So, how can IT support lean manufacturing? For one, while complex packaged enterprise (ERP, SCM, etc.) systems may seem inconsistent with the simplicity of visual control, they actually work well together. In fact, although visual signals, such as kanbans and status indicator lights, are an effective way to trigger factory floor activities and the movement of materials, their inherent weakness is their lack of memory—visual signals cannot be recorded or tracked to determine historical performance or provide real time status for anyone that is not in direct view.
Yet, by coupling visual controls with real time collection of data from the factory floor, manufacturing enterprises should be able to capture the critical information behind the visual control signals for management oversight, planning, and accounting purposes. This information can be used for statistical analysis, to measure historical performance, and to monitor status—all of which are essential elements of the continuous improvement that lean manufacturing emphasizes. Lean aspiring manufacturers can also use enterprise systems to replace some visual controls, such as physical kanban card signals, with electronic ones, as a way to improve efficiency further and eliminate non-value adding activities.
Furthermore, these systems can play a critical role in establishing and ensuring standardized work. This is because they can serve as the central repository for critical engineering or product data management (PDM) information for standardized work, including BOMs, process routings or operations, valid product configurations, work instructions or SOPs, engineering change notices (ECN), schedule information, and costs. More robust solutions can even track as-designed, as-built, and historical actual product information, which can be analyzed to determine the impact that product changes have on efficiency and productivity.
Lean teams operate visually within the lean factory and move products as they determine necessary by visual signals on the shop floor. On the other hand, enterprise systems only send production information after such data has been entered into the software, which then activates triggers that move the information to the downstream recipient, letting them know it is their turn to work on the part. Even if this delay is not exactly in tune with lean principles, these lean teams still need data stored in enterprise systems, which contains information needed to perform their job (e.g., what to do with the part when they get it), understand the requirements of their customers (e.g., size, color, etc.), and understand the specifications of the job (e.g., quantities needed).
Enterprise systems also allow for this information to be organized, and, in some solutions with built-in workflow management capabilities, make this information easily accessible for employees to support engineering, production, regulatory, and customer needs. Some enterprise systems with constraint-based planning can help manufacturers reduce setup times, while those with strong enterprise asset management (EAM) capabilities can help implement total productive maintenance (TPM). These systems also allow for the near real time monitoring of factory floor activities, as they provide manufacturers with critical status information required to prepare for and execute changeovers. This status capability can be used to monitor machinery and equipment and communicate the completion of jobs or critical events such as breakdowns instantly.
Enterprise application systems, such as ERP, can also be used successfully to support lean enterprise transformations, especially for manufacturers that have highly variable demand for a large number of products and who operate in mixed-mode manufacturing environments. To apply lean principles to these new environments presents manufacturers with special challenges that the right ERP system can help overcome, such as the increased difficulty of calculating heijunka schedules, more frequent adjustment of kanban sizes, and increasingly smaller leveling periods. In these instances, the solution must have a planning system that can smooth demand for items with highly variable demand, and act as a shock absorber to maintain continuous flow and leveled production. The solution could also use a real time monitoring and feedback system to synchronize operations and trigger the movement of materials, as well as have automatic backflushing capabilities for demand-based inventory management and replenishment.
In fact, enterprise systems can even be used to support mistake proofing, thereby helping to prevent manufacturing defects from occurring in the first place and minimizing the impact that defects have on downstream activities. Computerized systems can prevent product defects by making standardized processes, critical documentation, and other quality information available to production personnel on an as-needed basis. Monitoring systems can also be used to flag defect-related issues instantly, alert downstream workers and activities, and record information for later analysis. On the other hand, rate-based scheduling applications can be used to stop production within manufacturing cells, allow workers to identify and correct defects, and then reschedule and restart production quickly to limit the impact on downstream processes. ERP systems can also allow manufacturers to backflush selectively for items and components affected by defects.
