In Part 1 we Looked again at the Lean house. Explored the limitations of traditional manufacturing approaches and how they can negatively impact a company's financial performance. We delved into Eliyahu M. Goldratt's insightful work, particularly his concept of Throughput, Inventory, and Operating Expense. These three metrics provide a powerful lens for evaluating a system's efficiency and profitability. And I finished part one with a question.
“What would happen to these metrics if we never stopped building or constantly pushed production at individual stations?”
Let’s start today with the answer.
Throughput: the best outcome for throughput is that it won’t
change. While it seems like everyone is busy and work is constantly ongoing, factories
have bottlenecks, be it in a work station, sales demand or logistical there is
somewhere that at 100% isn’t as good as the rest.
Manufacturing isn’t a race it’s more like a group hike, and
the job isn’t completed until every activity in the process is done. Having
some of the activities running faster doesn’t finish the hike any sooner and 'get the job done' but it can cause a heap of problems.
Inventory: One of those key problems here is a build-up of
inventory, be it finished good or work in progress (WIP) and levels will
typically skyrocket if production keeps pushing out products without
considering actual customer demand or process limitations and downstream
holdups. This ties up valuable cash flow and drives up storage and movement
costs. In the worst case, as inventory builds up defects and other problems are
hidden.
Operating expense: More inventory leads to more expenses; in the absolute best case this will only be the logistical costs above. But often the build up of inventory disconnects the work in progress from the next steps in the job which will lead to finding defects late and will affect more parts as they build up. Causing rework or scrappage costs and so operational expense increases and delays pile up which actively reduces throughput.
Like a restriction in a busy road pushing more traffic into
the jam never gets anyone to their destination sooner so modern smart motorways
actively reduce the speed up the road from a traffic jam, reducing the amount
of traffic that joins it so that when the restriction is removed the jam will
clear sooner. The focus therefore should not be on keeping the rest of the
factory running but on resolving the issues and removing the restriction to
allow the processes behind to flow.
In his further work Goldratt emphasises controlling production rate to manage inventory levels. Where Goldratt proposed careful control of material release as the drum beat for the factory, in lean manufacturing this is done using pull flows. This ensures that work only progresses when there's demand from the next step in the process. In the ideal single piece flow each workstation only has the single WIP product and the lowest amount of materials available to complete that workpiece, each time a product passes to the customer in a sale it opens a space for the work behind it to progress, which in turn opens a space behind it and so on down the line back to the first workstation which can then begin a new order. Likewise, when materials are consumed at the workstation they are then replenished, Toyota use Kanban cards as a method of signalling stores that there is space for replenishment and this ideal process in called Just in time.
This approach is based on considering the whole system, the key to the definition of throughput is that it’s based on the final handover to the client or sale and not the beginning of production. The steps that make up the whole process from end to end is called the value stream and laying this out in a process flow is the first step in building up the value stream map (VSM). As a whole system map, the processes mapped out aren’t just the individual work centres but also includes movement of product, quality control and anything else that needs to happen to get the product to the customer. The VSM should also show the flow of information needed to complete the product and time each steps takes. Lastly, the value stream map helps identify if a process adds value to the final product from the customer's perspective or is considered non-value added. Non-value-added activities consume resources but don't directly contribute to what the customer sees as valuable.
These activities are classed in lean as waste and fall into
8 categories, Transportation, Inventory, Motion, Waiting, Overproduction, Over-processing,
Defects and Skills otherwise known as TIM WOODS.
- Transportation: Unnecessary movement of people, materials, or products.
- Inventory: Having more stock than is immediately needed for production.
- Motion: Any unnecessary physical movement by workers that doesn't add value to the product.
- Waiting: Idle time for workers or machines due to delays, breakdowns, or lack of materials.
- Overproduction: Producing more than is demanded by the customer, leading to excess inventory.
- Over-processing: Performing unnecessary steps or using overly complex methods in production.
- Defects: Any product that does not meet quality standards and needs rework or scrapping.
- Skills: Underutilising the skills and knowledge of employees.
By understanding the value stream and using a pull flow, effort can be focused on the issues that prevent the smooth flow of production to the client. Understanding the wastes allows for targeted improvements, achieving a more efficient manufacturing system through continuous improvement.
Rounding off the lean house tour Standardised work forms a part of the foundation in the lean house, if 3 people do a job 3 ways you need 3 different improvements for that task to benefit every time. Standardised work allows for the improvements to help the process every time and with everyone working in the same manor. They all have the opportunity to suggest and help implement changes that will benefit everyone working with that process.
This whistle stop look around the lean house over the last few posts has covered at not only the features but on how and why they work. Together these will increase throughput, reduce inventory and operational expense thereby making the company Money, achieving the Goal.
The just in time process of Toyota took decades to develop to where it was in the 80s and they have had a further 40 years of refinement, it’s impossible to deliver the perfect single piece flow line without years of trial and error, next time I’ll take a look at the steps to develop these processes and how you sensibly mange breaking the rules to get started, and have something successful to improve on towards the ideal.
