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THE LEAN SPECTRUM OF WORK
June 2004

According to Industry Week Magazine, over 90% of manufacturing companies have world class manufacturing programs like lean transformation underway, yet less than 10% of those companies are happy with the progress that they have made toward their goals. The Lean Spectrum defines the core types of work that we see the most successful lean companies performing today in order to achieve breakthrough business performance. It is hard to find a manufacturing company today that is not working diligently on at least one of these core types of work. As more companies adopt more comprehensive approaches to their lean transformations, we are confident that the gap between the desire for lean performance and the consistent attainment of meaningful results will narrow significantly. Consider the lean work elements described below and whether some of these might close a gap or two in your lean transformation efforts.

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Dave Gleditsch
Pelion Systems, Inc.
We describe The Lean Spectrum of work and transformation across five core activities:

  • VISUALIZE – model the factory of the future
  • DEFINE and DESIGN – define current state capability and design the lean factory of the future
  • RUN – run the lean factory and supply chain
  • EXTEND – lean across the enterprise and supply chain
  • IMPROVE – lean operations to make them even better

VISUALIZE - model the factory of the future
Conventional wisdom states that you need to know where you’re going if you ever hope to get there. Key methods to visualize the lean destination are:

  • Value Stream Mapping – graphical depiction of all the overall steps involved in making the conversion of raw material into what the customer is willing to pay for. Value Stream Mapping defines the major flows of work and material for the manufacturer, supplier, logistical and planning collaboration processes. Critical path cycle times, changeover flexibility, resource requirements are defined while also analyzing the entire Value Chain for those work elements that do not add value in the eyes of the customer. Value Stream Mapping first baselines the “current state” of capability and then drives the lean implementation team to vision a more responsive, cost effective, and higher quality “future state” of operation.

    Value Stream Mapping is an essential effort that involves many constituents across the organization in the lean process, specifically quantifies critical process data that often has been generalized in the past, and begins to build consensus on what the process really is today – and how it can be improved in upon in the future.

  • Entitlement Visioning – one of the most frequently overlooked steps in achieving breakthrough lean performance is quantifying just how good the organization or process is “entitled” to be. Each business should have two or three concrete metrics that describe the most compelling performance issues being faced. If you don’t have these is place today, you should work diligently to define them. If you do have them in place, ensure that you can link valid process metrics that will drive those business performance metrics (i.e.: market share growth driven by three-month moving average shipping performance; gross margin expansion driven by overtime elimination).

    Hopefully, in our Value Stream Mapping efforts, we measured and defined the current state of performance for these process metrics. If not, this is critical data to acquire now. Then, in a near-perfect lean business and supply-chain, how good are these metrics really entitled to be? If you could organize a hall of fame team, with the proper resources and systems, and could break down all barriers to a full lean transformation, just how good could your company perform against these metrics?

    Now we can determine the “gap” from our current state of performance, and the level of performance that we are entitled to. In our lean project scoping and chartering efforts, we can ensure breakthrough results if we focus our efforts on projects that close a significant percentage of the performance gap (a low end of 33%, with a median of 50% closure is not a bad gauge of priority here). This discipline ensures linkage of our efforts with compelling business needs (absolutely critical to keeping your lean program funded and moving), drives us to focus resources on truly breakthrough results, and jump-starts the financial justification process for investing appropriately to be as good as we can be.

  • Process Mapping – detailed mapping of critical process flows to make individual products or families of products within a factory, business, or logistical process. This more detailed mapping of product flow, process relationships, mixed-model family relationships to the process, and factors that influence both demand and work within a process really enables a fact-based lean design to be established and then implemented effectively. Lean implementation teams can get stalled at the Value Stream Mapping stage with questions of what specifically to do next to take concrete action while dealing with the considerable complexities of their processes and products. Teams that have selected the right areas to focus on through entitlement visioning, and then drill-down to appropriate levels of modeling with process mapping, have charted a successful path for driving improvements.

