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Apart from Dell using lean manufacturing system, there are other small scale
industries who use this system. Mumbai Dabbawallas are employed in a
unique service industry whose primary business is collecting the freshly
cooked food in lunch boxes from the residence to the office workers and
returning the empty boxes. They work according to the requirements of the
customers and work on a six sigma concept.
Typically, a customer's order history and a business forecast are used as the
basis for planned purchasing and manufacturing activity. At Dell, the
refinement of processes sought to move order fulfillment closer to real time
by simultaneously evaluating supply constraints, factory capacity, shipping
constraints and the specific requirements of each customer order. These
capabilities were realized through Accenture‘s customization, implementation
and integration of i2 Factory Planner (manufacturing scheduling), i2 Supply
Chain Planner (MRP and inventory planning) and i2 Collaboration Planner
(communication with suppliers and logistics operations). This marked the
first time that all three modules were implemented concurrently in a build-
to-order environment.
The video that demonstrates the Naples Sailboat Company outlines a similar
process. The production process consists of three workcenters (1, 2, 3) that
work towards the product that is then handed over to shipping. Each of
these stations has a Kanban, e.g. a visual signal for processes further up the
stream. The chained usage of these Kanban's causes an upstream process to
be triggered. Selling a completed boat via the shipping department causes a
signal to previous workcenters. The flow of Kanban signals goes from the
customer backwards through the workcenters, e.g. 3 → 2 → 1. The flow of
materials goes the opposite direction, from basic parts assembly in
workcenter 1 to final assembly in workcenter 3. This pull-system underlines
the customer-focused approach of this system, similar to the Toyota
Production System. The process begins by selling a product at the end of the
line and not by putting the first piece together. Signals throughout the
workcenters are handled the same way as signals to external vendors, in
order to replenish stock inventories. The continuous need for replenished
inventory keeps the overall workflow going, while every workcenter retains
its independent responsibility to have the right level of inventory.
6. Watch the following videos and explain how a pull system differs
from a push system and what the benefits of a pull system are:
A pull system is one in which the supply chain sends a product through the
supply chain because there is a specific demand for that one product, as
opposed to creating inventory and ―pushing‖ the product out to distributors,
wholesalers, vendors, or customers so they have to keep inventory, or
worse, the production company has to keep inventory. A ―push‖ supply chain
is the exact opposite: they consist of many warehouses, retail stores, or
other outlets in which large amounts of inventory are kept to satisfy
customer demand on the spot.(learnleanblog.com)
When a business employs JIT(Just In Time) and the pull model of business,
they are taking on a few risks, but at the same time they are reducing costs
dramatically. Because they do not have to stock inventory at that point in
the supply chain, there is no risk of lost investment in that inventory, and
they will not be scrambling when a demand signal changes based on
seasonality, current events, publicity, or any of other reasons why customer
demand and purchasing behaviors change.
There are many businesses that can benefit from the pull methodology of
supply chain management, and it should be the goal of most businesses to
make as many aspects of their supply chain pull systems instead of push
systems as possible. The businesses that can most benefit from these
strategies are manufacturing, more so than any other business. Because
they run the greatest risk of losses when they have unsold inventory, they
benefit the most from this pull system.
A perfect example of an almost ideal pull supply chain is the Dell business
model. Michael Dell started manufacturing computers out of his dorm room
while in college. The difference between him and his competitors is that he
did not own a storefront or a manufacturing plant. He had to keep his
inventory down to a minimum, if any at all, and did not have room for parts
storage, no matter how small the components may have been.To counter
these constraints, Dell created the ultimate business model: customers built
their computer's specifications on the internet, and using those
specifications, the computer was built. Not a single spare part was left over,
and Dell had no inventory, as each computer was shipped out the door as
soon as it was manufactured.(learnleanblog.com)
From the video one can understand come to know the financial benefits a
company gets when its shifts it operation to Lean methods and also uses the
Lean based ERP system. The video also talks about how most of the
American companies are yet to follow the Lean process of manufacturing
even though it has a lot of benefits. Also concept of Inventory turns is
mentioned in the video. The inventory turns is a performance metric and
refers to buying less and more often than buying raw material at but at one
time. The higher the inventory turn a company has more will be the
transactions. The increase in transaction can be seen in three functional
areas namely the Purchasing, Al invoicing and Receiving Department.
