Sustaining the Lean Journey

Presented by:

Zeeshan Syed

Lean Sigma Practisioner

SPARE 30 MINUTES TO UNDER STAND TOYOTA PRODUCTION SYSTEM

A 30 MINUTE GUIDE

ON

TOYOTA PRODUCTION SYSTEM

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What is “Toyota” lean?

Taiichi Ohno (founder of TPS):

“All we are doing is looking at the time line from the moment the

customer gives us an order to the point when we collect the cash.

And we are reducing that time line by removing the non-value-

added waste.”

There is no Such Thing as Being “Lean”

• Being “Lean” is relative-

– Relative to your own performance

• Continuous Improvement means that you never arrive-

– You are never “Lean” enough

• The journey is not a speed race- it is an endurance race

– Will you be in the race in 20 years?

– Will you still be continuously improving?

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Why study Toyota?

• Total annual profit on March 2003 was $8.23 billion- larger than combined earnings of GM, Chrysler and Ford. Profit margin is 8.3 times higher than industry average.

• Toyota shares rose 24% from their 2002 values. Market capitalization was $105 billion as of 2003 – higher than total of Big 3.

• In 2002, Lexus outsold BMW, Cadillac and Mercedes Benz in the US for the third year in a row.

• In 2003, sold more vehicles than Ford and Chevrolet.

• The company has made profit every year over the last 25 years and has approximately $20-$30 billion in cash on a consistent basis.

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Ford vs. Toyota

• Ford’s mass production system was designed to make

huge quantities of limited number of models.

• Toyota needed a system to make low volumes of

different models using the same assembly line.

• Ford had cash and a large market.

• Toyota needed to turn cash around quickly.

• Toyota didn’t have the resources for huge volumes of

inventory and economies of scale afforded by Ford’s

mass production system.

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More laurels

• In 2003, Toyota recalled 79% fewer vehicles in US than Ford and 92% fewer than Chrysler.

• According to Consumer Reports, 15 out of the 38 most reliable models from any manufacturer over the last seven year came from Toyota/Lexus.

• According to J.D. Powers ranking for initial quality and long-term durability, Lexus was #1 most reliable car in 2003 followed by Porsche, BMW and Honda.

• Not a single Toyota car is on the dreaded “vehicles to avoid” list published by Consumer Reports. About 50% of the GMs and more than 50% of the Chryslers are to be avoided.

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How did it happen?

• Incredible consistency comes from operational excellence.

• The operational excellence is based on the quality improvement tools and methods developed by Toyota (under the TPS): such as JIT, kaizen, one-piece-flow, jidoka, and heijunka!

• These technique triggered a “lean revolution” in the manufacturing sector.

• Of course, Toyota system is much deeper and in fact is at a philosophical level!

• Toyota Way – 14 principles which constitute this philosophy.

• 4 Main Indicators of TP.S – 3 Financial (Throughput Rate , Inventory & Operating Expense) & 1 Non-Financial (Overall Equipment Effectiveness) are the essence.

The underlying premise of Theory of Constraints is that

organizations can be measured and controlled by variations on

three measures:

1.Throughput .TV

2. Operational expense. O.E

3.Inventory. I

Throughput is the rate at which the system generates money

through sales.

Inventory is all the money that the system has invested in

purchasing things which it intends to sell.

Operational expense is all the money the system spends in order

to turn inventory into throughput.

Organizations that wish to increase their attainment of T.P.S

should therefore require managers to test proposed decisions

against three questions.

1.Increase Throughput Rate TVr?

2.Reduce investment Inventory I (money that cannot be used)?

3.Reduce Operating Expense?

.

How we view cost

• ROI

– The bottom line when dealing with owners and

investors.

• OEE

– A valuable means to view general efficiencies

or deficiencies, whichever the case may be.

• ROA

– More focused on the asset value it’s self.

What is OEE?

OEE - Overall Equipment Effectiveness

It is one of the most important non-financial indicators used in PDOFS.

With the OEE, the efficiency of the manufacturing machines can easily be monitored and improved.

What is OEE?

“O.E.E” stands for “OVERALL EQUIPMENT EFFECTIVENESS”

= % Availability x % Productivity x % Quality

Availability / Operating Rate = Run Time of the Machine

Available / Scheduled Time Productivity /

Performance Rate = Actual Machine Speed .

Design speed as recommended by Manufacturer

Quality Rate = Amount Produced - Amount of Defects/Rework

Amount Produced

QRPROROEE ..OEE Factor World Class

Operating > 0.90

Performance > 0.95

Quality > 0.99

OEE > 0.85

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What is “Toyota” lean?

End result of applying the TPS to all areas of business.

A five-step process:

• Defining customer value.

• Defining value stream.

• Making it “flow”.

• “Pulling” from the customer and back.

• Striving for excellence.

8 Wastes

Overproduction

Excess inventory

Defects

Non-value added

processing

Waiting

Underutilized people

Excess motion

Transportation

Toyota Lean = Eliminating the waste

Typically 90% of Total Lead Time is Non-Value Added!!!

