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Lean Cost Model
◼ New Equation: Price-Cost=Profit
◼ In Order to be in Profit we have to provide
some values to Customer.
◼ Value: Value is something for Which the
customer is willing to pay.
Value = Performance(P)
Lean Cost Model
Value = Performance(P)
◼ There are four ways to increase the Value:
Lean Method Model
◼ In Order to Increase the Output:
◼ Increase the
◼ Add Machine.
◼ Focuses on
Efficient use of
Types of Activities
Value Added (VAs) Non Value Added(NVAs)
◼ MUDA means WASTE.
◼ Waste refers to any activity that does not
add value and is not necessary.
◼ Waste only adds to time and cost.
◼ These wastes were of 7 types (TIMWOOD)
and now one new waste-Non-utilized talent
or skill is added.
◼ Total Wastes:7+1=8 (DOWNTIME).
7 Deadly Waste
- Extra Processing
- Rework (Defects)
Add NO value - Only
serve to raise costs
Adds to cycle
Excessive Emails Taking files to
in the Inbox
disk with data
Lots of inventory on
shelves, racks and floors
Losses due to
Efficient use of inventory… Not Just-in-Case inventory
Wasted cycle time
Movement of People
Idle time due to
lack of “Standard”
cycle timeCauses bottlenecks
Waiting for people,
When Inventory Waits, Customer Waits
Produce or order only what, when and in the quantity needed
no one reads
Hides other process
Takes up floor
/ disk space
Working on the
Producing more than the
customer or next process
of doing the
Eliminate Excess work
Create Delay in
Lack of Clarity
Escalated impact of initial defect if passed on to next process
◼ Increasing the speed or efficiency of
◼ Reducing the time gap b/w different
operations on the product on
different platforms in assy. line.
It implies that reducing the
manufacturing time within production
Reducing the moment time of the
product within production system
Evolution of Lean thinking
◼ The idea of lean is originally
introduced by Henry Ford.
Henry Ford like to keep the
manufacturing system incredibly high
so that each step of operation
followed naturally into next step of
operation and there is no time delay
b/w any two steps of operations
within the manufacturing system.
Evolution of Lean thinking
◼ The roots of lean management
established in 1940s in Toyota
Toyota accommodated the lean
thinking and developed the Toyota
After Adoption, Annual profit of
Toyota in 2003 was more than the
Combined Profit of GM, Chrysler and
Evolution of Lean thinking
Kiichiro Toyoda Taiichi OhnoEiji Toyoda
◼ Increases the
by Conveyors and
systems in Textile
◼ He introduced the
same concepts on
certain lines in Toyota
Introduced the concept
Concept of TPS
◼ The Toyota Production System (TPS) was
established based on two concepts:
◼ The first is called "jidoka"(which can be
loosely translated as "automation with a
human touch") which means that when a
problem occurs, the equipment stops
immediately, preventing defective products
from being produced;
◼ The second is the concept of "Just-in-Time”,
in which each process produces only what
is needed by the next process in a
Aim of TPS
Q1.)Aim of TPS?
A2.)By Thoroughly Eliminating: ‘MUDA’
Q3.)What is Muda?
Q4.)What is waste?
A4.)Waste of Overproduction
A5.) Working Capital gets tied up in Inventory, Warehouse storage space,
Forklift trucks to move goods, Material handlers to operate trucks,
Computers to keep track of inventory locations, staff to maintain these
A Quick Q&A
◼ Scientific way of workplace management
S. No. Japanese English
1 Seiri Sorting
2 Seiton Set in order
3 Seiso Shine
4 Sieketsu Standardise
5 Shitsuke Sustain
◼ Kaizen=Kai (Change)+Zen(for better)
◼ Kaizen means change for better(Continual
◼ Kaizen is small incremental changes made
for improving productivity and minimizing
◼ Masaaki Imai is known as the father of
3M (MUDA, MURA, MURI)
◼ Why to remove?
◼ Reduction in waste generation
◼ Reduction in Inconsistent process
◼ Reduction in Stress/Strain on Equipment/People.
◼ Documented procedures for manufacturing
that captures best practices.
(Including the time to complete each task)
◼ Note:Must be “Living documentation” that is
easy to follow.
◼ Forms a baseline for further improvement activities.
◼ Eliminates waste by consistently applying practices.
Value Stream Mapping
◼ “A Tool used to visually map the flow of
production which shows the Current and
Future state of processes in a way that
highlights opportunity for improvement”.
◼ Exposes waste in the current processes and
provides a road map for improvement through the
◼ Just-in-Time (JIT) manufacturing, also
known as Just-in-time production system or
the Toyota production system, is a
methodology aimed primarily at reducing
flow times within production system as well
as response time from suppliers and to
◼ “The right part at the right time in the right
◼ Claims for JIT:
◼ Reduced inventory
◼ Reduced WIP
◼ Shorter Lead Time(not to early not to late)
◼ JIT is the result businesses wants, not a starting
◼ JIT relies on many lean tools, such as
continuous flow,Heijunka (Line
balancing),Kanban, Standardized work and
◼ JIT Implementation:
◼ Top management commitment.
◼ Steering committee
◼ Education program.
◼ Pilot project planning.
◼ Employee training.
◼ Pilot implementation.
◼ Pilot post mortem
◼ Feedback to steering committee.
◼ Expansion to next project.
