ON-DEMAND LEAN PRODUCTION
by Dr. David M. Anderson, P.E., CMC
See New article on Inventory Reduction
The ability to build mass-customized and standard products on-demand is the payoff for lean production programs. Lean Production is taught in the context of build-to-order and mass customization through Dr. Anderson's in-house seminars and implemented through his leading-edge consulting.
Lean production1 is a key prerequisite for Build-to-order and mass customization. The key prerequisites of lean production are product line rationalization and standardization which simplify both the supply chain and manufacturing operations. This will make implementation easier and faster and ensure the success of lean production as well as build-to-order and mass customization.
There are two types of lean production: replacement and spontaneous build-to-order. In replacement lean production parts are common enough to be already built and available to be pulled into assembly from kanban bins. If not, then parts are made by spontaneous build-to-Order with common parts made available through kanban and the non-common parts built on-demand from standard raw materials by CNC machine tools or manually from on-line instructions.
The most important attribute of lean production is the ability to build products quickly and efficiently in batch-size-of-one. In order to do that, all setup must be eliminated including any delays to kit parts, find and load parts, position workpieces, adjust machine settings, change equipment programs, and find and understand instructions.
PROBLEMS WITH SETUP
Mass Production deals with setup by accepting it as a "necessary evil" and then spread it over as many products as possible in batches or lots to minimize the set-up "charge" per part. For decades, industrial engineering have used formulas to try to calculate the "Economic Order Quantity" (EOQ). However, manufacturing in batches drastically raises costs and lead times because of the following considerations:
For an summary about the shortcomings of mass production click here to see the editorial, "End of the Line for Mass Production; No Time for Batches and Queues."
SETUP & BATCH ELIMINATION 3
If successive products are to be unique and different, there cannot be any significant setup delays to get parts, change dies and fixtures, download programs, find instructions, or any kind of manual measurement, adjusting settings, or positioning of parts or fixtures. For a plant to mass customize or spontaneously build products to-order, all product setup must be eliminated, not just the low-hanging fruit or reduce setup as "much as you can." Definition: "eliminating" setup means that setup is reduced to the point where it is still feasible to operate efficiently in a batch-size-of-one mode.
Note that much setup is designed into the product and process.
Setup & Batch Elimination Steps:
For Parts With Unavoidable Setup:
THE LEAN SUPPLY CHAIN
The typical response when suppliers are asked to deliver parts just-in-time to their customers’ pull signals is to keep building the parts in large batches, try to stock enough in their finished goods inventory, and meter them out "just in time." However, this is not really just-in-time and it is certainly not conducive to spontaneous BTO. Parts availability would depend on the assemblers’ forecasts, which are becoming increasingly less accurate, and the supplier’s inventory, which is costly to carry, especially as obsolescence risks increase. There are four basic techniques that contribute to a spontaneous supply chain:
(a) Kanban resupply. As mentioned in the third point above, parts that qualify for kanban resupply, and the related techniques of min/max and breadtruck, can be made in batches as long as the response time and bin (or delivery) size is adequate. Even though parts are made in batches, this still qualifies for a spontaneous supply technique because the batch (a bin’s worth of parts) is made upon the pull signal that the current bin has emptied. Of course, the parts manufacturers may have to implement setup reduction to make small batch production economical. Thus, kanban resupply avoids the hazards of forecasting, the cost and delays of purchasing, and the cost and risk of inventory. The resupply is automatic once the pull signal gets to the supplier.
(b) Spontaneous build-to-order of parts. For parts that do not qualify for kanban, suppliers themselves would need to implement spontaneous BTO so that they could actually build on-demand to their customers’ pull signals. This is the only way to supply mass-customized parts on-demand, which may be needed for mass-customized products. Spontaneous BTO of parts may require (1) the development of vendor-partner relationships for suppliers to establish the ability to build parts in any quantity on-demand and (2) versatile information systems to process and distribute the necessary information.
