Lean Manufacturing Tool Kit by jennyyingdi


									Lean Manufacturing Tool Kit

Techniques, Tools, Terms, and Tricks Used In World Class
Philosophy vs. Techniques: The overall philosophy of Lean, i.e. Continuous Improvement and the
Elimination of Waste, is best enforced through constant pressure to reduce inventory and ship on time.

Consider the techniques, listed below, as “tools” in your “Toolbox”. As you lower the inventory, problems
will surface. The following tools and techniques will help resolve them.

Just as you would not attempt to drive a nail with a screwdriver, each of these tools has an appropriate
time and place for its use.

   o   5S / Area Organization. The 5 S’s actually stand for Japanese terms, which loosely
       translate as Sort, Set in Order, Shine, Standardize, and Sustain. A place for
       everything. Everything in its place. Clean. Shadow boards. Labels. Transparent
       containers. Clear posted instructions. Color codes. All appropriate tools where needed
       and fit for use. Remove the un-needed. Place infrequently used items out of the way.

   o   80% Solution: When approached with a capital expense proposal, ask “How would you
       solve this problem if we could only provide you 10% – 20% of your requested funds? In
       many cases, Pareto’s law applies; i.e. we can attain 80% of the results with 20% of the
       expenditure. Note: The remaining 20% of the gain might still justify the additional 80%
       of the expenditure, but the alternative solutions are worth understanding.

   o   90% of Authority is Assumed: It’s been many years since a very wise mentor made
       that profound statement. It continues to be proven true. Decide what needs to be
       done, and do it. Another expression that often applies is “Sometimes it’s better to Beg
       Forgiveness than to Ask Permission”!

   o   Activity Based Costing: (ABC): Refers to the allocation of the various major
       components of overhead, based on the % of effort that each product requires from
       those support areas. As an example, product “A” might be very labor intensive, but
       require very little space, capital equipment, or engineering support. Product “B” is just
       the opposite, highly automated but requiring a large factory area, considerable amount
       of maintenance, and constant engineering support. Applying overhead based only on
       labor, or space, will likely provide inappropriate costing of both product lines. ABC
       attempts to ascertain the actual costs of each overhead department, and then applies
       those costs to the various product lines based on the percentage used by such product
       line. Note that a detailed ABC can be quite time consuming. Quite often, a “thumbnail”
       ABC is sufficient.
       We had one client that was just about to terminate a product line. I asked if we might
       do a quick ABC. It turned out that the product line in question was a “cash cow”, while
       the line that had been planned to expand, was marginal at best!
       In some situations this technique can be critical. The inappropriate application of
       overhead can be detrimental, or even terminal, to the company. Pricing decisions and
       product terminations are often made based on “full costing”. When the “peanut butter”
       approach is used, i.e. smoothly applying overhead based on one attribute such as direct
    labor, or space, products can be inappropriately costed, causing bad decisions. (See
    Contribution vs. Full Costing)

o    ABC Inventory Classification: Utilizing Pareto’s Law, inventory is generally classified
    into 3 broad categories. The “A” parts representing the “Critical Few” items that
    constitute the biggest annual dollar usage, and must be closely controlled. The “C”
    Items representing the “Trivial Many” that make up the largest number of SKU’s, and
    the least amount of annual dollar usage. And the “B” items represent the moderately
    important middle ground. Each company chooses where the demarcation is between
    such classifications. Note that there are no “rules” as to where you draw the line
    between A’s, B’s and C’s. We recommend that the A items be kept to a quantity of
    SKU’s that you can adequately manage. Percentages of A, B, and C items also vary
    significantly by industry. A common breakdown in the electro-mechanical assembly
    industries is: 80% of annual dollar usage = A items, 15% = B items, and 5% = C
    items. Pick what makes sense for you. And, change it whenever it no longer makes
    Once the classification is done, your planner’s emphasis is placed on carefully monitoring
    and controlling the level of “A” items on hand. Contrarily, the rule on “C” items is to
    make them non-issues, i.e. make sure that we never run out. This philosophy is often
    expressed in the raw material inventory and/or lot size policy: e.g. we plan to carry a 2
    week supply of “A” items, 5 Weeks of “B” items, and 13 weeks of “C” items.

o   ABC Raw Material Inventory: Actual vs. Plan:
    Many inventory planners use a lot size and/or order point formula for raw material
    procurement based on the ABC classification of the raw material items. E.g. 2 weeks of
    “A” items, 4 weeks of “B” items, and 12 weeks of “C” items. The general rule is to
    procure a lot size of the policy number of “weeks supply” when the on-hand inventory
    reaches it’s order point (generally about ½ the lot size). I.e. when the on-hand
    inventory level of an “A” item got down to 1 week supply, an order for an additional lot
    of approximately 2 weeks supply would be placed.
    It is therefore reasonably straightforward to calculate the amount of inventory dollars
    that this policy should create.
    In almost every company where we have calculated this number, the actual inventory
    was TWICE as much as computed. We’ve found, consistently, that just about ½ of the
    raw material dollars on-hand are “exceptions” to the inventory policy (either planned or
    The point is this: Attacking the A,B,C inventory rules will only get at half of the
    problem. You’ll need to dig into the exceptions to get at the other big piece of the pie.

o   Accountability: We dropped a client, after several months of their people missing due
    dates on their action commitments. They were wasting our time and their money.
    Don’t even bother to begin any significant transformation process, like Lean
    Manufacturing, if corporate management neglects to hold people accountable. Should
    we expect an occasional failure? Of course. But when the recover date is missed,
    repeatedly, it’s time to take clear demonstrated corrective action. Occasionally the
    “rock” is a person. Remove the rock, or you risk undermining the entire transformation

o   Accuracy vs. Precision: As you move toward a lean operating environment you will
    discover that measurements often become less precise. At the same time, however,
    they tend to be more accurate than before. In all too many traditional operations, the
    parameters being measured are “precisely wrong” or at very least, denote an
    unwarranted degree of precision.
    As an example, a product in a traditional layout may move in a batch through multiple
    departments. Each department would “cost” the item based on either the actual set-up
    and run times, or “standard” times plus some efficiency factor. The result would be a
    detailed listing of every cost segment (operation), plus an applied factor for factory
    overhead functions such as material handling, etc.
    In a lean environment, the operations might be assembled into a cellular layout, with
    hand-offs between operations. Unit cost would simply be the total cost of the cell,
    divided by the number of units produced. While the Lean cost measurement is less
    detailed, it is hard to dispute its accuracy.

o   Analysis Paralysis. Time is indeed “of essence”. There are, of course, issues that
    justify a complete and thorough analysis prior to taking action. Most decisions,
    however, do NOT involve major risk. Ask the questions: “What will it cost to do this? If
    this should fail, in the most spectacular way, can we recover? What will it cost to put it
    back if it doesn’t work?”
    Take a quick look at the risks in “just doing it”. It has been our experience that far too
    much inappropriate analysis takes place in industry. We have literally seen companies
    repeatedly spend thousands of dollars to “study” a situation, when a simple trial and
    error of the alternate solutions would have cost hundreds. One company spent a small
    fortune analyzing where to put a tool supply cabinet! They concluded that it should be
    in the middle of the shop area so that all could access it efficiently. Who’d of thought?!
    Look to error on the side of action. Do something. If it works, do more of it. If it
    doesn’t, try something else.
    On a side note: If you are attempting to choose between a couple alternatives where
    none has a clear advantage… It probably doesn’t make any difference which one you
    pick! Chose one and get on with it!

o   Andon: See “Opportunity Signals”

o   Backflush: Typical MRP logic removes parts from raw material inventory when a “kit” is
    pulled from stock, i.e. the parts are issued. A second transaction is then processed to
    “close” the assembly back into stock as a completed unit. Backflush eliminates one
    transaction. The parts are deleted from inventory, upon completion of the assembly.
    E.g. “I built 5 bicycles so I must have used 10 tires”. Doing so can significantly reduce
    and simplify transactions. Note that backflush is credible, from an inventory control and
    accounting perspective, only if the production lead times are extremely short (ideally,
    less than one day), and when process quality is extremely high, i.e. items do not linger
    in “discrepant material” limbo. Backflush is extremely effective when parts are stored at
    the point of use.
    Note: Some of the older MRP software required a simple software fix: simultaneous open
    and close of the work order. The computer is instructed that when an order is closed,
    assume that it had been opened, and do both transactions simultaneously.

o   Backlog: Measure and Control It: Backlog of work in technical and support
    departments such as engineering and drafting must be controlled or lead times will
    grow. This is accomplished through continuous monitoring of backlogs, with a rule that
    they will not be allowed to grow beyond some pre-determined amount. A required
    change in capacity can be determined by watching the amount of overtime necessary to
    maintain this level of backlog. Example: Our policy is to maintain the backlog of
    engineering work at under five days. If the backlog grows to six days, overtime will
    applied to reduce the backlog to within our guideline. If overtime is consistently
    required, management will need to evaluate the need for adding of more permanent
    resources to the department. (See “Value Engineering”)
o   Banked Hours of Capacity: During periods of rapid WIP and / or Finished Goods
    inventory reduction, additional capacity will generally be freed up. Example: We
    currently have 6 weeks worth of Finished Goods inventory on hand, and we wish to
    reduce that level to three weeks. This can only be accomplished by 1) making less than
    we ship, or 2) shipping more than we make. For some period of time, we will need to
    produce less than we ship. You can think of the labor that has been invested in the WIP
    or finished goods inventory as “banked”. In some client companies, we have been able
    to utilize this effect to get caught up on an over-extended order book. People were
    moved from the front-end operations, and utilized to help with the finish-end operations,
    thereby allowing increased shipments during the inventory reduction period. In other
    plants, the freed up capacity was used for cross training, re-layouts, painting the
    factory, etc. All too often we hear these statements, made in earnest: “We don’t have
    the time to train our people” and in the next breath “We can’t let the people sit around
    while we reduce the inventory”. Take advantage of this one-time effect. Use the excess
    capacity to get caught up, or to improve your process capability!

o   Bench Marking: Bench marking has become the vogue of late. The idea is to compare
    your operating performance, in various categories, with the world’s best. Some
    companies will spend weeks, even months, researching other companies to find “best in
    class’ data. Before spending this time and money, it is critical that you ask this simple,
    but powerful, question: “What would we do differently if we had this data?” In every
    case, where we’ve asked this question, the answer was “Well, we’ll seek to get better in
    those areas”. Here’s an idea: “Seek to get better” now!
    I’m going to go out on a limb here. Odds are that you are NOT the world leader in any
    parameter! Your lead times are too long. Your inventory is too high. Your delivery
    performance isn’t good enough. Your quality and reliability need improving. And, your
    costs are too high.
    In our experience, bench marking is either 1) an ego trip, e.g. “we’re already really
    good”, 2) a way for some consultant to add a few more billable days, or 3) a way to
    postpone actually DOING anything! Don’t waste the time and effort. If you really want
    to know what world class companies are doing, try reading any of the excellent books
    that are readily available. An old classic is “World Class Manufacturing” by Richard

o   Best Practice Studies: If it is truly used to see what, and more importantly, HOW
    other companies are excelling, then “BPS” can be of benefit. Too often, however, “best
    practice” is tied to “bench marking”. Pretty much all real “Best Practice” methods are
    well documented in the available literature. Don’t spend the money and time sending
    teams of individuals on boondoggles. Bring in a mentor that’s done it with proven
    results. As NIKE would say... "Just Do It" And, when you're done, “Just Do It again”!

o   Bills of Material: Flatten them! Eliminate sub-assemblies where ever possible.
    Utilize “Blow-Through” BOM’s where required. Use kanban controls to schedule any
    physical subassemblies that you do choose to make, thereby eliminating all “in & out of
    stock” inventory transactions. (See Blow-Through BOM’s)

o   Blitz: A commonly used (and often abused) term meaning to target an area / process
    and make rapid significant changes, with minimal study and analysis. It is a powerful
    concept, when appropriately applied, and can also be used to illustrate the power of a
    “Just Do It” approach.
    In most environments, the results of the blitz will generate considerable improvement.
    It is important to emphasize, however, that the operators in the area blitzed, will need
    to “tweek” and fine-tune the operation in order to achieve the blitz’s full potential. Most
    blitzes should be thought of as a series of changes: try something, adjust it, tweek it, let
    it settle in, tweek it again, and then, after it has settled down, proceduralize and
    document it.
    Caveat: Blitzes are all too often un-targeted, i.e. done with little concern as to the
    overall impact on the total company. The results of such un-focused blitzes typically
    have a significant local impact, but little or no impact on overall company well being.
    See “Solutions Looking for a Problem”

o   Blow-Through BOM’s (Bills of Material): Many “assembled product” manufacturers
    need to maintain subassembly identity, and/or control configuration, for replacement
    parts. In these circumstances, rather than have a flat bill of material, it is much more
    practical to continue to show all subassembly levels on the bill of material. A “Blow
    Through” level, allows the subassembly’s parts to be called out, for kitting or backflush
    purposes, on the next higher level assembly. The MRP algorithm “blows through” i.e.
    treats the subassembly’s parts as if they were called out on the next higher-level

o   Boom-Bust Cycle: Some Causes: I just got off the phone with a steel finishing plant
    / distributor. He said that their on-time delivery performance was terrible, and that
    their lead times had extended considerably. When I mentioned some ways to fix this
    issue, his response was classic: “The customers have learned to expect it” “We can't
    turn down orders. We just promise what they want to hear, then beg forgiveness”
    And what do the customers do in these situations? You’ve go it! They double order.
    They order high “just in case”. They ask for it early, knowing full well that it will be late.
    And what then happens when things slow down, just a little bit, and suppliers begin to
    get on time? Right again! The customers start canceling orders, and pushing out
    deliveries. They'll ask you to “hold it” for them until they really need it.
    We go from “Can’t make Enough” to “Can’t Give It Away” virtually overnight! Classic
    Boom – Bust cycle.
    Ask any customer which he'd rather have: An unfavorable, but realistic promise date?
    Or a “Tell them what they want to hear, then ship it when you can” promise?
    When I mentioned that we could help them fix this situation, he said, "It isn't a priority.
    We're too busy".
    This is doubly interesting since when we’d spoken a few years prior, he’d said that he
    didn't want any help then either. You got it! They were too slow then! Odds are, the
    answer will be the same in another year or so when this bubble, caused by artificially
    inflated demand, bursts.
    When are we going to learn?
    There are some simple, yet powerful ways to reliably promise, and deliver, on time, and
    NOT turn down lucrative “urgent” orders, and, while still keeping the plant running at
    You may not be able to protect your entire industry. But by maintaining reasonable lead
    times and reliable delivery performance with, at minimum, your "A" customers, you
    can dampen your own boom - bust cycle considerably.

