Automotive Industry Lean Model Analysis
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Published: Mon, 26 Feb 2018
In any organization there are essential activities which need to be run effectively: production, quality, logistic, and so on. These activities are the means for the main purpose of any company which is ‘to make money’ (Goldratt, 1993:41).
Today the companies are facing a fierce market place: set the production with customer demand, in variety and quantity, and pursuit superior quality. To reach this is a high goal for any company, reach that and being effective is the core of nowadays strategy plan. The financial crisis that exploded the last year led many companies analyze the way they were operating in, and seek how to be more effective and make the company sustainable in the medium and long term.
Reduction of cost is important at any time but reduction in time of crisis is essential. The way to escape the pitfalls faced in the mass production requires a redefinition of the production management system which eliminates the waste and pursuit the efficiency of the company as a whole.
This dissertation is a case study base in an industry of automotive industry. This sector has the characteristic of being very influential in the development of emerging trend in management. From Henry Ford’s and the introduction of the moving assembly to Toyota Production Systems many innovations have been development in this sector.
Taiichi Ohno (1988) was the first person to identify seven inefficiencies which do not contribute to the goal of any company. These inefficiencies of wastes are denominated as ‘muda’ in the Toyota Production System. It was after the book ‘The machine that changed the world?’, 1990, when the term Lean began to be known all over the world.
Lean thinking is the medicine for companies suffering from inefficiency, and is ‘Lean because it provides a way to do more with less; less human resources, less equipment, less time and less space’, (Womack J. et al., 1990:15). All this reduction measures could be easily translated into money hence when a company is making money it has a future to plan.
Another characteristic of automotive industry is the low margins. The company, in which is based the dissertation, as many of others automotive manufacturers, is struggling with low or negative profits. Through the application of Value Stream Mapping, Cell layout, and Takt time is the intention of the research to show and encourager the company to swap from traditional production into lean manufacturing
The company where the case study is bases is a sensitive phase of change. Due to this reason this dissertation will not display the company name, name of persons working at the company and other pieces of information that can be derived from the research. Therefore the company is referred throughout all dissertation as ‘the company’.
Aims and objectives
The main objective of this dissertation is to study and understand lean model and revealing the efficiency of lean techniques by applying them in a case study. These objectives can be summarised as the following:
- To carry out an extensive literature review about the lean model.
- To study the different elements and techniques of lean
- Draw the potential new ways to seek the processes and process layout.
Outline potential improvements in the points below which contribute to solve the problem of the current highly expensive processes.
This study intends to show the benefits of lean approach application and be used as an internal feasibility study of the potential application of this philosophy into the company. Nevertheless, whether the company finally decides to apply these principles or not is not the purpose of this project.
The methodology for the first three chapters involves and intensive literature search and review on the lean philosophy. The source of this information was from extensive range of information sources as: written literature; books, journals, and the internet resource; also detailed discussions with lecturers and colleges who had knowledge on the topics. An important part of the literature review was to understand the concept of the lean and how can be applied.
Secondary data is based in review documentation provided by the company. Primary data collection is based on the observation of how the company is currently working and after the working procedure are know lean approach will be applied starting with Value Stream Mapping, and the subsequence tools and techniques, described in more detail in the next chapters. Nevertheless a deep explanation to this topic will be found in the methodology chapter.
One of the most important limitations for this dissertation is time limit, driven in part for the limitations time that the research had to the company. The research will be focus to a small area, but the same steps can be applied for all areas/families.
No consideration will be taken, about potential issues derived from this research concerning to material handling.
Another limitation is the confidential agreement between the research and the company, for this reason relevant information data could not be publicly released.
The distance to the company being researched and the researcher is clear limitation for the arrangement of appointments with the company. Nevertheless this limitation known beforehand and a planning was agreed with the company in the first meeting; both sides agreed to make three on site visit of 3 working days each and another visit for presenting the research.
