1st condition
From: Norman Bodek
Sent: February 21, 2005
Condition 1:
“To lay out the facilities in the sequence of the process.”
When we attempt to convert the production process with our existing
facilities from large lot production to one-piece flow the waste of transportation
immediately is understood. With our past production methods (Hirano calls this
“Dumpling production.”) workers normally stood in front of one machine producing
in large lots. This was understood by managers and of course, by our accountants as
the most productive and efficient method.
We would achieve high productivity, high utilization of equipment, and hopefully minimum
downtime of machines. We accepted change-over times as a given and accepted a
certain level of defects (plus or minus 3% was the industry standard). Non-value
adding wastes in this older method were at times enormous. With lot inspection
methods if the lot didn’t meet our standard, often the entire lot was discarded or we
had to sit down and do 100% inspection of the parts to separate the acceptable from the
defective.
Re-work was also enormous and probably worst of all was the long lead
times. I remember in 1980 when I bought a Buick Station Wagon, it took General Motors 13
weeks to deliver the automobile to me. I was shocked when I went to Japan in the
early 1980’s to find that Toyota could build and ship a new car to the customer
within a week. Back in 1980, GM turned over inventory four times a year while Nippon
Denso, a Toyota subcontractor had a turnover ratio over 350, less than one days inventory
in the plant.
In the late 1980’s I would visit with Mr. Ohno, at the time he was
chairman of Toyota Gosei, on each of my semi-annual study missions.
“When Ohno would speak to our study mission group, his lecture was always very simple
and basic. He would start by giving us his famous ‘river example.’
“Inventory[1] is like a river of water and as it flows through the
plant it hides problems and other wastes. It hides the machine problems,
quality/defect problems, and many others. All of these problems add to the cost of
manufacturing.”
To address this issue Ohno recommended that we start by slowly reducing inventory,
‘reducing the level of water in the river.’ “As you lower the level
of inventory, problems rise to the surface of your awareness, [2] then
one by one you solve those problems and eliminate them, then you can lower the river
again,” Ohno said. You continue to do this eliminating those non-value added
wastes.
Lowering the river of inventory is the heart of lean manufacturing. Keep this
centered in your mind and practice it. People have a tendency to complicate things.
It is only because they really don’t fully understand and appreciate the
simplicity and power of reducing inventory.
If you had a batch size of 100 parts, Ohno would tell you to lower the
batch size to 99 and see what happens. If a problem occurs then solve it and then
take away another piece.
The process of lowering the inventory levels led to the concept of one-piece flow, but
when you cannot get to one-piece flow you use the Kanban[3] system and
work with small batch sizes.
One-piece flow is producing only one part at a time then moving that part immediately to
the next machine. The machine in a cell often has a device to hold the part while
being machined then it is either moved automatically to the next machine or carried there
by the worker. There is virtually no inventory built up between these
machines.”[4]
A wonderful tool “To lay out the facilities in the sequence of the process,” is
called Value Stream Mapping. Goals are to shorten the lead time, arrange the process
into cells and to deliver to the customer products
and services “Just-in-time,” the right product, at the right time, in the right
quantity and in the right quality.
Laying out the facilities in the sequence of processes eliminates the
mountains of work-process-inventory found between machine centers.
Let’s here from
you.
Norman Bodek
Notes:
[1] Since Ohno’s death Toyota has slightly
reversed the trend to completely remove inventory and has additional inventory to protect
them against disasters. But, Toyota is still probably the best JIT Company in the
world.
[2] These problems could be machine failures. If
one machine goes down, excess inventory allows the process to continue without having to
immediately fix the machine. If there was a quality defeat inventory allows you to work
without having to get to the root cause of the problem.
[3] In December 1980 we interviewed Yasuhiro Monden,
professor of accounting at the State University of New York at Buffalo and author of the
Toyota Production System. We titled the article Kanban – The Coming
Revolution for we liked the name Kanban better than the Toyota Production System but
Kanban is only a subset and JIT became the term of choice. Kanban means
signboard and is a vehicle to switch the manufacturing process from a “push” to
a “pull” system. The subsequent process goes back to the previous process
and presents a production order, the Kanban, to allow the previous process to produce.
[4] The above paragraphs are from my last book
“Kaikaku The Power and Magic of Lean.”
From: Chuck Lamb
Sent: February 21, 2005
Norman,
Very interesting start. Looks like a combination of Lean and TOC. Your extra
inventory seems to be what is called "Buffer" in the TOC world. I've found
that they both are valuable (Lean and TOC) and can be better than one or the other in
whole. I'm looking forward to the other conditions.
Regards,
Chuck Lamb
From: Prasad Velaga
Sent: February 21, 2005
Norman,
I view the existence of large inventory in a different way. In my view, large inventories
were maintained for negotiating with problems concerning machine breakdowns,
rework/rejection due to quality problems, labor issues, uncertainty in supply and quality
of raw materials, lack of demand forecasting, deesire for not loosing potential sales, and
other problems. I don't know whether any management maintained inventories only to hide
such problems.
Inventory is a necessary evil until these problems are eliminated.
Regards,
Prasad
From: April Wicker
Sent: February 22, 2005
Hi Norman
Nothing new here, but it helps all of us to be reminded. It really is that simple. When my
company began to reduce inventory, we discovered just how poorly our suppliers were
performing. With lots of inventory, we could afford to accept a thousand parts, cull the
bad ones, and move the good ones to production. Now, we don't have time nor room for
inspection, we need our suppliers to supply all good parts all of the time.
When we accomplish all good parts all of the time, who knows what we will find to improve
next!
April Wicker
From: B. Hauser
Sent: February 22, 2005
Norman - good stuff. Keep it coming, and correct me if my
understanding is wrong below....
Prasad - you are right in saying that the inventory "buffers" against down-time,
etc. Managers may not be purposefully hiding those problems with inventories, but in
effect that is what is happening. If a company is protecting against these problems,
there is no urgency to eliminate them. I believe what Ohno was saying is to slowly remove
the buffer, exposing 1 problem at a time (ie: a quality problem). Now the problem
has some urgency, and it will focus the proper resources to fix it. Once the quality
problem is fixed, lower the inventory a little more, then focus on solving the next
problem.
Similar to following the 5 focusing steps in TOC.
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