Monday, April 5, 2010

Lean Manufacturing JIT Case Study

To get the point over regarding the use of Just in Time (JIT) as part of implementing lean manufacturing here is yet another case study for you to read and digest.

I became involved in a project that was already ongoing to help a company to cope with capacity issues. They made “art” products for major retail chains, large framed prints, photo frames and the like.

They had a rather restricted premises space wise and could not yet afford to move elsewhere as profits were not yet as “expected” despite good levels of orders. They had got to the point where they were having to turn orders away as they just did not have the capacity to cope with them. The factory was running on significant amounts of overtime and they were struggling to meet the orders that they had.

They did not make to stock, all production was to order, the customers ordering “large” quantities for delivery to their warehouses where they then split the orders for delivery to the branches.

There were two main areas of production, large high value items which were generally fully hand crafted and low volume and the higher volume (100 – 500 items per order) smaller items (still picture frames of up to a meter square). We concentrated on the higher volume smaller items as this was the main area of concern in the business (not just because it was easier!)

This production line occupied one building with the main assembly line running along the length of the building. The frame being cut to size, and then nailed into the recognizable rectangular frame shape before fitting glass, print, inserts, back plate/stand and then shrink wrapping. The individual components being completed in small cells along the side of the building, such as trimming prints to the correct size on a guillotine.

When I joined this project, the main assembly line had been turned into a flow line producing each item one after another without problem and each sub assembly area had implemented 5S and improved efficiencies at the cell level. But they were still not meeting customer orders, in fact there was felt to have been no improvement at all!

Why was this so? I watched the line for a few hours at the start of production, they started with an empty line as it was the start of the week, as the product progressed along the line it got about half way along the line and was then being placed into boxes as the subassembly that was required at this point was not available. Near the end of the line, operators were taking product out of boxes that had been packed the previous weeks to fit the hangers that had not been in stock when they were run! It seemed that this was a common occurrence, talking to the operators it was rare for a product to reach the end of the line without either a supplier or an internal shortage!

There was no co-ordination between the subassembly stages and the main production lines, the subassemblies built to their weekly schedule as produced by the computer system as did the main production line, but each picked and chosse their order within the week. As to suppliers, they appeared to be a big problem also but no one could quantify the size of the issue.

What was required was a simple system to ensure that the subassemblies built to the order the line was going to run, and that the line only “launched” items for which all subassemblies and purchased parts were available.

One hour later we had a simple white board in place, down the left edge all of the products in the order the line wanted to run, across the top a list of subassemblies and purchased parts. The subassembly areas were instructed to build in the order of this list and to tick the box to show when they were complete. The stores man was instructed to tick the box as product was delivered or if it were in stock to show purchased parts availability. The main line’s job was easy, launch the first product for which every box was ticked!

We started this system before lunchtime that Monday morning, by Wednesday afternoon we had completed each and every product for which there were purchased parts available and matched the best week’s production figures! There was nothing for the line to build due to supplier shortages for the remainder of the week! The operators on the line during previous weeks were filling their time by packing and unpacking unfinished products on the line and cleaning down and setting up multiple times for the same product.

The following week they beat the production record on Tuesday afternoon, everyone in the office appeared to be at one supplier or another trying to resolve issues which were preventing delivery! They again could not produce past Wednesday because of supplier shortages.

Supplier issues were resolved over the following several weeks, and output was roughly doubled through the facility, overdue orders were met and new contracts signed.

Just In Time requires the flow, not just the efficiency of individual cells. The suppliers are as important to your success as your own production, you must include them as part of your process flow for implementation of lean manufacturing to succeed.

Sunday, April 4, 2010

Just In Time Manufacturing Case Study 2|JIT

The following case study regarding Just in Time and lean manufacturing is not as “sad” as the last as it was eventually a successful implementation. But I will give you some history regarding how the company “played” with lean manufacturing over a period of a few years before entering into a crisis situation which forced them to change.

The company in question made luxury office furniture, they offered a vast range of products in a number of different colors and finishes. They had been in operation for around 20 years and were reasonably successful, owning probably the biggest factory in the town in which they were located.

I became involved with the company when they contacted the local university for help in downsizing their company due to turndown in demand. They needed to reduce the space taken up by their operation as they had another company that was offering to take over half their factory space for a substantial rental fee.

They had lost a significant portion of their business to local (UK) competitors over the previous year or two, much of the business going to three separate companies that had been set up by previous directors of the company in direct competition. The perception being that these ex-directors had stolen the customer base. This led to a number of redundancies and to the obvious conclusion that the factory was now far too large for the size of their operation and they should either move to smaller premises or rent out a portion of their current location which was owned by the company rather than rented.

They had used consultants in the past to implement lean manufacturing to improve their business with some success. They were happy with what they had done in the past as it had generated some savings but they had never really realized the gains that they felt they should have been able to achieve and as such had ceased to actively pursue lean.