13,14,15 of Aprilïƒ 1 toma de contacto y anÃ¡lisis de la situaciÃ³n actual
21,22,23 of Juneïƒ 2 Implementation de VSM, cell layout, takt time,.
13, 14, 15 of July ïƒ 3 seguimiento de las mejoras applicadas
24 of Augustïƒ 4 Ajustes y presentacion del projecto a la compaÃ±Ãa.
This dissertation is divided into 8 chapters, with a brief outline below;
Chapter 1 Introductionïƒ This chapter explains about the nature and the background of the dissertation objectives.
Chapter 2 Literature reviewïƒ Is included here a study of the background literature on lean manufacturing.
Chapter 3 Tools and techniquesïƒ This chapter explains the tools and techniques used under the umbrella of lean manufacturing.
Chapter 4 Methodologyïƒ This chapter gives the overall view of the research design taking into account the methodology under taking to do the primary research and explain the type of research, data and tools used.
Chapter 5 Company overviewïƒ This chapter discuss the current situation of a second tier car company which is faced a crisis.
Chapter 6 Implementation of lean
Chapter 7 Data result and analysis
Chapter 8 Conclusion and recommendations.
This page is left blank on purpose
Origins of Lean Manufacturing
Any new management approach that emerges will undoubtedly contain pieces from the knowledge from the past. Therefore we can find characteristic of lean were addressed in the past like: interchangeable parts developed by Ely Whitney (1765-18825), the work standardization made by Frederick W. Taylor (1856-1915), or the time and motion studies made by Frank Gilbreth (1868-1924), where he pursuit the elimination of ‘non-value’ elements.
But without any doubts the most influence person in the development of Lean was Henry Ford, he organized all the elements of a manufacturing system; people, machines, tooling and raw materials, in a continuous flow system, for manufacturing the famous ‘model T’ by applying this methodology the factory achieve to rise the effectiveness in the assembly process and by 1920 he achieved to reduced the price of the ‘model T’ at 34% of the original price in 1908.
Kiichiro Toyoda travelled to EEUU (1929) in his search for learn the ‘American Way’. Ford’s assembly line provided the ‘flow’ idea upon which Kiichiro Toyoda based his early car production, but soon he realized the need to adapt it to the market conditions and the culture in Japan. They knew that they could not compete with the giants like Ford in foreign markets. Therefore, they were producing only for internal market, and bring the raw materials from outside, for that reason Toyota could not lower cost by exploding economies of scale, that’s why they build a systems upon an strategy: ‘to make many models in small numbers’ (Ohno, 1988). They pursuit the cost reduction through the elimination of the inefficiencies; defined as muda, Japanese word for waste. (W. J. Hopp et al, 2000)
Henry Ford vision about systematic elimination of waste, standardization and elimination of process variability, Quality at the source, and so forth was so inspirational for Ohno and the definition of TPS. In the book ‘Toyota Production System; beyond large-scale Production’, 1988, Ohno quoted the Ford’s book ‘Henry Ford’s Today and Tomorrow’ in different chapter as a key to the development of lean principles.
In 1945, after Toyoda Kiichiro set an ambitious goal: ‘Catch with America in three years’ (Ohno, 1988). In order to achieve this goal Toyota production system was developed as a respond to the severe competition imposed by mass production and offered an alternative production system according with the restrictions of the moment.
Under these conditions Taiichi Ohno (1912-1990) was brought into the company as a leader to translate the ideas of Kiichiro Toyoda into action. He was working for the company since 1932 but wasn’t until 1943 when he went transfer to Toyota Motor Company, where he became Machine-shop manager in 1949. During that period the company was fighting on bankruptcy hence major investment or massive inventories weren’t affordable.
For many years the western companies had cut the cost by increasing the production but after oil crisis, explore around 1973, rapid growth stopped and the principle ‘if you can make it, you can sell it’ (Ohno, 1988, p2), most of the Japanese industries had losses, but Toyota overcame these problems. The capability of Toyota to overcome the crisis was the trigger for eyes opener to Japanese companies and implement the TPS.