DEFINE (design the current state capability) and DESIGN (design the lean factory of the future)
Lean implementation enables organizations to improve operations based upon factual information using best practice methods and lean mathematics. Lean design methods allow implementation teams to model a variety of options for improvement, reduce the risk of disruption through effective anticipation and planning, and build a foundation for high quality training, management and improvement of the lean operation. First defining current process capabilities and characteristics is an essential step to the subsequent design of leaner, more responsive and predictable processes. Key methods we see being deployed in the design the lean operation are:

  • Standard Work Definition – for each process defined in process mapping, the typical labor and machine times; changeover attributes, flexibility, and/or constraints; actual time available per day or shift for the process to run are defined in standard work analysis, for each product that consumes resources within that process. This data will feed the lean design process and then act as a baseline for continuing improvement and kaizen focus.

  • Lean Quality Database – many manufacturing processes continue to deal with a variety of process yield and scrap challenges. In order to always support customer requirements with current shipping performance, it is essential to consider the impact of these yield factors on both factory resources and material replenishment requirements. Again, this data acts as a baseline for kaizen focus and improvement.

  • Product Family Definition – the greatest challenges as well as the largest benefits in lean manufacturing are presented in low to medium volume production with a medium to high variety of products. Effective definition of the families of products to build on the same production lines or cells is a significant challenge for the lean implementation team. Family definitions are also critical for finished goods and raw material planning strategies to meet customer service and flexibility requirements.

  • Demand Analysis – traditional manufacturing and supply chain processes are often designed to pre-determined process constraints. In reality, customers and markets don’t demand products and services with an outlook to a company’s manufacturing limitations on volume, mix, and flexibility. Demand analyses that assess a variety of scenarios and the production capabilities needed to support them permits lean teams to model both productive and customer-flexible lean factories. Demand scenario modeling disciplines are also very helpful for managing seasonality, new production introduction, and ongoing plant rationalization strategies as companies run their lean factories.

  • TAKT time process flow – a proven and powerful method to achieve world-class lean capability is through the deployment of TAKT time flow process design. TAKT times translate market demands or production volumes into units of times that lean engineers use to design, balance, and manage lean factory operations. TAKT time management enables continuous and predictable flow of production to the rate demanded at any point in time.

    In the TAKT time design engine, the four previous elements of our discussion – work, quality, demand, and product families are integrated to calculate resource requirements, identify bottlenecks to flexibility, and to balance factory flow. Depending upon the manufacturing challenges of volume and variety, we see three important best-practice approaches to TAKT being utilized – 1) daily mixed model flexibility with a demand flow driven TAKT time; 2) rate-based planning to a Heijunka level TAKT target; and 3) gating process TAKT rate with a constraint-based lean management approach.

  • KANBAN demand-pull material replenishment – lean transformation occurs as organizations move from forecast estimating drivers to responding to real-time market and factory events. Responding to demand and pulling material through the supply chain is a proven technique for reducing overall material inventories while actually increasing the availability of the inventories that are most in need. Material pull chains define the point-to-point flow of material to the point of consumption on the production line. Interim stocking locations are often integrated in the pull chains to speed the movement and reduce stock-outs of parts at the needed location. Visual based replenishment systems then drive rapid response to real-time material needs in the factory as well as across the supply chains. They simplify work and empower more people in the organization to manage the work of material replenishment. SUPERMARKET and marketplace inventory investments convert the flow of products and semi-finished goods products from a schedule based to an event-driven system with all the corresponding benefits of component material KANBAN management.

RUN - the lean factory and supply chain
Companies that have made a successful transition from designing lean factories and supply chains to consistently running lean with sustained performance have developed disciplines and methods that support the unique challenges of operating on the lean edge while providing customers with demand-driven responsiveness.

