www.mesa.org2008 North American Plant-to-Enterprise ConferenceSeptember 21-23, Orlando, FL

Lean ManufacturingStrategic Initiative

Guidebook

Contributors:- Chad Vincent, Baxter - Charlie Gifford, 21st Century Manufacturing- Conrad Leiva, iBASEt - Ganesh Wadawadigi, SAP- John Dezelme, Independent - John Smith, Ease Inc.- Nancy Glenn, Independent - Robert Quinlan, GE Healthcare- Stephanie Green, Valent Group - Tom Knight, Invistics

Working Group Chair:Ganesh Wadawadigi, Ph. D.

SAP

Definition

Lean Manufacturing principles anchor on customer value and continually seek to identify and eliminate non-value added activities in the production processes. Lean synchronizes and sequences these processes to customer demand by creating a smooth flow of material using pull based replenishment. Further, by creating a visual and standardized work environment, relevant and timely information provided to employees empowers them to rapidly diagnose and resolve issues thus improving their productivity, raising quality standards, and lowering production costs. Business value in increased manufacturing efficiency gained with Lean Manufacturing lies in higher inventory turns, lower lead times and improved customer service levels. Lean is a journey, and use of appropriate technology and business applications is essential to sustain and scale the initiative not only within an enterprise but to extend the benefits to the supplier network.

Lean is a Journey

Three Pillars of Lean

Process: Manufacturing Styles

Satellites Commercial Printing

Heavy Equipment Automotive Sugar

Refinery

Pro ject Jo b Sho p Line Flo w/ Bat ch Assem b ly Line Co nt inuo us

High Mix High Vo lum e

Examples

Source: Integral Logistics Management: Operations and Supply Chain Management in Comprehensive Value-Added Networks, Paul Schönsleben

Process: Comparing High-Volume and High-Mix

ShortLong (2+ years)Time frame for product changes

InconsistentConsistentQuality

UnreliableReliableEquipment

Long, frequentShort, infrequentChangeovers

HighLow (3rd shift free)Utilization

HighLowProduct mix

VariableHighVolume

VariableStableDemand

High MixHigh Volume, Repetitivee.g., ToyotaManufacturing Characteristic

Extending TPS to Address High-Mix

Optimization of lot sizes and/or campaign sizesRules of thumb like EPEILot sizing

Part-generic techniques like CONWIPPart-specific KanbanPull scheduling

Optimization of inventory buffers using operations research

Rules of thumb to slowly lower “water levels”Inventory optimization

Shifting bottlenecks & optimization of capacity buffers

Fixed bottlenecks & rules of thumb to dedicate capacityBottlenecks and capacity planning

Flow path metrics leveraging enterprise software

Visual line of sight metrics like Heijunka boardsPerformance measures

Focused factories aligned to flow pathsDedicated people for each cellOrganization

Flow paths through shared equipmentDedicated cells for similar productsValue streams

High-variety, make-to-order or engineer-to-order processes

Stable, high-volume, make-to-stock processesExtended operations value chain

High MixHigh VolumeLean Techniques

Information: Role of Technology?

• Real-time data collection and actionable insights through visibility

• Internal linkages to adjacent and enterprise business processes

• External linkages to supplier ecosystem• Flexibility to rapidly adapt to changing

business conditions

How can Technology be Leveraged?

Making a Case for ROI

• Focus on shareholder value: – Believable financial metrics– Accurate evidence from Mfg.– Operations metrics to financial metrics

• Top-line metrics expected are:• Return on Investment (ROI)• Payback Period• Net Present Value (NPV)• Internal Rate of Return (IRR)• Modified IRR• Total Cost of Ownership (TCO)

Tie each to the 3 Basic OperationsMetrics using Tangible Benefits…

Aligning to COO’s Goals

1. Increase revenue with Throughput• Tied to top Business Drivers• Time- To-Market & To-Volume

2. Decrease Inventory and Operational expenditures

• Tied to top Business Drivers• Tied to reduced CAPEX• Reduce Labor & Material Expense

3. Reduce Operating Risk• ROI, fines, shutdowns, safety

claims, project failure

Quantifiable Benefits

Direct Materials: Reduce: Rejects and WIP InventoryWaste: Reduce: Waste Disposal CostMfg. Productivity: Increase: Data Collection, Throughput and Root

Cause Analysis CapabilityReduce: Rejects, Rework, Retest and Downtime

Quality Inspections: Reduce: Data Collection and Compliance AuditsFacility Cost: Reduce: Safety Stock, Energy, Space CostAdmin Productivity: Reduce: Return Processing, Handling, Write-offs,

Warranty Claims & Contract ConcessionsRevenue: Increase: Market Share, Price Premium, Capacity

Accelerate: NPI Maintenance: Reduce: Planned and Unplanned Downtime

Benefit Calculations Based on Resource Optimization & Reduction:Labor, Material, Equipment, Space, Energy

Next Steps – Taking the Guidebook to Completion

• Provide feedback• Become a contributing member of the

Working Group• Additional case studies that exemplify

benefits and showcase lessons learned in your Lean journey