On visiting the company the real reasons for the down turn in business became evident, the competition was offering lead times of two to three weeks, whereas the company that we were in was struggling to meet six weeks. The customers were mainly asking for “next week” delivery, so they were far from this requirement.

The company knew that lead time was a major issue but had not managed to successfully tackle it over previous lean implementations. They were also hiding behind the “previous directors stole our customers” banner rather than accepting the real issues.

The first lean implementation was factory wide, they implemented 5s with some success, the factory was on the whole tidy and well organized. Shadow boards and tool racks were evident at each machine and so on. They also tried to tackle waste within the factory, at the time the biggest issue was the movement of inventory, which was also a health and safety issue due to a serious accident with a fork truck.

As you can imagine, office furniture is made up of various cut wooden panels and other components, these when produced in batches create some significant amounts of cut, heavy material, which at the time had to be moved from process to process using fork trucks. This was “resolved” by the company installing a network of what can only be described as rail tracks and trolleys that could be maneuvered through the factory from process to process. They managed to make the biggest waste in the factory more efficient rather than trying to eliminate it! This actually produced some savings to the company and was felt by those involved to have helped reduce waiting times as people were in control of their own material rather than waiting for the now no longer required fork trucks.

Their second foray into lean was to re-hire the same consultants with an aim to reducing the overall lead time, this was achieved in part by re-organizing and laying out the final assembly line. This was actually quite nice and was felt to have shaved about a week off of the lead time. The line was a well designed flow line with materials entering from sides where they were required and 2 bin Kanban systems for the smaller items used on the line.

But none of this achieved the lead times being asked for by the customers, it also did not satisfy the overall aims of Just In Time (JIT) or of Lean Manufacturing. They were still making larges batches of products that were then pushed through the factory rather than making what the customer wanted when the customer wanted it!

Investigating the planning and flow through the factory we found that the companies ERP system was also set up to build in a weeks long delay between each process to allow for any problems with delivery, quality or machine availability. They were actually planning a long lead time!

This is a common problem with ERP, MRP and even some “manual” planning systems that they are set up with these delays between processes to make the planner’s job easier as there is stock and flexibility within the system for the shop floor to continue easily without making too many adjustments to the plan when problems occur. The outcome however is that the lead times through the factory are made even longer!

The machinery was all modern and computer controlled within the factory, setups were a matter of pushing a button and a few minor material changes when required. They were not a barrier to reducing batch sizes as they are in some factories.

The main saw could cut each and every panel for any product at the same time rather than cutting all table tops then all drawers etc. This was actually a very simple implementation!

We designed the layout with the operators and supervision, a very simple highly compressed layout. We then planned the moves over a number of weeks before the main shut down so that we could move equipment piece by piece. We had several weeks of inventory to run through the system, so we were able to move the first few processes closer together whilst the later processes were still running.

The planning was drastically simplified, customer orders modified for only board cutting efficiency were given to the saw to cut – this meant that at the most we ended up with only 2 or 3 additional products for stock rather than the usual 30 to 40. (Plans were in place to review available board sizes to prevent even this.)

The saw then cut in the order they received the paperwork, these customer orders were then placed in one of the only 4 possible locations between the saw and the next process with a numerical flag sat on top so that the next process took the oldest order.

The next process took the oldest order, did the work they were required to do then placed the order into the limited spaces between it and the next process and so on. If there was no space, no work was done, the operators were instructed to go and help in other areas, normally the next process.

In this way the order flowed through the factory in less than 2 days! Yes 2 days from the initial 6 weeks that they were quoting and not meeting! Business increased due to customers no longer trying to go elsewhere to get a shorter lead time. This is Just in Time, this is lean manufacturing in action!

The space in the factory was a fraction of before, even with an additional assembly line installed to cope with additional demand. The finished goods stores slowly began to reduce to a mere shadow of its former “glory” as the remaining slow moving stock was shifted. Half the building was rented out as per our original request for help!

This took around 6 months to implement fully from the initial visit to a fully working system led by 3 experienced consultants. I don’t have the monetary savings that were made by this project as the company never released them to us but they were considerable.

Just in time is a major part of implementing lean manufacturing, focusing on giving the customer what they wanted, when they wanted it rather than looking for individual wastes to eliminate gave the company the revolutionary change that they required.

Friday, April 2, 2010

Just In Time Case Study

I want to emphasize the need to implement the main principle of lean, the need for Just in Time (JIT) manufacturing. The need to define value and make it flow at the pull of the customer. Look back at my previous post how to implement Just In Time for an explanation.