  • Engineering Change Control – many people view the lean transformation process a “one-time” engineering effort. In reality, market demands, distribution requirements, product definitions, manufacturing processes, and process capabilities change frequently. Lean managers benefit from processes and applications that streamline the effort and cost of engineering change, while very importantly managing these control functions with the world-class quality that our customers and regulatory agencies demand.

  • SUPERMARKET Replenishment – ongoing management of supermarket inventories to continually “right-size” them provides an appropriate supply of the right products to support factory response capability while defining upper inventory control limits as well as elimination programs for slow moving products. Visual based supermarket replenishment systems can effectively eliminate time and errors in decision-making by responding real-time to demand events.

  • Level Loading (Heijunka Smoothing) – customer flexibility is often met with very agile production flexibility, though this frequently has higher associated costs. Flexible production that respects sensible upper and lower control limits constraints for helps to reduce the sometime significant costs of pure and total flexibility. Leveling production requirements, smoothing large demand variations, while integrating with SUPERMARKET kanban techniques provide powerful alternatives to the lean manufacturer.

  • Factory Sequencing – many lean factory managers require tools to drive the specific sequence of actual production on the shop floor. In order to optimize efficiency and predictability, it is not enough to provide the production line with a deck of cards – or a daily production schedule or Heijunka plan. It is also important to shuffle and deal those cards in a specific order or sequence that optimizes labor efficiency and material flow, while reducing the overall setup times required and the bottleneck wait times experienced.

  • Daily Resource Planning – labor and machine resource planning that is done with high-level, generalized assumptions can result in a significant waste of labor and capital, each and every day. The lean manufacturing information created in the Define/Design phase enables lean managers to have a superior view of the capacity and labor requirements of daily and varied customer demands. Predictable shipping performance with ever tightening timeframe requirements - as well as improved levels of labor productivity are driven by planning the right machine and labor resources for each daily mix and volume of products that is required by current demand.

  • Electronic KANBAN - electronic kanban methods streamline communication for event-driven material flow, enable high quality with large numbers of KANBAN signals, improve visibility for planning personnel, provide exceptions alerts for reducing stock-outs and planning effort.

  • New Product Management - an agile manufacturer can win market share not only by designing superior products and services, but also by executing change more efficiently than its competition. Lean management systems that equip product development teams to rapidly launch new products and efficiently integrate those new products, options, and features with existing production have an enormous speed-to-market advantage over less agile competitors.

EXTEND - lean across the enterprise and supply chain
Broad deployment across all of the production lines, factories, divisions, and suppliers is essential to meaningful bottom-line improvement at the corporate level.

  • Extend lean capability across the entire factory, divisions, and suppliers – Leveraging best practice work that has been done in prior lean implementations reduces the effort required to expand lean adoption across broad organizations and supply chain networks in ongoing implementations. Creating lean databases and standards in the Define/Design phase – and carrying that information forward enables teams to leverage prior work.

  • Supplier Kanban – best practices extend the deployment of demand-pull KANBAN to a broad number of suppliers and parts with best practice support such as:

    • Web portal technology for collaboration with small and very large suppliers and subcontractors that drives reduced paperwork, streamlined transactions and overhead management costs for both customers and suppliers.
    • Increased linkage of material demands with real, not just forecasted events across the factory, supply chain, and distribution channel
    • KANBAN visibility and real-time messaging dialogues between suppliers and customers for ongoing communications, problem resolution, material data and documentation management.
    • These event-driven execution methods are most effective when also integrated with forward-looking material plans for improved visibility for suppliers.
    • Reconciliation of kanban replenishment activity and existing ERP inventory control and purchasing applications
    • Real-time supplier shipping performance and quality conformance reporting

  • Fabrication KANBAN – these methods manage complex machine centered processes to still be driven by visual based kanban methods. Fabrication Kanban management applications regularly evaluate the demand of multiple competing downstream assembly processes or customers, account for variable setup, transit time, planning queue and changeover requirements, while defining optimum changeover sequences. These management applications can liberate the machine shop managers and planners from much of the daily fire-fighting they do today and enable them to work on higher value-added improvement efforts.