(c) In-house part fabrication. In order for spontaneous BTO to work, all parts and materials must be available on-demand. If there are any key parts that are not suitable for kanban and no supplier can build them to your pull signal, then you might have to bring those operations in-house. Companies that have outsourced certain operations in the interest of focusing on functional "core competencies" may have to reevaluate their strategies. Unfortunately, most outsourcing is a batch operation which does not lend itself to spontaneous BTO.
If the new core competency is to be spontaneous BTO or mass customization, then the manufacturer will need a complete supply chain that can build products and all their parts on-demand. This may require the selective "reintegration" of certain key steps.8 One of the author’s clients, Badger Meter, of Milwaukee, Wisconsin, found it was able to build a wide variety of water meters flexibly except the printing of the face plates, which had to cope with several ways of measuring water flow plus the logo of every customer (utility). So they learned how to print face plates in small quantities to complete the picture.
(d) Strategic stockpiles. Strategic stocks may be necessary until one of the above three techniques can be applied. As far as overall inventory strategy is concerned, this could be considered temporarily moving one step backwards after moving twenty steps forward. Hopefully these parts are standardized and consolidated so that there would be few to stock and each would have a good chance of being used one way or another.
FLOW MANUFACTURING and ONE-PIECE FLOW
If setup can be eliminated or reduced enough to eliminate the need to manufacture in batches, then parts, sub-assemblies, and products can flow one piece at a time. One-piece flow may be essential when building to-order a wide variety of standard or mass-customized products.
It also eliminates much of the waste of batch-and-queue manufacturing: waiting, interruptions, overproduction, extra handling, recurring defects, and other non-value-added activities.
One-piece flow has a distinct advantage for assuring quality at the source. First, flow manufacturing eliminates the possibility that recurring defects may be built into several batches before being caught at a downstream inspection step. Second, people working in flow manufacturing look for any visible deviation as each part is handed to "its customer" (the next station). Further, if the part doesn’t fit or work in the next operation, the feedback will be immediate leading to quick rectification of the problem.
In flow manufacturing, parts may be manually handed to the next station, which may be very close, thus eliminating the need for mechanized conveyance or fork lifts, whose aisles may occupy as much space as the production line.
One-piece lines are usually sequential, sometimes breaking into parallel routes when needed to balance the line (see next section). Rather then laying out "lines" in a literal straight line, it may be advantageous create a U-shaped line which bends the line into the shape of a "U" for the following reasons:
In sequential one-piece flow, when one production machine breaks down, the whole line will go down. Therefore proactive equipment maintenance is important to prevent unexpected production interruptions. A good TPM program should assure this. Inventory buffers may give an allusion of protection, but may still require special measures, like overtime, to recover.
Equipment maintenance can be more responsive and less costly with standardization of all replaceable parts: belts, motors, fuses, controllers, etc.
Ideally, to achieve optimal machine tool and work station utilization, one-piece flow lines should be balanced so that the time to do the required tasks at each station, called the takt time, is fairly constant.
Another way to balance lines is to make certain stations become kanban sources, so that they make kanban parts during times when they have excess capacity.
Flexible operations work best with dedicated cells or lines for every product family. Cells can be permanently configured so that within a product family, all setup has been eliminated. This strategy work best with many simpler dedicated machines instead of a single "mega-machine, unless the mega-machine can handle a very large family -- enough to justify its expense. In some cases older or "obsolete" machines may be used to provide complete set of machines for the cell; this was one of the solutions covered in Eli Goldratt’s The Goal.9 Remember that speed or capacity may not be as important as flexibility.
Total cost analysis must be used taking into account all related overhead costs in addition to the usual material and processing cost. In some cases, cells may be installed even if the cell alone can not be justified by traditional analyses, but if the cell completes a valuable plant capability like build-to-order. The guiding strategy for cell design is flexibility and setup elimination.