Do you want to wait till your competitors achieve this while you sit there with an unresponsive factory offering lead times of many weeks while they can offer a lead time in days. Do you want your hard earned cash tied up in masses of stock that you will take months to sell and then have to invest it back into masses of raw materials and work in progress to produce more slow moving stock, while your competitor enjoys his cash?

I want to show you how a new viewpoint is required through a couple of examples of companies that I have been into over the years that I worked as a consultant. The following example is quite tragic and a real waste!

I visited a factory a few years back, a long established manufacturer of “traditional” board games and similar products such as puzzles, art and craft sets, painting by numbers and the like. At the time I was working on an initiative sponsored through the UK department of trade and industry and this company had phoned looking for a grant to fund new machinery. Whilst we did not have grants to hand out I suggested that it may be possible to free up the required money from the business and that I should come take a look. They were looking for about GBP30,000 for a business with over 2 million turnover.

The company was located in the middle of a large town in a magnificent series of very old building that were over 150 years old, they employed over a hundred staff and supplied direct to toy stores and other companies across the UK and Europe.

The company had a huge range of products, many hundreds of variants that they supplied from stock held in the largest part of their facility, the products themselves were assembled on simple production lines which basically selected all of the required components and placed them into the required packaging. There was a limited amount of injection molding to produce plastic game pieces, most component parts being brought in.

I spent time watching the operators assemble the games and other products, selecting the components, forming the boxes and packing and shrink wrapping them. The process was very simple, the lines did not take long to set up and all components were close to hand, each “line” was run by only one to three people and each “box” was swiftly filled and wrapped. There were a number of spare lines that were being kitted up for production that the operators moved onto when they were finished with the product they were producing.

The other half of the business concerned order fulfillment, operators took lists of orders from the many customers and worked their way through the many rooms of the warehouse to assemble the specific customer orders, generally a small pallet of products comprising 20 to 30 different products of single figure quantities.

Now some facts and figures regarding the operation to illustrate some issues, the turnover of the factory was a little over 2 million UK pounds every year, a figure that was declining due to competition in a price sensitive market. The business was operating at a loss! Stock holding of finished goods was almost 2 and a half million UK pounds, over a years worth of stock sat in the warehouse! Each year the company wrote off around 5% to 10% of this figure as being obsolete.

This in itself is horrific, the company holding so much stock as they felt that they had to have their entire range available to be able to satisfy orders rapidly. Indeed the customers expected next week delivery which they always achieved. So maybe this was necessary to achieve the market need for prompt and full delivery. But then consider the next set of “figures”.

Whilst I was watching the production processes I carefully timed each product being produced, each one took barely a minute to complete, the production operators making up around 40% of the total staff of the company. I then timed how long it took the warehouse staff to find and palletize the products that had been ordered, surprise surprise, they took longer to search through the various stacks and boxes of products across the various rooms of the warehouse than the production people took to produce them, a considerable amount more time, almost twice by my very rough timings. Around 50% of the staff were employed in the warehouse, the remaining 10% being employed within the offices. Remember my previous posts on manufacturing wastes?

I am sure that you can see that with a little organization it would be quicker to assemble the product to order than it would be to find the specific variant of the product in the stores, collect it adjust the stores figures and palletize it.

I could see that the company could do this very easily, they had many hundreds of variants but only about a dozen main products that would lend themselves to being set up as simple one person cells, instead of picking from stores, they could just go from cell to cell completing the required product as ordered, simple!

The owner confided that although the many customers liked their products there were many cheaper products on the market and that although some of the other suppliers were less flexible than they were, the customers were having to purchase elsewhere to get the reduced prices. The business could not afford to reduce prices any further as they were already making a loss and needed to rapidly cut costs. They were considering making redundancies and were fearful that they would have to close all together.

The answer was simple for this business, make to order! Shut down manufacturing, clear the stock, recoup the cash tied up. Then start to make what the customer wants when they ordered it. This was a business in crisis, they would have to shed jobs to survive, but once re-organized with a different production model they could hopefully expand their market share beyond what they had and re-hire workers. But they had to take action now or they would lose the business, it was that serious.

I hope that my explanation above is enough for you to see that Just in Time and lean manufacturing was the solution for this business, that they could save a significant portion of their costs and hopefully enable them to survive if not compete healthily.

The owner of the business was in his late seventies, had always run the business in this way, and his belief was that the only way to survive in the industry was to supply from stock and their superior range of British built products would help them survive. It did not matter how many ways it was explained to him, how many diagrams and graphs were drawn, how many additional people I brought to visit him (I made several subsequent visits to try to persuade him), he would not and could not change his mind set. His senior management were convinced, the staff were convinced as even they could see where the business was heading, but he was the owner and he was in charge, and in true old school traditional management style, ”into the valley of death rode the ....”

