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Proceedings of the 2009 Industrial Engineering Research Conference

A Waste Relationship Model for Better Decision Making in Lean


Manufacturing
Sainath Gopinath, Theodor I. Freiheit
Department of Mechanical and Manufacturing Engineering,
University of Calgary,
Calgary, Alberta, T2N 1N4, Canada
Abstract
Lean manufacturing is about eliminating waste, but waste requires metrics that can be tracked in order to eliminate
them. In this paper, metrics are proposed to monitor the seven traditional non-value added wastes and a center
point metric is proposed that can give systematic insight into short-term system waste performance. These metrics
are also used to explore the relationship between the wastes. Understanding waste relationships can facilitate effective tradeoffs decisions for better decision making in a Pareto-optimal waste-dependent system. The trade-off relationships and center-point metric are statistically verified using simulation.

Keywords
Lean manufacturing, Wastes relationships, Performance metrics, Trade-offs, Decision making

1. Introduction
Lean manufacturing emphasizes value creation by eliminating waste. Waste is non-value added activities that contribute to product cost for which the customer is unwilling to pay. Eliminating waste can reduce product cost and
improve quality, but it is not possible to uproot waste completely even in an efficient system whose operations are
waste-dependent (that is, has waste as a part of its functionality). It is necessary to understand the waste relationships in order to minimize system waste to the lowest possible level.
Lean manufacturing is the practice of a theory of production that considers the expenditure of resources for any
means other than the creation of value for the presumed customer to be wasteful, and thus a target for elimination [17]. In lean manufacturing, seven wastes have been defined as [1]:
Overproduction (production ahead of demand)
Defects (any product / service that the customer is unwilling to accept)
Transportation (moving products that are not actually required to perform the processing)
Waiting (any resources / materials staying idle)
Inventory (all components, work-in-progress and raw materials not being processed)
Motion (people or equipment moving more than is required to transform the material)
Processing (Unnecessary / Over-processing than minimum processing for the material transformation).
It is not possible to eliminate waste completely in a system that has waste as the part of its functionality. In other
words, for many systems a minimum amount of waste is necessary for it to perform its intended function. These
systems are referred to as waste-dependent system in this paper. Since complete waste elimination is not possible,
waste can only be brought down to a point where the system exhibits Pareto optimality. Pareto optimality is a term
used in economics and design for describing a solution to a system with multiple objectives whereby no part of the
solution can be improved without making some other part worse [8]. A manufacturing system that is Pareto optimal
will be referred to henceforth as an efficient waste-dependent system. To improve upon these systems, work tasks
within the production system must be redesigned to achieve functionality without the waste.
To achieve a waste-dependent efficient system, the relationship between wastes must be understood. Wastes relationships must therefore be measured quantitatively. Feld [9] defines a manufacturing metric as a standard measure
that describes a performance criterion for manufacturing process so that everyone in the organization is working
towards the same goal. An attempt has been made to identify a set of metrics that can quantitatively measure different wastes. However, not all metrics in the existing literature fulfill the requirements of this paper, so several metrics
have been proposed to provide the information necessary to understand the waste relationships.

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In summary, this paper proposes a waste relationship model to facilitate trade-off decision making with the objective
of reducing all wastes to the minimum possible level in an efficient waste-dependent system without jeopardizing its
intended functionality. Moreover, this paper identifies, develops, and integrates a set of metrics, determines the
waste relationship, and statistically verifies the proposed waste relationship in a simple manufacturing system.

2. Methodology
A three-step methodology was followed for this work. First, the literature on Lean manufacturing was reviewed to
define wastes and explore potential metrics. Second, the logical relationship between wastes was mapped using concept mapping and a relationship model was developed. And third, the model was statistically tested using discrete
event simulation to determine the correlation between the wastes. The review of current research in Lean manufacturing identified wastes and metrics that have been developed, and identified a few holes in the existing research.
Next, the concept mapping was selected to assimilate the relationships between wastes, as it is a powerful technique
for the graphical representation of knowledge [10]. Moreover, it is a technique helpful for understanding relationships concepts (in this case, an identified waste) with other concepts (other wastes). Finally, several simple manufacturing systems were modeled in the Arena simulation software, and their measures of waste were analyzed in the
statistical software package MiniTAB.