◼ A method of regulating the flow of goods within
the factory and outside suppliers and customers.
◼ Kanban (Literally a Signboard) is a scheduling
system for Just-In-Time (JIT) production.
◼ Kanban is a system to control the logistical chain
from a production point of view, and is an
inventory control system.
◼ Kanban was developed by Taiichi Ohno, an
industrial engineer at Toyota, as a system to
improve and maintain a high level of production.
◼ A Kanban card includes a part code number, its batch
size, its delivery ‘address’, and other related
◼ Kanban (Literally a Signboard) is a scheduling system
for Just-In-Time (JIT) production.
◼ Although all production plans were shared with
suppliers to ease their planning, only Kanbans
triggered part production. When and only when the
supplier received Kanban, they began making that
part in the stated quantity, and shipped a container
full of that part to the proper ‘address’ on the
◼ Assembly group leaders adjusted the number of
circulating Kanbans for each part within a set range,
determined by the PPC department, to avoid having
teams run out of parts OR containers overflowing
onto the plant floor.
◼ Eliminate waste from inventory and overproduction.
◼ Metrics designed to track and encourage
progress towards critical goals of the
◼ The Best manufacturing KPIs:
◼ Are aligned with top level strategic goal.
◼ Are effective at exposing and quantifying
◼ Are readily influenced by plant floor
◼ Frame work for measuring productivity loss
for a given manufacturing losses.
◼ If OEE 85%,Good performance indicator
◼ Three categories of losses are traced:
◼ Availability(ex: downtime)
◼ Performance(ex: Slow cycles
◼ Quality: (ex: rejection)
Operator Efficiency(OE) = (Cycle time*Good production)*100
Total line run time
M/C Availability(MA) = (Total line run time)*100
Total available time
Quality ratio(QR) = (Total Ok production)*100
◼ Formula for reference:
Overall Equipment efficiency(OEE) = (OE)*(MA)*(QR)
◼ A Problem solving methodology which
focuses on root cause fixing.
The vehicle will not start. (The problem)
1. Why? - The battery is dead.
2. Why? - The alternator is not functioning.
3. Why? - The alternator belt has broken.
4. Why? - The alternator belt was well beyond its useful
service life and not replaced.
5. Why? - The vehicle was not maintained according to the
recommended service schedule. (The Root Cause)
◼ SMED stands for Single minutes exchange of
◼ It changing process tooling in 9 minutes or
◼ This process was first introduced by Shigeo
Shingo at Mazda, Mitsubishi and Toyota in
the 1950s and 1960s.
◼ Changeover: Starts at the end of the last
good product of the previous batch and ends
with the first good product of the new batch.
◼ Set-up activities : Two types
◼ Internal set-up activities : Elements in the
changeover which can only be done when the
machine is stopped.
◼ External set-up activities: Elements that can be
performed when the M/C is running.
◼ The SMED improvement steps:
◼ Preliminary stage: Observe and record.
◼ Stage1: Separate internal and external
◼ Stage2: Convert internal activities into
◼ Stage3: Stream lines all activities.
◼ Stage4: Document internal and external
Andon is a manufacturing term referring to a signboard
incorporating signal lights, audio alarms, and text or other
displays installed at a workstation to notify management
and other workers of a quality or process problem.
▪ Andon Cord: A rope running along the assembly line over
the work area
▪ Andon Board: A signboard that showed work station’s
◼ PDCA stands for Plan-Do-Check-Act.
◼ Also, called Plan-Do-Study-Act (PDSA),
Shewhart cycle or Deming Cycle.
◼ The PDCA cycle is a four step model for
carrying out change.
◼ Just as a circle has no end, the PDCA cycle
should be repeated again and again for
◼ Poka (Inadvertent errors)+Yokure (To avoid)
◼ Also called Mistake Proofing or Error Proofing
◼ Mistake proofing is the activity of awareness,
detection and prevention of mistakes which
◼ Our customers and consumers(defect).
◼ Our Employees (Injury).
◼ Awareness : Having the forethought that a
mistake can be made, communicating the
potential and planning the design of the product
or the process to detect or prevent it.
◼ Detection : Allowing the mistake to happen but
providing some means of detecting it and
altering someone so that we fix it before
sending it to our customer.
◼ Prevention : Not allowing the possibility for the
mistakes occur in the first place.
◼ Category of poka yoke:
◼ Preventive devices: A prevention devices
engineers the process so that it is impossible to
make a mistake at all.
◼ Design of a Sim card
◼ Design of USB cable pin.
◼ Plug and sockets.
◼ Detection devices: A detection devices signals
the user when a mistake has been made , So
that the user can quickly correct the problem.
◼ Example: A car beeps if the key is left in the
◼ Quenchant temperature indicator.
◼ Jidoka: Automation with human touch (Autonomation).
◼ Jidoka demands that the a process stops itself as soon
as the Errors/Faults are detected so improvements and
troubleshooting can happen immediately.
◼ M/C are often Equipped to recognise
bad O/P from good O/P.
◼ Built-in-quality to the process.
◼ First used by Sakichi toyoda at the
beginning of 20th century
◼ A pillar of the TPS.
Toyota this means that if an abnormal situation arises the
machine stops and the worker will stop the production
line. It is a quality control process that applies the
following four principles:
1.Detect the abnormality
3.Fix or correct the
4.Investigate the root cause
and install a countermeasure.