Introduction to Kaizen, Kyosei Obeya

How to be Creative, Innovative, Fast & FlexibleRachmat BoerhanInstructor & Consultant

Lean manufacturing is a Japanese Pull System which maximises throughput and profit with minimum inventory and waste.2. This method is employed with great success by Toyota, Honda, Canon, Panasonic, and all globally competitive manufacturers.3. This method employs, Value stream mapping, pull systems, SPC, Six Sigma and other Deming techniques. 4. The key words are KAIZEN & KYOSEI & OBEYA. What is Lean Manufacturing?

Kaizen Kyosei& ObeyaKaizen = Continuous Improvement

Kyosei = Living and Working Together for the common good

Obeya = Big Room

WasteExpenses (P&L Bal Sheet)

Resources ($,Plant, People, Material etc)Planning System

Develop a Pull System with Continuous FlowEnhance People skill, flexibility and TeamworkAchieve Shorter Lead TimesHave Less Inventory and WasteUse capital more effectivelyMaximize Value AddedImprove QualityHave Less Defective Product and ProcessReduced Time to Market for new ProductsImprove Information and data flow

Aims of Lean Manufacturing

Lessons from The Best Companies in the WorldJohn Blakemore in Sept and Oct 2006, visited some of the best companies in the world including, Honda, Toyota, Canon, Mazda, Kawai, Panasonic as part of an investigation to add to our understanding of Lean Manufacture.These lessons can be applied to all manufacturers.To the list of Lean we now need to add Kyosei, (inc Karakuri and the German Meister system).

Value CreationValue ChainCustomerPeopleMarketing&SalesInnovationFinanceOperationsCustomerValueSUPPLY

Pull Systems:1. Reduce and cap Work In Process(WIP)2. Make by Replacement or MTO3. Aim at limiting cycle time variability4. Aim at Continuous WIP (CONWIP)5. Kanban = linked processes6. CONWIP = pull from FG Supermarket7. MRP = push to FG8. CONWIP is the most Robust System

The Magic of Pull

1. Once value is added to a product, the product must continue to have value added.2. No queuing, idle time or stopped flow3. Remove or speed up the bottlenecks4. Synchroniselook at a Formula 1 pit-stopContinuous Flow

Minimise WasteWaste can be in the form of : Material Time (total, lead etc) Space Money Tampering ( Changing ) Double Handling Breakdowns Band-Aid Solutions Setups, Cleanups, Idle Time, Inventory (RM, WIP, FG)

Japanese Inventory

Lead Time Reduction

Effectiveness

1. Quality, Cost, Delivery (OTD)2. Lead Times3. Stock Turns4. Working Capital5. Waste %6. Quality Indices7. Time to Market8. Net Tangible Value9. ROI, RONA, 10. EBIT, VA

Key Performance Indicators

Pirelli ..Output & DefectivesDefectives

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Output

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Maximise Value Added1. Keep the product moving to customer2. Run Time/ Total Time maximised3. Maximise use of Tools and Jigs4. Use clear labels5. Eliminate non value added steps 6. Push to Pull

PROCESS PARTS (6)1234561 - Setup(Preparation) 2 - Run(The Value Added Step)3 - Maintenance (Preventive)4 - Breakdown(Errors & rework)5 - Idle(available to run but not utilised6 - CleanupVA = 2,(3)? = Run + Preventive MaintenanceEliminate Breakdown Idle Setup? ( SMED) Cleanup Concurrent EngineeringValue Added