o   Bottleneck: The machine or function that limits the output of the entire factory. The
    idea is to focus all efforts on improving the output of the bottleneck.
    One caveat: Challenge the validity of all perceived bottlenecks. Is it a physical
    limitation? Or is it an imposed limitation? Unless your facility is running 24 x 7, most
    bottlenecks are imposed, not truly a physical constraint. When looked at, in its most
    basic form, there are only a few true physical limitations to increased output: Time,
    Money, and the Marketplace. If you are trying to increase the output of buggy whips,
    the market will likely be your limitation. For most other products, given enough time
    and money, any bottleneck can be overcome. In the short term, however, very real
    bottlenecks may exist in your operation. (See “Theory of Constraints”)

o   Build the Entire Plant at Dock Height with Easy Access to the Entire Periphery.
    In a lean environment, we seek cost effective material delivered directly to the point of
    use. We also want easy shipment / loading. Having a plant that is all at truck dock
    height allows for dock doors to be placed anywhere on the periphery of the plant,
    thereby providing considerably more flexibility. The use of side loading trucks may also
    enhance this process.

o   Build in flexibility: Make it easy to re-arrange equipment. Leave a loop of wire in the
    ceiling so that benches and equipment can be repositioned. Put twist lock outlets in the
    ceiling on a grid. Use quick-disconnect air hookups (in ceiling). Put equipment, where
    practical, on wheels (with wheel locks). The idea is to make “change” as easy and
    inexpensive as possible. Once flexibility is established, the organization can readily
    capture the gains that small incremental improvements provide.

o   Capacity: Demonstrated vs. Theoretical: There are several ways to calculate
    “theoretical” capacity. And, in circumstances where there is no other data, doing so can
    provide useful information. However, wherever actual DEMONSTRATED performance
    data exists, use it. And be careful to use long-term average data. Not, the “best week
    we ever had” data. While history doesn’t always represent the future, it’s generally
    more accurate than the calculated numbers.

o   Capacity: Do We Really Need More? “We need more draftsmen.” Said the head of
    engineering. “Our backlog of drafting work is 40 days!” It turned out that their backlog
    of drafting work had ALWAYS been about 40 days! Do they need more permanent
    drafting capacity? No. Here’s a simple rule of thumb. If your backlog of work
    continues to remain fairly stable, then you probably do NOT need additional
    capacity (on average). In this circumstance, you have demonstrated that you have, in
    fact, got the appropriate capacity to deal with your average demand. If you didn’t, your
    backlog would continue to grow. Instead, you may just need a temporary, one time,
    increase in capacity to reduce the backlog. In the real-client example above, we worked
    a considerable amount of OT, and brought in some part-time help. Once the backlog
    was reduced (to less than 5 days on average) the original level of staffing was able to
    maintain it at that level. (See Backlog: Measure and Control It)

o   Capacity Reservation: In many industries, it is imperative that suppliers retain
    capacity for their “A” customers. Doing so protects your critical few customers from
    lead-time vacillations. Aggregate capacity control, i.e. not accepting orders in excess of
    your demonstrated capacity, is also crucial. It allows you to continue reliable deliveries,
    even in the face of excess demand. Lead time may float for your “B” and “C” customers,
    but quality and delivery performance remain World Class.

o   Cascade Planned Maintenance: In capital intense industries, scheduled maintenance
    “down periods” tend to dry up the inventory prior to the next downstream process step.
    The idea of cascading planned maintenance is to schedule these down periods
    sequentially, in the sequence that the product flows. Picture an inventory “hole”,
    created by the maintenance down period, flowing from operation to operation. While
    process #1 is down for maintenance, the inventory queue in front of process #2 dries
    up. We then shut down process #2 for maintenance, thereby allowing the queue in
    front of it to re-build, while the queue in front of process #3 is depleted. This cascading
    continues throughout the entire the remaining processes. This technique, combined
    with modularizing the planned maintenance duration, can have a huge impact on the
    success of in-process kanban controls. (See “Modularize Planned Maintenance” and the
    article “Running Steel lean”)

o   Cause & Corrective Action Reports: Accountability can be significantly improved via
    this simple technique. Whenever a commitment is missed, demand a “cause and
    corrective action” report. As the name implies, we’re seeking an explanation of the
    reason for the missed commitment, and the proposed fix so that the commitment will be
    attained. Understand, we are NOT advocating a lot of bureaucratic paperwork. The real
    purpose is twofold: 1) force a real understanding of the situation, and 2) make it such a
    pain in the @#$%%^^ that it quickly becomes evident that it is easier to make the
    commitment, than do the explanation!

o   Challenge all “Cure Times” “Test Times” etc. Nature doesn’t necessarily work in
    8,16,24 hour blocks. Plot failures vs. time. If ALL failures occur within the 1st 2 hrs,
    why run an 8 hr test?
    Do some failure testing for various cure times. We have seen dramatic reductions in
    overall cycle times simply by challenging and changing here-to-fore sacrosanct “rules”.

o   Cellular Manufacturing: Arrange equipment so that a product can flow easily from
    operation to operation. Seek one-piece flow within the cell. Minimize storage and
    conveyance devices. Wherever possible use “Hand-offs” between operations.
    Note that cells will naturally occur if there is enough pressure to reduce inter-operation
    inventory (the catalyst for change). We were working with an electric power meter
    company that was very vertically integrated. On the 1st floor, punch presses made
    components used for the various meters. On the 3rd floor, one product line of meters
    was assembled. We formed a team composed of both assembly and punch press
    operators, and set an inventory reduction goal curve. This rapidly evolved into work
    cells on the 3rd floor. However, in about one month the team said “This is crazy, we’re
    wearing a path in the floor running over to get the punch press parts” (They had a dumb
    waiter elevator to move the parts between floors) “We need to add back some
    inventory” they said. We, of course, said “That’s the wrong answer. What else can we
    With a little more discussion, it was agreed to move the press from the “press floor” to
    the 3rd floor. It was placed in the cell. Problem solved.

o   China Contingencies: In a large number of industries, due to the substantial cost
    differential, some portion of the product line (parts, sub-assemblies, or even finished
    product) will be procured from distant sources (China, India, Korea, Mexico, etc.). It is
    imperative that a clear set of contingencies be incorporated with this procurement policy
    to mitigate your shipping performance risks. Such policies may include: Retaining some
    capability to produce in-house or domestically; Willingness to pay for air-freight when /
    if required; Producing / procuring domestically during startup / product introduction
    “trial” phase (possibly at a loss, due to the higher local cost structure); etc.

o   Color-of-Money Issues: Standard corporate measurement systems treat cash
    generated from inventory reduction differently than cash generated from operations.
    This is a correct procedure in “normal operating conditions”, i.e. when there is not a
    transition to “Lean” going on. However, during such a transition from traditional
    operating practices to “Lean Manufacturing” a one-time windfall of cash, via permanent
    inventory reduction, is likely to occur. As long as the appropriate systems (kanban
    controls, inventory goal curves, etc.) are put in place, this inventory delta is enduring.
    Management should seriously consider providing all, or a portion of this inventory
    reduction cash to fund operating improvements: tooling, cross-training, equipment re-
    arrangement, capital items, etc. In addition, top management should consider allowing
    permanent inventory reduction to be considered when evaluating capital and
    expenditure proposals. If spending $10,000 on a piece of equipment (a “working asset”)
    will allow for a $50,000 permanent inventory reduction (a “non-working asset”), the
    decision appears to be a no-brainer. Yet, all too often, this type of proposal is rejected
    because it doesn’t fit the normal justification criteria.

o   Column Pricing: It is common practice, in many industries, to provide price breaks at
    increasing volumes of purchase. The name comes from the typical form in which such
    pricing is presented, i.e. columns showing the price at various purchase quantities. The
    problem occurs when column pricing is set up so as to encourage “lumpy” demand; i.e.
    buy a bunch now, then nothing for a long period of time. This happens when the price
    break is based on the amount taken at any one time. A Lean organization is always
    looking for ways to smooth demand. This can be accomplished by rewarding volume in
    terms of annual purchasing volume, as opposed to “per delivery”. Needless to say,
    smoothing demand implies smaller, more frequent, runs. This, of course, forces
    reducing set-up costs so that small lots can be effectively produced. Every solution
    causes new problems! Lean is, indeed, an iterative process.

o   Common Sense: My teenage daughter wanted to see what her Dad did for a living, so
    I brought her along to a basic “Lean” workshop I was conducting. I presented the
    philosophy and some of the common techniques of Lean. At lunch I asked what she
    thought. “They pay you for this?” she said. “It’s all common sense”. And so it is.
    There are a lot of people trying to make it complicated. It isn’t. 1) Reduce the
    inventory. 2) Fix the problems that arise. Repeat!
    The concept and techniques are straightforward. Making the necessary culture change
    to embrace these concepts, however, is NOT. Every company makes this transition,
    hopefully, just once. The problems that you will encounter are predictable. Get some
    help. Find someone that’s done it 20, 30, 50 times. The payback can be huge.

o   Communication Devices: I walked into the meeting with our new client. After a few
    minutes of discussion, I got up to explain a concept. There was no whiteboard or flip
    chart in the room! “How the heck do these people communicate?” I thought.
    Make it easy for people to convey ideas. Hang butcher paper in the hallways and on the
    walls. Hang markers on strings or make wall mount hangers to hold them. Make sure
    that every office and conference room has a large white board and an ample supply of
    markers. Put flip charts in every meeting room. Make sure everyone knows to bring a
    pad and pen to every meeting. These simple, low cost items stimulate conversation,
    communication, and brain-storming. Communication devices are not an expense. They
    are an investment, with a huge payback.

o   Compete with Speed / Responsiveness. Not just price (note: Quality is a given).
    One strategy that I have personally implemented at one of our own factories is this: Get
    your customers dependent on your quick response time. We provided product in 1-2
    days. Our competition required 2 weeks. Our customers loved the quick response, and
    soon got dependent on it. They couldn’t go elsewhere! A great book on this subject is
    “Competing Against Time”, by George Stalk.
    Needless to say, speed without reliability is not of much value. Measure both your
    response time and your on-time delivery performance to the original promise date. Set
    goals to improve each. (See “On-Time Delivery”)

o   Continuous Flow Manufacturing (CFM):          Another term for “Lean Manufacturing”
o   Continuous Questioning: Things are often not what they seem. Don’t be afraid to dig
    deeper. Ask Why? Why not? A couple extremely powerful questions are: “What value
    does that add?” And “What would keep us from doing that… Right Now?” (See Five

o   Continuous Product Replenishment (CPR): A modification of traditional kanban
    replenishment. The idea is to produce the aggregate forecast quantity of product, but
    use the lowest “days supply” to determine what specific SKU’s are produced, rather
    than using an absolute kanban quantity per item.

o   Contribution, vs. Full Costing: One technique that companies use to avoid the risk of
    misapplication of overhead, deals with the “contribution” that a product makes. No
    attempt is made at “Full Costing,” i.e. applying overhead to the more readily attained
    “direct costs” of labor and material. Contribution is defined as the amount and/or
    percent of money that the product “contributes” toward both overhead and profit. This
    can be extremely important when considering the elimination of a product line. If no
    other product is available to fill the capacity that would be freed up, the elimination of a
    “loser” could have serious detrimental consequences. I.e. the product that is “losing
    money” when fully burdened with its overhead, might still be “contributing” to covering
    some of those overhead costs. When in doubt, do a proforma with and without the
    product line.
    Contribution is a relatively simple way to look at costs and pricing when the application
    of overhead is subjective or difficult to do. (See Activity based Costing)

o   Conveyors: Avoid them where possible. They’re inflexible, take up a lot of space, can
    block traffic flow, and can be used to store inventory. If you must use conveyors,
    investigate moveable conveyors (wheeled) and extension conveyors (the conveyor can
    be extended or collapsed like an accordion). (See Slippery Floors)

o   Cost of Complexity: Unit optimization rules, lot sizing, etc. all complicate the
    scheduling process. It is intuitively obvious that complexity costs money. However,
    since it is difficult to measure the actual costs of complexity, we tend to treat it as zero.
    Assign an arbitrary cost adder to complex solutions. Seek simplicity.
    Note: The very simplest scheduling method is FIFO: First In First Out. Lean attacks all
    of the things that cause us to deviate from simple FIFO.

o   Counter Cyclical Products. We worked with a toy manufacturer. Their workforce
    went from 90 people to 900 people every year due to the seasonality of toys. Not a
    terribly efficient way to operate. The idea is to find compatible products / markets that
    have a demand pattern that is counter to your current demand pattern, i.e. is “up” when
    your current demand is “down”. Using the toy manufacturer as an example, their
    primary capabilities were injection molding and assembly. We would search for products
    that require similar capabilities, but have their strong season in the spring and summer,
    such as landscape / gardening, construction, etc.? We would also look for counter
    cyclical markets, e.g. spring & summer toys (outdoor games, water toys) and counter-
    seasonal locations (i.e. their summer is our winter), e.g. winter toys (sleds, skis,
    toboggans, etc.) in South America?

o   Credibility: Say what You’ll Do, and Do What You Say: In too many companies, the
    strategy is to take the order, then hope like hell we can find a way to ship it! Order
    entry must have, and use, rough cut capacity control. Credible delivery begins with
    credible order promising.
o   Creative Ways to Increase Capacity: Switch to a 10 hr, 4 day shift to draw
    employees. Stagger people’s days off to increase capacity, i.e. every employee works
    only 4 days per week, but not necessarily the same days (you can run a 4, 5, 6 or 7 day
    operation). Note that a 10 hour day, 6 day week buys you 50% more capacity from the
    same plant and equipment, without having to add an afternoon or night shift.
    If you are, or plan to run a 2nd shift, consider changing the work hours to start the shift
    at 8:00 PM In our experience, this pattern better fits the American employee’s needs
    (parents are home with the kids after school, and can still participate in the family
    dinner). We had a client that was experiencing great difficulty staffing a second shift.
    They then changed their 2nd shift offer to a 4 day week (10 hrs/day) and a 8:00 PM
    starting time. They had people standing in line applying for the positions!

