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Lean Production System

Lean principles are mechanism required for implementation of lean production.So,before moving to lean principles,we need to understand lean production and its requirement.

Lean production ,also known as Toyota production system, means Doing more with less-less time, less space,  less human effort, less machinery, less materials- while giving customers what they want.

“ The machine that changed the world”,  by James Womack popularized five lean principles which acts as mechanism for implementation of lean production.

“Genius is when Idea and execution of that Idea  are simultaneous”

Albert Einstein

These 5 lean principles provide strategic steps for successful implementation of lean strategy. Its like recipe to awesome  lean production system dish.

Before  we move further ,we need to understand new Economics of price calculation,which indeed explain why we need Lean  production.

NEW ECONOMICS

As per old method accounting department would determine cost based on the principles of cost accounting and profit margins typical  for the industry would be added.

Old Equation : Cost + Profit = Price

In current scenario customer has become very powerful. They have a number of options available.  Such scenario has kept price component fixed(or falling). This has led to a new definition of price calculation.

New   equation :  Price( fixed)- Cost= Profit

Focus word is  cost reduction.This calls for implementation of lean strategy.

PRINCIPLES OF LEAN PRODUCTION

A.IDENTIFY VALUE

If we get  value wrong, everything goes wrong.

To identify value we need to ask basic questions like

1.Who are our customers(Internal/External)?

I would explain it with the help of example.

Suppose you own a coffee shop and you have divided your business operations into two departments kitchen  staff and front desk staff.

For kitchen staff  end user( who purchase the coffee) is external customer and  front end staff is internal customer.

2. What do they need from us?

 Now since we have identified our customers, we need to find what they need from us?

In the end what matters is ,what customer is willing to pay for.

Value is like a diamond. hold it up to the light and the range of colors  emerges. Not all are relevant to our situation.

There might be certain ideas which are genius to us,but customer find them irrelevant. Working on such ideas is not going to help  meet customer expectations.

Suppose you have a cake shop.You sell cakes for Rs. 1200 per kg.One fine day you increased  price of your cake to Rs. 2000 per kg.

One of your old customers visit your shop and try few cake testers. He doesn’t find any difference in the taste or quality of cake. He ask you a question in surprise.You haven’t changed taste or quality of your  cakes but you have increased your price. Can you help me understand this?

Sure!you exclaimed.  We have started baking our cakes in gold plated ovens.

Customer  left shop in shock.

Moral of the story is,do you think customer would  pay extra 800 per kg,if you start baking your cakes in gold plated oven. The answer is  big no!

So to identify what customer wants is super duper important.

B. MAP THE VALUE STREAM

Value stream mapping is an excellent tool to  identify opportunities for improvement. It reflects our current condition and point out things we can improve on.

Value stream mapping is  listing down process starting from  receiving order till delivering order. As a matter of fact 90% of the activities involved in creating final product are non value added activities. Important point to note is,that when value stream mapping is not just about identifying material flow but information flow as well.

Value stream mapping helps map out those 90% non value added activities. Once we find out those non value added activities we can start reducing them.

Let me give you an example.

Consider the custom made office chair that is delivered two months after you  order it. the value added work( that is the work actually performed) in the Assembly process consists of putting together the upholstery and cover with standard form  cushions and then bolting together the chair.

This takes a few hour at most. actually making the fabric and form and frame and parts which are done in parallel takes another day at most everything else during the two months you are waiting is waste.

To identify the waste we would break down the whole process.Starting from you placing the order for chair till you receive the chair. This process would be called  value stream mapping.

C.CREATING FLOW

So we did value stream mapping.Reduced or eliminated non value adding steps. But the story doesn’t end here.

Imagine we have eliminated all the  non value adding steps, but due to uneven loading the flow is disrupted. Would you be able to satisfy your customer needs? The answer is no!

In Lean management flow is a key concept. Any kind of waiting is a waste .Bottlenecks in process leads to increase in waiting,which indeed leads to waste.

So just eliminating non value adding steps doesn’t solve the problem.We need to improve material and information.

Imagine there are three processes required to convert   raw material to final product. First process has 20 piece per hour production rate,  second process has 10 piece per hour production rate and the third process has 20 piece per hour production rate .

Due to difference in the production rate of first and second process, work in progress inventory would keep on piling up at second process.This contributes to waiting waste.

In this case flow can be improved by installing additional machine for second process,balancing out production rate at all three process.

D.CREATING PULL

Once we have improved the flow,time to market can be improved drastically.

Pull system is used to improve time to market or time to consumer.

Pull system is derived from supermarket concept.Shelves of supermarket are filled only once material on shelf is sold.Similar to that,in pull system production is done based on actual customer demand and not projected customer demand.

Real life example of pull system would tea corner.

We see tea corners on almost every street of INDIA.They are a beautiful example of pull system.They prepare tea only once they receive order from the customer.They don’t put pot on the stove and then look for customers.

Pull System helps reduce waste,WIP and working capital.

Tools like Kanban card system and Just in time are used to implement pull system.

E. SEEK PERFECTION

All four principles are down to dustbin,if this last one is not followed.Lean strategy is not just a tool but a way of thinking.

It should be part of an organization’s culture.

Improvement is a continuous process.Its not a one time activity.

By following first four principles of lean we have reduced waste.But we can make it zero.Practically its not possible.So we need to keep do it as a continuous process.

Moreover customer demands keep on changing and we have to keep up with them.If we don’t keep up with customer demands,we will be out of business soon.

Best example of changing customer demands is recent focus of Indian consumer on safety aspect of small cars.Indian market is a cost sensitive market,but in recent time Indian consumers are willing to pay premium for improved safety.This has led all OEM’s to shift their focus on safety aspects of small passenger cars.

If you wish to build lean muscular body,you have to exercise regularly.On same lines lean strategy should be part of your daily activity,not just one time affair.