Introduction to Lean Systems

Lean Systems Defined

• Lean manufacturing is a systematic method to maximize value and minimize waste
• Henry Ford revolutionized mass production, known as Fordism
• Post-WWII Japan saw the rise of the Toyota Production System (TPS) because of resource constraints
• Taiichi Ohno going to Ford observed inefficiencies like assembly line rework, batch production inflexibility, and excessive inventory
• Ohno concluded that an alternative was needed, beyond the traditional method
• Drawing inspiration from Piggly Wiggly's inventory replenishment based on real-time demand led to a pull-based system development
• TPS focuses on continuous operational improvement, demand-driven production, and minimal inventory
• These TPS principles are the foundation of modern lean manufacturing

The Machine That Changed the World

• MIT researchers highlighted Toyota’s lean system being far better than Ford’s mass production model
• By the 1980s, Toyota's lean production system outperformed traditional mass production

• Toyota surpassed Chrysler (mid-1980s) and was closing in on Ford and GM (1990s) in global market share

Benefits of Lean Manufacturing

• Lean principles in business operations drive cost efficiencies in fixed and variable expenses
• This enables firms to achieve profitability at a lower breakeven point
• Noncore capabilities are outsourced, reducing expenses on equipment and facilities
• Overproduction, excess inventory, defects, and unnecessary motion are eliminated, reducing variable costs
• This results in a lower breakeven point

Lean Guiding Principles

• These principles act as a fundamental set of values, beliefs, and philosophies that guide decision-making and strategy
• There are five core principles

Principle 1: Precisely Specify Value for Each Product

• Lean Thinking defines value as "what customers perceive as value" and satisfying customer needs by eliminating anything that does not contribute

Principle 2: Identifying the Value Stream

• Mapping all steps, resources, and processes helps identify the value stream
• This helps eliminate the key types of waste

Identifying Key Types of Waste

• Transportation: Unnecessary movement of materials
• Inventory: Excess stock beyond immediate needs
• Motion: Unnecessary movement of people or equipment
• Waiting: Delays due to bottlenecks or idle time
• Overprocessing: Features or tasks that are unneeded
• Overproduction: Producing more than needed
• Defects: Errors requiring rework or scrapping

Principle 3: Make Value Flow without Interruptions

• Making value flow without interruptions ensures a smooth production process, free of delays, bottlenecks, and inefficiencies
• This is achieved by eliminating bottlenecks, steadying production processes, synchronizing production with demand, and creating standard work processes

Principle 4: Let the Customer Pull Value

• Pull-based production systems drive customer pull value
• Products/services are created only in response to actual customer demand
• This avoids excess inventory and overproduction
• Ensures efficient resource use, and reduces reliance on forecast-based production, improving flexibility

Principle 5: Continuous Improvement / Pursue Perfection

• Continuous improvement or Kaizen is a core principle focused on quality, productivity, and efficiency
• It involves ongoing improving products, services, or processes with small yet incremental changes

Lean System Culture and Shared Beliefs

• A cultural shift is needed when implementing Lean principles
• Employee engagement, adaptability, teamwork, and empowerment are emphasized to drive continuous improvement and efficiency

Culture Components

• Acceptance: Everyone must accept/buy into lean philosophy
• Source of Flexibility: Company can respond rapidly to demand changes, and cross-train employees
• Teamwork emphasized when solving problems
• Workers have the power to make decisions that affect their work areas

Shared Values and Beliefs

• Manage with Data: Lean emphasizes data-driven decision-making
• Goals are to be met: Setting attainable and measurable goals
• Standardization is a cornerstone: Documenting, repeatable, and refined best practices
• Process Orientation: Optimizing workflows rather than individual tasks

Implementing Lean Systems: Tools and Techniques

• These tools aim to make lean systems easier to apply

Development of Facilities

• Development of facilities improves the efficiency of the factory and workplace

Total Productive Maintenance (TPM)

• TPM works to prevent and identify equipment breakdowns
• Equipment breakdowns create product variation and unplanned shutdowns
• Equipment failures often result from a lack of preventive maintenance.
• TPM is reached by: Predictive Maintenance, regular schedule maintenance, focus on prevention, equipment operator training and repair personnel

Focus Factories

• Focus Factories are facilities with higher flexibility, quality, and efficiency as a result of specializing in a market segment, product line, or process.