3. Metrics
Metrics for measuring waste in manufacturing systems should be easy to collect and simple to understand. To be
useful to decision making processes in manufacturing industries metrics must be feasible for collection on a real,
dynamic manufacturing shop floor. In addition, the number of metrics should be kept to a minimum in order to keep
data collection costs as low as possible and to minimize the time necessary to understand what is happening in the
system [11]. According to Baines [12], resource activities are cost drivers. In other words, as the number of metrics
increases, information collection increases, and it in turn increases the activity cost drivers. Many manufacturing
performance metrics can be identified in the research literature, but not many are both feasible and simple.
There are many performance metrics available that were developed by various researchers in different contexts like
Lean manufacturing, Total Productive Maintenance, or Theory of Constraints. Unfortunately many of these metrics
cannot be used directly to measure shop floor performance. For instance, some metrics are too general (provide
global measurements), require over-complicated calculations (e.g. Dock-to-Dock [13]), or require the collection of
historical data (e.g. machine reliability). In some cases, metrics are better suited for computer simulation models
than direct shop floor measurements, e.g. Build-To-Schedule [13]. Additionally, some shop floor performance metrics provide superfluous or redundant information and make things look unnecessarily complex.
Many metrics found in the literature, particularly for measuring shop floor performance, dont satisfy the above requirements. For example, Duque et al. [14] aimed to integrate a set of metrics proposed by different authors for
measuring shop floor performance in such a way that they are consistent with the different stages and elements of
Lean manufacturing implementation. Some of the metrics they identified and developed are WIP, Setup time, Machine downtime, Transportation, and Space Utilization. These metrics only measure a few wastes and werent developed with a minimum metric set objective in mind. Rother & Shook [15] developed a set of metrics for Value
Stream Mapping (VSM) to characterize and model the shop floor. However, even VSM, developed based on Lean
manufacturing concepts, fails to capture Transportation, Waiting (Operator, Machine & Material), Motion, and
Processing wastes. Practical and feasible shop floor metrics from VSM include Defects and Inventory. Chuan et al.
[16] identifies a good Processing metric. From the metrics identified in the literature, only Defects and Processing
fulfill the above requirements. Therefore metrics are required for Inventory (WIP, WH), Overproduction, Waiting
(Machine, Operator, Customer, and Material), Motion, and Transportation. Table A in the appendix summarizes the
metrics found in the literature.

4. The Relationship between Wastes


A concept map was developed to understand the logical relationships between the wastes. This map was informed
by Rawabdeh [4], who developed a waste relationship model, but who missed a few critical relationship scenarios
like Transportation and Inventory (WIP). From this map, an understanding of the waste relationships was developed,
giving the trade-offs between different wastes in an efficient waste-dependent system. A matrix of the relationships
was developed, but is not presented here due space limitations. These relationships can be used to aid multi-level
decision making by selecting the appropriate metrics from Table 1 and determining the relative impact between the
wastes resulting from waste reduction programs. Processing waste is not considered in this model as it is specific to

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Table 1: Waste metrics table
Waste Code

Waste

Metric

Comment

Inventory Warehouse

Inventory Work in
Progress

Over-Production

Waiting (Material WIP)

Transportation

Waiting
(Machine)

Waiting
(Operator)

Motion

Waiting
(Customer)

Defects

1
1

% Utilization

1-%Operator
Saturation

See [17]

,
See [16]
Processing
K
F Transportation Frequency; FI Finished Inventory; MCi ith Machining Center or Work Station; n Number of Machines, Buffers, or Workers; P Total Units Produced Si Scrap from the ith Machining Center; T
Total Time; Tm Time spent in motion; TRi ith Machine Operation Time; Tt Transportation Time; Tw Idle
or Waiting Time; WIP Work in Progress Inventory; WH Warehouse Inventory.

particular manufacturing processes and is not related to the other wastes except Defects (as Processing increases, the
Defects are reduced). Rawabdeh [4] also has similar views on the Processing waste.
It is desirable to have a single simple, feasible metric that can provide, at least to some degree, a measure of all
wastes in the manufacturing system. This metric would reveal critical information about the whole systems performance. Therefore, a center point metric is proposed that can give systematic insight into the system waste. From
an examination of the logical connections between wastes in the concept map, two candidate metrics present themselves, WIP, measuring inventory waste, and Customer Waiting Time, representing a particular kind of waiting
waste. WIP is directly coupled to WIP Waiting Waste, Transportation Waste, and Waiting (Machine) waste since
all of these wastes directly require material flow. This is also true to a lesser degree with the other wastes. Since
production control is pull, the customer triggers the production of their order, and thereby any waste in the system
should have a high correlation with their wait.