o   Critical Equipment Spare Parts: As we reduce production inventory and focus on on-
    time delivery, the need for reliable equipment, and quick response when a piece of
    equipment does fail, increases significantly. Beware the temptation to start slashing this
    spare parts “inventory”.
    In the early stages of a lean transition, it is not unusual to actually increase the supply
    of spares. Some of the cash, freed up from the reduction of “production inventory,” may
    need to be spent on additional “critical spares”. Later, after production inventories have
    been dramatically reduced and are now reasonably stable, you can begin working on
    ways to reduce the spare parts inventory pool as well. Work with critical parts suppliers
    to reduce their replenishment times. Standardize equipment to minimize the variety of
    spares that must be retained. Etc. Note: In some industries, retaining a machine shop
    and some capable employees (machinists) can also hedge against the loss of a critical

o   Cross Training: The need for cross training increases as the Work In Process inventory
    is decreased. Variations in the work content of the individual tasks becomes
    increasingly obvious. Employees, therefore, will need to become more flexible and
    multi-skilled. This will require cross training. Establish cross-training matrices, with
    target dates. Create/define, if necessary, different levels of proficiency. Typical levels
    are 1) Capable: The employee can perform all the requirements of the task, to
    specification, and produce a good quality product. 2) Skilled: Same as above but at a
    higher level of output. I.e. “proficient”. And 3) Master: Capable of performing the job
    at the skilled level, plus set-up the machine, perform routine maintenance, and train
    other operators.

o   Culture Change: For most traditional manufacturing companies, the transition to Lean
    is truly a culture change. Emphasis on individual operator / unit performance is replaced
    with aggregate performance measures. Teams become the norm. On-time delivery
    becomes a “given”. All too often we see a top management team basically saying “Go
    get us one of those ‘lean’ things.” Making the culture shift, and sustaining it, requires
    top management understanding, buy-in, and constant vigilance. As they say, “you can
    delegate authority, but you will always retain responsibility”.
    The transition typically requires a Clear Vision, with a Perceived Need, and a Sense of
    Urgency, Pervasive throughout the Organization. We have found it essential that top
    management keep it’s finger on the pulse. This takes place at the weekly review of the
    goal curves. Management must quickly change the questions from “If” to “How” the
    goals will be met.
    Another key role of top management is the modification of measurement and reward
    systems to reflect the new way of operating. Traditional measurements typically
    encourage and reward “Local optimization”. Lean measurements and reward systems
    seek to optimize “the whole”. Quite often this will require, at least temporarily, sub-
    optimizing some units. Without a change in measurements and rewards, there will be
    conflicting pressures that will inhibit progress.

o   Customer Classification: All customers are NOT equal. Like most other business
    parameters, customers can and should be ranked by importance. Pareto’s law will likely
    prevail, i.e. 20% of your customers generate 80% of sales and profits. These are your
    “A” customers. Reserve capacity for them. During good times or bad, you’re “A”
    customers should expect and receive short, fixed lead times. Lead times may, however,
    float for your B and C customers.
    Note that All customers should expect and get reliable delivery performance. Lead time
    may float, but delivery performance to your promise date must be constant.

o   Cut Lead Times in the System, Immediately. Planned lead times are self-fulfilling.
    If you “plan” for an assembly to take 4 weeks to complete, it will almost always actually
    take at least four weeks! You will issue it to the shop floor 4 weeks ahead of its due
    date. And, there will also be four weeks worth of other work on the floor “ahead” of this
    You can think of WIP as items standing in line waiting for their turn. The more items
    waiting in line, the longer the wait. If we were to increase the planned lead-time to five
    weeks, the system would tell us to issue another week’s worth of stuff to the shop floor.
    And each item would have that much longer to wait in line for its turn. Conversely, if we
    cut the planned lead-time, fewer items would be on the shop floor, and all items would
    therefore have a shorter wait.
    Bottom Line: Cut system lead times, and enforce schedule adherence. Instill the
    discipline to not start any product into WIP prior to its scheduled start time. Do this
    NOW! This is a big “bang for the buck” item.

o   Cycle Counting: Cycle counting is the process of monitoring your inventory accuracy
    by regularly counting a few randomly generated part numbers. While each count
    discrepancy is corrected through this process, that is NOT the purpose. The purpose is
    to identify, and correct, procedural problems that allow inventory accuracy to degrade.
    Focus less on the number of SKU’s counted, and more on the analysis and corrective
    action of the underlying root causes.

o   Cycle Counting; Do it on the “Off Shifts” if possible: Cycle counting is
    considerably easier if parts are not being transacted during the cycle count process. The
    easiest way to accomplish this is to do cycle counting at a time when no production
    activity is taking place. For a one-shift operation this might be done in the evening or
    nighttime. It could also be done on the weekends. In companies that do “batch”
    processing of transactions, if possible, choose a time after the batch has been run, and
    before the beginning of operations; typically early morning before the start of the 1 st
    shift. Note: Where parts are stored at the point of use, ALL items can be counted daily /
    weekly by the area production operators.

o   Defect Displays Boards: Many cosmetic defects are difficult to quantify. Providing
    samples and/or photos showing the distinction between minimally acceptable and not
    acceptable provides a clearer reference for operators. Make sure that such aids are
    placed on the shop floor where they are easily accessible by the appropriate operators.
    Get the operators involved in the design of the display: which items / defects should be
    displayed? Layout? Location of the display, etc.

o   Design for Manufacturability: Design new products with the manufacturing process/s
    in mind. Make sure that you have representation from manufacturing intimately
    involved during the front-end design process. Designing a product with current and
    future production capabilities in mind, can save not just money, but also time-to-

o   Designing to a Target Cost: The marketing group provides forecast sales volumes for
    various price levels. Management decides the target price and cost needed to
    accomplish its objectives. The design team is then tasked to provide a product that
    meets the requirements, at or below the target cost. If it cannot do so, the project may
    be terminated.

o   “Doneness” Criteria: Establish, in advance, exactly what constitutes successful
    completion of an action item. Is the task to initiate a discussion? Establish a plan?
    Produce a result? What result? To what level of performance? How measured? Is
    someone else’s verification required? If so, who? Getting agreement on this critical
    parameter can be the difference between completing a project on time, and missing the
    due date.

o   Don’t Over Study. Just Do It! Overcoming inertia to get something done is difficult.
    We suggest that you ask three test questions: 1) Is it safe? (i.e. no one will get hurt if
    we try this) 2) Is the customer protected? (If this fails in the most spectacular way, can
    we still provide the customer with a quality product, on time?) and 3) Has everyone
    been INFORMED (and there’s been no outcry). If the answers are positive, then Just Do
    Do what you can, with what you’ve got, where you are, right now! (See “Silence
    is Acceptance”)

o   Drive the Inventory Out of WIP: In most manufacturing companies, the initial lean
    focus should be on reducing WIP inventory. Push the existing WIP forward into Finished
    Goods, or, preferably, backward to raw.
    Inventory in WIP correlates directly with cycle time (think of WIP as items waiting in
    line. The longer the line, the longer the average cycle time).
    We generally advocate a multi-phase approach. First, get the inventory out of WIP.
    This will force operating improvements, shorten replenishment times, and improve on-
    time completion reliability. These improvements will then allow you to work on reducing
    finished goods. This frees up cash and reduces risk of obsolescence. Finally, work with
    suppliers to reduce raw material.
    Note: during phase one, it may even be advisable to temporarily increase the amount of
    raw material on-hand. Reducing WIP is difficult enough without facing chronic parts

o   “Dropping a Product Line? Be Careful!: Be extremely cautious when considering
    the elimination of “unprofitable” product lines. Make certain that the allocation of
    overhead to such product lines is a valid representation of the level of support required
    from the OH departments. I saw a company eliminate a very labor intensive product
    line because it was “unprofitable”. With this product line gone, ALL of the overhead now
    fell on the “profitable” product, making it, too, unprofitable. (See Activity based

o   Employee involvement: While this is, of course, a powerful tool in achieving world
    class operating performance, it is not an end in itself. When you squeeze the inventory
    out of the system, employee interaction and interdependency will automatically occur.
    It is in this environment that employee involvement and teaming skills will be required.
    Provide the skills training and empowerment as, and when, the environment is ready to
    accept them. Forcing “teams for teams sake” can be both a waste of money and a
    cause of additional headaches. We have seen companies spend small fortunes forming
    employee teams, only to have the teams focus their energy discussing critical issues
    such as what music should be played over the PA system!

o   Empowerment: The idea is to free up 100% of the brainpower within an organization.
    We consider the production operator as the “expert” in his/her job. The difficulty is in
    focusing the empowered employee to work on things that better the company. To do
    so, it is critical to align goals and reward systems so that what is good for the individual
    is also good for the company.
    Recommendation: Provide clear quantifiable objectives for the natural work teams to
    pursue. In our process, this is typically the local increment of the corporate goal
    curves. Then provide the empowerment to achieve these goals. This will require Time &
    Money. Allot specific time for team meetings and time to work on the initiatives.
    Provide some discretionary funding, when appropriate, to allow the team to try low-cost
    ideas without going through an approval cycle.

o   Enforce Schedule Commitment, Every Shift, Every Area. There are two ways to
    attain reliable delivery: 1) carry a lot of finished goods inventory, or 2) maintain reliable
    schedule completions. Consider on-time performance as a quality parameter. Measure
    on-time completion to the schedule date and set goals to improve it. One critical change
    in perception is the following:
    The shift ends when the schedule is done, not the other way around. Start with
    “every week”, then “every day” and finally “every shift”. Needless to say, if you are on
    a two-shift operation, it is difficult to hold the 1st shift accountable for their schedule
    attainment if the 2nd shift starts at the same time that the 1st shift ends. One solution to
    this problem is the staggered shift pattern, e.g. 8 hr shift, 4 hour gap, 8 hr shift. This
    pattern allows each shift to work overtime when required to hit their schedule, exactly,
    every day.

o   Enterprise Resource Planning (ERP): “MRP on steroids”. ERP was a natural
    progression from Material Requirements Planning or MRP. ERP software attempts to
    integrate all functions of the organization, as well as customer and supplier information.
    While a comprehensive ERP system can be a powerful resource to the company, be fully
    aware of the tremendous resource drain that must be incurred to implement, train your
    people, and truly adapt / institutionalize such a system into your culture. Whatever the
    software company tells you, in terms of time and money, double it!
    Another big risk is in installing an ERP system prior to “leaning” the operation. Too
    many companies have spent huge amounts of money to, basically, automate their
    waste! If your lead times are too long, lot sizes too large, and discipline too weak, no
    system on earth will do you much good. In addition, when the operation is greatly
    simplified, many of the computer system requirements are similarly simplified.
    Caveat: ERP software is typically “general”, i.e. has features and capabilities that may
    not be required in your environment. Be careful to “lock out” these features before
    someone starts playing with them. Wherever possible, Keep It Simple! (See the article
    “ERP and Lean”)

o   Equipment Isolation: (also known as “Lock Out, Tag Out”): Is a much needed
    precaution when performing maintenance on large dangerous pieces of capital
    equipment. It can, however, also be a major stumbling block when attempting to
    reduce change-over times and/or modularize scheduled maintenance. If this rock
    appears, focus some blitzes and be prepared to spend some money to shorten the
    isolation time. In capital intense industries, such as metals production, doing so can be
    a big payback item. (See “Running Steel Lean” article)

o   Expense Your Raw Material: Traditional accounting systems consider inventory as an
    asset. In most companies, that asset is broken down even further into Raw, WIP (work
    in process), and Finished Goods. Tracking and controlling this inventory asset can be a
    complicated and costly exercise, and generally adds no value from the customer’s
    As inventory and cycle times are reduced, and kanban controls are put in place,
    inventory levels become very low, and quite stable. In such cases, you may be able to
    greatly simplify your bookkeeping by expensing raw material as it is received. Your CFO
    will need to investigate all legal and tax reporting constraints. Where this is impractical,
    consider backflush upon completion to finished goods, or even upon shipment. (See

o   Expediting; Cause of Many Missed Deliveries: When lead times are long, it is
    common practice to give priority to key customers. This typically means expediting
    them ahead of older orders that may already be in queue. This “re-shuffling of the
    deck” adds complexity, and causes the previously scheduled completion dates to
    become invalid; e.g. customer A’s order was scheduled to complete today. However
    customer B’s order was expedited in front of A, thereby making A late. We have found a
    consistent correlation between the amount of expediting taking place, and the percent of
    missed deliveries.
    Be extremely careful about the questions you ask. If you ask, which order gets priority,
    it is pretty well a given that someone’s order is going to be missed. Ask instead “What
    will we need to do to get ALL the orders that have been promised for today?” You’ll get
    a lot better answers!
    Solution: Control the order book, i.e. do not over promise. Cut WIP inventory levels
    (which reduces lead times). Measure on-time completions and set goal curves to
    improve. Establish a policy “The day ends when the schedule is completed” not the
    other way around. Remember: another definition for “priority” is “who do we screw?”
    (See “Order Promising”)

o   Fail Safe: Make the process incapable of producing a defect. Every defect is a
    treasure. It identifies a process problem that we can now attempt to permanently fix.
    At every defect discovery ask “What can we do to make this defect impossible to re-
    occur?” There are excellent books, complete with illustrations and examples of failsafe
    devices and techniques. Get some and pass them out. (See “A Chapter per Week”)

o   Faxban: A pre-filled out form requesting replenishment of items, complete with
    supplier name and fax number. Office and production workers simply dial or hit the
    speed dial for the vendor, and insert the faxban to order replenishment materials. The
    back of the form has a history file where the date ordered is recorded.

o   FIFO, LIFO, and FISH: (FIFO = First In First Out) (LIFO = Last In First Out) (Fish =
    First In Still Here) Rotate your stock. Doing so minimizes risk of obsolescence and aids
    in the quick discovery of defects. Make sure that all of your storage systems are FIFO.
    We’ve found dead bodies buried in some of those old LIFO inventory piles!

o   Figures Don’t Lie, But Liars Figure: Be “from Missouri”. Make sure you dig into the
    data. One common trick is to use a “creative” scale to portray a distorted picture.
    Graphs can be adjusted to look great, or terrible, depending on the scale and / or the
    time period reflected. Another trick is to tell the truth, but use a rare or isolated case as
    if it represented the norm. Get the source data, and check it out for yourself. We
    commonly see this ploy utilized when explaining why lean “can’t be done” in their

o   Finite Loading Systems: A philosophy and software methodology that schedules only
    to your stated capacity. With such software, any schedule requirement that exceed the
    stated capacity in any given time period is automatically pushed in or out to an available
    capacity “hole”. This software approach has proven to be very powerful in industries
    that are truly capacity limited, i.e. that run 24 x 7. This approach has, however, caused
    major problems, even disasters, where it was applied to “widget makers” that were not
    24 x 7 operations. Do you really want the system to automatically reschedule a product
    when you hit 8.1 hours (one shift operation)? At 16.1 hours (two shift operation)? Also,
    finite loading systems are often extremely “nervous” i.e. continually changing schedule
    In the vast majority of industries, standard MRP back-scheduling logic is far simpler to
    use, and provides more credible and stable schedules. We advocate a simple
    philosophy: Combine reasonable schedules, with perfect execution. Use capacity
    planning (and capacity reservation for your “A” customers) to provide reasonable
    promise dates. Then do what ever it takes to make sure that those dates are achieved.