Raw material comes out of the ground in a steady flow. Most products are ultimately consumed in a steady flow. Most irregularities in factory workload are artificially induced.10 Sources of irregular factory workload include:
Line capacity issues:
DEVELOPING PRODUCTS FOR LEAN MANUFACTURE 12
Problems Going Lean with "Un-lean" Product Designs
Concurrent Engineering of Product Families and Flexible Processes
To be successful at designing products for a lean environment, product development teams must:
Designing to Eliminate Setup
Designing for CNC
RESULTS OF SETUP ELIMINATION AND BATCH-SIZE-OF-ONE FLOW
Setup eliminated ž batch-size-of-one flexibility ž one piece flow ž WIP elimination
Eliminating Setup Itself Can:
In addition, Batch-Size-Of-One Flexibility Can:
In addition, one-piece flow can:
In addition, eliminating WIP inventory can:
Dr. Anderson is a California-based consultant specializing in training and consulting on build-to-order, mass customization, lean/flow production, design for manufacturability, and cost reduction. He is the author of "Build-to-Order & Mass Customization, The Ultimate Supply Chain Management and Lean Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or Inventory" (2008, 512 pages; CIM Press, 1-805-924-0200, www.build-to-order-consulting.com/books.htm) and "Design for Manufacturability & Concurrent Engineering; How to Design for Low Cost, Design in High Quality, Design for Lean Manufacture, and Design Quickly for Fast Production" (2008, 448 pages; CIM Press, 1-805-924-0200; www.design4manufacturability.com/books.htm). He can be reached at (805) 924-0100 or firstname.lastname@example.org; web-site: www.build-to-order-consulting.com.
1. An excellent reference on lean production is: Lean Thinking; Banish Waste and Create Wealth in Your Corporation, by James P. Womack and Daniel T. Jones (Simon & Schuster, 1996).
2. ibid., p. 83.
3. Much of this is drawn from the book "Build-to-Order & Mass Customization, the Ultimate Supply Chain and Lean Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or Inventory," (2004, 520 pages, CIM Press,1-805-924-0200; www.build-to-order-consulting.com/books.htm); Chapter 8, "On-Demand Lean Production."
4. Robert W. Hall, Zero Inventories, (Homewood, IL, Business One Irwin, 1983), Chapter 5.
5. Shigeo Shingo, A Revolution in Manufacturing, The SMED System, (Portland, OR, Productivity Press, 1985).
6. Kiyoshi Suzaki, The New Manufacturing Challenge, Techniques for Continuous Improvement, (New York, Free Press, 1987), Chapter 3.
7. Kiyoshi Suzaki, The New Manufacturing Challenge; Techniques for Continuous Improvement, Video program (Dearborn, MI, Society of Manufacturing Engineers).
8. Adrian J. Slywotzky and David J. Morrison, Profit Patterns, 30 Way to Profit from Strategic Forces Reshaping Your Business, (Times Business, Random House, 1999), "Reintegration," p. 117-123.
9. Eliyahu M. Goldratt, The Goal, (North River Press, Second Revised Edition, 1992).
10. James P. Womack and Daniel T. Jones, Lean Thinking; Banish Waste and Create Wealth in Your Corporation, (1996, Simon & Schuster), p. 87, "Is Chaos Real?"
11. Ibid. p. 88, "Do we really need a business cycle."
12. Much of this is drawn from the "Build-to-Order & Mass Customization, the Ultimate Supply Chain and Lean Manufacturing Strategy for Low-Cost On-Demand Production without Forecasts or Inventory," (2008, 512 pages, CIM Press,1-805-924-0200; www.build-to-order-consulting.com/books.htm); Chapter 10, "Product Development for Build-to-Order & Mass Customization."
13. For a general summary on agile product development, see the book Agile Product Development for Mass Customization, by David M. Anderson (McGraw-Hill, 1997); Chapter 9, "Agile Product Development for Mass Customization."
14. Mihaly Csikzentmihalyi, Flow: The Psychology of Optimal Experience (New York: Harper Perennial, 1990).
15. Jones, Daniel J., "JIT & the EOQ Model: Odd Couples No More!," Management Accounting v72, n8 (Feb 1991), pp. 54 - 57.
16. Richard J. Schonberger, World Class Manufacturing, The Lessons of Simplicity Applied, (New York, Free Press, 1986), p. 83.
17. ibid., pp. 229-236.