The ideal lot size for a lean system is

Toyota Lean Application

Lean and Just-in-Time

Student Tip

JIT places added demands on performance, but that is why it pays off.

Just-in-time (JIT), with its focus on rapid throughput and reduced inventory, is a powerful component of Lean. With the inclusion of JIT in Lean, materials arrive where they are needed only when they are needed. When good units do not arrive just as needed, a “problem” has been identified. This is the reason this aspect of Lean is so powerful—it focuses attention on problems. By driving out waste and delay, JIT reduces inventory, cuts variability and waste, and improves throughput. Every moment material is held, an activity that adds value should be occurring. Consequently, as Figure 16.1 suggests, JIT often yields a competitive advantage.

A well-executed Lean program requires a meaningful buyer–supplier partnership.

Many services have adopted Lean techniques as a normal part of their business. Restaurants like Olive Garden expect and receive JIT deliveries. Both buyer and supplier expect fresh, high-quality produce delivered without fail just when it is needed. The system doesn’t work any other way.

Culinary Institute of America

Supplier Partnerships

Supplier partnerships exist when a supplier and a purchaser work together with open communication and a goal of removing waste and driving down costs. Trust and close collaboration are critical to the success of Lean. Figure 16.2 shows the characteristics of supplier partnerships. Some specific goals are:

Supplier partnerships

Partnerships of suppliers and purchasers that remove waste and drive down costs for mutual benefits.

Figure 16.1 Lean Contributes to Competitive Advantage

· Removal of unnecessary activities, such as receiving, incoming inspection, and paperwork related to bidding, invoicing, and payment.

· Removal of in-plant inventory by delivery in small lots directly to the using department as needed.

Figure 16.2 Characteristics of Supplier Partnerships

OM in Action Lean Production at Cessna Aircraft Company

When Cessna Aircraft opened its new plant in Independence, Kansas, it saw the opportunity to switch from craftwork to a Lean manufacturing system. The initial idea was to focus on three Lean concepts: (1) vendor-managed inventory, (2) cross-training of employees, and (3) using technology and manufacturing cells to move away from batch processing.

After several years, with these goals accomplished, Cessna began working on the next phase of Lean. This phase focuses on Team Build and Area Team Development.

Team Build at Cessna empowers employees to expand their skills, sequence their own work, and then sign off on it. This reduces wait time, inventory, part shortages, rework, and scrap, all contributing to improved productivity.

Area Team Development (ATD) provides experts when a factory employee cannot complete his or her standard work in the time planned. Team members trained in the ATD process are called Skill Coaches. Skill Coaches provide support throughout each area to improve response time to problems. Andon boards and performance metrics are used for evaluating daily performance.

Cessna Aircraft Company

These commitments to Lean manufacturing are a major contributor to Cessna being the world’s largest manufacturer of single-engine aircraft.

Sources: Interviews with Cessna executives, 2013.

· Removal of in-transit inventory by encouraging suppliers to locate nearby and provide frequent small shipments. The shorter the flow of material in the resource pipeline, the less inventory. Inventory can also be reduced through a technique known as consignment. Consignment inventory (see the OM in Action box, “Lean Production at Cessna Aircraft Company”), a variation of vendor-managed inventory ( Chapter 11 ), means the supplier maintains the title to the inventory until it is used.

Consignment inventory

An arrangement in which the supplier maintains title to the inventory until it is used.

· Obtain improved quality and reliability through long-term commitments, communication, and cooperation.

Leading organizations view suppliers as extensions of their own organizations and expect suppliers to be fully committed to constant improvement. However, supplier concerns can be significant and must be addressed. These concerns include:

1. LO 16.3Identify the concerns of suppliers when moving to supplier partnerships

1. Diversification: Suppliers may not want to tie themselves to long-term contracts with one customer. The suppliers’ perception is that they reduce their risk if they have a variety of customers.

2. Scheduling: Many suppliers have little faith in the purchaser’s ability to produce orders to a smooth, coordinated schedule.

3. Lead time: Engineering or specification changes can play havoc with JIT because of inadequate lead time for suppliers to implement the necessary changes.