o   Five Whys: As a rule of thumb, if you ask “why” five times, you’ll get to the actual root
    cause of the problem.
    “We didn’t make the schedule” Why? “The machine stopped” Why? “The fuse blew”
    Why? “The bearing hadn’t been lubricated” Why? “We didn’t know it needed grease”
    Why? “We have no preventative maintenance schedule.”

o   Forecast Error: It is considerably easier to forecast aggregate sales, rather than sales
    for an individual SKU. Use “Total Volume” forecasts to plan your capacity and capability
    needs, both in-house and with your supplier base. Then leverage quick response to
    handle the individual SKU variability wherever possible.
    Reserve capacity. Standardize components. Etc. (See “Rubber Factory”)

o   Forward Pricing Using Learning Curves: Forward pricing generally refers to the
    practice of aggressively pricing new products based on an anticipated or historical cost
    improvement formula. Learning / Improvement curves are planning tools evolved from
    historical data. They basically say that the production cost of a certain type product will
    reduce by a factor of X% every time the cumulative output doubles. For example, with
    as 70% improvement curve (from history) we would expect that if the 1000 th unit
    produced cost us $1.00, then the 2000th unit should cost us about $0.70. The 4000th
    unit should cost about $0.49 (.7 * $0.70 = $0.49), etc..
    The pricing process is a bit of chicken-and-egg in nature. Marketing says “We think we
    could sell 1,000,000 of these if we could produce them for ~ $0.35/ea.” Operations
    makes a few runs and then applies the historical learning curve to see if such a
    production cost is feasible. If agreement is reached, the initial pricing of the product will
    be substantially below the current cost! Marketing signs up to “get the volume” at this
    price. Operations signs up to drive the actual cost to the target cost over that same
    volume. Progress is continually monitored by plotting “actual cost” vs. “target cost”
    taken from the learning curve. Corrective actions are taken as required to stay on plan.

o   Freight: As lot sizes are cut, and frequency of replenishment is increased, freight costs
    can become an inhibitor. There are a multitude of alternative solutions: Buying from a
    distributor, Consolidating shipments via use of a consolidator, Utilizing company vehicles
    running a regular route, etc. One client of ours had a wire mill that provided wire to
    multiple motor assembly plants throughout the southeast. We set up wire racks in each
    plant with a designated number of coils for each wire type that they used (kanban
    control). Each day the truck from the mill replenished the wire that was used the day
    before. He then noted the number of coils missing from the racks, by type, and called it
    in to the mill. That night the mill ran the required coils for delivery the next day. The
    trucks ran a route that began at the wire mill and circled from plant to plant, returning
    to the mill at the end of the cycle.

o   Go, No-Go Gauges: One simple form of Failsafe is a set of gauges that measure a part
    for its’ upper and lower dimensional tolerance. If the “go” gauge will fit over the part,
    the part is not oversized. If the “no-go” gauge does not fit over the part is not
    undersized. This type of gauge system is regularly used to measure cylindrical items
    like shafts.

o   Goal Curves: This is one of the most powerful mechanisms that we’ve found to drive
    continuous improvement. Measure a parameter that is important to your customer,
    then set a goal to improve that parameter, e.g. reduce our lead time by 20% in the next
    six weeks. Now draw a line on a graph from the existing performance level to the target
    level and date. Measure progress against the goal curve weekly and take corrective
    action to stay on the curve. This process forces continuous improvement. Goal curves
    form the foundation of our Rapid Impact process. This process has generated consistent
    dramatic results in over 100 companies and in 30+ different industries. Goal curves

o   Goal Curve Review Meetings: Goal curves drive improvement & provide a powerful
    mechanism for top management to monitor and control the improvement process.
    Weekly reviews of actual progress vs. the goal curves are the control mechanism.
    Division / department heads present their data to top management. If they are on their
    curve, no additional data is required. If not, then a cause and corrective action report is
    required. (See “Cause & Corrective Action Reports”)

o   Habits: It takes 3 weeks to truly extinguish an old habit and replace it with a new one.
    Do NOT expect a change, often even a simple one, to immediately demonstrate it’s
    potential. I recall a re-layout that the natural work team proposed. It required an
    operator to work “from right to left” where she had, for years, taken parts from the left
    side and moved them, after processing, to the right. “It can’t be done” she said. We
    asked her to try it for one month, and then we’d “let the data decide” whether to keep
    the new layout, or go back as before. Needless to say, by the end of a month, the
    operator was quite happy with the new workflow, and the output was substantially
    A good way to illustrate this to a group is to ask people to tie their shoe. Then ask them
    to do it again, only reversing the roles of each hand. It quickly demonstrates the need
    to practice a new procedure sufficiently long to become adept, before judging the
    applicability of a change!

o   Hours of Operation, Order Entry: If your customer base covers more than one time
    zone, it may provide a competitive advantage to man your customer service area during
    “normal business hours” for all the time zones served. One of our east coast clients did
    a considerable amount of business with customers located on the west coast. We
    encouraged them to stagger the hours of a couple of their order entry people to 8:00 PM
    (5:00 west coast time). They rapidly experienced a 20% growth in sales from that time
    zone! While the automated systems continue to improve, there is still no substitute for
    that human interaction.
o   Inventory Build: There are many business issues that can justify a short-term build
    up of inventory: anticipated supplier price increases, anticipated increase in demand
    beyond plant capacity, etc. The CEO of one client made a decision to build inventory in
    anticipation of increased demand. The inventory build was held at a flexible stage, and
    was kept separate from the inventory reduction targets. Doing so, allowed the company
    to continue it’s lean initiatives while accomplishing this other business objective (Note:
    Demand DID increase, and a sizable profit was made on the inventory investment).
    There are very few “absolutes”. Common sense must prevail.

o   Inventory Carrying Cost: Cost of money, space, insurance, taxes, tracking, counting,
    shelf life (material deterioration), material movement / handling, counting, record
    keeping, lost, damaged, obsolescence, rework, etc. Inventory delays innovation (we
    must wait until the old parts are used before implementing the new design), and can
    add to lead time (items must wait their turn). Inventory adds to complexity. Many of
    our electro-mechanical assembly clients have estimated their inventory carrying cost at
    between 2% and 4%… per month! Some academics have claimed as high as 100% per
    Calculate a realistic cost of inventory for your operation. Be sure to add a factor for the
    very real, but difficult to quantify, parameters mentioned above.

o   Inventory and Quality: Reducing inventory can have a significant positive impact on
    product quality. Less inventory means fewer potential defects. Reduced inventory
    means less handling and storage damage. And, most importantly, less inventory means
    shorter lead times, thus reducing the time between the cause of the defect and its
    discovery. And quicker discovery means improved probability of identifying the cause of
    the defect. Identifying the true cause is half of the solution.

o   ISO 9000: While ISO is touted as a quality tool, in practice it is generally more of a
    marketing tool. The gist of ISO is that a company will DO as they say they will do.
    Generally speaking, if you document your procedures and follow your documentation,
    you can become ISO compliant.
    The good news is that ISO can be used to help institutionalize the Lean procedures.
    Do your Lean conversion first. Then follow up with ISO.
    Another caveat: Keep all ISO documentation at the highest level possible, i.e. avoid
    getting too detailed. Do NOT let ISO become an excuse to not make the myriad of small
    changes that World Class performance requires. Good enough… Isn’t. Keep the
    documentation at a high enough level that small changes are still compliant.

o   JUST DO IT! How much will it cost to make a suggested change? And how much to
    put it back if it doesn’t work? Will that break the company? Is it safe (no one will get
    hurt)? Can we recover so as to protect the customer if this initiative should fail? If the
    change passes this test… Then just do it!
    At one client site, the area work teams concluded that a concrete block wall needed to
    be removed so that the two areas could be combined into one large manufacturing cell.
    Without batting an eye, the plant manager brought in the maintenance guys, and began
    knocking out the wall. The area operators were given tours of other plant areas and
    some additional training while waiting for the demolition to be completed. I asked the
    plant manager, after the fact, if the cost had been worth it (he could have waited and
    done it when the operators were no longer on the clock). He said “It was the best
    money I’ve ever spent. The additional training was needed, the plant tours helped the
    operators better appreciate their role in the big picture, and the ownership that was
    conveyed by taking their suggestion and implementing it with a sense of urgency was
    priceless!” (See Analysis Paralysis)
o   Just In Time (JIT): An earlier term for “Lean Manufacturing”.

o   Kaizen: Japanese term for Continuous Improvement.

o   Kaizen Blitz: A concentrated improvement initiative typically focused on one shop or
    office area. Generally involves 2-5 days. The intention is to MAKE SOMETHING
    HAPPEN, i.e. to attain significant tangible results by the end of the project. (See the
    article “Just Do It”)
    Caveat: Blitzes are a powerful way to get something done in a particular area. Too
    often, however, blitzes are performed without any company-wide direction. Local
    results look great. Company wide bottom line results are negligible. (See “Solutions
    looking for a Problem”)

o   Kanban: A signal to move or make an item. The simple rule is that no item is to be
    produced or moved unless there is a kanban authorizing it. While a kanban can be
    anything: A light, a card, etc. in the USA, it most frequently takes the form of a physical
    space or container: e.g. squares taped out on a table, lines painted on the floor, marked
    tote bins, carts, racks, etc. (See Kanban Controls) (See Pull System) (See the article
    “Taking the Mystique out of Kanban Controls”)

o   Kanban “Blitz”: Form teams between operations, areas, and/or departments. Set
    goal curves to reduce the amount of inventory between the locations. The team reaches
    agreement on the size, amount, and location, of the initial kanbans. They then go into
    the area and install the agreed upon kanbans: Mark off the locations, remove the excess
    inventory, mark containers, establish preliminary procedures and checklists, hold
    education sessions for all operators, etc. At the end of the blitz, a functioning kanban
    system should be in place and operational. Following the blitz, the teams should be
    plotting their progress vs. the goal curve and initiating the necessary actions to stay on
    the goal curve. (See “Cause & Corrective Action”) (See “Problem / Idea Charts”)

o   Kanban Checklist: A listing of good kanban practices that is used to periodically
    monitor kanban utilization. The checklist includes tracking “exceedances” i.e. how often
    the actual level of inventory exceeds the allotted kanban quantity, the level of operator
    understanding, clarity of the limits, procedures, rules posted in the area, use of goal
    curves to reduce the kanban quantity, a listing of tasks to be performed when the
    kanban is full, etc. (See “Kanban Full” Projects)

o   Kanban Controls: Kanbans put upper limits on inventory, potential defects, and cycle
    times. They provide visual control and a simple mechanism to force continuous
    improvement. While kanban controls are not applicable in every circumstance, utilize
    them wherever possible. They are easy to implement. Easy to understand. Easily
    monitored. Visual. And provide a simple, but powerful way to force improvement, i.e.
    continuously press to reduce the kanban size!

o   “Kanban Full” Projects: Have your production teams compile a list of project type
    things that need to be done in or around their work area. Sort the list by approximate
    time modules, e.g. the minimum amount of time that they would need to accomplish all,
    or a meaningful portion, of the project. Have the teams post their list in the production
    When the operation is stopped due to a down stream issue, i.e. the kanban is full, or an
    upstream issue, i.e. the work has dried up, the list provides the team alternatives for
    meaningful work while the problem is resolved.
o   Kanban Lights: In some industries it makes sense to have dedicated areas for certain
    item production. If these items are not in constant demand, you may need a signaling
    device to notify operators that a product needs production / replacement. One easy
    signaling device is a simple pole sticking high in the air, with a light bulb on top. The
    light tells your operators when it is time to move to that area. Similarly, kanban lights
    can be used to signal the need for more product or materials.

o   Kanban Size: As a general rule, attempting to “calculate” the correct kanban size is a
    waste of time. Kanbans provide a perfect mechanism to force continuous improvement
    through inventory reduction. Choose an initial kanban quantity large enough to cover
    the common problems that are currently being encountered. Establish the disciplines of
    stopping when the kanban is full.
    Then, set a goal curve to reduce the size of the kanban over time. A simple rule of
    thumb for sizing kanbans: “What ever it is, It’s too much!” The eventual outcome of
    such kanban reduction pressure is the assembly line. Here, the kanban size between
    operations is zero!

o   Kickoff Video: In making such a dramatic change as the transition from traditional
    manufacturing philosophy to Lean, clear visible Top Management support is critical. In
    small companies, this is readily accomplished through all-employee meetings that begin
    with a short introduction by a top level officer of the company.
    In large companies, a reasonable substitute can be attained by utilizing a short video
    clip of the CEO / COO. The video contains a “perceived need” and a “sense of urgency”
    to make the change.

o   KISS vs. KICC: Everyone has heard of KISS: “Keep It Simple, Stupid.” And, most
    people believe that KISS makes sense. Yet, so many companies have an ingrained
    culture of “Keep It Complicated and Confusing.” Over testing. Over documentation.
    Over approvals. Management must challenge these unreasonable impediments to
    progress. At a meeting with the management team of a Fortune 100 company, we
    recommended a “just do it” change. One of the Vice Presidents said “That’s not our
    culture.” The CEO responded with “That’s why they’re here” (meaning The Hands-On
    Group). We’ve seen companies spend months discussing the need for speed! (See
    “Just Do It”)

o   Kitting: The “Set-Up” for Assembly: The traditional way to get sets of parts to the
    assembly area is through “kit pulling.” The stockroom stores the parts. The MRP system
    then generates a “pick list” that the stockroom uses to “pull” the parts, which are then
    issued to the shop floor.
    This kitting activity acts very much like the change-over of a machine in its impact on
    the ability to reduce lot sizes. As the batch size for assembly is reduced, i.e. moving us
    closer to making just what the customer wants, just when the customer wants it, the
    number of kits being pulled increases. This increases the workload (and cost) of this
    non-value adding activity. Kitting becomes a “rock” that needs to be addressed.
    And then there is the issue of “kit integrity.” The assembly area comes up short of a
    part. Did they lose it? Or did the stockroom simply count wrong? We’ve seen this lead to
    even more non-value adding steps such as “kit inspection” where the stock room’s
    counts are verified, “witch hunts” to assign blame, additional trips to the stockroom to
    get the missing parts, and trips back to the stockroom to re-stock any overages that
    may have been inadvertently kitted (more often, however, any excess parts are simply
    “stashed” in the assembly area for "future use"). Generally the solution is NOT in
    improving the kitting function. The focus, instead, should be on reducing or eliminating
    the entire centralized kitting activity. (See “point of use stocking” and “Locked

o   Late-in-the-Day Pickup Time from UPS / Fed-Ex: Many companies, after making
    the transition to “Lean,” are now capable of shipping “same day” for certain types of
    orders. This capability may be inhibited if your means of shipping is via Fed-Ex, DHL, or
    UPS and they have an early pickup time.
    We worked with a client that produced high-pressure valves and fittings. After making
    the transition from “Make to Stock” to “Make to Order” and dramatically reducing the
    process times, we were able to produce same day. However, the UPS pickup time was
    2:00 PM. We work with UPS to delay the pickup until 5:00 PM. The end result:
    Eliminated $500,000 of finished good inventory, and went from a 2 day lead time (filled
    from finished good stock) to an “Order by 10:00 AM, ships same day” lead time and
    make to order. As you would expect, the company attained a significant increase in
    market share solely from this improvement in responsiveness.
    Work with your carriers to improve your scheduled pickup times. Also, investigate the
    opportunity to cost-effectively “drop off” product at the carrier’s office.

