The principles of lean and agile Manufacturing

All related literatures are reviewed in this chapter. Lean concept focuses on eliminate waste, while agile concept focuses on flexibility in supply chain. The theories that cite the topic of reducing cycle time in, which related to the lean concept. Detailed topics included in this chapter are

1. Principles of Lean Manufacturing

2. Product cycle time improvement

3. Principles of Agile Manufacturing

2.1 Principles of Lean Manufacturing

Eiji Toyoda and Taiichi Ohno at the Toyota Motor Company in Japan had found the Lean production concept after World War II. “Toyota Production System (TPS)” is the original moving assembly line developed by Toyota Motor that make material flow continuously (Shingo, 1981; Monden, 1983; Ohno, 1988; Jones, Roos, and Womack, 1991). Henry Ford (1926) had been using parts of Lean as early as the 1920’s, as prove as by the following quote:

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“One of the most noteworthy accomplishments in keeping the price of Ford products low is the gradual shortening of the production cycle. The longer an article is in the process of manufacture and the more it is moved about, the greater is its ultimate cost”

In the past, the traditional business in the manufacturing industry Lean is a philosophy that is a method of inventory management and production control (Diana Coggin, 2003). Lean Manufacturing principle seeks to remove non-value-added activities from the production process. The Lean Manufacturing technology focuses on the production, quality, customer service, and profitability. It investigates the total operations system. The core of Lean Manufacturing is that can synergistic work to create a streamline, high quality system and produce the product meet the customer requirement with no waste. (Shan and Ward, 2003).

Lean is a methodology that used to increase speed and reduce the cost of any process by eliminating waste. The main concept of Lean Manufacturing is that can be work together to create a streamline, high quality system and produce the product meet the customer demand with no waste (Shah and Ward, 2003). The companies can produce, develop and distribute products with half or less of the human effort, tools, time, space and overall expense by eliminating unnecessary steps, recombining labor into cross-functional teams dedicated to that activity, planning all steps in an activity in a continuous flow, and continuous attempt to improvement. They can also become more flexible and responsive to customer demands (Harvard Business School Press, 2000).

The benefits of lean manufacturing is greater productivity, lower cost, shorter delivery times, improved quality and increased customer satisfaction. The objective of lean manufacturing is to deliver orders on time with shortest lead time with minimum inventory and with fewer resources.

2.1.1 Characteristics of a Leans process

The principle of lean manufacturing is to eliminate waste in all the processes, there are seven types of waste: overproduction, inefficient transportation, general delays, inefficient internal materials handling, processing, inventory, defects. Lean principles can be used to improve productivity driven by workers, based on their knowledge of the work and equipment, with the goal of increasing value added work (Holly and Gaskins, 2004)

The characteristics of Lean process assist to flow of process run as continuously as possible with a rapid cycle time. The precise description of each work station activity specifying cycle time, take-time, the work sequence of specific tasks, and the minimum inventory of parts on hand needed to conduct the activity (Stenzel, 2007).

The characteristics of lean processes are:

Make to order

Single-piece production

Just-In-Time materials/pull scheduling

Short cycle times

Quick changeover

Continuous flow work cells

Compressed space

Multi-skilled employees

High first-pass yields with major reductions in defects

2.2 Product cycle time improvement

Lean manufacturing is an operational strategy oriented toward achieving the shortest possible cycle time by eliminating waste. Cycle time reduction is identifying and implementing more efficient ways to do things. Reducing cycle time requires eliminating or reducing non-value-added activities. The technique often decreases the time between a customer order and shipment, and it is designed to radically improve profitability, customer satisfaction, throughput time, and employee morale. ( Michael and Kentaro, 1998)

Cycle time reduction is an important access in the tool chest of performance improvement methods. Cycle time reduction focuses on the opportunity to the time to complete the many process in the company. Cycle time is identifiable for a business process or the company, specific activity. Total cycle time is the sum of the cycle time of all activities in all the process of the company. It is important to understand the four components of the activities cycle time. Components of cycle time: wait, move, delay, process.

Wait is the time an item that waiting to be moved to the next activity.

Move time is the time during which the item moved from the last activity to the next.

Delay or set up time is the time from when the item is ready to be processed at the next operation, until the work actually starts.

Process Time is the time it takes to complete the work once it has begun.

