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Operational Efficiency

When a process is analyzed, “red flag conditions” may be found. Red flag conditions are frequent changes to a job, overly complex processes, operations lacking work and inspection standards, poor measurement systems, lack of employee training, or long lead times between jobs. If order-to-delivery lead times are long or jobs are infrequently scheduled, special causes of variation may act on a process. Other red flag conditions are poor employee morale or poor working environment related to lighting, cleanliness, visual perception, or noise; in situations in which capacity is constrained, equipment and people may be pushed to their operational limits. Some of these red flag conditions could exist within a process.

At an operational level, the effects of red flag conditions may be longer lead times, high per-unit costs, and lower quality. As an example, high inventory could be caused by waiting for materials or people. Waiting could be caused by poorly trained associates, or cluttered workstations could make it difficult to find the materials. Or there could be unnecessary movement of materials because they do not have an assigned location and associates must search for them. Other effects include creation of NVA operations, batching of work, redundant controls, inefficient machine or job setups, ambiguous goals, poorly designed work and inspection instructions, outdated technology, a lack of useful information to execute work tasks, poor communication between associates, limited or poor coordination of resources, ineffective training especially with respect to crossfunctional skills, and higher process complexity.

Red flag conditions contribute to error conditions that in turn contribute to errors. As an example, in noisy and cluttered work environments, people lose focus and may start to work a job but fail to choose the right components because of distractions. This red flag condition has created an error condition. If an associate does not see the error and uses the component, then an error or defect is created. The consideration now becomes how soon will the defect be found. If it reaches a customer, the costs are higher than if it is immediately found. Knowing that red flag conditions exist enables them to be eliminated, along with their associated error conditions. Quality and lead times are immediately improved.

There are many other proven tools and methods to identify the process improvements that help improve operational efficiency. Table 6.6 summarizes these. Capacity planning helps ensure capacity is matched to actual demand. Capacity utilization rates differ by industry. Processintensive industries such as paper manufacturing or oil and gasoline refining are designed to operate at a 95%+ utilization rate and have products designed for continuous changeovers (e.g., changing the ratios of raw materials in a blend on the fly). These production systems are continuous. Call centers also have high capacity utilization because work can be distributed over many agents by technology. Their capacity utilization rates often exceed 95%. Incoming demand can be balanced by rerouting the volume to other call centers in the same network but currently at a lower utilization level.

In batch manufacturing, capacity utilization is still matched to demand using Lean methods such as takt time and the careful scheduling and movement of work through their systems using visual or electronic queuing. In these systems, utilization varies with the ability of an organization to effectively match resources to demand. What is not preferred is the historically poor practice of loading a system to produce at high utilization rates and increasing inventory unless it is done for strategic purposes or because the system has design constraints. Lead time between subsequent production increases as inventory is built, thus reducing scheduling flexibility and increasing waiting time. Producing at high utilization rates may also push equipment and workers to a point where quality problems start to occur. Products may need to be scrapped or reworked and additional work added to schedules to meet customer requirements.

Table 6.6 has several other useful tools and methods. Process mapping helps us visualize the relationships between operations. Then we can apply a value-add lens to the process to eliminate nonessential operations. As discussed previously, the takt time ensures customer demand is satisfied even if a process is initially inefficient. Then standardizing work, mistake-proofing processes, continuing preventive maintenance, practicing quality improvement, utilizing specialized scheduling methods, reducing lead time (e.g., using SMED), cross-training employees, and reporting metrics are introduced to balance flow, meet external demand,


Ten Lean Tools and Methods

Tool or Methods

1. Implement capacity planning (resources to meet demand).

2. Utilize process mapping and simplification (operational-spatial relationship).

3. Calculate takt time calculation (production per time).

4. Standardize work (used to balance flow).

5. Mistake-proof processes (used to stabilize takt time).

6. Continue preventative maintenance.

7. Maintain high quality in product and process design (do it right the first time).

8. Constantly reduce lead time through application of single-minute exchange of dies, transfer batching, mixed-model scheduling, and other methods (reduce lead time).

9. Continually cross-train employees and empower them within their local work groups.

10. Establish performance measurements and visual controls (constant improvement).


Bottleneck management.

and improve operational efficiency. We will discuss these later in this chapter.