Costs in the Supply Chain Labour

Chart1

Total Sell+ Mkt30Total Sell+ Mkt30Total Sell+ Mkt30Total Sell+ Mkt19

4Inv & Store & frt6Inv & Store & frt1Inv & Store & frt1Inv & Store & frt

5Quality Costs8Quality Costs1Quality Costs1Quality Costs

Total SC Costs9Total SC Costs14Total SC Costs2Total SC Costs2

NPBT1NPBT14NPBT8NPBT19

TCF Cost Comparison Models A Now 24 24 12 GP=GM Expenses 20 5 5

TCF Cost Comparison Models A Now 100 24 24 12 60 40 Expenses 20 5 5

TCF Cost Comparison Models B Sri Lanka 100 24 12 6 60 40 Expenses 20 5 5

TCF Cost Comparison Models B Sri Lanka 100 24 12 6 42 58 Expenses

TCF Cost Comparison Models C Stge 1 100 24 24 12 42 58 Expenses 20 5 5

TCF Cost Comparison Models C Stge 1 100 60 40 Expenses 20 5 5

TCF Cost Comparison Models D Stge 2 100 24 24 12 60 40 Expenses 13 3 3

TCF Cost Comparison Models D Stge 2 100 24 24 12 60 40 Expenses

Cost Elements

Costs as a Percentage of Selling Revenue

TCF Cost Comparisons

Chart2

100100100100

MaterialsMaterials0Materials

Dir LabDir Lab0Dir Lab

OH labOH lab0OH lab

60426060

40584040

ExpensesExpensesExpensesExpenses

Selling Costs0Selling Costs0

Mkt Costs0Mkt Costs0

Gen Admin0Gen Admin0

30303019

Inv & Store & frtInv & Store & frtInv & Store & frtInv & Store & frt

Quality CostsQuality CostsQuality CostsQuality Costs

91422

114819

A Now

B Sri Lanka

C Stge 1

D Stge 2

Elements

Costs as a Percentage of Sales

TCF Cost Models

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100100100100

40584040

39443221

114819

A Now

B OS Labour

C QR 1

D QR 2

Elements

Costs as Percentage of Sales

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1000

805

6010

4515

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2825

2130

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EOQ

Total Setup Effects Costs

Inventory Costs

Setup $

Inventory

Lot Sizes

Costs

Setup Effects Costs and Inventory Costs Versus Lot Sizes(The point of Intersection is the EOQ and assumes no reduction in the Setup costs)

Sheet1

TCF Cost Comparison Models

A NowA NowB Sri LankaB Sri LankaC Stge 1C Stge 1D Stge 2D Stge 2

Sales100100100100

Materials24242424

Dir Lab24122424

OH lab1261212

Total Purch&Man60426060

GP=GM40584040

Expenses

Selling Costs20202013

Mkt Costs5553

Gen Admin5553

Total Sell+ Mkt30303019

Inv & Store & frt4611

Quality Costs5811

Total SC Costs91422

NPBT114819

ABCD

NowOS LabourQR 1QR 2

Sales100100100100

Gross Profit40584040

Expenses39443221

Net Profit Before Tax114819

CostsSetup $Inventory

01000

10805

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Manufacturing or Service?There is no such thing as a pure Manufacturing Company All companies are Service Driven

The Solution Lean Customer Service DrivenCooperative CultureStrong RelationshipsTeam Cross Functional StructureHigh VelocityAccurate InformationShort Time PeriodsSynchronised ProcessesPull not PushDynamic not Static

Hazard: 800% productivity gain in 18monthsPirelli : Output doubled, NP from 5% sales to 15% profitCSFB: $40M fr WC , OT D 32% to 95%, Loss to $40M EBITATannery: Colour defects eliminated from 15% defectiveSteel Fabricator: Plant redesign, Mat Handling $ halvedComputer Supplier: Loss $60,000 to profit $1.0M I yearAluminium Fabricator: Productivity doubled in 6 monthsSpeedo: QR to retailer, inventory down, service up.14 Plastics Companies: All increased bottom line in 1 yr. Geelong Cement: Productivity Gain of 25% in 6 monthsWarkworth Mine: Productivity Gain of 16% in 6 Months12. BHP to PVA: RM Inventory reduced from $1.5M to $60,000