The Toyota Production System (TPS) was first denominated in the West as Just in Time (JIT).After the initial visits of industries from western countries to Japanese industry, the people returning with stories of factories which produced only what was needed, when needed, without any ‘Just In Case’ expensive stock. Later, we realised that there was more than this, and the JIT was worked because was part of a more global management system, TPS. A system in fact useful to reduce costs and from that time the TPS became very popular. (Y. Monden 1993).
But this system got popularity in the western countries after a researcher made in 1990 for Massachusetts institute of technology (MIT) by James P. Womack and Daniel T. Jones. This five year research about the future of the automobile makers, revealed a gap between the conventional mass production and the new trend used in Japanese industries. This book coined the term ‘Lean’ as a description of the Toyota Production System.
Definition of Lean
As is described above, Toyota Production System was born in Toyota (1945). This system is sustained for two pillars: Just in Time and Autonomation or Jidoka. The name of Lean manufacturing was given in a research published by Massachusetts institute of technology (MIT) in 1990.
Ohno make three statements in his book ‘Toyota Production System; beyond Large-Scale Production’, 1988, taken together we can use as his definition:
‘The basis of the TPS is the absolute elimination of waste. The two pillars needed to support the system are: Just in Time and Autonomation (Jidoka)’ (Ohno, 1988 p4)
‘Cost reduction is the goal’ (Ohno, 1987 p8)
‘After World War II, our main concern was how to produce high-quality goods. After 1955, the question became how to make the exact quantity needed’ (Ohno, 1987 p33).
We can conclude that for Ohno the TPS consist of many techniques that are designed to reduce the cost by removing the waste and providing the right product, at the right quantity at the moment is required. ‘Using less of everything’ this statement was made in the book ‘The machine that change the world’ (Womack et al. 1990) as a definition of Lean production.
Another important contribution of TPS was a new approach of looking at the equation formed by: Price, Cost and Profit. When TPS was developed, the western was using the following equation to obtain price of a product:
Price=Cost + Profit
In this formula if the cost increase, the best way to maintain the same profit is by raising the price, is based on the principle that is the company who fix the price. By offering more feature, quality or service they can raise the price. By another hand, Japan proposed the next expression:
Profit=Price €“ Cost
In this equation is the market, the final customer who is fixed the price. The companies used the ‘voice of the customer’ as a means to design the new features of a product, and the price they are willing to pay for it. With this equation the only way to obtain better profits is by reducing the cost as much as possible (fig. 3.1). This equation leads the companies to pursuit internal improvement if they want to keep or raise the profit in the current market situation. (J. Santos, et al. 2006).
Figure 3€‘1 Equation price-cost benefits (adaptation of J. Santos et al 2008)
Price fixed by the customer
Summarizing we can conclude that Lean is a theory of management that consider the uses of resources for any means other than the creation of value from customer point of view is a waste (defined below); and pursuing the elimination waste as a means of achieving greater efficiency of the process. (Y. Monden, 1993)
Seven types of Wastes
Muda is a Japanese means ‘waste’. According to James P. Womack (2003) ‘any activity which absorbs resources but creates no values’ is called waste.
Lean thinking provides a way to identify the value, defined by the final customer, and analyze the value stream in the search for not added value action in order to eliminate and based in Continuous improvement, where the search for new improvements is never ending. (Womack et al., 2003)
The wastes defined by Ohno include parts not right the first time, piles of products made in ‘Just in case’, processing step that no one had analyzed, to realized that they are not needed, transporting goods thought work floor, workers, machinery or material waiting to the next step in the process, and so forth. (Womack et al., 2003, p16). There are many types of waste; some are easy to discern others difficult. An important thing to remember is that to eliminate waste, you must find it first, towards eliminating it. The seven wastes (7Ws) addressed by Ohno (1988) are detailed below, with the addition of the one defined by Womack, 2003.