Next, the system’s bottleneck and capacity-constrained resources need to be managed. Figure 6.6 shows several bottleneck scenarios. In scenario A, a bottleneck is feeding a non-bottleneck resource. The throughput through the downstream resource needs to be balanced with the bottleneck throughput. To ensure operational efficiency, the downstream operation should be utilized at the same rate as the bottleneck (assuming equal production rates). In scenario B, the bottleneck is downstream of the non-bottleneck. The utilization rate of the non-bottleneck resource must match that of the bottleneck. The same utilization strategy is applied in scenario C, except that the two operations run in parallel. The throughput rate of the non-bottleneck must be balanced to the bottleneck resource. There is a final configuration, not shown in Figure 6.6, in which a bottleneck feeds several non-bottleneck resources. Ensuring that a bottleneck resource is fully utilized will increase the throughput of the process workflow and reduce lead time.

Transfer batches are an important strategy for reducing lead time. In a transfer batch production system, as opposed to one that uses a process batch, units (or material or information) are moved downstream to subsequent workstations as soon as they are built. In other words, they are not batched. Depending on the number of units in a batch, lead time reductions of 50% or more are attainable across all production operations. The example shown in Figure 6.7 shows that each unit requires one minute of work at each of the four workstations. If 100 units are moved through each of the workstations as a batch, the total throughout time through the four sequential operations using a process batch system, is 400 minutes or 100 minutes + 100 minutes +100 minutes +100 minutes. Using a transfer batch system, in which each unit is transferred to the downstream workstation as it is completed, results in a throughput time of just 103 minutes or 100 minutes + 1 minute + 1 minute + 1 minute. This is a throughput time reduction of approximately 74%. Transfer batches also increase quality compared to a process batch system because defects are immediately found by the next downstream operation. This helps prevent excessive scrap or rework.

A third major method used to reduce lead time is quick response manufacturing (QRM). QRM is used to reduce lead time in master production schedule (MPS) and materials requirements planning (MRP) systems. QRM dynamically matches demand, causing scheduling changes to available resources by providing lower-level operations (i.e., work cells) with updated demand information. QRM is an adjunct to (MRP) in which local control is enabled at a work-cell level. This contrasts with an MRP system that pushes out customer demand based on cumulative lead times and the MPS schedule. An MPS/MRP demand-push environment is based on higher-level, external product forecasts incorporated into the MPS and offset by the MRP using a product’s bill of material (BOM) and component cumulative lead times. Operational problems occur if demand or capacity change within a product’s cumulative lead-time or frozen time fence (i.e., a promise to produce at the cumulative lead time). This creates a situation where jobs are left incomplete due to materials shortages because the materials were not ordered. The cumulative effect


Transfer versus process batches.

is higher work-in-process (WIP) inventory levels and other scheduling issues.

Figure 6.8 shows a high-level view of a local work cell QRM application. In this example, local work cells communicate using a type of Kanban system that signals an upstream work cell to produce for the work center immediately downstream. This communication system is enabled by collapsing the BOM so that the MRP system is placing demand only at higher levels of the BOM and not at a work-cell level. This operational change enables local work cells to dynamically react to schedule changes. This creates a more stable production schedule and avoids process breakdowns because teams can make operational decisions based on the current


Quick response manufacturing (QRM). BOM = bill of materials.

process status, including available resources and capacity. Design-for- manufacturing methods can also help simplify and modularize designs to consolidate entire portions of a BOM and to outsource component manufacturing where possible.

A mixed-model scheduling system is another useful method to reduce lead time and increase throughput. Mixed-model scheduling is difficult to implement, however, because success depends on product and process design changes. Using this scheduling method, product differentiation is made at higher levels of assembly rather than at lower levels. If products or services have a high degree of design commonality, then their setup times will be reduced, allowing more setups and a more flexible system. This method dramatically reduces production lead times. Figure 6.9 shows a manufacturing sequence (i.e., schedule) of three products. Initially, each product is produced once every four weeks versus the mixed-model schedule of every two weeks, in which the lead time is reduced by 50%. The advantage is that if external demand changes, this system can flex to meet the revised schedule because the product is produced every two weeks


Mixed-model scheduling.

rather than every four weeks. Inventory is reduced by 50% because it is proportional to the lead time.

Preventive and corrective maintenance systems are deployed to ensure equipment is available. Effective preventive and corrective maintenance programs rely on reliable equipment and developing optimum combinations of preventive and corrective maintenance of each piece of equipment. Takt time is more stable when equipment is up and running to support production. Table 6.7 describes planning for unscheduled (corrective) versus scheduled maintenance (preventive). Planning includes establishing equipment classifications, identifying failure probabilities,


Implementing a Maintenance Program

Availability = Reliability + Maintainability Maintainability — (Preventive+ Corrective) Maintenance

Corrective Maintenance

Preventive Maintenance


Diagnose problem.

1. System has a failure rate which increases over time and is predictable (follows a known failures distribution).


Remove failed components.