The component of the cycle time decision elements:

a. Processing time: timing that the thing is being worked on by an operation. To studying this matter seriously by using tool; a stopwatch from camera – following unit being processed by one operator – all the way through the process (or sub-process).

Processing Time = Manual Work + Walking + Waiting

b. Waiting time: timing between sub-process that the thing gets shuffled around or sits around waiting for someone to work on it. As well as knowing “Waiting & Transportation Time” or “Inventory/Transpiration Time. In this case have effect from waiting time in each work station and wait time of part of car model.

c. Change overtime; the amount of time takes to change over the making or program from the end to previous step to the current step. If you have to takes always will effect with total cycle time.

d. Since a batch size of one has been unpracticed the goal is in improve productivity periodically. The ultimately reduces inventory carry costs, work in progress, and cycle time. Also this enabling the company operates profitably at lower margins.

2.3 Principles of Agile Manufacturing

The Agile Manufacturing was presented in the first time at the publication in the USA of a report entitled 21st Century Manufacturing Enterprise Strategy (Barutcu, 2007). So, it has been introduced as a method of increasing competitive advantage in response to increasingly competitive global markets. Agile concept focuses on the fast response to changeable of customer demand (Mason-Jones, Naylor, & Towill, 2000). The key component in agile manufacturing is flexibility (Nagel and Dove, 1991; Goldman, Nagel, & Preiss, 1995). The agile manufacturing methods can be adjusted and consolidated into companies of any size to ensure the growth and success. The changeable of customer and technological requirements that make the manufacturers develop agile supply chain capabilities in order to be competitive (Barutcu, 2007). So, many companies use the flexibility and agility to respond the customers’ requirement and markets demand in real time (Mason-Jones et al., 2000; Yusuf et al., 2004).

The new concept of agility manufacturing need to secure competitive advantage from the production process that can be both efficient and responsive (Davis, 1987; Pine, 1993). Agility can be defined as the ability of an organization to succeed in a constantly changing, and unpredictable business environment (Iaccoca Institute, 1991). The agility has four basic principles that to improve customer interaction by providing added value in order to satisfy customers’ needs (Nagel, 1993).

The lead time to satisfy customer demands is important for both lean and agile. High product quality levels are also important for both lean and agile (Childerhouse & Towill, 2000). In the case of lean, minimal lead times are required because time is waste and should be removed if possible. In the other hand, in the case of agile, minimal lead times are required to be able to respond volatile customer demand as quickly as possible (Towill, 1996). So, the concept of lean can be used to eliminate waste, when demand is smooth by planning to maximize profit by the way of reducing the physical cost (Womack & Jones, 1996). And the concept of agile, the main point is the extreme of volatile market demand (Christopher, 2000). The lean concept try to offer the good quality products at lower price by removing inventory and waste from the process, in the other hand, agile concept try to serve as quickly as possible to the customer requirements and specifications (Maskell, 2001).

Naylor et al., (1999) stated that both lean and agile paradigms in relation to supply chain strategies:

“Agility means using market knowledge and a virtual corporation to exploit profitable opportunities in a volatile marketplace.”

“Leanness means developing a value stream to eliminate all waste, including time, and to enable a level schedule.”

To understand the evolution of these paradigms, a brief history of industrial production processes need to be described. There have been three major phases or paradigm shifts of industrial production in the modern world (Smith, 1992; Womack et al., 1991). These phases are as follows:

1. Craft production. This phase is in which craftsmen contracted and completed individual projects on a job-by-job basis. Customer requests were typically for unique products, which varied to some extent from a previously manufactured item.

2. Mass production. This phase is largely associated with the coming of age of Henry Ford’s mass production assembly line this was the time in which “cookie-cutter” products were rolled off the end of the line at breakneck speeds. Product variety was minimal at the beginning of this phase and increased somewhat as time progressed.

3. Lean/JIT production. This is a phase which only recently has been recognized as a viable production alternative. Lean/Just-in-time (JIT) manufacturing attempts to use the advantages of mass production in concert with the principles of JIT and elimination of waste in order to minimize the total cost of producing a product.

All related literatures are reviewed in this chapter. The researcher has discussed relevant concepts in the production process in make-to-order manufacturing. Lean focuses on eliminate waste whereas agile focuses on flexibility in supply chain.