Recent Achievements

What Has Been Done (Shaw Australia)$300M T/O

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-1

13.8

14.7

17.9

23

22.8

EBITA

6 Months Period

Millions of Dollars

EBITA for 6 Months Periods

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6 mnthsEBITA

July Dec2001-1

Jan-June200213.8

Jul-Dec200214.7

Jan-June200217.9

Jul-Dec200323

Fcast22.8

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Lean Production, Pirelli (Italy, Australia) (Loss to Profit then Float)Defectives

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Output

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Removing Variation, Cr in Effluent (Saving a Tannery)

The End

**The basic aim of Lean Manufacturing is to introduce a pull system with a short lead time. This lead time is made up of two main components , value added and non value added time.Value added time is run time on a machine for example, non value added time is storage time, setup time, idle time, breakdowns,inspection time etc.An ideal goal is to achieve 100% value added time..practically impossible. For Shaw the value is probably 5.4%.(limited measurements)A Lean Manufacturing System will not work if the manufacturing processes and the machinery do not perform to their capability.The capability that is referred to here is the statistical capability index Cp.This index measures the ratio of the difference in the upper and lower specification limits set for the attribute or variable being measured, and six standard deviations of the mean measurement. Ie. X = + or 3 sigma.***The basic aim of Lean Manufacturing is to introduce a pull system with a short lead time. This lead time is made up of two main components , value added and non value added time.Value added time is run time on a machine for example, non value added time is storage time, setup time, idle time, breakdowns,inspection time etc.An ideal goal is to achieve 100% value added time..practically impossible. For Shaw the value is probably 5.4%.(limited measurements)A Lean Manufacturing System will not work if the manufacturing processes and the machinery do not perform to their capability.The capability that is referred to here is the statistical capability index Cp.This index measures the ratio of the difference in the upper and lower specification limits set for the attribute or variable being measured, and six standard deviations of the mean measurement. Ie. X = + or 3 sigma.** 1. Service value is created and measured at the customer or buying decision interface as shown in the above diagram.All elements or themes or functions influence the success or otherwise of this event. 2. The value chain or the supply chain are Strategic chains. 3. Value must be created for all participants in the value chain for the enterprise to achieve maximum benefits.. 4. All major Themes in the business have a role to play at the buying decision stage. 5. Once the decision is made to buy, the core processes of the enterprise must create a product or service which in turn delivers customer value for potential repeat business. 6. The system is a string of processes 7. All systems are affected by the strategic decisions made to capitalise on opportunities to create a competitive advantage and improve organizational effectiveness.*The whole purchasing function must focus on creating a Pull system so that a continuous self perpetuating process is created and maintained.

At 100% pull with synchronised processes we aim to maximise the value added and minimise working capital. *Every time a product or service is idle it is not adding value. Storage , double handling, inventory are all waste as the capital tied up is not working.

With ideal continuous flow, the lead time is determined by the value added time.*****The three core measurements are Quality Cost and Delivery.Lead times must be reduced to match the expectations of the customers.Ideally if we knew the exact delivery lead time to meet the customer expectations, and if we had the processes to produce in that time, then we could make every product to order (MTO) with no finished goods inventory. The obsolescence in this system would be zero. At the moment this is not feasible. However, for low risk high demand products we can afford some inventory. We call these A class products. For higher risk products where the production lead time is equal to the sales in that period, we call these C class and we can phase our production to fit the expected demand based on the movements and sales from the previous period. B class products are the Bad products that are necessary to complete a range or be used as marketing loss leaders or special promotional strategies.The classification of A,C,B is largely dependent on sales volume, and the economic production run(EPR) for the total process plant and equipment. The EPR for the plant will be set by the production unit with the lowest value added time percent most probably but this is mainly determined by the cost of a setup or changeover compared with the cost to run (add Value)In a plant producing a wide variety of products on short runs, as a start, it will pay to isolate the appropriate inventory stage to hold product. For the case of synthetic carpet at Shaw this was the greige stage where the number of variations are 77 and this increases to 1500 after dyeing and backing. ***********