Total Productive Maintenance:Lean manufacturing further requires manufacturers to address equipment productivity issues through the adoption of total productive maintenance (TPM), which is a set of techniques, originally pioneered by Denso in the Toyota Group in Japan, that consists of corrective maintenance and maintenance prevention, plus continual efforts to adapt, modify, and refine equipment to increase flexibility, reduce material handling, and promote continuous flows (see Lean Asset Management—Is Preventive Maintenance Anti-lean?). TPM is operator-oriented maintenance that involves of all qualified employees in all maintenance activities. Its goal, hand in hand with the aforementioned five S's, is to ensure resource availability by eliminating machine-related accidents, defects, and breakdowns that sap efficiency and drain productivity on the factory floor. This includes setup and adjustment losses, idling and minor stoppages, reduced operating speeds, defects, rework, and startup yield losses.
Machine breakdown is a critical issue for the shop floor, as in a lean environment one machine going down can stop the entire production line or flow. Accordingly, TPM and other advanced enterprise asset management (EAM) options increase equipment reliability, and thus improve availability, reduce downtime, reduce product scrap (and wasted time managing that scrap), and increase machine tolerances (and consequently quality). As a further aid, diagnostics management features can automatically identify situations where the current maintenance strategy is not working and trigger a continuous improvement review. This often requires support for reliability driven maintenance (RDM), which can underpin the TPM strategy (see Reliability Driven Maintenance—Closing the CMMS Value Gap?). Finally, enterprise systems that can synchronize maintenance and production planning should maximize the available production time and contribute towards greater throughput and overall equipment effectiveness (OEE).
Simulation is another tool to help reduce maintenance-related waste. By supporting simulation, advanced service management systems typically include maintenance scheduling based on production plans, with automated update of the maintenance schedule based on actual finished production (with electronic links into the equipment's own runtime meters to schedule maintenance). The idea is to eliminate the following "big six" maintenance-related wastes.
1. Equipment downtime
2. Setup and adjustments
3. Minor stoppages or idleness
4. Unplanned breaks
5. Time spent making rejected product due to machine error
6. Rejects during start ups
Cellular Manufacturing
Moving from maintenance to manufacturing processes, the lean philosophy traditionally depends on cellular manufacturing, which is a manufacturing process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell. Manufacturing cells, arranged to ergonomically minimize workers' stretching and reaching for parts, supplies, or tools to accomplish the task, often replaced traditional, linear production lines to help companies prroduce products in smaller lot sizes, ensure a more continuous flow, and improve product quality. A related concept, nagara, is the Japanese term used to depict a production system where seemingly unrelated tasks can be produced by the same operator simultaneously. Nowadays, however, lean thinking is moving beyond pure cell- and product grouping-based production.
Single-digit Setup
Since lean manufacturing requires manufacturers to produce to customer demand only, it requires them to make products in ever smaller batches. This is opposed to the traditional long runs of equipment and the fallacy that it is more efficient to run a big, EOQ-based batch rather to run several shorter ones that include changeovers. Yet, long runs mean large inventories, which in turn tie up large sums of money and keep customers waiting longer for finished goods and services. This trend toward smaller batches has created a need to reduce setup and changeover times throughout the manufacturing process. This is accomplished via the various embodiments of the single-digit setup (SDS) idea of performing setups in less than ten minutes (e.g., through astute jigs, optimized sequencing of internal and external process activities, roller tables or conveyers, hydraulic clamps, knobs and quick, fasteners, etc.). Related to this is the single-minute exchange of die (SMED) concept of setup times of less than ten minutes, which was developed by Shigeo Shingo in 1970 at Toyota.
Pull System
A pull system is another key characteristic of lean, demand-driven manufacturing, since the ultimate goal here is to have the flow of materials controlled by replacing only what has been actually consumed. Pull systems, also known as kanban (coming from the Japanese words kan, which means "card", and ban which means "signal"), ensure that production and material requirements are based on actual customer demand rather than on inevitably inaccurate forecasting tools. A kanban signal, which can be a card, empty squares on the floor for bins, lights, or a computer software generated signal, triggers the movement, production, or supply of materials or components that are usually held in bins of a fixed size. The aim is to improve inventory control and shorten production cycle times by controlling the level of inventory and work by the number of kanbans in the system. Over time and with process improvements, the quantity of components in the kanban bin can be reduced or resized dynamically, on-the-fly, as required.