Order components for repair (if not in stock)

2. Cost of prevention is less than the cost of allowing the failure and correcting it at that point.


Repair or replace components which failed.


Verify quality' of the repairs.


Develop the goals and objectives for the maintenance program relative to unscheduled (corrective) versus scheduledmaintenance (preventive) activities to ensure equipment availability'.


Determine equipment classifications, failure probabilities and other economics of maintenance by' equipment classification.


Assignresponsibilities and budgets to each equipment classification.


Develop maintenance strategies based on equipment design.


Develop systems to monitor and schedule maintenance activities with reporting relative to system performance and costs.


Train people in use of the system.


Periodically' review the system performance andadjust as necessary to the system.

and managing information related to usage, schedule maintenance, and contingencies for handling breakdowns. Planning is used to assign maintenance responsibilities and budgets on the basis of equipment design, the systems to monitor and schedule maintenance, and metrics to track equipment performance and costs against budget. Training is also important for the people supporting the maintenance system.

SMED also contributes to takt time stabilization and lead time reduction by reducing and stabilizing job setups using a combination of tools and methods. Table 6.8 lists the ten steps of a successful implementation


Ten Steps to Implement Single-Minute Exchange of Dies (SMED)


1. Identity individual work tasks of setup using process maps, videos, and work and inspection instructions.

2. Separate internal work tasks from external work tasks associated with setup activities.

3. Move internal work tasks to external setup work tasks.

4. Simplify all work tasks associated with internal and external setups.

5. Design equipment to unload and load dies and align tools, as necessary.

6. Mistake-proof remaining setup work tasks to eliminate manual adjustments.

7. Standardize new setup procedures.

8. Apply 5-S methods to the setup areas to ensure efficient and accurate setups.

9. Train employees on the use of the new procedures.

10. Continually improve the setup process over time.

of a SMED program. The first step is to identify individual work tasks related to the setup using diagrams of the work area and identifying the sequence of work tasks needed to do the setup. Videos, current work procedures, and inspection instructions are useful for understanding the current setup process.

After an initial analysis of how setup work tasks are done and the time it takes to do each one, the SMED team separates internal or on-line setup work tasks from those that can be completed externally or off-line. In parallel, all work tasks, both internal and external, are simplified to the greatest extent possible. After the setup process has been simplified using SMED, equipment, fixtures, and other tools are designed to allow dies, fixtures, or other tools required to complete setups to be exchanged quickly. The improved setup process is standardized, and work and inspection procedures are updated to ensure the work is consistently done. The updated process is then mistake-proofed to eliminate manual adjustments.

Integral to SMED improvements is the application of 5-S methods to ensure standardization of the work and mistake-proofing. 5-S is a set of improvement actions applied to a work area. The first step is organizing the work area by sorting what is need from what is not needed for production. The second step is setting the work area up for efficient task completion by placing tools, equipment, people, and supporting materials in locations that are clearly marked. The third step is to assign cleaning or sweeping responsibilities in the work area. The fourth step is


Implement a visual system to show equipment status, product locations, inventory, team, metrics status, etc.

standardizing the work for consistency using visual controls, checklists, training, and similar methods. The fifth step is sustaining the improvements though self-discipline and continuous improvement. Integrated with a Lean deployment are other initiatives such as total quality or Six Sigma. These initiatives improve process yields and are applied to a standardized process. Cross-training employees and empowering them to control the quality of work is an integral part of an effective Lean system. Performance measurements and visual controls show where to reduce waste to improve the process.

Figure 6.10 illustrates the deployment of visual controls as a sequential process requiring 5-S as its foundation. Visual displays in either electronic or physical form increase the ability of the local workflow team to actively control their process workflows. Studies indicate that people gain 60% of their information through visualization. In production systems, visuals are used to show equipment status, product status, inventory status, the team responsible for the work, and metric reporting performance to target, and so on.

Effectively deploying the Lean tools and methods listed in Table 6.6 creates a process that has lower cycle times and cost as well as higher quality and throughput rate. Inventory investment will also be lower. Let’s return to our takt time example, now shown in Figure 6.11 as a modified


Value-add operations remaining in the process.

and improved process. The optimum resources used by this process have been reduced from 12 workstations to 6 workstations over the initial baseline shown in Figure 6.3. This is because NVA work has been eliminated. Table 6.9 shows that now only 50% of the original people or workstations are required to maintain the takt time because the total time to produce on unit decreased from 290 to 140 seconds. Lead time on the critical path decreased by 58%. Note that the new efficiency is 33% because we now have a modified process design with only value-add operations. Additional efficiencies can be obtained by applying the Lean tools and methods summarized in Table 6.10.

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