o   Latest Technology: Utilize the available technology to enhance performance: portable
    phones, cell phones, speaker phones, fax machines on the shop floor, bar codes, e-mail,
    web sites, web based training, video conferencing, video cameras, TV’s on shop floor,
    voice recognition software, laptops, PDA’s, wireless networks, etc. (See “Video

o   Lead Time: How to Calculate: There are some elaborate methods to calculate actual
    throughput time. These methods are, however, typically less accurate, and a lot more
    difficult to do than this simple method. Think of your inventory as items waiting in line
    for their turn. In any queue, the more items in line, the longer it takes to get an item
    through the queue.
    To calculate actual lead time, simply divide your on-hand inventory by your average
    usage rate. E.g. we have 2000 pieces in WIP, and we complete, on average, 500 pieces
    per day. Therefore our average actual lead time is 20 / 5 = 4 days.

o   Lead Time Reduction by Increasing Available Work Hours: In most traditionally
    operated plants, the lead time to get a product through the operation is considerably
    longer than the actual “Value Add time. However, as you reduce the lead times you
    may hit the “available work hours” rock. One way to further reduce lead times is to
    increase the number of available work hours. This does not, necessarily, mean adding
    capacity. It may simply mean moving some of your workforce to the currently idle
    hours of the day or week. As an example, in a typical one-shift operation, plant and
    equipment sit idle 16 hours per day (plus 24 hours per day on weekends). By simply
    moving some of your people from 1st to 2nd shift, you can cut your lead times
    dramatically. A simple example is a product that requires 4 sequential operations, each
    operation takes 8 hours to perform. On a one-shift operation, the shortest possible lead
    time is 4 days. By moving some of your people to 2nd shift, the lead time is now 2
    days. Operation A is done day 1, 1st shift. Operation 2 is done day 1, 2nd shift, etc.
    Capacity does not change, but WIP inventory and lead-time are both cut in half.
    Note: If you can not get sufficient numbers of your current employees to immediately
    move to 2nd shift, the shifts can be balanced through longer term policy rules: Require
    that all new hires be added only on 2nd shift. Allow attrition to balance the shifts. Note:
    theoretically, the optimal crewing covers 7 days/week. (See “Creative Ways to Increase
    Capacity” for some additional ways to entice employees to move to the “off shift”)
o   Lean Manufacturing: The latest term used to describe a philosophy of manufacturing
    committed to the elimination of waste from the entire value stream, and to “Continuous
    Improvement” in all things. Waste is defined as anything that does not add value from
    the customer’s perspective. Previous names for this same concept include “Just In
    Time,” “Zero Inventory,” “World Class Manufacturing,” “Continuous Flow Manufacturing,”
    The term is often misused.
    The basic concept is that inventory hides waste. Applying continuous pressure to reduce
    inventory, while maintaining a high level of customer service, forces the exposure of this
    waste. A host of techniques have evolved to assist with eliminating the root cause of
    this waste. (See “Rocks & Water Analogy”)

o   Let the Data Decide: This is a powerful counter to the “It won’t work” objection.
    When hit with all the reasons why a recommended change “Can’t be done” simply ask
    that the team give it a good valid test (at least 3 weeks) and then we’ll “let the data
    decide”. By that, we mean that we will measure the important parameters, for both
    alternatives, and choose the one that is best for the company. This is also an excellent
    way to resolve disputes. Can’t agree on which way to do things? “Let the Data Decide”

o   Level the MPS (Master Production Schedule): There is a lot written about level
    loading the factory. This is a useful and practical endeavor in some industries, notably
    automotive. It may not be as applicable in other industries (see “Rubber factory”).
    However, many of the standard Lean tools will naturally help in smoothing the MPS.
    Reducing lot sizes reduces “lumpiness” (see “Column Pricing”). Reducing lead times and
    maintaining a high level of delivery performance will reduce the “boom-Bust” syndrome
    (see “Multiplier Effect”). And creative delivery systems will help reduce the
    transportation penalty of small frequent deliveries.
    Step one is to gain the capability to produce “linearly” (a little bit of everything every
    day). Step 2 is to work closely with your customers to get them to take delivery in this
    fashion. Step 3 is to find creative ways to keep the unit “cost of delivery” from
    increasing (both for incoming material and for shipping).

o   Lighting: Spending a little money on improved lighting can be one of the best
    investments you can make. There is a correlation between workplace light levels and
    both quality and productivity. Note also, that quite often the existing lighting isn’t as
    much the problem as the shadows being cast by too much inventory! The amount of
    effective work-station light, as well as air circulation, were dramatically improved at one
    client site, simply by removing the huge amount of work in process inventory between
    operations! A new coat of light colored paint can also improve lighting significantly.

o   Locked Stockroom: Some customers require their suppliers to maintain a locked,
    controlled stockroom. This can be an inhibitor to “point of use” stocking. One solution
    is to make the entire plant a “locked stockroom. Keep expanding the stockroom “fence”
    until the entire operation is inside the “stockroom”. This approach was utilized with
    super results at a military hardware supplier client of ours. We simply kept expanding
    the stockroom to enclose more and more production operations. Eventually, the entire
    factory was one large “controlled” stockroom.

o   Lock Out, Tag Out Procedure: This necessary safety procedure can be an inhibitor to
    quick change-over and to “modularizing” maintenance. (See “Equipment Isolation”)

o   Lot Size Reduction: In most companies, lot sizes are too large for even the existing
    change over costs. The “optimum lot size” based on the balance of change-over costs
    and inventory carrying costs should be smaller than that which is currently in use. The
    reason for this is pretty straightforward: We tend to underestimate the real cost of
    inventory. Several prominent electro-mechanical assembly firms estimates that their
    real cost of inventory is in the order of 4% per month!
    Generally speaking, we advocate cutting the lot sizes first, then reducing the change-
    over costs. Doing so provides the incentive for a SMED initiative. (See “SMED” See
    “Inventory Carrying Cost”)

o   Low Hanging Fruit: In almost every business opportunity, there are the “easy to
    attain” gains, and there are the ones that will require some effort, time, money, etc.
    The “Low Hanging Fruit” is a term used to identify the easy gains. We strongly advocate
    going after these first. In our approach to Lean, these gains typically take the form of
    cash and space that can be freed up from through-out the entire organization. If you
    think of the “Rocks and Water” illustration, there is generally a certain amount of water
    lying above the rocks, i.e. “low Hanging Fruit” that can be “harvested” without the need
    to fix any major underlying “rocks”. Go after these “macro Gains” first. Then go after
    the “micro gains” by fixing the rocks as they appear. This approach provides bottom
    line impact up front (results beget results), generates cash through inventory reduction
    (to fund the removal of the rocks), and provides inertia (See “Rocks & Water Analogy”)

o   Maintenance: Condition-Based: The concept is to enhance your normal scheduled
    maintenance with sensory information that provides a “heads-up” that maintenance may
    now be required. It involves the monitoring of equipment to provide an early warning
    that something is out of the normal operating conditions and that maintenance may be
    required. This monitoring utilizes vibration sensing, in-line gauging, and other such

o   Maintenance Signals: As inventory is reduced, the need to respond quickly to a
    “machine down” situation becomes critical. Flashing lights, horns, pagers, walkie-
    talkies, cell phones, etc. should be utilized as needed to assure that your maintenance
    people are immediately notified. Make sure that the normal “filler” work being
    performed by these key individuals is of a nature that it can be interrupted at a
    moments notice: e.g. process improvement projects, PM, etc.

o   Maintenance Work Area Lighting: Many maintenance operations occur within the
    dark recesses of the equipment. Permanent or portable lights can be of great help.
    Also, make sure that every maintenance person is provided a high quality, lightweight,
    hands-free head set light.

o   Maintenance: Modularize & Cascade: In some capital intense industries, extensive
    scheduled maintenance periods can cause disruptions in flow, mandate large kanban
    levels between operations, and cause additional complexity (see the article “Running
    Steel Lean”). One obvious solution is to reduce the extent of time required per down
    period, i.e. “modularize” the maintenance events. Instead of doing one 24 hour down
    period per month, the attempt would be to do one six-hour maintenance each week.
    Making this transition will require overcoming many obstacles, not the least of which is
    resistance to change. It will generally also require some capital expenditures.
    Cascading maintenance means to schedule maintenance on machines in the order that
    product flows. Doing so allows the “hole” (depletion of inventory between operations) to
    flow from machine to machine.

o   Maintenance Operator as Teacher: We’ve had some excellent results by re-defining
    the role of the maintenance people to include training. Ask your skilled maintenance
    personnel to teach operators to do routine maintenance: oil, grease, clean, inspect, etc.
    This can free up the skilled maintenance people to focus on the difficult infrequent
    maintenance and on equipment upgrades.

o   Maintenance: Point of Use Tool Storage: For common maintenance, involving
    relatively inexpensive tools, locate the tools directly at the point of use. Securing such
    tools with simple clips or other quick-release securing devices can significantly improve
    efficiency. In some applications the “tool” can be permanently attached to the machine,
    i.e. weld the ratchet onto the nut, switch to wing nuts, etc. Standardizing hardware can
    also assist with maintenance.

o   Management By Walking Around (MBWA): We worked with a client that produced
    all sorts of labor efficiency / utilization reports for their supervisors. The only problem
    was that the report data was, at best, meaningless, and at worst, outright wrong! It
    turned out that if the supervisors would spend less time poring over reports, and more
    time on the shop floor, they would know how, and who is performing!
    As an organization moves toward “Lean”, many of the traditional measurement devices
    fail to perform accurately. People are cross trained and move back and forth to various
    jobs. Operators perform minor maintenance. Natural work teams work on improvement
    projects. Kanbans will cause short term delays, etc. Measurement often must move
    from individual performance to team performance. In some progressive companies, the
    teams themselves provide input into the individual reviews. There is, however, no
    substitute for being “out there” on the shop floor.

o   Master Production Schedule (MPS); Using Negative Numbers for “What-If”
    Analysis: Some of the older MRP / ERP software is not capable of “what if” analysis.
    One low-cost way to provide such capability is to allow the MPS (Master Production
    Schedule) to accept negative numbers. A trial run, un-netted, of a “change only” MPS
    will show the material and labor changes caused by the proposed change. E.g. “what if
    we were to add 20 widget A’s and make 15 less widget B’s”? We would schedule only
    the delta A’s and negative delta B’s in a trial MPS, and “exploding requirements” un-
    netted. The result would be a netting of any common components and would show the
    additional materials and labor needed, as well as identifying any surplus parts that this
    change would cause.

o   Material Requirements Planning (MRP): A back scheduling, gross to net logic
    system that calculates material requirements based on the Master Production Schedule,
    Bill of Material structure, on-hand inventory, scheduled receipts, lead times, lot sizing
    and safety stock rules, etc. (See Enterprise Resource Planning, ERP) (See the article
    “ERP & Lean”)

o   Measurement & Reward Systems; Performance Against Standard: The largest
    productivity improvements come from methods changes, not from increasing the level of
    effort of the people. Traditional PAS logic calls for a standard change when ever a
    process/procedure changes. Yet, if the “standard” is changed every time there is a
    method improvement, performance typically will fall! Why, because people are new at
    the new method. They need practice to come down the learning curve. This is
    obviously a negative incentive to change the method. In a lean environment, we are
    always looking for a better way to do things. Seek a performance measure that
    encourages process method improvement. This is best accomplished by comparing
    current “actual” cost to historical actual cost. If improvement is what you seek, it is
    pretty much irrelevant what it “should cost” based on some theoretical “standard”.
    What really matters is “is it currently costing me less than last year? Last month? Last
    Instead of spending time and energy calculating a theoretical “standard,” you will be
    much further ahead if you focus on finding a better way, and on providing people timely
    feedback as to how well they are performing. If you feel compelled to have a
    performance against standard system, at minimum calculate performance vs. both the
    current standard and against a fixed standard. The former measures theoretical level of
    effort (current standard). The latter measures their impact on profitability and rewards
    people for innovation (methods changes) as well as effort.

o   Measurement & Reward Systems; Unit Output Measures: Many traditional
    organizations have M&R systems that encourage local optimization, often at the expense
    of aggregate total company well being. These will invariably become an impediment to
    your lean transition efforts. (See “Optimize the Whole”)

o   Minimum “Modularized” Down Time Intervals: This is a technique appropriate for
    some “assembly line” type operations, i.e. an environment where a failure of any one
    piece of equipment will shut down the entire line.
    We worked with a steel pipe mill. Maintenance had been neglected for years, and the
    line was regularly shut down as one after another problem occurred. An interim solution
    was to have each operation develop a list of 2 hr maintenance / reliability projects. The
    rule was established: When any piece of equipment breaks down, the entire line will
    remain shut-down for at least 2 hrs while everyone works on their area projects. Within
    a few months, total line up-time was significantly improved.