Pull systems and pull signals (i.e., any signal that indicates when to produce or transport items in a pull replenishment system) can be found in many operational departments. For example, in just-in-time (JIT) production control systems, a kanban card can be used as the pull signal to replenish parts for the using operation. In material control, the withdrawal of inventory can also be demanded by the using operation, with material not being issued until a signal comes from the user. Likewise, in distribution, there would be a pull system for replenishing field warehouse inventories, where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.
Conversely, materials requirements planning (MRP) is a push system, which schedules production based on forecasts and customer orders. Thus, MRP creates plans to "push" materials through the production process based on forecasts that by nature cannot be accurate. That is to say, traditional MRP methods rely on the movement of materials through functionally-oriented work centers or production lines (rather than lean cells), and are designed to maximize efficiencies and lower unit cost by producing products in large lots. Production is planned, scheduled, and managed to meet a combination of actual and forecast demand. Thus, production orders stemming from the master production schedule (MPS) and MRP planned orders are "pushed" out to the factory floor and in stock.
Sequencing and Mixed-model Production:Another lean tool is sequencing, or determining the order in which a manufacturing facility will process a number of different jobs from one production line in order to achieve objectives (e.g., the quantities needed daily). This is also referred to as mixed-model production, as it makes several different parts or products in varying lot sizes so that a factory produces close to the same mix of products that will be sold that day. The mixed-model schedule or sequence governs the making and the delivery of component parts, including those provided by outside suppliers. Again, the goal is to build models according to daily demand. This is of paramount importance in the automotive industry, given that competition for a growing percentage of sophisticated consumers in the global marketplace is driving automotive original equipment manufacturers (OEM) to offer products with an ever-increasing number of features and options.
Today, from the perspective of pure functionality, cars and trucks are becoming a commodity, and competitive product differentiation can therefore be achieved mostly through offering unique colors, fabrics, styles, features, and option packages, which create thousands of potential combinations for any given type of vehicle. Stocking all of these combinations is price-prohibitive, while discovering whether a particular vehicle combination was produced is much too time-consuming, akin to finding the proverbial needle in a haystack. In addition, fastidious customers expect immediate availability of unique vehicle features and option sets. These factors create a conundrum—how to quickly and profitably deliver a customized, finished vehicle.
Allowing buyers to uniquely configure their own vehicle and delivering their "perfect order" within a reasonable timeframe requires a radical departure from the traditional methods of mass production. This new process identifies the unique, individual requirements of each vehicle and synchronizes its assembly with JIT delivery of specifically configured components from suppliers. These components are then delivered to the OEM assembly plant in the exact sequence that each car or truck goes down the final assembly line, which allows the OEMs to produce a tailored vehicle for each customer.
It boils down to the fact that suppliers today are confronted with the dilemma of guaranteeing high levels of customer satisfaction as measured in on-time deliveries and high product quality at reasonable costs, while simultaneously striving to maintain low levels of inventory. For instance, if a car buyer selects or modifies the color of leather seats in the vehicle he orders just one week before that vehicle starts production, how can the supplier provide it if it takes the supplier twelve weeks to buy the leather that goes onto the seats? Furthermore, within the supply chain itself actual requirements and projected demand for component parts are typically out of sync.
Historically, these problems have been overcome by maintaining additional quantities of raw or finished material as a "buffer" against requirements that exceed projected amounts. This extra downstream inventory, along with the attendant time lags and postponements in delivery caused by spikes in demand, conspire to add to the overall levels of inventory carried by suppliers. However, these practices seem to be changing since the advent of solutions, such as QAD JIT Sequencing Module (JIT/S), which help suppliers execute the JIT delivery of configured components while simultaneously coordinating supply and demand to minimize inventory levels and reduce the amount of extra costs caused by expediting activities in the supply chain. To do this, the JIT/S module integrates the mid-range or long-term planning and supply chain communication functions of MRP processes with its execution processes, which are focused on manufacturing configured products that are delivered to the customer at the exact time they are needed.
