Use Lean Techniques to Make Your Business More Efficient
SO HOW CAN WE MAKE YOUR COMPANY more efficient?
My name is Joe Rizzo and I like to talk to you about the tools of Lean.
Value Stream Mapping
The first one is value stream mapping. We talked about the second principle of Lean, which is value stream; those are all the steps required to deliver a product or to deliver a service. Within every process there is value-added activities and non-value-added activities. We want to identify the non-value-added activities and start removing them with the tools of Lean.
Watch video below (courtesy of Businesstown.com)
So the value stream mapping is a visual representation of how you produce a product or how you deliver a service. Across the value stream map, in the upper right-hand corner, we have the customer. The customer sends in order; the order goes to customer service, which in turn has to send it to sales. The order is entered into the production systems through the inventory control system. Out of the inventory and production control system, purchasing is notified to start buying the supplies and materials that they need to produce the product. The materials finally arrive at the receiving dock.
Then, from the receiving dock, the material usually goes into inventory, but the best way is to go directly to the floor. When the material – raw materials and parts, whatever is required to build the product – start on the floor, then we have the individual steps required to make the product and put it back into inventory where it can be shipped directly to the customer.
So we find some interesting things when we do a value stream map. We determine which steps are necessary, which steps are value-added. So again, the value-added steps are those that the customer is willing to pay for.
An interesting thing happened about 20 years ago at General Motors. A guy by the name of Lopez was the purchasing manager, and he bought all the components to make automobiles. He went out into the supplier’s plants and he stood on the factory floor for an hour or two when he observed the waste. For instance, if the company was selling General Motors a part for a dollar, and he observed 50% waste, he would tell plant manager at the end of the day, “I’m only paying 50 cents for this product, I’m not paying $1, because I saw a lot of waste in your operation and I’m not willing to pay for waste.”
Work in Process Inventory
We identify the waste in the value stream, and another interesting thing that we find is between the steps in the manufacturing process, and probably in the service industry too, there’s a buildup of inventory. We call this inventory work-in-process inventory. and the reason work in process inventory exists is because of the unbalance or different machine rates for each of the different steps. For instance, the first machine could produce a part in 25 seconds; the second machine can produce a part in 20 seconds. So over time there will be a buildup of inventory between the two stations and so on and so on down the line, because of this inventory.
We can calculate the amount of inventory in terms of customer demand, or days. And so we take the value-added time of 25 seconds 20 seconds and so on through the line, we find out that the total value-added time in the whole process is only 5-10% of the time. For instance, if a new order comes in and we have to start from the beginning again, we have to wait for all that inventory to clear before we can start producing the new order. This ends up being a long lead time for the order.
The Future State: An Ideal Process
From the current state we go to the future state. The future state is also called the ideal state. The ideal state is a process that has no waste. Through a bunch of applications of Lean tools, we find ways to eliminate the waste. We can’t look down the end of the road and find the perfect solution, but the way the brain works, we can make improvements of what exists. Where will you store your materials? How is the product going to flow? How is the information going to flow?
This is really important for small and startup companies. You have an advantage over other companies because you can set it up right the first time. I did a consulting job for an instrument company in Maine. Their device was no bigger than the palm of your hand, but the operators had to walk 1 mile just to assemble that little device. So course we worked on ways to rearrange the flow and shorten the travel distances, and put things in a row, and we’re just on the first day were able to reduce that a travel time by two thirds.
5S – Sort, Set in order, Shine, Standardize, Sustain
The next tool is called 5S. 5S stands for Sort, Set in order, Shine, Standardize, and sustain. Another word for 5S is workplace organization. Probably if you look at your desk or work area, it’s kind of cluttered – just a wild guess on my part. But I’ve been into many plants, in the manufacturing floors, offices are generally cluttered.
1. Sort So what we do is, we apply the first S which is Sort. And we take out all those things that are not needed to do your job. This includes stacks of paper, a cup full of pens, three or four coffee mugs on your desk, photos of your beloved children, all these extra things are you really don’t need to do your job. In the manufacturing plant, it’s extra inventory; instead of one box of gloves there’s a case of gloves; extra supplies, not things that you need to do your job. So we take all those things out, and we put back in what is left. When we put things back in, this is our opportunity to improve flow, and we can generally set up straight-line flow or U-shaped cell when we put everything back. and this is the most efficient way of producing an item or delivering a service.
2. Set in Order So then we go to the next test which is Set in order. “Set in order” means finding a place for everything and putting everything in its place. We even go so far as to labeling the item and labeling the place or the home where that item is supposed to go each time and every time.
POUS – Point of Use Storage
If we go back to Henry Ford’s assembly line, because the assembly line is spread out over huge plants, all the right parts have to be delivered to the right station. That’s point of use storage.
3. Shine The third S is Shine, and this is scrubbing or cleaning the work area to make it very bright and shiny and a good place to work. First impressions are important; if the areas work and clean then we’re pretty assured they were getting a high quality product the first time and every time.
4. Standardize The fourth S is Standardize. Standardize is, make a record of the work area, the way it looks when you finish the shine process, and that’s the standard that we want to maintain for next week, next month, the following month, and even next year.
5. Sustain How do we make sure that the work area stays clean throughout the next month, the next year? Well, one of the ways is to do a 5S audit in each area is audited on a periodic basis. We have a little friendly competition between all the different work areas with a score in this, and we compare scores at the end of the month or the end of a quarter. Whoever has the best score gets a reward and is recognized by their peers. What side benefit do you get out of that? Well, morale improves, people like to come to work now. It’s cleaner, it’s a much better environment.
With Lean, because we tap into people’s human creativity and we ask them what they think and then we implement their ideas, we often find that people come to work an hour or so earlier.
They can’t wait to come to work.