o   Minimum Specifications: Cull out the critical performance characteristics. Specify
    these as to the minimum acceptable requirements. Then loosen or eliminate all other
    specifications. This is particularly beneficial during the design phase of a new product.
    By specifying only the critical performance attributes, the design team has considerably
    more room to be creative. Note that this is also true for your suppliers. We have found
    dozens of cases where a non-critical parameter was causing a supplier to quote a high
    price. Once these non-critical constraints were relaxed, major cost and quality gains
    were attained. (See “Design for Manufacturability” and “Designing to Target Costs”)

o   Minimize The Number of Suppliers: The cost of a purchased part includes much
    more than it’s purchase price. Reliability of delivery, lead time, quality, packaging,
    freight, response to change requests, delivery location, delivery frequency, etc. are all
    factors effecting the total cost of purchase. Find one or two top performing suppliers for
    each commodity type, and then concentrate your purchasing volume with these
    suppliers. Discuss with them your requirements, annual purchase volume, delivery
    expectations, etc. Negotiate price based on annual expected purchase volume. Share
    information. Ask for capacity reservation so that lead times remain stable and delivery
    reliable. (See “Capacity Reservation” and “Minimum Specifications”)

o   Mixed Model Production. Simplicity saves money, and the simplest scheduling
    system is First In First Out (FIFO). Strive for the flexibility, both internally and from
    your suppliers, to produce your products in the sequence that orders are received. This
    will require responsive suppliers, flexible manufacturing operations, quick changeovers,
    and flexible capacity. (See “SMED” and “Rubber Factory”)

o   Monuments: A slang term for large, extremely difficult to move, pieces of equipment.
    An environment with monuments will typically require some different lean techniques
    than those used in a standard “widget maker” factory. (See the article “Running Steel
o   Modularize Planned Maintenance: In “capital intense” industries, planned
    maintenance often removes critical pieces of equipment from service for multiple shifts
    or even multiple days at a time. The disruptive impact of this planned outage can be
    huge. This is particularly true when we have reduced the allowable queue between
    operations, i.e. installed inter-unit kanban controls.
    The idea is to re-engineer the maintenance processes to allow them to be done in
    smaller increments, “modules”. Thus, instead of scheduling one 24-hour maintenance
    period to be done every month, we would seek to replace this schedule with one 6-hour
    down period, each week. (See “Total Productive maintenance” and “Cascade Planned

o   Move Equipment: Plan on a 2nd & 3rd move: Continuous improvement means
    continuous change. Build flexibility into your re-arrangement on the 1st move: e.g.
    Flexible power drops, flexible air connections, light equipment on lockable wheels,
    equipment on skids, etc. Encourage and expect a 2nd and 3rd move as your people
    continually “tweak” the arrangement.

o   Move Some Maintenance People to the Off Shifts to Get “Time on the Machine”.
    We were working with a corrugated box plant client. The production people said that
    their biggest issue was that the equipment was breaking down due to lack of
    preventative maintenance, and that equipment upgrades were not getting implemented
    in a timely manner. The maintenance crew agreed with the assessment, but complained
    that they could never get “time on the machine.” It turned out that the maintenance
    staff was scheduled to work the identical hours that the production people worked (three
    shifts, 5 days / week). They couldn’t work on the equipment because the equipment
    was scheduled for production. We met with the entire maintenance crew, explained the
    requirement and logic, and proposed a few alternatives. The team went off alone, and
    in a few hours came back with an excellent plan. They had prepared a twenty four hour
    by seven day crewing schedule, that was acceptable to all crew members and that was
    much more cost effective than those that we had recommended.
    By having access to the idle equipment on weekends, an excellent Preventative
    Maintenance program was implemented, and equipment upgrades were addressed in a
    timely manner. Within six months of the change, this issue was no longer a problem
    and productivity jumped by 20%!

o   Muda: See “Waste”

o   Multiplier Effect: Extensive supply chain inventory has the effect of exaggerating
    demand swings at the lower end of the chain. This effect is caused by an attempt to
    adjust “days supply” of inventory at the same time as adjusting for the change in rate of
    usage. Example: I have an inventory policy of keeping 4 weeks supply of a component
    (raw material) on hand. My demand has been 100 per week. I now anticipate my
    demand dropping to 90 per week. Instead of ordering 90 per week of this component, I
    would need to order less, so as to adjust my inventory level (I now want 4 weeks supply
    = 4 * 90 = 360 pieces on hand). If I “smooth” the inventory reduction over a few
    weeks, I may change my orders to 80 pieces per week.
    Net result: Where our company saw a 10% change in demand, our suppliers will see a
    20% change in demand! Thus the “Multiplier”. The same effect happens when demand
    increases. And, the further down the supply chain, the greater the swings.
    You can readily see that the extent of this multiplier is proportional to the amount of
    inventory in the supply chain, and the number of levels in the chain.
    What can you do about it? Reduce inventory throughout the supply chain.
    Note: your customers will carry inventory of your product in proportion to your lead time
    and your delivery reliability. Do these things well, and you’ll minimize the multiplier.
    You’ll also want to monitor and compare changes in your product’s demand to changes
    in top level demand.
    Analysis of the recession of the 1970’s showed that while the end demand for steel
    products fell ~ 10%, the demand on the steel industry (the bottom of the supply chain)
    fell by over 40%! Needless to say, a “Lean” supply chain is essential. Maintaining short
    lead times, and reliable deliveries to your customers is also crucial. (see “Boom – Bust

o   Natural Work Teams (NWT’s): By reducing the inventory between operations,
    natural work teams will automatically come about. Inventory elimination and a pull
    philosophy forces a mutual dependence upon operators. Inventory reduction may even
    allow operations to be placed physically next to one-another (a manufacturing “cell”). In
    such an environment, a problem at one operation rapidly impacts both the upstream and
    the downstream operations, forcing operators to communicate and begin acting as a
    Note: We are NOT forming teams for teams sake. We are squeezing out the inventory,
    which results in the formation of “teams” whether you want them or not! It is at this
    time, when people are closely interdependent, that additional teaming skills training will
    be needed. Books like “Zapp” and “Heroz” can be useful training aids. (See “Training:
    Do a Chapter a Week” and “Problem Idea Charts”)

o   Natural Work Teams; Discretionary Budgets: One way of providing NWT’s with a
    sense of empowerment is to provide them with a discretionary spending budget. The
    idea is to allow the teams to buy items that they need to improve their performance,
    and to encourage the NWT’s to try low cost things that may, or may not, work. The
    budget is generally $X per month. No management approval is required for the team to
    spend their allotment.
    While this discretionary budget can be both an employee motivator and a practical
    process improvement aid, this is one area that we would NOT advocate “just do it”.
    Spend some time. Think it through. Establish clearly defined “acceptable uses” for the
    spending. Create a “straw man” procedure as to how the team would make spending
    decisions. Discuss safety precautions that the teams must consider.
    Some companies have established team accounts at places like Grangers, and allow
    their teams to place orders against these accounts. Others provide debit cards.
    Remember: It is a whole lot easier to increase the spending limits than it is to decrease.
    Start slowly, and then build upon it. And don’t second-guess valid attempts that did not
    work out. These budgets are typically small, and therefore low risk. It is not at all
    unusual for the teams to spend several hundred dollars on items that had little or no
    positive effect, before they eventually hit the project that saved the company tens of
    thousands of dollars. The idea is to encourage trial and error!

o   NPI (New Product Introduction): Use a multi-function team to develop and
    prototype new products. Engineering, manufacturing, procurement, sales/marketing,
    etc. Make sure that adequate time is allotted to “tweaking” after the initial prototypes
    are produced.
    It has been our experience that NPI has an 80/20 law of its own. Twenty percent of the
    time and cost will be required to develop a viable concept. The remaining eighty percent
    will be required to bring this concept to a saleable product. Note that in almost every
    industry, “time to market” continues to grow in importance. It IS possible to set
    deadlines. And it is critical to set a cut-off on design changes (for the introductory
    model). In today’s environment, it is almost always preferable to have “good” product
    out first, rather than a “great” product out late.
o   Objectives, Strategies, Tactics (O.S.T.): Top level goals (Objectives) must be
    supported by 2nd tier Strategies, which are supported by departmental Tactics (goals and
    measurements). (See “Goal Curves”)

o   Old Equipment: In some industries, and some circumstances, old otherwise “obsolete”
    equipment can be cost effectively used if dedicated to a very limited product line. The
    savings come from the lack of any changeover and from a very reliable repeatable
    process. This situation is typically practical in environments where excess space is not
    terribly costly, since the equipment is generally idle for long periods of time.

o   On-Time Completions: Many companies maintain a respectable delivery performance
    by carrying substantial amounts of finished goods inventory. This is true even in “make
    to order” environments. They accomplish this by scheduling to a padded completion
    date: i.e. we promise shipment for 9/30, but we schedule completion internally for
    9/23. The logic is that if we happen to have a production hiccup, we can still ship to the
    customer on-time.
    Needless to say, if we are ever to drive out this waste, we must measure, set goal
    curves, and improve performance on on-time completions. On-time completions should
    become a critical company well-being parameter, and treated accordingly.

o   On-Time Delivery: While it is important to measure your shipping performance, this
    parameter is of less importance to your customer than on-time delivery. This can
    sometimes be difficult to measure and control, however, it is a critical factor to
    consider. In some industries, such as automotive, on-time delivery is THE critical
    parameter. Missing a delivery can idle a production process causing millions of dollars
    per hour. If it is not yet critical in your industry, it will be in the future. Work with your
    “A” customers to find ways to measure and improve this critical measure of
    performance. Monitor you carriers’ performance to stated lead times. Utilize the
    tracking systems that most carriers now provide. Look into using company-owned
    vehicles in lieu of common carriers, etc.

o   On-Time Shipment, to the Original Promise Date: I spoke to the president of a
    steel service center the other day. He candidly told me “We will not turn down an
    order. We promise what the customer wants to hear, then beg forgiveness”. When I
    asked what his delivery performance was, he replied, “We ship 95% on time.” How do
    you explain the disparity? Easy. They kept “revising” their promise date until they
    finally shipped the order. Then they measured against their final promise. I still don’t
    know why they weren’t 100% on time! I guess they just got too lazy to re-promise
    some orders! Needless to say, the only credible benchmark is the original promise date,
    unless, of course, the customer initiates the change. Beware: Some companies delude
    themselves by saying “we talked to the customer, and he said it was OK.” In actuality,
    all we’ve really done is reinforced the idea that the customer should ask for his product
    earlier than he really thinks he’ll need it. Treat on-time delivery, as measured against
    the original promise date, as another critical quality parameter.

o   On-Time Shipment to the Request Date: An additional measurement that some top
    performing companies track is their delivery performance versus the initial customer
    request date. Doing so can identify opportunities: Can we charge a premium for less
    than standard lead time? Can we gain share, or increase prices if we cut our standard
    lead times to less than the competition?
    Note: Short lead times are of little value if your delivery performance to your promise is
    not near perfect. However, short lead times combined with reliable delivery
    performance can be a significant competitive advantage. Caveat: Prove out that you
    can perform BEFORE you advertise the capability.

o   “One Perfect Unit” Day: A full, or partial day is set aside to focus on “perfect quality”
    at every station: Standardizing procedures, establishing written sequential inspection
    criteria, identifying and implementing failsafe devices, clarifying quality standards,
    implementing visual “quality” boards, etc.

o   One Size Does NOT Fit All: Various Lean approaches and techniques are effective for
    various industries and situations. Kanban controls are an excellent example. Kanban is
    an extremely powerful tool. It is not, however, applicable in some environments
    (sporadic, infrequent product demand; job shop; engineer to order; etc.). Too many
    consultants have one set of tools, and attempt to force their use into inappropriate
    circumstances. Think of this list as your tool kit. You, as the craftsman, must apply the
    appropriate tool as / when needed. “If the tool fits, use it”. (See “Solutions Looking for
    a Problem” and “Goal Curves”)

o   Operation Checklists: The pilot goes through his pre-flight checklist to make certain
    that no important parameter is overlooked. This same logic can and should be applied
    to equipment start-up procedures, and even between shift hand-offs between crews.
    Similar checklists are a basic fundamental of good maintenance procedures. Such
    checklists protect the equipment, and are an important safety procedure.

o   Opportunity Capacity: It can be a significant profit enhancer to reserve some capacity
    when aggregate demand exceeds capacity. It is normal in such situations for industry
    wide lead times to extend, and delivery performance to degrade. The capability to
    reliably deliver in short lead time can command significant price premiums. This
    situation has occurred repeatedly in the steel industry, and the technique is called
    “opportunity tons”.

o   Opportunity Signals: Visual or auditory signals that identify a need, i.e. more
    material, or a problem, i.e. the machine is down.

o   Optimize the Whole, Not Necessarily the Pieces: A Lean initiative’s primary focus
    should be on optimizing the entire organization. As inventory is squeezed from between
    operations, all units will tend to be operated at the speed, and in the sequence of the
    bottleneck operation. While this will increase the performance and effectiveness of the
    entire operation, it will generally have a negative impact on some unit efficiencies. One
    of the most difficult obstacles that many companies must overcome is the fact that their
    current measurement and reward systems target “unit optimization”. The easiest way
    to think about this is to picture an automobile assembly line. Every piece of equipment
    is paced to the rate of the line, yet most of the equipment could produce considerably
    more than that pace. Doing so, however, would require queues of inventory between
    operations, different crewing schedules, etc. We could indeed increase the effectiveness
    of the individual pieces of equipment, but how efficient do you think the total factory
    would be?
    Note: There are techniques that can and should be applied to individual units that have
    been sub-optimized to improve their effectiveness as well. However, the biggest gains
    come from the initial phase of optimizing the whole.

o   Order – Delivery (O.D.) Cycle: The elapsed time from the receipt of an order to the
    delivery of the product is called the O-D cycle. Needless to say, this is an important
    parameter in the eyes of most customers. Measure it and set goals to reduce it. (See
    “Lead Time: How to Calculate)

o   Order Entry: Hours of Operation: While many companies already operate 24 x 7
    customer service departments, those that only have humans on duty during “business
    hours” need to take a look at their customer-base geography. The idea is to man your
    phones during the business hours of you customers. An east coast company with a
    substantial amount of customers on the west coast will appear to be rather customer
    unfriendly if they close at 2:00 PM in the afternoon! Staggering the hours of your
    customer service people can readily remedy this situation.

o   Order Promising: It is critical to on-time delivery that order promising be done with
    consideration of available material and capacity. The rule is to make “reasonable”
    promises, then focus on doing all that is required to execute to that promise. This may
    mean paying premium freight for delivery of shortage materials, and working any
    necessary overtime to accomplish the schedule.

o   Paint: A coat of white or light colored paint on the ceilings, walls, and floors (even
    cabinets and equipment) can have a dramatic effect on lighting, as well as employee
    attitudes and product quality. It’s difficult to catch a defect if you can’t see it! It also
    makes oil leaks more readily detectable.