Such solutions illustrate the difference between kanban and other lean manufacturing techniques and JIT sequencing. Both are execution-oriented, since both respond to demand in near real time. However, lean manufacturing customarily tends to focus on the replenishment and supply of commodity parts (i.e., parts that are shipped in standard packs by the dozen or as case lots), while JIT sequencing concentrates on unique (or configured) parts, which are shipped individually or shipped with other configured parts of the same kind. In practice, kanban communicates a fixed quantity of demand over a variable time frame, or a variable quantity of demand over a fixed time frame. Neither of these processes adequately address the configuration requirements seen in sequencing. In other words, while kanban systems typically manage the supply or production of items with low variability, sequencing manages the production of highly configured, variable items. Therefore, in a JIT sequence, the statement of demand expresses the exact configuration of the needed item. For example a requirement for a seat would be to "deliver tan, leather, left front seat, with heater and electronic motor lumbar support mechanism, by 14:15 for Vehicle Number 12345".
Activity-based Costing
Another waste reduction practice is the allocation of overhead costs on a more realistic basis than direct labor or machine hours. The tool that achieves this is an activity-based cost (ABC) accounting system, which accumulates costs based on activities performed and then uses cost drivers to allocate these costs to products or other bases, such as customers, markets, or projects. The ABC information about cost pools and drivers, activity analysis, and business processes is then used for activity-based management (ABM) to identify business strategies; improve product design, manufacturing, and distribution; and ultimately remove waste from operations. The system is considered to provide a truer reflection of actual revenues and costs than traditional ccost accounting, in which the focus is generally placed on reducing costs in all the various accounts, leveraging the traditional absorption costing approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to each unit of production (whereas the fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs).Leveled production, known in Japanese as heijunka, involves producing products in a specific uniform cycle to overcome the queuing and line stoppage problems associated with traditional manufacturing and to match the planned rate of end product sales. Leveled production means that production cycle times at individual work stations or production cells are coordinated based on the customer demand, so that work moves continuously and smoothly throughout the entire manufacturing process.
One way to achieve leveled production is by implementing takt time (the term is based on the German word for an orchestra conductor's baton, used to regulate the speed, beat, and timing at which musicians play), which means basing the production rate on an estimate of how many units per hour must be processed at each work canter in order to meet market demand. Takt time sets the pace of production to match the rate of customer demand, and becomes the heartbeat of any lean production system. As the "pacemaker" of a lean system, takt time is essential to the smooth flow of work through production cells, and is a key factor in planning and scheduling work. It is computed as the available production time per day divided by the rate of daily customer demand. For example, if one assumes demand is 10,000 units per month, or 500 units per day, and planned available capacity is 420 minutes per day, the takt time would then equal 420 minutes per day divided by 500 units per day, or 0.84 minutes per unit, which means that a unit should be planned to exit the production system on average every 0.84 minutes.
By using takt time, production can be leveled to either a set level or to between a minimum and maximum level. These levels can be set in a computer system for any date and any period length, from a day upwards. Leveled production results in a steady demand pattern, which ensures a predictable, smooth schedule and avoids capacity bottlenecks. This simplifies planning and control (since every day in the plan within the leveled period is basically the same), creates stability in production, and gives operators a far better understanding of what they have to do each day and how they are performing against goals and targets. It also makes life easier for upstream suppliers who can be passed stable schedules.
Closely related to the above concept is line balancing, which can be used in two ways. On the one hand, it can be used to identify the number of workers and the duties each worker should accomplish to meet the changing demands. This requires the balancing of the assignment of the tasks to workstations in a manner that minimizes the number of workstations and minimizes the total amount of idle time at all stations for a given output level. In balancing these tasks, the specified time requirement per unit of product for each task and its sequential relationship with the other tasks must be considered. On the other hand, the technique can be used for determining the product mix that can be run down an assembly line to provide a fairly consistent flow of work through that assembly line at the planned line rate (i.e., takt time).
Flow Manufacturing
In fact, traditionally, lean manufacturing always has kept such a continuous flow of materials in mind. Properly designed manufacturing lines or cells are planned and loaded according to takt time and operate smoothly through the use of the aforementioned visual controls and mistake-proof procedures. Flow manufacturing pulls materials from external supplier or internal feeder operations through a synchronized manufacturing process in order to satisfy customer demand. The term flow manufacturing is closely related to, and thus often confused with, other demand-driven manufacturing strategies that streamline processes and eliminate waste, such as agile, JIT, and lean manufacturing, given that all of these use pull signals to replenish supplies and are subject to continuous improvement. However, flow manufacturing leverages some additional algorithmic techniques to help manufacturers create any product on any given day, and in any given quantity including the "quantity of one" (i.e., EOQ = 1), while keeping inventories to a minimum and shortening cycle times to fill customer orders ever more quickly.