4. Quality: Suppliers’ capital budgets, processes, or technology may limit ability to respond to changes in product and quality.

5. Lot sizes: Suppliers may see frequent delivery in small lots as a way to transfer buyers’ holding costs to suppliers.

As the foregoing concerns suggest, good supplier partnerships require a high degree of trust and respect by both supplier and purchaser—in a word, collaboration. Many firms establish this trust and collaborate very successfully. Two such firms are McKesson-General and Baxter International, who provide surgical supplies for hospitals on a JIT basis. They deliver prepackaged surgical supplies based on hospital operating schedules. Moreover, the surgical packages themselves are prepared so supplies are available in the sequence in which they will be used during surgery.

Lean Layout

Lean layouts reduce another kind of waste—movement. The movement of material on a factory floor (or paper in an office) does not add value. Consequently, managers want flexible layouts that reduce the movement of both people and material. Lean layouts place material directly in the location where needed. For instance, an assembly line should be designed with delivery points next to the line so material need not be delivered first to a receiving department and then moved again. Toyota has gone one step further and places components in the chassis of each vehicle moving down the assembly line. This is not only convenient, but it also allows Toyota to save space and opens areas adjacent to the assembly line previously occupied by shelves. When a layout reduces distance, firms often save labor and space and may have the added bonus of eliminating potential areas for accumulation of unwanted inventory. Table 16.1 provides a list of Lean layout tactics.

Table 16.1

Lean Layout Tactics

Build work cells for families of products

Include a large number of operations in a small area

Minimize distance

Design little space for inventory

Improve employee communication

Use poka-yoke devices

Build flexible or movable equipment

Cross-train workers to add flexibility

Distance Reduction

Reducing distance is a major contribution of work cells, work centers, and focused factories (see Chapter 9 ). The days of long production lines and huge economic lots, with goods passing through monumental, single-operation machines, are gone. Now firms use work cells, often arranged in a U shape, containing several machines performing different operations. These work cells are often based on group technology codes (as discussed in Chapter 5 ). Group technology codes help identify components with similar characteristics so they can be grouped into families. Once families are identified, work cells are built for them. The result can be thought of as a small product-oriented facility where the “product” is actually a group of similar products—a family of products. The cells produce one good unit at a time, and ideally, they produce the units only after a customer orders them.

Increased Flexibility

Modern work areas are designed so they can be easily rearranged to adapt to changes in volume and product changes. Almost nothing is bolted down. This concept of layout flexibility applies to both factory and office environments. Not only is furniture and equipment movable, but so are walls, computer connections, and telecommunications. Equipment is modular. Layout flexibility aids the changes that result from product and process improvements that are inevitable at a firm with a philosophy of continuous improvement.

Impact on Employees

When layouts provide for sequential operations, feedback, including quality issues, can be immediate, allowing employees working together to tell each other about problems and opportunities for improvement. When workers produce units one at a time, they test each product or component at each subsequent production stage. Work processes with self-testing poka-yoke functions detect defects automatically. Before Lean, defective products were replaced from inventory. Because surplus inventory is not kept in Lean facilities, there are no such buffers. Employees learn that getting it right the first time is critical. Indeed, Lean layouts allow cross-trained employees to bring flexibility and efficiency to the work area, reducing defects. Defects are waste.

Reduced Space and Inventory

Because Lean layouts reduce travel distance, they also reduce inventory. When there is little space, inventory travels less and must be moved in very small lots or even single units. Units are always moving because there is no storage. For instance, each month a Bank of America focused facility sorts 7 million checks, processes 5 million statements, and mails 190,000 customer statements. With a Lean layout, mail-processing time has been reduced by 33%, annual salary costs by tens of thousands of dollars, floor space by 50%, and in-process waiting lines by 75% to 90%. Storage, including shelves and drawers, has been removed.