o   Paper Templates of Equipment used for re-arrangement trials: With small easy
    to move equipment, we will typically advocate that only cursory paper layout planning
    be done. We’ll come up with a general idea of how & where things should go, then get
    on the floor and do a lot of trial and error. However, when equipment is big and/or
    difficult to move, it makes sense to spend more time planning. While scale drawings are
    a good start, there is nothing like “walking” the new layout. This can be achieved by
    making full sized cardboard cut-outs of the equipment and then letting the entire team
    play “paper dolls” until a comfortable mutually agreed upon arrangement has been
    established. Mark out the locations on the floor, and then do the real equipment move.

o   Pareto’s Law: The 80/20 rule is typically utilized in inventory control. Annual dollar
    usage, i.e. the quantity of an item used per year times the unit cost, is ranked in
    descending order. In most companies, the top 20% of the items, or SKU’s (stock
    keeping units), will constitute about 80% of the total annual spending dollars. In many
    industries, like electro mechanical assembly, the ratio is more likely to be 90/10. (See
    “ABC Inventory Classification”)

o   Pay For Raw Material on “Shipment” Rather Than Receipt: As the frequency of
    raw material deliveries increases, the number of receiving transactions also increases.
    There are many ways to circumvent this additional transaction cost. One such way is to
    pay for your vendor’s material based on the amount of product your company has
    shipped. A simple example: We manufacture bicycles. I shipped 20 bikes, therefore I
    must have used 40 tires. Since we have good records of our shipments, and we have
    complete and accurate bills of mater5ial, the computer can readily calculate raw material
    usage. Needless to say, such an arrangement requires approval from your vendors, and
    demands that your inventory turnover be high. You’ll also have to have very low scrap
    rates and a good way to collect scrap data.

o   Perpetual Inventory Control: I’ve got 20 units of item A. I bring in 10 more units,
    and use (ship / scrap, etc.) 5 units. What’s my new on-hand balance? (20 + 10 – 5 =
    25 units are left on hand) This is an example of what a perpetual inventory system
    does. The computer processes incoming and outgoing transactions, typically through
    MRP / ERP type inventory control software, so as to maintain an on-going, i.e.
    “perpetual”, accurate parts balance at all times.

o   Physical Inventory: As opposed to a perpetual inventory, a physical inventory (PI) is
    a “go out and count them” process. In most companies, day to day inventory balances
    are maintained via perpetual inventory control. A “physical” is generally done as an
    event for a specific purpose; e.g. accounting audit, due diligence process, etc. (See
    “Cycle Counting”)

o   Physical Inventory: Thumbnail: When you find yourself in an “inventory accuracy
    emergency” this technique can be an effective band-aid. The idea is to do a thumbnail
    physical inventory by checking the appearance of the on-hand physical supply vs. the
    inventory record. “That looks like about 100” and the records say 120. Close enough.
    Move on to the next idem. The idea is to quickly catch the “gotcha’s” that will bite you.
    Then, go back and do a good physical inventory, and implement all the necessary
    procedures to maintain on-going accuracy.

o   Physically kitting to find shortages… CREATES shortages. We’ve all seen it. The
    raw material inventory balances in the system are not accurate, so someone comes up
    with the idea to “pull the parts early to identify the shortages”. Sounds reasonable. It
    isn’t! Parts, available on one kit, are short on another. Pulling parts early significantly
    decreases the odds of being able to make ANYTHING complete! The only viable option
    is to fix your inventory accuracy, and put systems in place to keep it that way. (see
    “Trial Kitting”)

o   Planning “Percentage” Bills of Material: Forecasting is generally easier, and more
    accurate, when done at the product family level. However, in order to utilize the
    planning data for material requirements purposes, the forecast must explode down to
    the specific part level. One easy way to accomplish this is through the use of a planning
    BOM. The planning BOM contains parts and labor requirements that represent the entire
    family of products, by proportions. The easiest way to create this bill of material is
    through the use of percentages. For example: Our product family “Adult Men’s Bicycle”
    is anticipated to sell 22% “Flyer” model, 47% “Clipper” model, and 31% “Off-Road”
    model. We would create a percentage planning BOM with these three products as
    components. The “quantity per” for each would be the forecast % of the family sales for
    each product, i.e. .22 Flyer, .47 Clipper, and .31 Off-Road. Thus, when we load the
    forecast into MRP and explode requirements, the resulting component parts and labor
    forecast will accurately represent this product mix.

o   Plant / Process Tours for All Employees: An operator had been doing a manual
    operation; scraping tape residue off a transformer core; for eight years. His thumb was
    all buggered up. We asked where the part went next. He had no idea. So, with
    approval of his supervisor, we walked the process. You guessed it! The section that
    he’d been manually scrapping for all these years, was, at the next operation, cut off and
    thrown away!
    We are continually amazed at the number of employees that have no idea what is being
    done in the other areas of the factory. Take the time to provide a tour for your
    operators. You may be surprised at how it increases there caring and awareness of
    opportunities for improvement. Note: This same concept has produced huge benefits
    when extended to customer and supplier sites.
o   Point of Use Stock and Supplies: Do you see any non-value adding activities in this
    familiar process? Parts are received, the count is verified, a sample is inspected for
    quality, a transaction is processed, they are moved to another location, another
    transaction is processed, some of the parts are then withdrawn, and another transaction
    is done, and the parts are finally moved to the assembly area.
    Wouldn’t it make more sense to put the parts immediately where they can be used for
    production? Now, I understand that lots of groundwork must be done to accomplish this
    logical step. Just like the Frito Lay delivery guy, let’s get the supplier, where ever
    practical, to deliver quality parts (we’ve pre-qualified his process), in reasonable batch
    sizes (we’ve shown him how to cut his set-up times), directly to the point of use.
    Transaction costs have been minimized through backflush.

o   Point of Use Tool Storage: Store any low-cost tools where they are needed. Put clips
    on the equipment to hold the screwdriver, wrench, ratchet, etc. within reach of the
    maintenance person. At one plant, we watched the maintenance person spend 20
    minutes searching all over the plant to find a set of vernier calipers. Investing a few
    hundred dollars in additional tools, combined with clearly defined locations for their
    storage, saved thousands of dollars, annually, in lost productivity.
    Note: Several tool supply companies will now furnish “vending machines” that are placed
    throughout the shop floor and are stocked with commonly used tools and supplies,
    generally on consignment. Operators/supervisors are provided with credit-card type
    keys that record when, what, and by whom, each part has been used.

o   Poka Yoke: See “Failsafe”

o   Pre-Agreement: Get agreement in advance. If …, Then … e.g. "If we can show that
    … is the case, then do you agree that we can…? We had a go-around with a quality
    engineer. We had him verify that not one test failure had ever occurred after the initial
    hour of testing (shake & bake). Yet, he refused to reduce the test time (8 hours). It
    took us months to convene all the right players to override this guy! (See “Let the Data

o   Pre-Meeting Coaching Sessions with the CEO: Our Rapid Impact process requires
    that Top Management monitor our lean transition progress via regular TMAC (Top
    Management Advisory Council) meetings. One trick that we utilized with great success
    is to hold a short pre-meeting get-together with the CEO prior to the TMAC. This
    provides us an opportunity to “coach” him/her as to where we anticipate resistance.
    E.g. “We are going to suggest … Jim is going to want to “study” it. We’d encourage you
    to suggest that we just ‘give it a try’”

o   Preventative Maintenance: (See “Total Productive Maintenance, TPM”)

o   Price Changes: In some industries it is standard practice to pre-announce price
    increases. Doing so has several consequences, all bad! As mentioned elsewhere in this
    article, we are constantly seeking ways to smooth demand. Pre-announcing a price
    increase has just the opposite effect. Orders spike as customers attempt to beat the
    deadline, and slump afterward. Customers attempt to “guess” what they’ll need, and
    then are forced to call in change orders. All of these actions adversely affect the
    company. Our suggestion: Announce, right now, that the company’s new policy is to no
    longer “pre-announce” price increases. Then enforce the policy.

o   Product focused layouts: Many traditional industries are arranged in “process
    focused” layouts, i.e. all lathes are in one area, all presses in another, etc. As we
    attempt to squeeze out interdepartmental inventory, it soon becomes apparent that a
    “product focus” makes more sense. E.g. to arrange the various kinds and quantities of
    equipment together so as to cost effectively produce a specific product or family of
    products. (See “Cellular Manufacturing”)

o   Profit Impact of Driving Down Inventory. Inventory reduction generates cash and
    improves operating performance. However, due to labor variance, and/or under
    absorption of overhead, accounting profits can actually go down, temporarily, during
    these periods of rapid inventory reduction. Also, a significant reduction of inventory can
    expose LIFO / FIFO layers in the inventory accounting system. The impact of this may
    cause accounting profitability to go in either direction. It is important that the CFO be
    tasked to provide a proforma of the impact on accounting profits that will occur if the
    targeted inventory reductions take place. Once this has been done, get approval from
    the board to go ahead. (See the article “Transitioning to Lean”)

o   Program Du Jour: A slang term for the syndrome of some companies to constantly
    change the corporate focus. It is often the fad of the moment: A new book comes out
    on “work teams”, so that becomes the drive, then another comes out on “six sigma”,
    and the emphasis changes. The only consistency is that little or nothing seems to get

o   “Problem / Idea” charts: This can be a powerful tool in some environments. Natural
    work teams are provided simple flip charts in their work areas. The chart has a column
    drawn with the heading: “Problem/Idea”. This is used for employees to post any issue.
    Two additional columns: “Responsibility”, and “Promise Date” provide a way for the
    team, and it’s support people, to keep track of commitments made to resolve such
    problems. Every problem is an opportunity. Make sure that they are posted, and then
    seek a solution. This is additionally powerful when combined with Management by
    Walking Around, and unit / area / kanban goal curves.

o   Prune the Customer Base (All Customers are NOT Equal): It is a useful exercise to
    evaluate your customers for margins, volumes, and a somewhat less tangible “hassle”
    factor. Most companies find that a “normal curve” exists. A few customers are quite
    profitable. The majority of customers are moderately profitable. And a few customers
    are just not worth continuing to do business with. Get rid of them. (See “Activity Based

o   Pull vs. Push: In a “Pull” philosophy, the next operation is considered a customer. As
    such, it is reasonable to ship a product to a customer only when it is requested, i.e.
    only when it is needed. In a “Push” environment, product is delivered to the next
    operation based on schedule, or simply availability, whether the next operation needs it
    or not. A pull philosophy is seen as superior for a number of reasons. Pull minimizes
    WIP inventory build up and thereby keeps congestion down and assures short lead
    Push systems have a tendency to constipate the system, adding to WIP and
    necessitating expediting. (See “Kanban Controls”)

o   Pull Systems: Utilize the Pull Philosophy. This is generally accomplished via kanban
    controls. The same pull philosophy can be extended as far up and down stream as your
    suppliers and customers allow. Visualize a chain of events triggered by the end user.
    He/she removes a product from the retail shelf, which causes the supplier to generate a
    replacement, which initiates demand for one more set of component parts, etc. (See
    the article “Taking the Mystique out of Kanban Systems”)
o   Put Time Limits on Discrepant Material Resolution: Discrepant material is in
    limbo. You can’t count on it, yet if you order replacement and then the discrepant
    material is released as OK, you’ll have excess inventory.
    Establish turn-around targets for “time to disposition”. Measure it. Push to assure that
    all functions required to make such disposition are available as close to 24 – 7 as
    feasible. You can’t have your operations waiting on material that may, or may not, be
    available for production.
    One effective technique is to require that all discrepant material remains within the
    kanban allotment, i.e. if you are allowed 20 pieces between operations, and 5 are on
    hold (discrepant), then only 15 “good” pieces are allowed in the kanban. This will add
    operating pressure for quick discrepancy resolution.

o   Quick Changeover Tooling: There is a large compliment of tooling and equipment
    now available that has been designed to simplify and speed up typical set-up
    operations. Quick clamping devices, slotted holes, ¼ turn bolts, hydraulic systems, etc.
    Pickup catalogues and/or search the web. No sense in re-inventing the wheel!

o   Receive at Night: There are several advantages to receiving incoming material at
    night. It often makes it easier for the shipping companies (traffic is lighter) and very
    often truck drivers must wait overnight before being able to unload. It also allows the
    received material to be entered in the system so all material shows for planning
    purposes during normal business hours.

o   Red, Yellow, Green: In many batch environments, there are certain high-use products
    where it is more economical to process the entire batch rather than process just the
    quantity required for the order. An example is the blanking of sheet metal parts from a
    coil of steel. If the product/s being blanked are high volume runners, completing the
    entire coil may make good economic sense (in many circumstances, there are very real
    capital limitations to SMED). On the other end of the spectrum, there are low-usage
    products that should NOT be processed ahead. This scenario is particularly true in the
    steel service center business.
    A cursory study of each product’s historical demand, cost of processing, and cost of
    carrying the additional inventory can lead to simple decision rules. The various products
    are coded. Green: Cut up the entire coil. Red: Cut only what is needed, then put the
    unused portion of the coil back into stock. Yellow: Use your discretion.

o   Reduce Set-up / Change-over costs to allow further lot size reduction. The basic
    rule is “Make just what the customer wants, just when he wants it.” Any additional
    production is waste and adds to inventory. The ideal is lot size of one. Historically we
    determined the lot size based on the change-over costs. A better direction is to
    determine the right lot size based on customer demand, then drive down your change-
    over costs, where possible, to allow such.

o   Remove doors wherever they’re not essential: We want product to flow, ideally,
    without interruption, through the entire process. Walls, doors, fences, separate
    buildings, etc. inhibit this flow. I toured a plant recently, where many of the
    departments were in separate rooms. Unless separate rooms are needed for process
    constraints, e.g. environmental controls, or security, a good 1st step to improve flow and
    communication is to remove the doors. The next obvious step is to remove all
    unnecessary walls as well.

o   Rent Space at Your Customer’s Site: I visited a blow-mold bottle maker a few years
    ago. Their process was highly automated, with minimal WIP. Palletized bottles were
    shrink-wrapped to protect them from dirt and dust. They had a large warehouse full of
    palletized bottles and a tremendous amount of shipping, with trucks continually
    departing. When asked for my recommendations, I said, “You are storing and
    transporting … AIR!
    I suggested that they rent some space at their primary customer’s site (this customer
    used 80+% of their volume), cut a hole in the wall, and deliver bottles directly to the
    bottling line.
    The result: No pallets. No shrink-wrap. No storage. No transportation. And a
    customer for life.