Yet, by coupling visual controls with real time collection of data from the factory floor, manufacturing enterprises should be able to capture the critical information behind the visual control signals for management oversight, planning, and accounting purposes. This information can be used for statistical analysis, to measure historical performance, and to monitor status—all of which are essential elements of the continuous improvement that lean manufacturing emphasizes. Lean aspiring manufacturers can also use enterprise systems to replace some visual controls, such as physical kanban card signals, with electronic ones, as a way to improve efficiency further and eliminate non-value adding activities.
Furthermore, these systems can play a critical role in establishing and ensuring standardized work. This is because they can serve as the central repository for critical engineering or product data management (PDM) information for standardized work, including BOMs, process routings or operations, valid product configurations, work instructions or SOPs, engineering change notices (ECN), schedule information, and costs. More robust solutions can even track as-designed, as-built, and historical actual product information, which can be analyzed to determine the impact that product changes have on efficiency and productivity.
Lean teams operate visually within the lean factory and move products as they determine necessary by visual signals on the shop floor. On the other hand, enterprise systems only send production information after such data has been entered into the software, which then activates triggers that move the information to the downstream recipient, letting them know it is their turn to work on the part. Even if this delay is not exactly in tune with lean principles, these lean teams still need data stored in enterprise systems, which contains information needed to perform their job (e.g., what to do with the part when they get it), understand the requirements of their customers (e.g., size, color, etc.), and understand the specifications of the job (e.g., quantities needed).
Enterprise systems also allow for this information to be organized, and, in some solutions with built-in workflow management capabilities, make this information easily accessible for employees to support engineering, production, regulatory, and customer needs. Some enterprise systems with constraint-based planning can help manufacturers reduce setup times, while those with strong enterprise asset management (EAM) capabilities can help implement total productive maintenance (TPM). These systems also allow for the near real time monitoring of factory floor activities, as they provide manufacturers with critical status information required to prepare for and execute changeovers. This status capability can be used to monitor machinery and equipment and communicate the completion of jobs or critical events such as breakdowns instantly.
Enterprise application systems, such as ERP, can also be used successfully to support lean enterprise transformations, especially for manufacturers that have highly variable demand for a large number of products and who operate in mixed-mode manufacturing environments. To apply lean principles to these new environments presents manufacturers with special challenges that the right ERP system can help overcome, such as the increased difficulty of calculating heijunka schedules, more frequent adjustment of kanban sizes, and increasingly smaller leveling periods. In these instances, the solution must have a planning system that can smooth demand for items with highly variable demand, and act as a shock absorber to maintain continuous flow and leveled production. The solution could also use a real time monitoring and feedback system to synchronize operations and trigger the movement of materials, as well as have automatic backflushing capabilities for demand-based inventory management and replenishment.
In fact, enterprise systems can even be used to support mistake proofing, thereby helping to prevent manufacturing defects from occurring in the first place and minimizing the impact that defects have on downstream activities. Computerized systems can prevent product defects by making standardized processes, critical documentation, and other quality information available to production personnel on an as-needed basis. Monitoring systems can also be used to flag defect-related issues instantly, alert downstream workers and activities, and record information for later analysis. On the other hand, rate-based scheduling applications can be used to stop production within manufacturing cells, allow workers to identify and correct defects, and then reschedule and restart production quickly to limit the impact on downstream processes. ERP systems can also allow manufacturers to backflush selectively for items and components affected by defects.
Total Productive Maintenance:Lean manufacturing further requires manufacturers to address equipment productivity issues through the adoption of total productive maintenance (TPM), which is a set of techniques, originally pioneered by Denso in the Toyota Group in Japan, that consists of corrective maintenance and maintenance prevention, plus continual efforts to adapt, modify, and refine equipment to increase flexibility, reduce material handling, and promote continuous flows (see Lean Asset Management—Is Preventive Maintenance Anti-lean?). TPM is operator-oriented maintenance that involves of all qualified employees in all maintenance activities. Its goal, hand in hand with the aforementioned five S's, is to ensure resource availability by eliminating machine-related accidents, defects, and breakdowns that sap efficiency and drain productivity on the factory floor. This includes setup and adjustment losses, idling and minor stoppages, reduced operating speeds, defects, rework, and startup yield losses.