5. Testing of the Relationship Model Using Simulation


The waste relationship model and the center point metric were tested using discrete event simulation in three similar
serial manufacturing system models of increasing complexity. Each model was run at three levels of demand rate
where no resource was deliberately set as a bottleneck; rather the resources would become system bottlenecks automatically by the randomness induced by the simulation. The demand rate (a Poisson distribution) was varied by
10% with respect to the system throughput time. The system responses are Overproduction (Finished Inventory),
Inventory (WIP, WH), Waiting (Material, Machine, Customer and Operator), Motion, Transportation, and Defects.
The intermediate complexity model, illustrated in Figure 1, has one raw goods warehouse (WH), a raw materials
transporter (TR), five serial work stations (WS) with five interspersed WIP buffers (W), a finished goods inventory
(FI), two machine operators (O), and a customer (CU). The raw goods supplier replenishes the warehouse inventory

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with large batch sizes. Production control is a pull system with the transporter and other system resources triggered
by the finished goods inventory level. The transporter moves small batches from the warehouse to the work in
process buffer. Then, the work stations pick the parts from their respective WIP buffers and processes them. Operator 1 loads, unloads, and transfers parts between work station 1, 2, and 3, and operator 2 controls work stations 4 and
5. Finally, the customer consumes from the finished goods inventory.

W2

TR
B2, V1, D1, S1

WH

WS 1

WS 2

CT1, S2, A1

CT2, S3, A2

W1

B1, LT, ROP1

O1
W3

W5
WS 5

WS 4

WS 3

CT5, S6, A5

CT4, S5, A4

CT3, S4, A3

FI
ROP2
W4
O2

Demand rate
CU

WH Warehouse, W WIP, WS Work station, O Operator, CU Customer, FI


Finished Inventory, TR Transporter, B Batch size, V Velocity, D Distance, LT
Lead Time, CT Cycle Time, S Scrap, A Availability, ROP Reorder Point

Figure 1: Schematic of intermediate complexity manufacturing system model


Each simulation level was run for two weeks (4800 minutes of production time) for thirty replications using Arena. Then, a correlation analysis was performed between all responses to understand the relation between different
wastes. The linear relationship between each waste metric was calculated using the Pearson product-moment correlation coefficient [17]. Table 2 shows the correlation coefficients (direction and magnitude) associated with the three
different simulation models of increasing complexities calculated using MiniTAB. It can be observed from the
Table 2 that the direction of the three correlation coefficients associated with each waste is the same and the magnitudes in many cases are approximately the same.
To determine which of the two candidate center point metrics, Inventory - WIP (B) or Customer Waiting (I), has a
higher association with the other wastes, a Fisher z-transformation was made of the correlation coefficients and a
paired t-test was conducted to determine if the correlation coefficient is significantly different. While correlation
measures the association between variables, it is not normally distributed and its variance is not constant. Therefore
a Fisher transformation is used to normalize the distribution and stabilize the variance [18]. The transformation converts the Pearson's r coefficient to a normally distributed variable z, whereby direct comparisons between variables are facilitated.
The center point metric is expected to have higher correlations with other wastes and the potential to provide systematic insight into the system. As is suggested by the figures in Table 2, the paired comparison test after the Fisher
transformation found that five of the eight Customer Waiting (I) correlation coefficients were significantly larger
than the Inventory - WIP (B) metric at a greater than 95% confidence. Only Overproduction (C), Material Waiting
(D), and Defects (J) were not significantly different. Customer waiting is a superior center point metric considering
the high correlation coefficients it has with many of the other wastes. However, WIP is also a good center point,
used by many manufacturing industries as a performance measure, and can hide the root cause of many other problems like quality or reliability [19], so it should not be discounted as a center point metric.