Table 16.2

Lean Inventory Tactics

Use a pull system to move inventory

Reduce lot size

Develop just-in-time delivery systems with suppliers

Deliver directly to the point of use

Perform to schedule

Reduce setup time

Use group technology

Lean Inventory

Inventories in production and distribution systems often exist “just in case” something goes wrong. That is, they are used just in case some variation from the production plan occurs. The “extra” inventory is then used to cover variations or problems. Lean inventory tactics require “just in time,” not “just in case.” Lean inventory is the minimum inventory necessary to keep a perfect system running. With Lean inventory, the exact amount of goods arrives at the moment it is needed, not a minute before or a minute after. Some useful Lean inventory tactics are shown in Table 16.2 and discussed in more detail in the following sections.

Lean inventory

The minimum inventory necessary to keep a perfect system running.

Reduce Inventory and Variability

Operations managers move toward Lean by first reducing inventory. The idea is to eliminate variability in the production system hidden by inventory. Reducing inventory uncovers the “rocks” in Figure 16.3(a) that represent the variability and problems currently being tolerated. With reduced inventory, management chips away at the exposed problems. After the lake is lowered, managers make additional cuts in inventory and continue to chip away at the next level of exposed problems [see Figure 16.3(b, c) ]. Ultimately, there will be little inventory and few problems (variability).

Student Tip

Accountants book inventory as an asset, but operations managers know it is a cost.

Figure 16.3 High levels of inventory hide problems (a), but as we reduce inventory, problems are exposed (b), and finally after reducing inventory and removing problems, we have lower inventory, lower costs, and smooth sailing (c).

“Inventory is evil.” S. Shingo

Bob Daemmrich/CORBIS-NY

Firms with technology-sensitive products estimate that the rapid product innovations can cost as much as 12%12% to 2% of the values of inventory each week. Shigeo Shingo, codeveloper of the Toyota JIT system, says, “Inventory is evil.” He is not far from the truth. If inventory itself is not evil, it hides evil at great cost.

Reduce Lot Sizes

Lean also reduces waste by cutting the investment in inventory. A key to slashing inventory is to produce good product in small lot sizes. Reducing the size of batches can be a major help in reducing inventory and inventory costs. As we saw in Chapter 12 , when inventory usage is constant, the average inventory level is the sum of the maximum inventory plus the minimum inventory divided by 2. Figure 16.4 shows that lowering the order size increases the number of orders, but drops inventory levels.

Ideally, in a Lean environment, order size is one and single units are being pulled from one adjacent process to another. More realistically, analysis of the process, transportation time, and physical attributes such as size of containers used for transport are considered when determining lot size. Such analysis typically results in a small lot size, but a lot size larger than one. Once a lot size has been determined, the EOQ production order quantity model can be modified to determine the desired setup time. We saw in Chapter 12 that the production order quantity model takes the form:

Q∗p=√2DSH[1−(d/p)]Qp*=2DSH[1−(d/p)](16-1)

Figure 16.4 Frequent Orders Reduce Average Inventory

A lower order size increases the number of orders and total ordering cost but reduces average inventory and total holding cost.

Example 1 shows how to determine the desired setup time.

Example 1 Determining Optimal Setup Time

Crate Furniture, Inc., a firm that produces rustic furniture, desires to move toward a reduced lot size. Crate Furniture’s production analyst, Aleda Roth, determined that a 2-hour production cycle would be acceptable between two departments. Further, she concluded that a setup time that would accommodate the 2-hour cycle time should be achieved.

Approach

Roth developed the following data and procedure to determine optimum setup time analytically:

· D = Annual demand = 400,000 units

· d = Daily demand = 400,000 per 250 days = 1,600 units per day

· p = Daily production rate = 4,000 units per day

· Qp = EOQ desired = 400 (which is the 2-hour demand; that is, 1,600 per day per four 2-hour periods)

· H = Holding cost = $20 per unit per year

· S = Setup cost (to be determined)

Hourly labor rate = $30.00

Solution

Roth determines that the cost and related time per setup should be:

1. LO 16.4Determine optimal setup time

Qp=√2DSH(1−d/p)Q2p=2DSH(1−d/p)S=(Q2p)(H)(1−d/p)2D=(400)2(20)(1−1,600/4,000)2(400,000)=(3,200,000)(0.6)800,000=$2.40Setuptime=$2.40/(hourly labour rate)=$2.40/($30per hour)=0.08hour,or4.8minutesQp=2DSH(1−d/p)Qp2=2DSH(1−d/p)S=(Qp2)(H)(1−d/p)2D=(400)2(20)(1−1,600/4,000)2(400,000)=(3,200,000)(0.6)800,000=$2.40Setup time=$2.40/(hourly labour rate)=$2.40/($30 per hour)=0.08 hour, or 4.8 minutes(16-2)

Insight

Now, rather than produce components in large lots, Crate Furniture can produce in a 2-hour cycle with the advantage of an inventory turnover of four per day.

Learning Exercise

If labor cost goes to $40 per hour, what should be the setup time? [Answer: 0.06 hours, or 3.6 minutes.]

Related Problems

16.1, 16.2, 16.3

Only two changes need to be made for small-lot material flow to work. First, material handling and work flow need to be improved. With short production cycles, there can be very little wait time. Improving material handling is usually easy and straightforward. The second change is more challenging, and that is a radical reduction in setup times. We discuss setup reduction next.

Student Tip

Reduced lot sizes must be accompanied by reduced setup times.

Reduce Setup Costs

Both the quantity of inventory and the cost of holding it go down as the inventory-reorder quantity and the maximum inventory level drop. However, because inventory requires incurring an ordering or setup cost that is applied to the units produced, managers tend to purchase (or produce) large orders; the larger the order the less the cost to be absorbed by each unit. Consequently, the way to drive down lot sizes and reduce inventory cost is to reduce setup cost, which in turn lowers the optimum order size.

The effect of reduced setup costs on total cost and lot size is shown in Figure 16.5 . Moreover, smaller lot sizes hide fewer problems. In many environments, setup cost is highly correlated with setup time. In a manufacturing facility, setups usually require a substantial amount of preparation. Much of the preparation required by a setup can be done prior to shutting down the machine or process. Setup times can be reduced substantially, as shown in Figure 16.6 . For example in one Kodak plant in Mexico, the setup time to change a bearing was reduced from 12 hours to 6 minutes! This is the kind of progress that is typical of world-class manufacturers.

Figure 16.5 Lower Setup Costs Will Lower Total Cost

More frequent orders require reducing setup costs; otherwise, inventory costs will rise. As the setup costs are lowered (from S1 to S2), total inventory costs also fall (from T1 to T2).

Just as setup costs can be reduced at a machine in a factory, setup time can also be reduced during the process of getting the order ready in the office. Driving down factory setup time from hours to minutes does little good if orders are going to take weeks to process or “set up” in the office. This is exactly what happens in organizations that forget that Lean concepts have applications in offices as well as in the factory. Reducing setup time (and cost) is an excellent way to reduce inventory investment, improve productivity, and speed throughput.

Lean Scheduling

Student Tip

Effective scheduling is required for effective use of capital and personnel.

Effective schedules, communicated to those within the organization as well as to outside suppliers, support Lean. Better scheduling also improves the ability to meet customer orders, drives down inventory by allowing smaller lot sizes, and reduces work-in-process. For instance, many companies, such as Ford, now tie suppliers to their final assembly schedule. Ford communicates its schedules to bumper manufacturer Polycon Industries from the Ford production control system. The scheduling system describes the style and color of the bumper needed for each vehicle moving down the final assembly line. The scheduling system transmits the information to portable terminals carried by Polycon warehouse personnel, who load the bumpers onto conveyors leading to the loading dock. The bumpers are then trucked 50 miles to the Ford plant. Total time is 4 hours. However, as we saw in our opening Global Company Profile, Toyota has moved its bumper supplier inside the new Tundra plant; techniques such as this drive down delivery time even further.

Figure 16.6 Steps for Reducing Setup Times

Reduced setup times are a major component of Lean.

Table 16.3 suggests several items that can contribute to achieving these goals, but two techniques (in addition to communicating schedules) are paramount. They are level schedules and kanban.

