

12.5.1 Formal Method 228

12.5.2 Key Elements to Observe 228

12.5.3 Effects of Implementation 229

12.6 Case Study: Flow Management of an Integrated Circuit Packaging Work-in-Process System 230

12.6.1 Bill of Materials (BOM) 232

12.6.2 Data Mining 232

12.6.3 Computer-Integrated Manufacturing (CIM) 232

12.6.4 Semiconductor Manufacture Processes 232

12.6.5 Data Mining 233

12.6.6 Ant Colony Optimization 234

12.6.7 Run-to-Run Control 234

13 Lean Manufacturing Business Scorecards 237

13.1 What Are Lean Manufacturing Business Scorecards? 237

13.2 How Have Lean Manufacturing Business Scorecards Been Evolved? 238

13.3 Lean Manufacturing Business Scorecard for Planning and Policy Deployment 240

13.3.1 Business Plan Process 242

13.3.2 Manufacturing Councils 242

13.3.3 Policy Deployment 242

13.3.4 Marion Production System (MPS) 243

13.3.5 Total Productive Maintenance (TPM) 244

13.3.6 Manufacturing Engineering (ME) 244

13.3.7 Energy Management Efficiency Program 245

13.4 Lean Manufacturing Business Scorecards for Problem Solving and Continuous Improvement 245

13.4.1 Dashboards 246

13.4.2 Scorecards 246

13.4.3 Total Value Management (TVM) 247

13.4.4 Single Point Lessons (SPLs) 247

13.4.5 Shutdown Monitoring 248

13.4.6 Best Practice Replication 248

13.4.7 Six Sigma 248

13.4.7.1 Define 248

13.4.7.2 Measure 249

13.4.7.3 Analyze 249

13.4.7.4 Improve 249

13.4.7.5 Control 250

13.5 Building the Business Intelligence Strategy 250

Bibliography 255

Index 259