Manufacturing companies, sometimes produce more than they have sold, some times because they want to build an inventories, in the expectation that the market requirements arise, another times with the purpose to keep everyone busy and / or to achieve a high used of the facilities. Whatever the reason is, making products for which there is no demand is waste and can drive the company out of business. The key point to found this waste is compare what is produced versus what is sold. (J. Nicholas, 1988)
This waste will include delay between the end of one activity and the start of the next activity. This waste can take many forms: operators or machineries waiting for orders, parts, materials, parts for the preceding process, equipment repairs, and so on. Contrasting with the previous waste, this one it is easy to identify.
As It was explain above, some companies minimizing the waste of waiting by keeping the workers and the machines active all the times, incurring in that way in the previous waste; overproduction. Stopping the machines and allowing workers to be idle in occasion, is less costly than producing products with no orders. Another advantage of these spare times is that the workers can used it to search for improvements. (J. Nicholas, 1988)
It is any kind of unnecessary transport of workers, parts, products, etc moved from one location to another. There two things that determine the transport through the factory; the layout facility and the sequence of operations. (J. Nicholas, 1988)
No value is added in any items while they are moving around, therefore all time and facilities involve in that are wastes. Rearranging the layout and putting sequential equipment together allow us to minimize this waste.
Too much machining; over processing.
A process may itself contain steps that are ineffective or unnecessary. When company use expensive or high precision equipment where investing in smaller and more flexible equipment would be adequate.
This often results in poor plant layout because ‘The monuments’ are located far away from the process and making the process incur in waste such transportation, wait and in addition overproduction (in order to set high utilization, and justify the investment).
Ohno in his book ‘Toyota Production System, Beyond Large Scale Production’ (1988), qualify the inventory as the root of all evil because covers other kinds if wastes and inefficiencies and encourages to wasteful practices.
Inventories represent items waiting for something to happen, where there are many associated and hidden costs (storage space, handling, management, insurance, lost of opportunity, and so forth). John Nicholas (1988) identifies that many companies even when they recognize the high cost of the inventory they justify them for dealing with issues such:
To cover fluctuations in future demand, where more accurately forecasted are necessary.
To cover the delay in lead times caused by breakdowns or delivery delays, where a Preventive maintenance plan would be necessary as well a close relationship with the suppliers.
To cover long setup times, where an improvement in standardization as well as a study of the setup times made the big batch unnecessary.
We can use the analogy of a ship on water (figure 2.1) to clarify the idea of hidden costs and problems incurred with high level of inventory.
As inventory is reducing, problems are exposed, which can be resolved. After that, the inventory is lowered again, in order to get more problem appear and management has to resolve them in order for the system to work.
Figure 3€‘2 Analogy of water and inventory
Out of spec.
Inventory level is hidden all problems
By reducing the inventory, production problems arise
The research is agreed with Ohno (1988) when he argued that people tend to build some inventory as a respond of their farming roots. ‘Our ancestors grew rice for subsistence and stored it in preparation for times of natural disasters’ (Ohno, 1988) this type of accumulation is no longer practical from the moment that we can find everything that we need from the corner shop. Nevertheless, break this habit in the day to day factory habits is difficult, is requires a change of attitude. But we need to keep in mind that reduction of inventory is not an end itself; it is a mechanism for revealing problems and wasteful practices in the production system.
People in work often confuse being in motion with working. A worker in constant motion all day may actually be doing little work; we should consider which portion of the motion is actually added value to the product.
This waste is related to ergonomics and the objective is to obtain that the 100% of the motion is work; added value. Hence pursues the elimination of wasteful motion, but not by increasing work. Motions as bending, stretching, walking, lifting, reaching, picking up, transporting, loading, and so forth take workers time and increase the cost, but not add value. (J. Nicholas, 1988)
Making defective parts and products.
The simplest form of waste is products that do not meet the specification. Manufacturing products right at first time requires no money. Defects in any product are a major source of waste, hold up production and increase production lead times avoidable if products were done right the first time.