Figure 16.7 Scheduling Small Lots of Parts A, B, and C Increases Flexibility to Meet Customer Demand and Reduces Inventory

The Lean approach to scheduling, described as heijunka by the Japanese, produces just as many of each model per time period as the large-lot approach, provided setup times are lowered.

Level Schedules

Level schedules process frequent small batches rather than a few large batches. Figure 16.7 contrasts a traditional large-lot approach using large batches with a level schedule using many small batches. The operations manager’s task is to make and move small lots so the level schedule is economical. This requires success with the issues discussed in this chapter that allow small lots. As lots get smaller, the constraints may change and become increasingly challenging. At some point, processing a unit or two may not be feasible. The constraint may be the way units are sold and shipped (four to a carton), or an expensive paint changeover (on an automobile assembly line), or the proper number of units in a sterilizer (for a food-canning line).

Level schedules

Scheduling products so that each day’s production meets the demand for that day.

Table 16.3

Lean Scheduling Tactics

Make level schedules

Use kanbans

Communicate schedules to suppliers

Freeze part of the schedule

Perform to schedule

Seek one-piece-make and one-piece-move

Eliminate waste

Produce in small lots

Each operation produces a perfect part

The scheduler may find that freezing, that is holding a portion of the schedule near due dates constant, allows the production system to function and the schedule to be met. Operations managers expect the schedule to be achieved with no deviations.

Kanban

One way to achieve small lot sizes is to move inventory through the shop only as needed rather than pushing it on to the next workstation whether or not the personnel there are ready for it. As noted earlier, when inventory is moved only as needed, it is referred to as a pullsystem, and the ideal lot size is one. The Japanese call this system kanban. Kanbans allow arrivals at a work center to match (or nearly match) the processing time.

Kanban is a Japanese word for card. In their effort to reduce inventory, the Japanese use systems that “pull” inventory through work centers. They often use a “card” to signal the need for another container of material—hence the name kanban. The card is the authorization for the next container of material to be produced. Typically, a kanban signal exists for each container of items to be obtained. An order for the container is then initiated by each kanban and “pulled” from the producing department or supplier. A sequence of kanbans “pulls” the material through the plant.

Kanban

The Japanese word for card, which has come to mean “signal”; a kanban system moves parts through production via a “pull” from a signal.

The system has been modified in many facilities so that even though it is called a kanban, the card itself does not exist. In some cases, an empty position on the floor is sufficient indication that the next container is needed. In other cases, some sort of signal, such as a flag or rag ( Figure 16.8 ), alerts that it is time for the next container.

1. LO 16.5Define kanban

When there is visual contact between producer and user, the process works like this:

1. The user removes a standard-size container of parts from a small storage area, as shown in Figure 16.8 .

2. The signal at the storage area is seen by the producing department as authorization to replenish the using department or storage area. Because there is an optimum lot size, the producing department may make several containers at a time.

Figure 16.8 Diagram of Storage Area with Warning-Signal Marker

A kanban system is similar to the resupply that occurs in your neighborhood supermarket: the customer buys; the stock clerk observes the shelf or receives notice from the end-of-day sales list and restocks. When the store’s limited supply is depleted, a “pull” signal is sent to the warehouse, distributor, or manufacturer for resupply, usually that night. The complicating factor in a manufacturing firm is the time needed for actual manufacturing (production) to take place.

A kanban need not be as formal as signal lights or empty carts. The cook in a fast-food restaurant knows that when six cars are in line, eight meat patties and six orders of french fries should be cooking.

Donna Shader

Several additional points regarding kanbans may be helpful:

· When the producer and user are not in visual contact, a card can be used; otherwise, a light, flag, or empty spot on the floor may be adequate.

· Usually each card controls a specific quantity of parts, although multiple card systems are used if the work cell produces several components or if the lot size is different from the move size.

· The kanban cards provide a direct control (limit) on the amount of work-in-process between cells.