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Table 2: Linear correlation coefficients between wastes (p-values: *<0.01; **<0.05; ***<0.1)
Correlation
Coefficients
A

-------0.63*
-0.67*
-0.75*
0.15
0.36*
0.34*
-0.67*
-0.62*
-0.77*
0.90*
0.86*
0.91*
-0.90*
-0.86*
-0.91*
-0.90*
-0.86*
-0.90*
0.90*
0.86*
0.90*
-0.84*
-0.83*
-0.87*
0.33*
0.45*
0.49*

-------0.72*
-0.62*
-0.53*
0.79*
0.76*
0.81*
-0.48*
-0.68*
-0.81*
0.49*
0.69*
0.81*
0.48*
0.69*
0.80*
-0.49*
-0.69*
-0.80*
0.84*
0.82*
0.87*
-0.30*
-0.29*
-0.38*

-------0.38*
-0.37*
-0.38*
-0.086
0.23**
0.29*
0.075
-0.23**
-0.30*
0.075
-0.22**
-0.29*
-0.064***
0.24**
0.29*
-0.54*
-0.62*
-0.60*
0.10
-0.079
0.064

-------0.58*
-0.71*
-0.87*
0.58*
0.71*
0.86*
0.58*
0.70*
0.86*
-0.58*
-0.71*
-0.86*
0.70*
0.73*
0.86*
-0.29*
-0.31*
-0.46*

-------0.995*
-0.997*
-0.998*
-0.994*
-0.997*
-0.994*
0.993*
0.996*
0.997*
-0.78*
-0.89*
-0.93*
0.37*
0.55*
0.53*

------0.998*
0.999*
0.995*
-0.997*
-0.998*
-0.999*
0.79*
0.89*
0.94*
-0.38*
-0.53*
-0.52*

-------0.997*
-0.997*
-0.995*
0.79*
0.89*
0.93*
-0.37*
-0.53*
-0.51*

-------0.88*
-0.90*
-0.94*
0.37*
0.52*
0.51*

-------0.34*
-0.39*
-0.44*

6. Conclusion
The relationship between wastes in efficient, waste-dependent lean manufacturing systems has been examined in
this paper. Metrics that are simple and feasible to measure on the shop floor have been proposed, and Customer
Waiting Time waste has been identified as a center point metric which is an important performance measure of responsive production systems. Correlations between wastes accumulated over a short period (two weeks) were demonstrated to have trade-offs in discrete event simulations. Therefore, it is concluded that the relationship between
wastes is strong enough to aid shop floor decision making in Lean manufacturing. In future work, it is suggested that
financial waste metrics be developed and their relationship verified using simulation. Additionally, the waste relationships should be verified in a real dynamic manufacturing environment.

Acknowledgements
The authors thank the support of Auto21 Canadian Network Centres of Excellence, and the University of Calgary.

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Appendix
Metrics

Table A: Metrics from the literature


Definition

Reference

Dock-to-Dock (DTD)

metric that measures how long it takes for raw materials or


sub-components coming into plant to be turned into finished products

[13]

Build-To-Schedule Ratio (BTS)

metric that measures how well a plant executes plans to produce


precisely what customers, in the proper sequence and mix

[13]

WIP Inventory

WIP: Value of WIP in the line

[14]

Setup time

Time spent in setups / total productive time (percentage)

[14]

Machine downtime

Hours-machine lost due to malfunction / machine hours scheduled


(percentage)

[14]

Transportation

Number of parts (trips) transported * Distance

[14]

Space Utilization

How much area does the line need, including its WIP and tools etc

[14]

WIP Inventory

WIP (Units) / Demand / day

[15]

Overproduction rate

Takt time / Cycle time

[15]

Defects

% Scrap

[15]

Cp (Process potential index)

Estimates what the process would be capable of producing if the


process could be centered

[16]

Cpk (Process capability index)

Estimates what the process is capable of producing if the process


target is centered between the specification limits.

[16]

OEE (Overall Equipment Effectiveness)

hierarchy of metrics which focus on how effectively a


whole manufacturing operation is utilized

[20]

OTE (Overall Throughput Effectiveness)

Actual throughput rate / theoretical throughput rate

[20]

CTE (Cycle Time Effectiveness)

Theoretical cycle time / actual cycle time

[20]

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