Unfortunately this business closed less than a year after my first visit with the loss of around 100 jobs, this business could have been saved and would have been able to grow if they had embraced the ideas of Just In Time and Lean Manufacturing. The owner was upset at the loss of the business but owning one of the largest pieces of prime real estate in the center of town he was consoled by the massive profit made when it was sold.

Thursday, April 1, 2010

How to implement Just In Time manufacturing|JIT

Just in Time or JIT is part of what we now call lean manufacturing, a philosophy that has developed out of the Toyota Production System (TPS). The idea of Just In Time is very simple, it is producing exactly what the customer wants when they want it, not more than the customer wants and not long before they want it. Then ensuring that it is not delayed or caught up in inventory.

It is not just in case manufacturing, building products and putting them into stock as a forecast says that we will get customers one day so it is ok for us to use our cash and capacity now to make them. It is not just too late manufacturing, delivering today what the customer wanted yesterday because we were too busy making what the customer might want next month!

Just in Time has developed from the observation that the greatest waste in manufacturing is that of inventory because of overproduction. In the post war days when Toyota was developing its business they realized with the scarcity of resources available to them and their suppliers they could not afford to produce products that the customer was not going to want straight away. If they were to ensure their survival they needed to make what the customer was actually ordering.

Just in Time is about reducing the time line for manufacture, enabling us to produce what the customer wants in an efficient manner without waste or delay. It is time elimination not waste elimination from the process, we are compressing the time required from order to delivery.

Traditional manufacturing is one in which product is made in large batches in functional “buckets”, for instance a factory producing furniture would have a functional area which cut the raw materials, this would cut batches of table tops, batches of panels, and other components, these batches would then be passed to the next area where they would be have holes drilled before being passed to the next functional area and so on.

The batches would be as large as possible to ensure that the machinery was used efficiently, minimizing the amount of time setting it up compared to the amount of time actually producing product. The resulting batch is often many weeks of required production, using up much needed cash and utilizing capacity on the process for product that could be produced that is wanted today.

These large batches would also ensure that if there were any breakdowns in the process or quality problems then subsequent processes would not be starved of product and could continue. The batches insulated the processes from all manner of potential problems, supplier delays, absenteeism, and all of the other issues that frequently occur. It would not matter if there were problems as the factory could still continue to work.

These batches would then have to be moved from this process to the next, often using fork trucks or other vehicles due to the physical size and weight of the batch. The next process often being some distance from the next as the machines for doing the next operation would all be organized in functional groups with the all of the workers with the required skills together. This process would continue through the factory until the required batches reach the assembly area where all of the batches of components would be assembled together, assuming that all of the components were processed!

The assembled product would then be placed into the final goods stock, the company would satisfy any immediate demand, customers who placed orders some weeks ago for product as often as not, and keep the remainder in stock to satisfy orders over the coming few months while other products were manufactured.

But what does this actually mean for the factory? The business cash is tied up in large amounts of work in progress (WIP) and in finished goods, preventing the company from using it to invest in anything else. The time taken for product to flow through the factory is many weeks as each process must complete the entire batch before it is passed to the next process. The complexity of the planning is huge, someone must plan what individual components are made on a variety of different processes in the hope that they are all ready for assembly at the same time (more often than not this will fail). The volume of inventory in the system masks all of the other problems so they are not tackled, out of sight, out of mind as they say!

Imagine a new scenario, a new paradigm, one in which we only produce what the customer wants when they want it! Imagine if we received a call from our customer saying he wanted some product for delivery early next week, we put in the request to our factory and a few days later there were our products ready to be shipped. Nothing else, just those products, no delays, no problems, no headaches!

If you are living in the traditional manufacturing world you would probably tell me that I don’t know what I am talking about. That I don’t understand the reality of your industry. That you would have to invest in more machinery and more people to achieve this, and even then it would be impossible. Open your eyes! Why can Dell computers hold only 5 days of component stocks and build to order where HP holds 90 days of stocks and supplies from stock? Which company suffers if the market changes and a new processor becomes available? Which company is the first to produce product with the new processor? Which is the company that can give the consumer exactly what they want rather than a best fit compromise?

Yes there are problems that need to be overcome, I never said that Just in Time is something that you can just turn up in the morning and wave a magic wand to achieve. JIT is an aim, you have to work towards it. Imagine what the competitive advantage would be if you could halve your lead time, imagine how much more cash would be available if you could reduce your stocks and WIP by half, imagine how much simpler your life would be if your products did not require complex planning processes and expensive computer systems to control them. Then imagine what would happen to your business if your main competitor does this before you!

It is learning how to implement Just In Time manufacturing (JIT) that is more important to the business than the focus on waste reduction that most lean manufacturing practitioners promote. It is this ability to produce the value the customer wants when they want it without delays and in the least wasteful manner that gives you lean. That and respecting and involving all of your staff in achieving these aims and continual improvement in all that you do, that is how to implement lean manufacturing.