Initially when a company practicing Mass production shifts it operation to
Lean production, there is a constraint that it faces. The constraint is not with
respect to the production but within corporate administrative process itself.
The constraint is seen in the exciting ERP system. By going on a leaner
method the company can decrease the its employee strength, increase
revenue per employee. Also significant increase can be seen in inventory
turn, purchase order line items and invoices. Also decrease is seen in the
value of on hand inventory. But the constraint can be seen with the increase
of purchasing professional, receiving professionals and AP Invoices
professionals. In order to get rid of the constraint one has to do away with a
labour intensive ERP system and introduce a leaner ERP system. By doing so
the constrained seen in the increase in the number of purchasing
professionals and other professionals is completely negated. Also using the
Leaner ERP system results in a lot financial benefits like decrease in number
of employees, increase in revenue earning per employee, significant increase
in purchasing order line items and invoices. Also significant decrease can be
seen in the value of inventory on hand. Thus seeing all these benefits a
company can increase its revenues by a significant amount and also expect
considerable profits. Following article explains the concept of inventory
turns: Inventory Turnover: The number of times that a companies inventory
cycles or turns over per year. It is one of the most commonly used Supply
Chain Metrics. Calculation: A frequently used method is to divide the Annual
Cost of Sales by the Average Inventory Level. Example: Cost of Sales =
$36,000,000. Average Inventory = $6,000,000.
Projected Inventory Turns: Divide the ―Total Cost of 12 Month Sales Plan‖ by
the ―Total Cost of Goal Inventory‖ Example: The Total Cost of 12 Month
Sales Plan is $40,000,000. Total Cost of Goal Inventory = $8,000,000
Turns can be viewed using Cost Value, Retail Value, or even in Units. Just
make sure that you're using the same Unit of Measure in both the
Numerator and the Denominator.
Kaizen was created in Japan following World War II. The word Kaizen means
―continuous improvement‖. It comes from the Japanese words 改 (―kai‖)
which means ―change‖ or ―to correct‖ and 善 (―zen‖) which means
―good‖(graphicproducts.com) Kaizen is based on making changes anywhere
that improvements can be made. Western philosophy may be summarized
as, ―if it ain't broke, don't fix it.‖ The Kaizen philosophy is to ―do it better,
make it better, improve it even if it isn't broken, because if we don't, we
can't compete with those who do.‖ In the Unites States its also termed as
Continuous Improvement or CI. Some people also refer to this as
Continuous Value Improvement and so on. Kaizen is a system that involves
every employee - from upper management to the cleaning crew. Everyone is
encouraged to come up with small improvement suggestions on a regular
basis. This is not a once a month or once a year activity. It is continuous.
Japanese companies, such as Toyota and Canon, a total of 60 to 70
suggestions per employee per year are written down, shared and
implemented.
Eliminating Waste
Improving Efficiencies
Improving Processes and
Improving Morale
Low inventories might make the life of the employees a bit easier. A
company having lower inventories will have lower inventory turn over and
this results in higher revenue and more cash to spend,also the revenue per
employee increases.There are other benefits also with lower inventory and
these are mentioned in the previous answers. With company adopting leaner
method's the responsibilty of the employee increases. Each employee is
more responsible and also it gives them an opportunity to work the exciting
problems and find solutions. With a team based model being followed there
is not authoritarian rule and this makes innovation or inventive ideas to
occur more easily or in other words scope of newer innovation or better
inventive methods is more. Also as the company has more cash to spend
then can be very encouraging and support their staff with good innovative
ideas. Also this gives companies a chance to work on better products and
systems and they won‘t be pulled down by legacy and large inventory
pending in their stocks. Toyota and Dell were the first companies to adopt
lean practices and have shown that it‘s possible for companies to innovate
continuously and come up with better customer service and products.