Machine breakdown is a critical issue for the shop floor, as in a lean environment one machine going down can stop the entire production line or flow. Accordingly, TPM and other advanced enterprise asset management (EAM) options increase equipment reliability, and thus improve availability, reduce downtime, reduce product scrap (and wasted time managing that scrap), and increase machine tolerances (and consequently quality). As a further aid, diagnostics management features can automatically identify situations where the current maintenance strategy is not working and trigger a continuous improvement review. This often requires support for reliability driven maintenance (RDM), which can underpin the TPM strategy (see Reliability Driven Maintenance—Closing the CMMS Value Gap?). Finally, enterprise systems that can synchronize maintenance and production planning should maximize the available production time and contribute towards greater throughput and overall equipment effectiveness (OEE).
Simulation is another tool to help reduce maintenance-related waste. By supporting simulation, advanced service management systems typically include maintenance scheduling based on production plans, with automated update of the maintenance schedule based on actual finished production (with electronic links into the equipment's own runtime meters to schedule maintenance). The idea is to eliminate the following "big six" maintenance-related wastes.
1. Equipment downtime
2. Setup and adjustments
3. Minor stoppages or idleness
4. Unplanned breaks
5. Time spent making rejected product due to machine error
6. Rejects during start ups
Cellular Manufacturing
Moving from maintenance to manufacturing processes, the lean philosophy traditionally depends on cellular manufacturing, which is a manufacturing process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell. Manufacturing cells, arranged to ergonomically minimize workers' stretching and reaching for parts, supplies, or tools to accomplish the task, often replaced traditional, linear production lines to help companies prroduce products in smaller lot sizes, ensure a more continuous flow, and improve product quality. A related concept, nagara, is the Japanese term used to depict a production system where seemingly unrelated tasks can be produced by the same operator simultaneously. Nowadays, however, lean thinking is moving beyond pure cell- and product grouping-based production.
Single-digit Setup
Since lean manufacturing requires manufacturers to produce to customer demand only, it requires them to make products in ever smaller batches. This is opposed to the traditional long runs of equipment and the fallacy that it is more efficient to run a big, EOQ-based batch rather to run several shorter ones that include changeovers. Yet, long runs mean large inventories, which in turn tie up large sums of money and keep customers waiting longer for finished goods and services. This trend toward smaller batches has created a need to reduce setup and changeover times throughout the manufacturing process. This is accomplished via the various embodiments of the single-digit setup (SDS) idea of performing setups in less than ten minutes (e.g., through astute jigs, optimized sequencing of internal and external process activities, roller tables or conveyers, hydraulic clamps, knobs and quick, fasteners, etc.). Related to this is the single-minute exchange of die (SMED) concept of setup times of less than ten minutes, which was developed by Shigeo Shingo in 1970 at Toyota.
Pull System
A pull system is another key characteristic of lean, demand-driven manufacturing, since the ultimate goal here is to have the flow of materials controlled by replacing only what has been actually consumed. Pull systems, also known as kanban (coming from the Japanese words kan, which means "card", and ban which means "signal"), ensure that production and material requirements are based on actual customer demand rather than on inevitably inaccurate forecasting tools. A kanban signal, which can be a card, empty squares on the floor for bins, lights, or a computer software generated signal, triggers the movement, production, or supply of materials or components that are usually held in bins of a fixed size. The aim is to improve inventory control and shorten production cycle times by controlling the level of inventory and work by the number of kanbans in the system. Over time and with process improvements, the quantity of components in the kanban bin can be reduced or resized dynamically, on-the-fly, as required.
Pull systems and pull signals (i.e., any signal that indicates when to produce or transport items in a pull replenishment system) can be found in many operational departments. For example, in just-in-time (JIT) production control systems, a kanban card can be used as the pull signal to replenish parts for the using operation. In material control, the withdrawal of inventory can also be demanded by the using operation, with material not being issued until a signal comes from the user. Likewise, in distribution, there would be a pull system for replenishing field warehouse inventories, where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.
