OPERATIONS MANAGEMENTOPERATIONS MANAGEMENTfor MBAs for MBAs FourthFourth Edition Edition

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Meredith and Shafer

John Wiley and Sons, Inc.

Chapter 5: Process Improvement: Reducing Waste Through Lean

Topic 8: Process Improvement / Lean Operations

OutlineOutline

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• Overview of Lean

• Traditional versus Lean

• 5 Lean Principles

• Benefits of Lean and 6 sigma

• Homework #3, #4

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Five lean principles: ◦ Specify value from the customer’s point of

view. ◦ Identify the value stream, the complete set

of activities required to create the output valued by the customer.

◦ Make value flow through the value stream by eliminating non-value added activities and streamlining the remaining value added steps.

◦ Have the customer pull value through the value stream.

◦ Pursue perfection.

Lean Thinking Lean Thinking

JapanJapanTheir work systems tend to be

based on three primary tenets: ◦Minimizing waste in all forms.◦Continually improving processes and

systems.◦Maintaining respect for all workers.

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Traditional Systems versus Traditional Systems versus LeanLean

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Priorities Product/Service Design Capacity Layout Workforce Inventories Suppliers Planning and control Quality Maintenance

Cellular Process used in Cellular Process used in LeanLean

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1. Specify Value1. Specify Value

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At the heart of lean is the concept of value, ultimately defined by the customer. Also, the opposite of waste.

Waste is often classified into one of the following seven categories:◦ Overproduction◦ Inventory ◦ Waiting ◦ Unnecessary transport ◦ Unnecessary processing ◦ Unnecessary human motions ◦ Defects

2. Identify the Value 2. Identify the Value StreamStream

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The value stream includes all activities (value added and non-value added) from the creation of the raw materials to the final delivery of the output to the end consumer.

Activities within a value stream map are often broadly categorized as:◦ Value-added (e.g., patient diagnosis) ◦ Non-value-added but necessary (e.g., requiring

patients to sign a HIPAA form) ◦ Non-value-added and not necessary (e.g.,

waiting for the doctor)

Example Value Stream Example Value Stream MapMap

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3. Make Value Flow3. Make Value Flow

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EffectivenessEffectivenessResource Avail X Efficiency X Rate of Quality OutputOEE = Avail X Performance X Quality

Efficiency = average actual output / capacity

Example: Call Center, available 96% of its operating hours. The center handles on average 750 call per hour but was designed to be able to handle 1000 calls per hour. 8% of the customers have to call back because of unacceptable service.

a.Determine the call center efficiency and overall effectiveness.b.Assume the call center availability follows a triangular distribution with availabilities as low as 80% and as high as 99%, with 96% being most likely. Further assume the demand follows a uniform distribution ranging from 600 to 900 calls per hour. Finally assume the call back rate varies via a normal distribution with mean 8% and a standard deviation of 3%. Use simulation techniques to arrive a range for call center effectiveness. What are the managerial implications?

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4. Pull Value Through the 4. Pull Value Through the StreamStream

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5. Pursue Perfection5. Pursue Perfection

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5SVisual FactoryKaizenPoka yokeTotal productive maintenance Overall equipment effectiveness

Benefits of LeanBenefits of Lean

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Five primary types of benefits:◦Cost savings ◦Revenue increases ◦Investment savings ◦Workforce improvements ◦Uncovering problems

Lean Six SigmaLean Six Sigma

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