Some of the key differences between the conventional mass production and
lean production are summarised below
the traditional mass production managers tends not to think about the
work force as a social entity, where as the lean production makes a
deliberate and explicit effort to organize the informal social network in
production system to align employee interest as closely as possible
with the company goals.
Lean production combines technological mastery of mass production
with the preindustrial respect for individual‘s autonomy as a
craftsperson.
Customer Satisfaction: Incase of mass production engineers make
products in large quantities at statistically acceptable quality levels;
dispose of unused inventory at fire sale prices. In case of lean
production engineers make what the customers want with zero
defects, when they want it and only in quantities they ordered.
In mass production Leadership by executive fiat and coercion and in
lean production Leadership by vision and broad participation.
Individualism and military-style bureaucracy functioning was seen in
mass production, where as in lean production team based operations
and flat hierarchies.
Culture of loyalty and obedience: subculture of alienation and labor
strife can be seen in mass production. Harmonious culture of
involvement based on long term development of human resources is
seen in lean production.
Mss production is usually associated with large scale machines,
functional layout, minimal skills, long production runs and massive
inventories . where as lean production has human scale machines,
cell type layput , multiskilling, one piece flow and zero inventories.
In mass production information management was poor and based on
abstract reports generated by and for managers. In lean production
information management was rich based on visual control systems
maintained by all employees.
Mass production had a model of isolated genius, with little input from
customers and little respect for production realities. whereas the lean
production had a team based model, with high input from customers
and concurrent development of product and product process design.
12. Especially explain the differences between the role and position
of the shopfloor workforce in lean and mass production.
In Kanban-based pull systems like the TPS, every step of the process
considers the following step as customer (Magee, 2007). The individual steps
of the manufacturing process are treated like independent companies within
the system. Employees are given the responsibility to manage their
inventories and improve the process by themselves, which is a lot more
engaging than a position in mass production. By trusting the shopfloor
workforce with these tasks, people feel more valued and a part of the final
outcome. As a result, individual employees pay more attention to quality and
the product is likely to be better.
Under Lean production the social entity is very important and cannot be
ignored. Lean production legitimizes the informal social network in an
company as an important source of co ordination and commitment.
Employees are encouraged to identify themselves with company rather than
their team or department. In lean production the team doesn't only
represent the formal structural unit but represents the notion of team work,
that embodies the goal of a co-operative relationship among the work team,
work departments and the organization as a whole. Goals and incentives are
formulated and work is organized to support the central influence of social
interaction on the operation of a productive system.
In lean production the peer relationship among the team members, support
provided by the team leader replaces the traditional foreman whose rules
was authoritarian in nature and rule based.Social relation is extremely
important in lean production.The peer control that comes from lean
production could easily go wrong if there is no cohesion ,some process of
close to the source dispute resolution, personal influence that is based on
expertise and not seniority and incentives that align the team members
interst with each other and with the other teams in the plant.
When Toyota started out to create Lexus, their luxury sub-brand, the
designers were sent out to live and learn a luxurious life themselves in order
to gain in-depth knowledge about the target audience. On a more abstract
level, this creates a strategy of winning and earning customers rather than
forcing products on a market. This underlines how the pull concept reaches
into all branches of an organisation, not only manufacturing. By continually
learning about customers and adapting internally, Toyota can translate
customer feedback directly back to product design and manufacturing. Due
to the low inventory levels and flexibility of lean production, emerging trends
and customer demands can be served better as the manufacturing process
can be adapted more quickly than conventional mass-production systems.