Conversely, materials requirements planning (MRP) is a push system, which schedules production based on forecasts and customer orders. Thus, MRP creates plans to "push" materials through the production process based on forecasts that by nature cannot be accurate. That is to say, traditional MRP methods rely on the movement of materials through functionally-oriented work centers or production lines (rather than lean cells), and are designed to maximize efficiencies and lower unit cost by producing products in large lots. Production is planned, scheduled, and managed to meet a combination of actual and forecast demand. Thus, production orders stemming from the master production schedule (MPS) and MRP planned orders are "pushed" out to the factory floor and in stock.
Sequencing and Mixed-model Production:Another lean tool is sequencing, or determining the order in which a manufacturing facility will process a number of different jobs from one production line in order to achieve objectives (e.g., the quantities needed daily). This is also referred to as mixed-model production, as it makes several different parts or products in varying lot sizes so that a factory produces close to the same mix of products that will be sold that day. The mixed-model schedule or sequence governs the making and the delivery of component parts, including those provided by outside suppliers. Again, the goal is to build models according to daily demand. This is of paramount importance in the automotive industry, given that competition for a growing percentage of sophisticated consumers in the global marketplace is driving automotive original equipment manufacturers (OEM) to offer products with an ever-increasing number of features and options.
Today, from the perspective of pure functionality, cars and trucks are becoming a commodity, and competitive product differentiation can therefore be achieved mostly through offering unique colors, fabrics, styles, features, and option packages, which create thousands of potential combinations for any given type of vehicle. Stocking all of these combinations is price-prohibitive, while discovering whether a particular vehicle combination was produced is much too time-consuming, akin to finding the proverbial needle in a haystack. In addition, fastidious customers expect immediate availability of unique vehicle features and option sets. These factors create a conundrum—how to quickly and profitably deliver a customized, finished vehicle.
Allowing buyers to uniquely configure their own vehicle and delivering their "perfect order" within a reasonable timeframe requires a radical departure from the traditional methods of mass production. This new process identifies the unique, individual requirements of each vehicle and synchronizes its assembly with JIT delivery of specifically configured components from suppliers. These components are then delivered to the OEM assembly plant in the exact sequence that each car or truck goes down the final assembly line, which allows the OEMs to produce a tailored vehicle for each customer.
It boils down to the fact that suppliers today are confronted with the dilemma of guaranteeing high levels of customer satisfaction as measured in on-time deliveries and high product quality at reasonable costs, while simultaneously striving to maintain low levels of inventory. For instance, if a car buyer selects or modifies the color of leather seats in the vehicle he orders just one week before that vehicle starts production, how can the supplier provide it if it takes the supplier twelve weeks to buy the leather that goes onto the seats? Furthermore, within the supply chain itself actual requirements and projected demand for component parts are typically out of sync.
Historically, these problems have been overcome by maintaining additional quantities of raw or finished material as a "buffer" against requirements that exceed projected amounts. This extra downstream inventory, along with the attendant time lags and postponements in delivery caused by spikes in demand, conspire to add to the overall levels of inventory carried by suppliers. However, these practices seem to be changing since the advent of solutions, such as QAD JIT Sequencing Module (JIT/S), which help suppliers execute the JIT delivery of configured components while simultaneously coordinating supply and demand to minimize inventory levels and reduce the amount of extra costs caused by expediting activities in the supply chain. To do this, the JIT/S module integrates the mid-range or long-term planning and supply chain communication functions of MRP processes with its execution processes, which are focused on manufacturing configured products that are delivered to the customer at the exact time they are needed.
Such solutions illustrate the difference between kanban and other lean manufacturing techniques and JIT sequencing. Both are execution-oriented, since both respond to demand in near real time. However, lean manufacturing customarily tends to focus on the replenishment and supply of commodity parts (i.e., parts that are shipped in standard packs by the dozen or as case lots), while JIT sequencing concentrates on unique (or configured) parts, which are shipped individually or shipped with other configured parts of the same kind. In practice, kanban communicates a fixed quantity of demand over a variable time frame, or a variable quantity of demand over a fixed time frame. Neither of these processes adequately address the configuration requirements seen in sequencing. In other words, while kanban systems typically manage the supply or production of items with low variability, sequencing manages the production of highly configured, variable items. Therefore, in a JIT sequence, the statement of demand expresses the exact configuration of the needed item. For example a requirement for a seat would be to "deliver tan, leather, left front seat, with heater and electronic motor lumbar support mechanism, by 14:15 for Vehicle Number 12345".