Operational Control

• Operational control improves how a company can control internal processes

Time Flow Balancing

• Production aligns with demand, preventing overproduction or delays
• Production pace is set by Takt time, which is a German word for “rhythm”
• Takt time is beneficial in lean manufacturing because it ensures workstations are balanced; standardizes work; minimizes bottlenecks, and acts as a pacing mechanism

Set-Up Time Reductions

• Switching between production tasks is minimized, involving making tools being changed more efficiently
• This improves flexibility, efficiency, cost-effectiveness in production, enhances productivity, and reduces downtime

Visual Control

• Visual cues enhance safety, efficiency, and standardization
• Operators and managers can quickly assess operations, and take corrective actions & detect issues quickly
• Andon lights act as early warning systems
• Floor markings improve organization

Poka-Yoka

• Poka-Yoke is a Japanese term for mistake-proofing or error prevention
• Examples: Physical guides, sensors or alarms that alert operators, and color-coding parts or components

Continuous Improvement

• These events adhere to the principles of continuous improvement and Lean methodology

Kaizen Events

• A Kaizen event is a focused, short term project for improving a process by increasing efficiency and reducing waste
• Teams are cross-functional
• Short-term from 1-4 days, fast-paced, and time-bound
• Action-oriented, quick implementation
• Repetitive and a continuous process
• The 5s are Sustain, Shine, Sort, Set in Order, and Standardize

5-S Program

• The 5S Program is a clean methodology used to create and maintain productivity, safety, and workflow
• Originated in Japan as part of TPS (Toyota Production System)

Range of Applications

• Lean is used in healthcare

Forms of Waste Eliminated in Healthcare

• Several improvements can be made in healthcare to reduce waste

Focused Hospitals: Specialty Care for Efficiency

• Specialty hospitals adopt specialized care models

Reduced Wait Times Through Better Scheduling

• Scheduling efficiency to minimize patient wait times
• Level scheduling (Heijunka), real-time demand monitoring, and appointment standardization are used to balance patient flow

Minimized Inventory with Vendor-Managed Systems (VMI)

• VMI systems allow suppliers to monitor and replenish stock levels rather than hospitals overstocking

Eliminating Medical Errors Through Standardized Processes

• Error-proofing(Poka-Yoke) and standard work are used to reduce mistakes
• Prevention techniques such as “X marks the spot” and signature verification improve accuracy and prevent mistakes

Reduced Motion: Eliminating Non-Value-Added Activities

• Healthcare minimizes unnecessary tasks

Innovations

• Lean systems aim to reduce waste and optimize efficiency while maintaining high-quality output
• Lean design principles maximize value and minimize waste throughout the lifecycle of products, services, and processes
• Lean innovation supports both incremental and radical improvements

Radical Innovation

• Requires new processes, disruptive thinking, and substantial resource investment.
• Introduces ground-breaking changes

Incremental Innovation

• Focuses on gradual gains
• Involves small, continuous improvements

Sourcing and Supply Chain Management

• There are several areas of supply chain management addressed

Supply Management’s Impact on the Firm

There are Five Types of Purchases:

• Materials used in manufacturing
• Indirect Materials for Maintenance, Repair, and Overhaul
• Capital Equipment such as chip assembly machines
• Information Systems & Software like ERP systems
• Services such as logistics support

Six Supply Management Goals

• Timely product/service delivery in the correct amount, condition, and place
• Identifying and mitigating supply chain risks like financial instability
• Decreasing the total cost of ownership (TCO) through pre and post transactions
• Increasing supplier quality with partnership, and collaboration
• Suppliers with technology that enhance products should increase access to new technology
• Sustainability, workplace safety, human rights, and community value must be addressed

Supply Category Management

• Business units are created when companies that group similar goods and services and manage them

Identify Purchasing Categories

• Identifying which product category is needed for cost efficiency

Spend Analysis

• Review historical purchasing data to understand suppliers and how money is being spent

Usage and Function

• Purchases are grouped based on their role

Supply Risk & Market Conditions

• How critical each category is based on availability

Portfolio Analysis (Kraljic Matrix)

• Matrix is a tool used to classify purchased goods/services by risk and the financial impact

Supply Risk

• How difficult it is to replace or source

Profit Impact

• How critical the item is to the company's profitability

Four Quadrants of the Kraljic Matrix

Non-Critical Items

• Risk and impact are low
• Strategy examples are basic packaging and office supplies
• Automate & optimize procurement

Leverage Items

• Low risk, high impact
• Strategy examples are raw materials
• Use bulk purchasing and competitive trading for better terms

Bottleneck Items

• High risk, impact is low
• Rare minerals, proprietary components
• Strategy is securing long term contracts and developing new resources