Quality defects result in rework or scrap and involve a remarkable cost to organizations, along with the associated costs such: re-inspecting, rescheduling quarantining inventory, and capacity loss.
The key point is attain Quality at the source or Quality Assurance where the parts are made right the first time, transforming the old idea of Quality Assurance; where the parts are inspected at the end of the line. In order to achieve this we can use tools such: Poka Yoke, Kaizen, and so forth. (Y. Monden, 1993)
Underutilization of Employees
In the book ‘Lean Thinking’ by James P Womack and Daniel T. Jones (1996), was added another wasted, added to the seven defined by Ohno (1988); which was denominated by them as Underutilization of employees.
The companies hire employees for the physical skills, and sometimes the managers forgot to take an advantage of the brainpower that they hired with those skills. Some common causes of inability to see this waste may result in mudas such high employee turnover, inadequate hiring practices, and so forth.
Not Used the employees as an experts of the process in which they are working is a waste of creativity and the improvement ideas that they can generate, this waste deserved the same important than the previous seven described above.
Tools and Techniques
There are many definitions that refer to lean; as Toyota Production System, Just in Time, Jidoka, flexible workforce, Kanban, TQM and so forth; partly because for many years had been confusion and many practitioners; mix up the purpose with the means. Lean production may be viewed as a bunch of all this practices/tools, and all ‘underneath subsystems’ give the necessary support to the main system.
The main systems Ohno (1988) described as ‘two pillars’ are:
Autonomation with human touch, or Jidoka
The tools/techniques of lean, as supporting ‘subsystems’ can be said as;
Visual Control, Andon
Value Stream Mapping
One Piece Flow
Total Productive Maintenance (TPM)
Some of the most relevant for the research purpose are explained below.
The two pillars of Lean: Just in Time
In 1950 Toyota was near to bankrupting, as a consequence they couldn’t afford major investment in new machineries or substantial inventories. In 1956 Ohno travel to America, where he got the perspective of Just-In-Time in the American supermarket.
He was interested in way the supermarket were working; by providing to customer what they need, when they need and in the quantity they need.
Ohno transfer this idea down to the process, and he developed a system that is working like a coordinate chain of ‘small supermarket’, where all processes are transformer in customer for the previous step and supplier for the next step and every step is only produced the quantity needed for the next step, with perfect quality and no waste. The system was denominated as ‘pull system’. TMMK (7may2010)
JIT was developed in the framework of TPS and evolved due to the need of the Japanese industry to survive in the post-war global market. Soon, the value of the system was proven into the manufacturing industry and a large number of companies worldwide hastened to implement this model to their own production systems (Monden, 1993).
Ohno developed a number of methodologies to support the Just in Time system; one of the best known is the Kanban system, detailed below.
Pull system and Kanban
The traditional mass production system is the one denominate as push production system, where every station start to assembly a part when the raw material arrive to the work station. The way to manage production system is usually based in forecasting. The parts usually are processes in batches according to a schedule for each process (fig 2.2). The materials must usually wait until the workstation complete the previous work and is performing the changeover necessary. Changes in schedules, breakdown in machinery and other incidents, make a planning inaccurate. (J Nicholas, 1988). When a problem occurs at one stage, the problem will not be notice in the rest of the system, because an inventory between the workstation are insulated the problems in each workstation, and dependency between workstation was low.
Figure 4€‘3 Push System
Retention points Process 1
Retention points Process 2
Retention points inspection
Information and material flow
High variability in lead times, long lead times, large Work in Progress inventory, and a numerous quality issues are arisen in this system. Besides with the problems associated with maintaining valid scheduled, made by the forecasting office, which is far a way from the shop floor and all the problems that arise in the manufacturing process.
By contrast the pull production is sometimes called stockless, because is minimized the work in progress, pursuit the one piece flow. It seeks to have every stage in a process produce and deliver materials downstream in the exact quantities and the exact times requested. (J Nicholas, 1988).
