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price by calculating your cost and adding on a margin for profit In todays competitive market the customer sets the price and you dont have the luxury of adding a profit margin The only way to remain profitable and grow your business is to eliminate waste from your value stream, thereby reducing costscost reduction principle
Lean Thinking
Price cost = profit
Profit
Profit
Cost
Cost
pay, and subtract your cost to determine what your profit will be Eliminating waste is important because customers not only set the price, but they also demand price reductions
focused on managing processes, and improving them by compressing time, rather than sweating assets Every business is a collection of processesprimary processes that create value and secondary processes that support them (office and administrative functions) Processes are sequences of steps that must be carried out to create value for customers and managed as a whole, not separately
Total Costs
Sales/Product Family
Lean reduces total costs enabling you to maintain or lower your prices and increase market share, thereby growing your business.
any extra time, labor or material spent producing a product or service that doesnt add value to it. Leans unique tools, techniques, and methods can help you reduce costs, achieve faster delivery and shorten lead times Lean fosters a culture in which all employees continually improve their skill levels and processes thereby increasing morale Quantum Associates, Inc
products and services are created and delivered in the right amounts, to the right location, at the right time, and in the right condition Products and services are produced only for a specific customer order rather than being added to inventory
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Eliminate Waste
Reduce Lead Time
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Eliminate Waste Waste is the activities that take up time, resources and space but does not add value to a product or servicecustomers do not want to pay for non-value-added activities
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payment is received The time it takes to transform raw materials into finished goods The time it takes to introduce new products after the design phase is completed The time it takes to complete a quote or submit a proposal Long lead times undermines your business. Reducing lead times can help you dominate your market.
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services prices and your operating costs to succeed. If your prices and operating costs are too high you will lose market share and profits To reduce total cost a Lean process must eliminate waste and reduce lead times.
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Benefits
Implementing lean tools and techniques will enable
your company to meet customer demand for a quality product or service at the time they need it and for a price they are willing to pay. Lean management methods create flexible and efficient business and manufacturing processes. Lean practices will help your company manage its total costs and provide a fair ROI to its stakeholders.
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Waste
Waste is anythingtime, cost or work that
adds no value in the eyes of the customer Waste exists at all levels and in all activities Lean shows us how to recognize and eliminate waste and not simply accept it as the way work is done around here
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The ultimate lean target is the total elimination of waste. Waste, or muda, is anything that adds cost or time without adding value. Seven deadly waste have been identified over the years. Recently an eighth waste has been identifiedunderutilization of people.
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finished goods Office/Serviceunneeded files, extra supplies, unnecessary copies, excessive unread emails, etc.
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handling and storage that occurs because of defects, overproduction, and too much or too little inventory, includes redundant activities, such as checking someone elses work. Obtaining multiple signatures, or excessive reviews The time spent producing product/service features which are irrelevant to the customer
Manufacturingreworking defective product
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materials being transported from one operation to another. Transporting something further than necessary, or temporarily locating, filing, stocking, stacking, or moving materials, people, information or paper.
Manufacturingmoving sub components from one work
process to another Office/serviceFiling/saving documents that will never be used again, updating customer records in different systems
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accommodate inefficient process layout, defects, reprocessing, overproduction. More walking, reaching or bending than necessary Any movement of people which does not contribute added value to the product or service
Manufacturingoperators having to walk back and forth to retrieve
tools or materials not stored in the immediate work area Office/serviceselecting additional keystrokes and fields to retrieve previous information, searching for misplaced files
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Eighth Waste
Underutilization of People - is a result of not placing
people where they can (and will) use their knowledge, skills, and abilities to the fullest
Assigning an employee to two jobs due to understaffing
Having employees perform a task that is politically motivated Not cross training employees
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Value-added Activities
Those steps the customer is willing to pay for
customer desires It must be done right the first time The customer is willing to pay for it
It is the customer who determines what a business is. What the customer thinks he is buying, what he considers value, is decisive it determines what a business is, what it produces and whether it will prosper. Peter Drucker
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to pay for but must be done to comply with regulations, organizational policies, and so on You must periodically examine these activities to make sure they are necessary, if not eliminate them
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Non-value-added Activities
Those activities the customer is not
willing to pay for and can be avoided Your goal should be to eliminate these activities because they are WASTE
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Understanding Waste
What would you be willing to pay for when ordering a hamburger?
___ Meat ___ Dough ___ Ketchup ___ Cost of radio, TV, web ads ___ Cost of delivery truck signs ___ Cost of store manager ___ Cost of cleaning ___ Cost of menus ___ Employee training ___ Profit
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There are three value streams for each product family that overlap and flow together:
Concept to Launch (engineering/design) Raw Materials to Customer (manufacturing) Order to Cash (administrative functions )
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Includes both value-added and non value-added activities Allows for seeing areas of waste in current state Future state is roadmap and apt to change Create icons specific to your business or industry Maps should be the plan for 6 months 2 years Maps many types
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Customer Queue/Wait
Data Box
Information Flow
Processe s
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Step Graph
Attributes
Pre-application
8 hrs.
Application
80 hrs.