Determining the Number of Kanban Cards or Containers

The number of kanban cards, or containers, sets the amount of authorized inventory. To determine the number of containers moving back and forth between the using area and the producing areas, management first sets the size of each container. This is done by computing the lot size, using a model such as the production order quantity model [discussed in Chapter 12 and shown again on 644 in Equation (16-1) ]. Setting the number of containers involves knowing: (1) lead time needed to produce a container of parts and (2) the amount of safety stock needed to account for variability or uncertainty in the system. The number of kanban cards is computed as follows:

1. LO 16.6Compute the required number of kanbans

Number of kanbans (containers)=Demand during lead time + Safety stockSize of containerNumber of kanbans (containers)=Demand during lead time + Safety stockSize of container(16-3)

Example 2 illustrates how to calculate the number of kanbans needed.

Example 2 Determining the Number of Kanban Containers

Hobbs Bakery produces short runs of cakes that are shipped to grocery stores. The owner, Ken Hobbs, wants to try to reduce inventory by changing to a kanban system. He has developed the following data and asked you to finish the project.

Production lead time=Wait time+Material handling time+Processing time=2daysDaily demand=500cakesSafety stock=12daysContainer size (determined on a production order size EOQ basis)=250cakesProduction lead time=Wait time+Material handling time+Processing time=2 daysDaily demand=500 cakesSafety stock=12 daysContainer size (determined on a production order size EOQ basis)=250 cakes

Approach

Having determined that the EOQ size is 250, we then determine the number of kanbans (containers) needed.

Solution

Demand during lead time =Lead time × Daily demand = 2 days × 500 cakes = 1,000Safety stock =12×Daily demand =250Number of kanbans (containers) needed =Demand during lead time+Safety stockContainer size=1,000+250250=5Demand during lead time =Lead time × Daily demand = 2 days × 500 cakes = 1,000Safety stock =12×Daily demand =250Number of kanbans (containers) needed =Demand during lead time+Safety stockContainer size=1,000+250250=5

Insight

Once the reorder point is hit, five containers should be released.

Learning Exercise

If lead time drops to 1 day, how many containers are needed? [Answer: 3.]

Related Problems

16.4, 16.5, 16.6, 16.7, 16.8, 16.9, 16.10 (16.11, 16.12 are available in MyOMLab)

Advantages of Kanban

Containers are typically very small, usually a matter of a few hours’ worth of production. Such a system requires tight schedules, with small quantities being produced several times a day. The process must run smoothly with little variability in quality or lead time because any shortage has an almost immediate impact on the entire system. Kanban places added emphasis on meeting schedules, reducing the time and cost required by setups, and economical material handling.

In-plant kanban systems often use standardized, reusable containers that protect the specific quantities to be moved. Such containers are also desirable in the supply chain. Standardized containers reduce weight and disposal costs, generate less wasted space, and require less labor to pack, unpack, and prepare items.

Lean Quality

Student Tip

Good quality costs less.

There is no Lean without quality. And Lean’s “pull” production, smaller batch sizes, and low inventory all enhance quality by exposing bad quality. Savings occur because scrap, rework, inventory investment, and poor product are no longer buried in inventory. This means fewer bad units are produced. In short, whereas inventory hides bad quality, Lean exposes it.

Table 16.4

LEAN QUALITY TACTICS

Use statistical process control

Empower employees

Build fail-safe methods (poka-yoke, checklists, etc.)

Expose poor quality with small lots

Provide immediate feedback

As Lean shrinks queues and lead time, it keeps evidence of errors fresh and limits the number of potential sources of error. In effect, Lean creates an early warning system for quality problems so that fewer bad units are produced and feedback is immediate. This advantage accrues both within the firm and with goods received from outside vendors.

In addition, better quality means fewer buffers are needed, and therefore, a better, easier-to-maintain inventory system can exist. Often the purpose of keeping inventory is to protect against unreliable quality. But, when consistent quality exists, Lean firms can reduce all costs associated with inventory. Table 16.4 suggests some tactics for quality in a Lean environment.

Lean and the Toyota Production System

Toyota Motor’s Eiji Toyoda and Taiichi Ohno are given credit for the Toyota Production System (TPS; see the Global Company Profile that opens this chapter). Three components of TPS are continuous improvement, respect for people, and standard work practice, which are now considered an integral part of Lean.