Value added

10%

Non-value added

Value Stream Mapping

Helps us see where value is created, and where waste

exists:

• Developed by „product family‟

• Shows flow of both material & information.

• Helps us „see‟ where/how specific Lean tools can be used to improve flow and eliminate waste

• Consists of two types of maps:

• Present State (“how it is”) Future State (“how it should be”)

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Truths from the TPS philosophy

• Often the best thing you can do is to idle a machine stop producing parts.

• Often it is best to selectively add and substitute overhead for direct labor.

• It may not be a top priority to keep your workers busy making parts as fast as possible.

• It is best to selectively use information technology and often better to use manual process even when automation is available and would seem to justify its cost in reducing your headcount.

“Identify activities that add value to raw material, and get rid of everything else.”

The 4 P’s and 14 Principles Make Sense

• Working to improve the 4 P areas will always make sense

• Toyota maintains the same principles and strategy for the long-term--no “Next Step beyond Toyota Way”

• The goals of the company have never changed:

“Produce the highest quality product, at the lowest possible cost, in the shortest possible lead time”

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14 Toyota-Way Principles

• Principle 1: Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.

• Principle 2: Create continuous process flow to bring problem to the surface.

• Principle 3: Use “pull” system to avoid overproduction.

• Principle 4: Level out the workload (heijunka). (work like a tortoise not the hare.)

• Principle 5: Build the culture of stopping to fix problems to get

quality right the first time.

• Principle 6: Standardize tasks are the foundation for

continuous improvement and employee empowerment.

• Principle 7: Use visual control so no problems are hidden.

• Principle 8: Use only reliable, thoroughly tested technology

that serves your people and processes.

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14 Toyota-Way Principles

• Principle 9: Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.

• Principle 10: Develop exceptional people and teams who follow your company’s philosophy.

• Principle 11: Respect your extended network of partners and suppliers by challenging them and helping them improve.

• Principle 12: Go and see for yourself to thoroughly understand the situation (genchi genbutsu).

• Principle 13: Make decisions slowly by consensus, thoroughly considering all options, implement decisions rapidly.

• Principle 14: Become a learning organization through relentless reflection (hensei) and continuous improvement (kaizen).

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Benefits of One-Piece Flow

• Builds in quality – Every operator is an inspector and works to fix problems in station before passing them on. If defects do get passed on, they are detected quickly and problem can be immediately diagnosed and corrected.

• Creates flexibility – If shorter lead times, more flexibility to respond and make what customer really wants. Pushes for set-up time reduction.

• Creates higher productivity – Every easy to spot the busy or idle station and easier to calculate the value-added work.

• Frees up floor space – Because of inventory storage reduction.

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Benefits of One-Piece Flow

• Improves safety – Smaller batches means simpler

transportation system and less accidents because of forklifts.

• Improves morale – People do high percentage value-added

work and can see the results of their work faster.

• Reduces cost of inventory – Obvious!

Develop “T” People

• People who have broad experience in Lean

• People with deep skill in Lean

• Equal effort between “Going Wide” and “Going Deep”

Spread Lean Across the Organization

Develop Depth of

Capability Within

the Organization

What is the Purpose of your Lean Efforts?

Deploy

Lean Tools

Develop

Lean Facilitators

Fix

Company

Problems

Total

Management

System

Lean Deployment Business Transformation

Tec

hnic

al

Sys

tem

Hum

an

Sys

tem

P h i l o s o p h y

P r i n c i p l e

Toyota Approach to Developing

the Toyota Way

Kaizen & Respect for People

Quality People Continuously

Improve System

Performance Measurement Safety, Morale, Quality,

Cost, Delivery

Key Lean Tools Std Work, E.T.P

Pull Kanban

Continuous Flow Process

Level Loading Process

SMED

Total Productive Maint.

Strategy Quality People

Value Stream

Method Leadership hierarchy directly

involved through teaching and

coaching

Reason Kaizen is the engine that drives

competitive advantage

Effect Kaizen by people in the

process leads to continual

organizational learning

Control Method Visual Controls,, on the floor

audits & coaching, HR

oversees fairness & equity

Result Continual Waste

Reduction,

Competitive

Advantage, Mutual

Prosperity

Benchmarking findings Causes of resistance

Employees: 1. Not aware of the

business need for change

2. Lay-offs were announced or feared

3. Unsure if they had the skills needed for success in the future state

4. Comfort with the current state

5. Believed they were being asked to do more with less, or do more for the same pay

Managers:

1. Loss of power and control

2. Overloaded with current responsibilities

3. Lacked awareness of the need for change

4. Lacked the required skills

5. Fear, uncertainty and doubt

Toyota Way Business Assumption:

Quality People Create Competitive Advantage

Competitive Advantage &

Mutual Prosperity

Strong Culture

Supporting Systems

Quality People