Approval/Title
80 hrs.
Closing Prep
40 hrs.
15 15 120
60 120 70
min min %
20 5 80
min min %
120 5 120
(1 day) 8 hrs
(5 days) 40 hrs
150 min
180 min
25 min
245 min
Queue time = 208 hrs Value-added time=10 hrs (600 minutes) Total lead time = 218 hrs (27.25 days)
Gadget Data
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PCE = 4.6%
Patient
Registration
15 mins
Triage
35 mins
Emergency Room
20 mins
Radiology
45 mins
Emergency Room
45 mins
ER Casting
40 mins
Discharge
3 4 3
3 2 4 4
3 3 2 5
3 5 15
3 3 5 5
Cast pt Pt educ
30 5
min min
2 5
min min
15 mins
35 mins
20 mins
45 mins
45 mins
40 mins
10 mins
13 mins
13 mins
23 mins
16 mins
35 mins
7 mins
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PCE =34%
Staging
Lam #1
I Crew size: 4 Run speed 58 ft/min Output: 500 pieces/hr
268 pieces
4,500 C/T= 7.2 sec pieces C/O= 5 - 25 min % Crew:days= 100% swing = 0% % Reliability = 98% Waste = 1/2% Sec available 27,000 Weekly hr = 5
I Crew size: 1 1/3 Run speed 184 ft/min. Output:1,584 pieces/hr 9000 C/T= 2.3 sec pcs C/O= 7 - 30 min % Crew Days =100% Swing =0% % Reliability = 95% Waste = Sec available 108,000 Weekly hr = 31.6
Resaw (4 saws)
Molder #4
Crew size: 4 Run speed 300 ft/min Output:1,285 pieces/hr I
Prime
Crew size: 3 Run speed: 3,15 l ft/min Output: 1,350 pieces/hr
9,000 C/T= 2.8 sec pieces C/T= 1.3 sec C/O= 5 - 45 min C/O= 1 min - 1 hr % Crew:days= 100% % Crew:days =100% swing = 0 % swing = % Reliability = 98% Waste = 1/2% Sec available27,000 Weekly hr = 38.9 % Reliability =73% Waste = 3% Sec available 27,000 Weekly hr = 18.5 48 hr
VA Ratio 1:311
Production lead time = 521,874 sec Value-added time 1,674 sec
.5 hr
48 hr
48 hr
1,034 sec
230 sec
280 sec
130 sec
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Lam #1
I Crew size: 4 Run speed 58 ft/min Output: 500 pieces/hr C/T= 7.2 sec C/O= 5 -25 min % Crew:days= 100% swing = 0% % Reliability = 98% Waste = 1/2% Sec available 27,000
268 pieces
4,500 pieces
VA Ratio =1:12
.2 hr Production lead time = 3.7 hr Value-added time 1,233 sec
Weekly hr = 5
.5 hr 1,034 sec 3 hr
Weekly hr = 38.9
199 sec
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DecisionsDecisionsDecisions
Is my company too small for Lean Process
Improvement? Isnt Lean a manufacturing process? I am a service business. Can I afford to implement Lean Process Improvement?
All of these industries have successfully applied Lean to their processes
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2005
10
2006
140 hours
38 days
Benefits
+82%
+81%
+33%
+40%
No Change
+40%
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22 days to 5 days and critical errors from 7 to zero Boosted productivity of its maintenance crews 36% at a 60 residential home complexreduced man hours from 56.2 hours/week to 35.9 hours/week
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They achieved all this with a very small investment in kaizen events.
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improve their quote process from 15 30 days to an average of 3 days. Some quotes are completed in 24 hours.
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with your designated process expert. Train-the Trainer 4 - 6 months Lean expert teaches and mentors in-house Lean Agent and improvement team Rapid Improvement Events 1 week
3-5 day commitment of your in-house team facilitated by a Lean expert and
Getting Started
Value Stream Maps
The roadmap to problem identification Going from the current state to the future state is
the driver for eliminating waste Your ultimate goal is to achieve the ideal state-once you reach your future state let that become the new current state and create a new future state, and so on Waste is the enemy. Always strive to eliminate waste from your value streams
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Getting Started
Value Stream Maps
For support and administrative processes Determine what data to include by the question you are trying to answer about your value stream or process Define the product produced by the process
Example: If your goal is to reduce days in receivable, you would define invoices as the product and identify the total number of invoices issued, cycle time and queue time for processing and collection, and total cycle time.
bottlenecks most likely occur and eliminate areas of waste in your future state map.
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Getting Started
Kaizen
Synonymous with continuous improvement Associated with events that Quickly implement Lean tools and techniques to eliminate waste Improve work flow Improve productivity Train workers in lean tools and techniques It is the Lean technique that will move your value
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Conclusion
Lean is a proven, company-wide systematic
approach to eliminate/minimize waste resulting in the production of a good or service at the lowest possible cost It is not just a manufacturing program confined to shop floor employees Lean is every system, every process, and every employee within the organization
If you are the low cost producer of a good or service you have a competitive advantage and will be able to grow your business. Lean is the tool to reduce your costs.
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