Figure 4€‘4 Pull System
Process 2 &
Refer to the figure 2.3, when a customer order arrives to the delivery point, this work station sends a production order to the downstream process, in order to refill the product had been delivered. The work station 2 in the moment is used more than two parts, and let the buffer with the minimum quantity, then sends a production order to the work station 1.
Just in time pursues the zero inventories; the system that is describing here is used a buffer, in that way any process shouldn’t wait to have the necessary material to start producing an order. Refer to the figure 2.3 each work station begins de production as soon as the order upstream is received. (J Nicholas, 1988).
In contrast with the Push production system, any problem in any work station is affected the whole system, so that all stage are working together in order to resolve the problem, increasing the chances of solving the root problem.
Kanban is a subsystem to support of the JIT system and was developed by Toyota in the early stages of TPS. Kanban is a Japanese word for card, but not necessarily need to be a card, sometimes can be a signboard, container, empty space, and so forth. The broadly idea is to use the Kanban, whatever the form is takes, as a signal to produce a specific number of parts request for the next process. (N. Slack et al, 2004).
The system is not used a complicated and expensive computer schedules. The theoretical operation of Kanban is no one product is manufacture until is demanded for the final customer. Therefore the signal Kanban is used as a trigger for a production. There are different types of Kanban; Conveyance Kanban, also know as a move Kanban, whose purpose is to move the goods along different production stages. The Production Kanban, work as a signal to a production process that can start producing a part to be place in the inventory. (N. Slack et al, 2004)
There are two procedures of using Kanban system; dual-card (used both production and conveyance) this is the original Toyota method, and the single-card, explained below (used only the production, but acting as both move and produce authorization), is more often used the last one, for the simplicity of use. (N. Slack et al, 2004)
Figure 4€‘5 Kanban system.
Process 2 &
Order to the supplier
To explain the concept we can use the example in figure 2.4, where each process made two piece batches. When the delivery point sent two finished parts, the operator takes a Kanban card from the container and sends it back down to the previous workstation; process 2,where that part is assembled.
When the Kanban card is received, the previous work station start to assemble new batch of 2 parts, and consequently it sends downs to the previous process the Kanban card in order to refill the parts used in the last operation. This chain or ‘work orders’ is repeated until an order is sent to the supplier of raw material.
This system keeps to minimum the paperwork, provides a self-manage workstation and one the more important achievements is that the inventory of Work in Progress is kept to a minimum. The parts are assembled only when a need for them and WIP is reducing by dropping the number of cards into the system.
The two pillars of Lean: Jidoka
Jidoka is a Japanese word meaning automation with a human touch, refers to the automatic control of defects under the supervision of an employee; or as is described by Ohno (1988) Autonomation. Is refers to a process that has incorporated mechanism to detect ‘non conformances’ and not allowed the process to pass a product if there isn’t a conformance with the requirements.
Sakichi Toyoda began to used Jidoka, also known as Autonomation; he invented the automatic looms that stopped immediately when any thread broke. In that way one operator was able to manage many machines with no risk of producing outside specifications.
This pillar of TPS is a €˜Proactive Systematic Approach’. That is means ‘instant detection of non conformances at the root source, pursuing the prevention’ is chosen over ‘correction for problems after its occurrence’.
Through this principle we ensure that hundred per cent of the products are free defects, and when a defect is found this is fixed directly, otherwise the worker had the authority to stop the line, in order to resolve it.(J. Nicholas,1998).No OK parts are very important in JIT, when a one short part can cause the stoppage of the whole factory, just to remember one of the quotation for define JIT ‘The exact product in the exact moment that is required’ (Ohno, 1988)
This authority to stop the line meets resistance in western managers, because they are afraid that this can cause a delay in the lead time. But that is only the negative side, by another hand should be viewed as improvements in the process, the root of many quality issues are discovered and as a result they are resolved. Thought Jidoka principles the employees are more aware of quality issues and the related problems, and the number of defects and rework drop at the end of the line. (Nicholas, 1988
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