Strategic Items

• Risk and impact are high
• Examples are OLED screens/ displays and custom semiconductors
• Strategy is investing in R&D, and building strong supplier partnerships

The Sourcing Process

• The purchasing department follows 4 steps to source a product/service

Identify Need & Develop Specifications

• The specifications are defined by the stakeholders

Internal Demand Generation

• The need for a product originates internally

Specification Development

• The requisitioning team defines the specifications

Identify Potential Suppliers

• Procurement teams conduct supplier market research

Supplier Market Research

• Identify capable suppliers through Internet & Database Research, Trade Directories & Associations, Industry Events, and Preferred Supplier Lists

Assess & Select Suppliers

• A formal document that solicits proposals from vendors with the information to meet vendor needs

Request for Proposal (RFP)

• Solicits proposals from vendors/service providers

Request for Information (RFI)

• Gathering information on potential products and services

Supplier Audits & Visits

• Operational efficiency, quality control. and compliance are assessed with in-person audits

Negotiation & Contracting

• Competitive Bidding and Negotiation Strategy

Manage Ongoing Relationships

Supplier Performance Monitoring

• KPIs, Metrics, Supplier Scorecards are used to benchmark agreed SLAs

Collaborative Programs

• Supplier Development Programs

Purchasing Practices

• Sustainability, and environmental impact should be considered
• Obtaining materials products in an ethical, sustainable, and socially responsible manner

Aspects of responsible sourcing

• Fair labor laws
• Ethical labor
• Environmental impacts
• Conflict Free Materials
• Traceability of Materials
• International regulations

Logistics Management

• There are several logistics areas of note

The Role of Logistics in Supply Chain Management

• Strategies regarding cost, quality, sustainability
• Logistics managers work to manage inbound, outbound, and internal flows from supplier
• Fulfillment-efficient transfer of products

Order Processing

• Facilitating order fulfillment ensures a smooth and efficient transfer of products by optimizing shipping, picking, and packing

Inventory Management

• Optimizing appropriate stock.
• Balancing demand fluctuations,
• Minimizing carrying costs

Logistics Impacts Inventory Management

• These are all impacted by logistics

Service Levels

• Meeting service expectations often means higher inventory levels

Transportation Mode and Speed

• Transit speed directly impacts inventory

Distribution Network Efficiency

• A well-structured distribution network with strategically located warehouses helps optimize inventory placement

Transportation Management

• There are key management topics to note

Key Concepts

• Logistics is influenced by distance and economies of scale
• Combined shipments can reduce costs through consolidation
• Transportation modes include planes, trains, and trucks

Economy of Scale Principle

• With more transportation, cost per unit drops

Tapering Principle

• Over greater distances, costs per unit decrease

Types of Transportation Consolidation

• These are all methods to consolidate deliveries to increase efficiency

Market Area Consolidation

• Grouping shipments optimizes efficiency

Pooled Delivery Consolidation

• Freight is shared, which is often coordinated by a 3PL

Scheduled Delivery Consolidation

• Companies wait until a specific thresholds are met for consolidation

Modes of Transportation

• There are multiple dimensions of services provided by companies

Service Dimensions

• Speed which is how urgent the deliveries are
• Cost increases with more urgency
• Availability which depends on locations
• If delivery must be on time it is dependability
• Capabilities need to handle size and volume
• The transit time of the delivery depends on the frequency the delivery takes place
• If they are eco friendlier modes of transport then there is more of an environmental impact

Modes of Transportation

• There are various modes that can perform the functions above

Trucking

• Trucking is the most flexible way ensure timely deliveries for fragile goods

Rail transportation

• Is cost efficient but requires a final delivery

Ocean Freight

• For international trade

Air Transportation

• High value and low weight

Intermodal

• It utilizes different aspects of transport

Warehousing Management

• There are several warehousing functions

Primary Functions

• Warehouses store to meet future demand
• Supply warehouses, break bulk warehouses and reverse warehouses

Distribution/Fulfillment

• After warehouse operations is defined follows the process of management

Material Handling and Packaging

• Selects the best management

Material Handling

• Identifies and implements the best equipment of shipping that meets regulatory and industry standards

Package

• Transportation of various modes optimize

Returnable

• Smart Scanning Technology should reduce any waste

Third-Party Logistics Service Providers

Third Party Logistics

• Outsources the logistic

Expertise and technology

• They access logistics like Al without development

Scalability and Flexibility

• Expansion with infrastructure

###Global Reach and Compilanc

• Shipping and regulatory compliance