Continuous Improvement

Continuous improvement under TPS means building an organizational culture and instilling in its people a value system stressing that processes can be improved—indeed, that improvement is an integral part of every employee’s job. This process is formalized in TPS by kaizen , the Japanese word for change for the good, or what is more generally known as continuous improvement. Kaizen is often implemented by a kaizen event. A kaizen event occurs when members of a work cell group or team meet to develop innovative ways to immediately implement improvements in the work area or process. In application, kaizen means making a multitude of small or incremental changes as one seeks elusive perfection. (See the OM in Action box, “Toyota’s New Challenge.”) Instilling the mantra of continuous improvement begins at personnel recruiting and continues through extensive and continuing training. One of the reasons continuous improvement works at Toyota, we should note, is because of another core value at Toyota, Toyota’s respect for people.

Kaizen

A focus on continuous improvement.

Kaizen event

Members of a work cell or team meet to develop improvements in the process.

Respect for People

Student Tip

Respect for people brings the entire person to work.

Toyota, like other Lean organizations, recruits, trains, and treats people as knowledge workers. Aided by aggressive cross-training and few job classifications, Lean firms engage the mental as well as physical capacities of employees in the challenging task of improving operations. Employees are empowered. They are empowered not only to make improvements, but also to stop machines and processes when quality problems exist. Indeed, empowered employees are an integral part of Lean. This means that those tasks that have traditionally been assigned to staff are moved to employees. Toyota recognizes that employees know more about their jobs than anyone else. Lean firms respect employees by giving them the opportunity to enrich both their jobs and their lives.

OM in Action Toyota’s New Challenge

With the generally high value of the yen, making a profit on cars built in Japan but sold in foreign markets is a challenge. As a result, Honda and Nissan are moving plants overseas, closer to customers. But Toyota, despite marginal profit on cars produced for export, is maintaining its current Japanese capacity. Toyota, which led the way with JIT and the TPS, is doubling down on its manufacturing prowess and continuous improvement. For an organization that traditionally does things slowly and step-by-step, the changes are radical. With its first new plant in Japan in 18 years, Toyota believes it can once again set new production benchmarks. It is drastically reforming its production processes in a number of ways:

· The assembly line has cars sitting side-by-side, rather than bumper-to-bumper, shrinking the length of the line by 35% and requiring fewer steps by workers.

· Instead of having car chassis dangling from overhead conveyors, they are perched on raised platforms, reducing heating and cooling costs by 40%.

· Retooling permits faster changeovers, allowing for shorter product runs of components, supporting level scheduling.

· The assembly line uses quiet friction rollers with fewer moving parts, requiring less maintenance than conventional lines and reducing worker fatigue.

These TPS innovations, efficient production with small lot sizes, rapid changeover, level scheduling, half the workers, and half the square footage, are being duplicated in Toyota’s new plant in Blue Springs, Mississippi.

Sources: Forbes (July 29, 2012); Automotive News (February, 2011); and The Wall Street Journal (November 29, 2011).

Processes and Standard Work Practice

Building effective and efficient processes requires establishing what Toyota calls standard work practices. The underlying principles are:

· Work is completely specified as to content, sequence, timing, and outcome; this is fundamental to a good process.

· Supplier connections for both internal and external customers are direct, specifying personnel, methods, timing, and quantity.

· Material and service flows are simple and directed to a specific person or machine.

· Process improvements are made only after rigorous analysis at the lowest possible level in the organization.

This Porsche assembly line, like most other Lean facilities, empowers employees so they can stop the entire production line, what the Japanese call jidoka, if any quality problems are spotted.

Bernd Weissbrod/dpa/picture-alliance/Newscom

Lean requires that activities, connections, and flows include built-in tests (or poka-yokes) to signal problems. When a problem or defect occurs, production is stopped. Japanese call the practice of stopping production because of a defect, jidoka. The dual focus on (1) education and training of employees and (2) the responsiveness of the system to problems make the seemingly rigid system flexible and adaptable. The result is continuous improvement.