Activity-based Costing
Another waste reduction practice is the allocation of overhead costs on a more realistic basis than direct labor or machine hours. The tool that achieves this is an activity-based cost (ABC) accounting system, which accumulates costs based on activities performed and then uses cost drivers to allocate these costs to products or other bases, such as customers, markets, or projects. The ABC information about cost pools and drivers, activity analysis, and business processes is then used for activity-based management (ABM) to identify business strategies; improve product design, manufacturing, and distribution; and ultimately remove waste from operations. The system is considered to provide a truer reflection of actual revenues and costs than traditional ccost accounting, in which the focus is generally placed on reducing costs in all the various accounts, leveraging the traditional absorption costing approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to each unit of production (whereas the fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs).Leveled production, known in Japanese as heijunka, involves producing products in a specific uniform cycle to overcome the queuing and line stoppage problems associated with traditional manufacturing and to match the planned rate of end product sales. Leveled production means that production cycle times at individual work stations or production cells are coordinated based on the customer demand, so that work moves continuously and smoothly throughout the entire manufacturing process.
One way to achieve leveled production is by implementing takt time (the term is based on the German word for an orchestra conductor's baton, used to regulate the speed, beat, and timing at which musicians play), which means basing the production rate on an estimate of how many units per hour must be processed at each work canter in order to meet market demand. Takt time sets the pace of production to match the rate of customer demand, and becomes the heartbeat of any lean production system. As the "pacemaker" of a lean system, takt time is essential to the smooth flow of work through production cells, and is a key factor in planning and scheduling work. It is computed as the available production time per day divided by the rate of daily customer demand. For example, if one assumes demand is 10,000 units per month, or 500 units per day, and planned available capacity is 420 minutes per day, the takt time would then equal 420 minutes per day divided by 500 units per day, or 0.84 minutes per unit, which means that a unit should be planned to exit the production system on average every 0.84 minutes.
By using takt time, production can be leveled to either a set level or to between a minimum and maximum level. These levels can be set in a computer system for any date and any period length, from a day upwards. Leveled production results in a steady demand pattern, which ensures a predictable, smooth schedule and avoids capacity bottlenecks. This simplifies planning and control (since every day in the plan within the leveled period is basically the same), creates stability in production, and gives operators a far better understanding of what they have to do each day and how they are performing against goals and targets. It also makes life easier for upstream suppliers who can be passed stable schedules.
Closely related to the above concept is line balancing, which can be used in two ways. On the one hand, it can be used to identify the number of workers and the duties each worker should accomplish to meet the changing demands. This requires the balancing of the assignment of the tasks to workstations in a manner that minimizes the number of workstations and minimizes the total amount of idle time at all stations for a given output level. In balancing these tasks, the specified time requirement per unit of product for each task and its sequential relationship with the other tasks must be considered. On the other hand, the technique can be used for determining the product mix that can be run down an assembly line to provide a fairly consistent flow of work through that assembly line at the planned line rate (i.e., takt time).
Flow Manufacturing
In fact, traditionally, lean manufacturing always has kept such a continuous flow of materials in mind. Properly designed manufacturing lines or cells are planned and loaded according to takt time and operate smoothly through the use of the aforementioned visual controls and mistake-proof procedures. Flow manufacturing pulls materials from external supplier or internal feeder operations through a synchronized manufacturing process in order to satisfy customer demand. The term flow manufacturing is closely related to, and thus often confused with, other demand-driven manufacturing strategies that streamline processes and eliminate waste, such as agile, JIT, and lean manufacturing, given that all of these use pull signals to replenish supplies and are subject to continuous improvement. However, flow manufacturing leverages some additional algorithmic techniques to help manufacturers create any product on any given day, and in any given quantity including the "quantity of one" (i.e., EOQ = 1), while keeping inventories to a minimum and shortening cycle times to fill customer orders ever more quickly.
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