  • Build to Replenishment – is often an interim step implemented in the transformation from a forecast-build process to a pure demand-driven or build-to-order process. Extending high quality SUPERMARKET replenishment into distribution and ultimately with end customers requires confidence and predictability from:

    • Defined response lead-times through lean factory and supply chain design and predictable performance within those lead-times with sustained lean methods
    • Flexibility capability to replenish on time to SUPERMARKET and finished goods “right-sized” inventory levels
    • Material supplies in-process to support kanban techniques at the semi-finished or finished goods levels

    IMPROVE - lean operations to make them even better
    Lean implementations and applications that have created a lean manufacturing database of critical process variables allows the lean engineer to continuously improve upon the process. Teams working in the new and lean manufacturing environment experience a change in thinking as well as new methods of working. Their horizons for change are increasingly opened and further enable efforts to improve process capabilities.

    • Standard work analysis – tremendous lean breakthroughs occur when overall process flow is improved, and significant flow bottlenecks are removed. Further focused efforts can improve each and every individual process at the operational level. Standard work analyses and sequence of events tools are invaluable for breaking down the individual components of work to a level that the lean improvement team can drive additional breakthroughs from.

    • Quality database – immediate visibility of quality and process capabilities provide closed-loop feedback through the quality database. These key process variable measurements integrate with lean design and planning engines to allow:

      • Real-time response to material and process changes
      • Exceptions management feedback of new and unanticipated process bottlenecks
      • Valuable data deployed in Six Sigma process engineering efforts to design more effective process capabilities

    • Total production maintenance management (TPM) – lean processes can respond effectively to a broad range of requirements and conditions. Ensuring machines in the lean factory are always ready to produce at the highest level of quality provides superior execution capabilities. TPM techniques, deployed as an integrated element of lean best practice methods provide powerful predictability and eliminate many unplanned process problems.

    • Actual time tracking – the lean manufacturer and supplier provides superior time and flexibility as response capabilities to its customers. Successfully tracking the actual times it takes to both produce and replenish products provides valuable feedback on actual lean performance against targeted lean goals and objectives – and enables more accurate forward planning efforts. The key gates along the timeline of material replenishment are quantified, become the focus of lean process improvement, are measured, as well as managed with status reporting, messaging technology, and key performance indicator measurement.

    In summary, it is increasingly apparent that companies must excel in lean capability in order to prosper or even survive in today’s global marketplace. The winning companies will be those that have broadly deployed superior methods that accelerate their full attainment of lean capability and then enable them to out-manage their competitors as they go forward in the future.

    At the end of the day, a winning lean capability is best described by lean business performance. Lean business performance is best gauged by the financial managers of a business. We believe that improved business performance, correlated with a company’s investment in lean transformation efforts, is evidenced specifically by a measure of expanding gross margin profit levels through:

    • Reduced cost of goods sold – from labor productivity savings and reduced total material expenditures. Comprehensive elimination of unnecessary costs such as premium freight, overtime expense, rework labor and material scrap costs.
    • Reduced overhead cost - through streamlined work, continuous improvement deployment, and improved overhead absorption through leveraged sales
    • Capacity productivity - through increased utilization of plant & equipment assets
    • Reduced interest expense - through increased inventory turnover
    • Increased sales volumes - resulting from increased market share as well as pricing premiums that are created through superior shipping predictability, flexibility, and value propositions delivered to both distribution partners and ultimate customers.

    Sustaining disciplines and applications, along with broad deployment of lean across the business provide both the time needed and the consistent delivery of results required for ongoing lean breakthroughs to roll-up to meaningful results at the corporate bottom-line.


    ABOUT THE AUTHOR

    Dave Gleditsch is the Chief Technical Officer for Pelion Systems, Inc.

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