2nd set
The most significant fact can be observed are the success of Japanese car
industry, especially Toyota. The so called ―Third industrial revolution‖ (Rose
& Parsons 2009) combines with responsiveness, quality and innovation. Take
Toyota for example, after World War II it observed the Ford‘s factory to
learn the mass production line system, and then integrate the mass
production idea into their production idea late. Toyota also learns from
Deming, who developed the theory in World War II. The experiences
contribute to Toyota‘s lean production and Just-In-Time (JIT) system. Toyota
applied some approaches on production, which includes high education level
of workforce, work as a team, the quality circle based on Deming‘s theory,
transfer the duty and permission about quality control to shop floor level,
and build knowledge base for shop floor level. Finally Toyota develops
principles for lean production:
• The team is responsible for the quality, not only the manager.
• Based on the relationship with suppliers to support JIT system, remove the
inventory from stock.
1. Define value.
Value from the end customer > specification of product or service >
specification capabilities + timing + the right place. This is the step to
convert the customer‘s concept into reality, which means in provider‘s
language, so the demand can be translated into the goal of production.
a. Product definition: Translate the customer‘s demand into the detail layout
and specification for engineers and workers to design the first stage of
production. I think in this stage the gap between the buyer and seller can be
a key factor. If the communication got misunderstanding, it may lead the
following procedure to fail.
b. Information management: Begins with the customer‘s order until the final
delivery stage. I‘d like to take my experience for example, when I place an
order on ASDA, it will record my delivery address, debit card number and
contact details. The information will be used until the delivery stage. To
avoid the inconsistent problem in the whole process, ASDA lock the
permission to modify my account detail until the delivery is complete. It can
be seen that ASDA is unable to communicate with the delivery staff in a
short time, so what ASDA can do is only to stop the customer from
modifying their detail.
In the process of making continuous flow, the muda (waste in Japanese) can
be observed. Remove muda and make the production process continuous
will speed up the value creation process.
4. Design and provide only when customer wants only. Since the end
customer is the source of value, the end customer should lead the product
line. In order to minimize the time from order to delivery, a fast reaction in
the product system should be designed, thus more muda will be discovered.
After losing its exclusive position in the market due to losing a patent-
infringement suit in 1989, Lantech faced problems which threatened its
perpetuity; time taking for minor improvement or new model; quality issue
in terms of manufacturing defects, overall no added value to deliver to
customers. Nevertheless, the key driving forces that enabled Lantech to
move to a lean production system are: (1) Commitment of founder and (2)
Hiring personnel who can trigger revolution in the organisation.
The founder, Lancaster kept trying new methods for better business position
from the beginning. Especially, after losing patent position, he perceived the
importance of value delivery to customers and worked on below 4 elements
for improvement. Yet, it didn‘t get into a lean production system and these
approaches didn‘t work well, ongoing experiments were worthwhile in terms
of ‗Kaizen.‘
c. New production method, Max-Flex, was adopted to cut lead time and
deliver customised wrapping machines to customers
d. better information technology was also adopted to control the status of all
machines in production.
(2) Hiring Ron Hicks: It seems that hiring him worked as a trigger to start
full-scale lean production system. His join to Lantech inspired Lancaster in
terms of lean thinking, and stimulated the company to shift into a lean
production system.
4 What changes were involved in making the shift from mass to lean
production?
In short, here are some good point of letting the customer pull product:
Production and distribution are demand driven, no inventory, response to
specific orders, point of sale data comes in handy when shared with supply
chain partners, goods are produced when inventory is low, keep inventory at
efficient levels, allows for customization, decrease in lead time, space,
mistakes while improving the product to more of what the customer wants.
This leads to greater perfection.
References
http://www.learnleanblog.com/2009/07/pull-system-key-lean-concept.html
http://www.graphicproducts.com/tutorials/kaizen/kaizen-benefits.php
http://mtchowdhury.blogspot.com/2007/12/possibilities-and-limitations-
for.html
http://www.lantech.com/
Beyond Toyota: How to Root Out Waste and Pursue Perfection, By: Womack,
James P., Jones, Daniel T., Harvard Business Review, Sep/Oct96, Vol. 74,
Issue 5.
http://en.wikipedia.org/wiki/Kaizen
http://en.wikipedia.org/wiki/E-business