o   Replenishment System: A mechanism to simply and reliably re-order and attain parts
    or services when needed. Replenishment system is a general term for specific
    mechanisms such as the two-bin system, kanban controls, min-max, etc. As the name
    implies, the idea is extremely simple: replenish what gets used. Note that such systems
    have limited applicability in job shop, one-of-a-kind environments

o   Reserve Capacity for “A” Customers: Your critical few top customers should expect,
    and receive, short fixed lead times and reliable delivery, no matter what your backlog
    position may be. In times of super heated demand, this can still be accomplished by
    closely working with your “A” customers to reserve adequate capacity to handle their
    actual (realistic) demand. Lead times for “B” and “C” customers may float in and out.
    Not so with your “A” customers. Provide them with short fixed lead times, even in a hot
    market, and you’ll have a customer for life.
    Note: while lead times may float for the B’s & C’s, reliability cannot. Credibility is
    paramount. Say what you’ll do, then do what you say.

o   Reserve Capacity for “Rape & Plunder”: In times of scare supply and excessive
    demand, it may make sense to reserve additional capacity beyond that required for your
    “A” customers. In such markets there is often an ability to attain a significant price
    premium for quick delivery. Note: if the “hot” order does not come in, simply pull some
    of the backlog ahead, i.e. capacity is not lost.

o   Resource Restriction: can be used to force innovation and process improvement.
    Take away a person. Challenge the team to make the schedule without them. Squeeze
    the space. Challenge them to find a suitable substitute for expensive supplies /
    materials. Necessity is the mother of invention.

o   Returnable / Reusable Packaging: In some industries, packaging and the cost of
    “de-trashing” i.e. getting rid of the packaging, can be a major expense item for you and
    your customer. Work with your “A” customer/s to find ways to reduce or eliminate the
    expendables: Use standardized, nesting, returnable shipping containers, pallets, fold-
    flat returnable plastic containers, etc. Also look for dual function packaging, e.g.
    packaging that can be used as part or all of the end-item packaging, e.g. use the same
    box to ship the picture tube that the customer (assembly plant) will use to ship the
    finished TV; Or the packaging becomes a part of the final product, etc.

o   Roaming Around Other Departments / Functions: A very astute boss of mine
    advised that I allocate a certain percentage of time, each week, to “roaming around” the
    company. The awareness of the “big picture” that doing so provided, was invaluable.
    Take the time to understand what the other organizations do within the company. Get a
    good overview of how the various pieces fit together. Doing so will pay for itself many
    times over, both in terms of providing more value to the company, and in advancing
    your career.
o   Rocks & Water Analogy: Consider your company as a ship sailing on a pond. Under
    the water are dangerous rocks. However, as long as the water is high enough, there is
    no need to worry about these rocks. In this analogy, the rocks represent problems
    that cost the company in terms of productivity, customer service, and quality. The
    water represents inventory.
    As in this analogy, corporations can continue to operate while "hiding" a myriad of
    problems beneath a blanket of inventory.
    If we begin to drain some of the water from our pond, some of these rocks will be
    exposed. We will then have to remove them so that our ship can continue to sail. The
    same occurs in our factories as we begin to reduce the inventory. Lot size / set-up time,
    vendor reliability, lack of flexibility, un-reliable processes, etc. will slowly be exposed as
    the inventory is reduced. Fixing these "rocks" reduces cost and improves quality and
    customer service. See the analogy below.

o   Rope -Off Customer-Required F/G’s to Prove That It Isn’t Necessary: Some
    companies are contractually required by their customer to maintain a certain level of
    finished goods on hand. This “safety stock” is meant to protect the customer in
    situations where the supplier misses a production schedule. Once lead times are
    reduced and on-time completion performance improved, these safety stocks my no
    longer be required. At one client site, we invited the customer to witness the inventory
    being held in his account. We recorder the lot numbers, and then “taped off” the entire
    inventory (several pallets) with the bright yellow police tape. We asked for agreement
    that if we could continue to ship at 100% performance, without breaking into this buffer,
    we be allowed to eliminate the buffer requirement. A compromise was reached that
    allowed our client (the supplier) to cut the safety stock requirement in half with each
    month of successful on-tine delivery. The requirement was eventually eliminated.

o   Rope Off Freed-Up Space: or it will refill. Space, freed up via the lean transition
    process, is a valuable asset that upper management can use for new products,
    acquisitions, sub-lease, plant consolidation, distribution warehouse. etc. Do not let this
    asset slip away. We have gone so far as to use yellow “Police” tape to cordon off the
    area. Post large notes stating that written approval from the plant manager is required
    to store anything in the area.
    Nature abhors a vacuum. Take aggressive steps to preserve the empty space or it will
    rapidly refill!

o   Rubber Factory: Build flexibility into your capacity. Use part-timers, overtime, cross
    training, move people between departments, etc. While it a very worthwhile effort to
    attempt to smooth production, quick response will, at times, demand some level of
    flexible capacity. (See “Counter Cyclic Products”)

o   “Rule” or “Exceptions”? In most discussions as to why a lean initiative “can’t be
    done”, it is the exception that is used to justify things. Look at frequency and
    percentages as well as the “facts” given; e.g. “We’ve got long lead time items from
    China” (on 1% of the parts!). One of the nice things about the Lean techniques is that
    they do not need to be used universally. Select the appropriate techniques and then use
    them only where appropriate. (See “Figures Don’t Lie, But Liars Figure”)

o   Safety “bag”: For small component users, a very simple form of replenishment signal
    is to place a quantity of components (sufficient to cover on-going operations during the
    replenishment cycle) in a separate bag that includes a replenishment kanban card. The
    instructions on the card advises to “use these parts last” and to order more once the bag
    of parts has been opened. The card can even contain the necessary reorder
    information. The card is provided to procurement, or the supplier, for order placement.
    (See “Faxban”)

o   Safety Stock: Be Cautious. In many MRP programs, Safety Stock is treated like a
    priority item, triggering expedite messages. Doing so can cause credibility issues with
    the system’s recommendations and lead to second guessing, or worse. (See the article
    “ERP & Lean”)

o   “Same As Except” Method of Estimating: This is an excellent way to quickly, and
    often more accurately, estimate the cost for a new product. When faced with the need
    for a quick cost estimate, begin with a similar existing item with a known cost. Then
    add & subtract for estimated differences. This method is almost always faster than a
    bottoms-up estimate, and often more accurate.

o   Schedule Accountability, By Shift: Delivery performance demands that the schedule
    be accomplished in all areas of the organization. Start with schedule completion each
    day. This will then lead you to measure & improve on-time schedule accomplishment by
    You will soon, however, run into a problem. The typical multi-shift operation has shifts
    that are “back to back”, i.e. one shift ends at the same time that the next shift begins.
    If your process allows, it can be a huge benefit to stagger the shifts, thereby leaving a
    gap between shifts for recovery, repairs, and preventative maintenance; e.g. 1st shift
    runs 7:00 AM – 3:30 PM, 2nd shift runs 7:00 PM – 3:30 AM (3.5 hr gap). Each shift can
    then be held accountable to make the schedule, exactly, before going home. Instill a
    discipline: “The shift ends when the schedule is done”. (See “On-Time Completions”)

o   Schedule Adherence; Order Entry: In most manufacturing companies, the majority
    of orders come into the company during day shift. Yet, to ensure a short lead-time,
    we’d like to be able to produce these orders on 2nd and 3rd shift. This requirement
    results in a philosophy of “The day ends when all orders have been entered into the
    system and are available for production”. Stagger the hours of your order entry people.
    Get agreement that the last person on duty will stay until every order is in the system
    (same day). As you continue to shorten your response times, making this change will
    become more important. (See “Order Entry: Hours of Operation”)

o   Schedule Randomizer: In some industries, it is still accepted practice to promise
    shipment “week of”. Obviously, this is NOT a world class practice! Be that as it may,
    until scheduling practices change, weekly schedules can cause a problem with the back-
    scheduling algorithms when lead times are dramatically reduced. A case in point: We
    worked with a steel company that scheduled all of their shipments for Friday of the
    promise week. The operations planning department had no good scheduling tools to
    provide credible “day of the week” completions. As we reduced the lead time, and
    began holding operations accountable for on-time schedule completions at the individual
    operation level, unrealistic schedules began to appear. Since many products had similar
    routings, and everything was scheduled to complete on Friday, workload “lumps”
    appeared at various operations.
    A quick and easy fix was to apply a simple randomizer to the internal completion date.
    This smoothed the completions over the promise week, and provided producible
    schedules. The customer continued to receive a “week of” promise date, but internally
    the operating and scheduling people were measured to the completion day. Needless to
    say, the next obvious step is to begin providing daily ship date promises to the
    customer. So far, however, we haven’t been able to win that battle!

o   Scheduling Function: Hours of Operation: We were working with a large corrugated
    box producer. They had customers clambering for next day delivery. We had
    streamlined the production operations to allow for extremely rapid turnaround.
    However, orders were received until 5:00 PM, yet the scheduler for the corrugator went
    home at 3:30. With some work-shift schedule changes, and some cross training, the
    problem was overcome. It was necessary to overlap the scheduling function beyond the
    end of 1st shift so that all of today’s orders could be entered into the schedule and be
    available for production TODAY.
    A similar problem arose at a steel finishing plant. Standard practice was for production
    scheduling to be done on weekdays, day shift only. However, production operations ran
    24 x 7. Needless to say, as the internal lead times were reduced, it became unrealistic
    to attempt to schedule production that far in advance. The schedulers agreed on new
    work schedules. Schedulers were also provided with PC’s and the ability to access the
    scheduling software. This allowed for critical schedule changes to be made electronically
    from the schedulers home.

o   Scheduling: Upstream & Downstream From a Bottleneck: In many industries,
    there exist true bottleneck operations. If the upstream and/or operations are NOT true
    bottlenecks, i.e. have excess capacity, then the objective is to use only one schedule;
    that which optimizes the bottleneck; for ALL operations. The same scheduling sequence
    (also called a “line up”) used for the bottleneck, is applied to as many up & down stream
    operations as feasible. The end result is a Lean environment while still optimizing the
    bottleneck operation.

o   Sequential Inspection: Here’s an easy first step in establishing sequential inspection.
    Have every operator write down the items that they could possibly mess up. Pass this
    list to the next operator as his/her checklist. Run for a week or two, adding to and
    correcting the list. Then formalize (print up, add color photos, etc.) and post at each

o   Sequential Pull: Many kanban systems are “product specific”, i.e. the kanban tells you
    what to make, when to make it, and how many to make. However, a more streamlined
    form of kanban, applicable in many industries, is “sequential pull”. In this system, the
    kanban signal is generic; it tells you “when” to move or make a part, but does not tell
    you what to make. A schedule, or “line up” tells you the specific item to move or make.
    The automobile assembly line and associated feeder lines are set up in this fashion. By
    “pulling” the correct parts in the correct sequence, a complete final assembly is
    produced with minimal WIP inventory, just in time. Note, that while this is by far the
    most efficient form of pull system, it requires a considerable amount of pre-work.
    Quality and reliability of all processes must be truly world class, as any defect or line
    disruption can throw off the sequencing. (See “Kanban”)

o   Set-Up Person; New Role as Teacher: Some companies have “high skill” set-up
    operators that are on-call to perform change-overs on the production equipment. This
    often causes delays, while production operators wait for the change-over expert to get
    to their operation. We’ve had some huge successes by re-framing the set-up person’s
    job to include simplifying the change-over, and training operators to do their own
    change-overs. Transition your “set-up” people into trainers and SMED experts (simplify
    the change-overs, document the procedures). Teach operators how to do their own
    change over. Then elevate the responsibilities of the set-up person to include process

o   Shadow Boards: Help people put things back where they go by creating a shadow
    board. By putting the outline of the tool on a board, or in a drawer, where the tool is
    supposed to be located, the location for tool becomes obvious. Combining the outline
    with color-coding can be even more effective. (See “5S / Area Organization”)

o   Sharing Equipment / Work Stations: We visited a transformer plant and noticed
    that more than ½ of the arbor winding equipment was un-manned. When we asked
    why, we were told that the 2nd shift operators all had their own equipment, and that no
    operator could continue the work of another. Winding was considered “art,” not
    The addition of standard methods, checklists, and a 5 minute shift overlap, allowed
    space, equipment, and WIP inventory to be cut in half.

o   Shorten Lead Times by Adding Shifts: Here’s a quiz: Our product requires four
    operations to be performed, in sequence. We’ve got four operators, each performing a
    different operation. Each operation takes 8 hrs to perform. There is only one shift.
    What’s the minimum lead-time? Right: 4 days. On day 1, operation 1 is completed. On
    day 2 operation 2 is completed, etc.
    What happens to WIP inventory levels and lead times if we were to move 2 of our
    operators to the 2nd shift? Operation 1 is done on day one, 1st shift. However, operation
    2 now can also be performed on day one, on the 2nd shift. Same with operations 3 & 4.
    The lead-time and WIP inventory levels are cut in half.
    Note: we did NOT increase capacity. Four operators still produce 1 completed unit each
    day. However, by manning more of the available hours, we are able to keep the product
    flowing, thereby cutting inventory, space requirements, and lead times accordingly. We
    used 8 hour operations for illustration purposes. Moving a portion of your capacity to
    the off shifts will have the same impact regardless of the work content.

o   Show Me: We were working in a traditional assembly plant and were about to re-
    arrange some equipment. I asked that the wiring be left flexible so that future minor
    equipment moves could readily be accomplished. However, the maintenance man
    assured me that this was not allowable “per the code”. I politely asked him to please
    show me where the code said this. I waited a few hours, then sought him out. As I had
    expected, he could not find any such prohibition in the code.
    Many constraints are perceived, habit, or hear say. Require the letter of the law be
    shown. Don’t be afraid to challenge convention. All too often, it’s being done that way
    because “it’s always been done that way”!

o   Side-Loading Trucks: The problem with the typical rear opening truck is that only a
    small amount of product can be reached at any time, and that the product flow is LIFO:
    Last In First Out. A lean environment requires frequent deliveries of material to the
    point of use. Thus, a side loading truck, combined with modified receiving capabilities
    along the entire periphery of the plant, provides a more fitting arrangement. Material
    can be accessed along the entire length of the truck, allowing material to be stored and
    unloaded where and when needed.

o   Silence is Acceptance: A culture of continuous improvement demands on-going
    change. It is difficult to make rapid progress if approvals are required for every action
    taken. Institute a procedure that encourages teams to “notify” people of actions they
    intend to take. The onus is then on those notified to “raise a flag” of concern. “Speak
    now, or forever hold your peace!” (See “Just Do It!”)

o   “Similar To” BOMs (Bills Of Material): If you do not have a final design, load the
    BOM for a similar product into your MRP. Then evolve it as product definition firms up.
    The “similar to” item is treated like the “same as, except” item discussed elsewhere.
    Schedule the anticipated demand in your master schedule, and then use the system to
    warn you of long lead item requirements, reserve capacity, project cash flow, etc. (See
    “Similar To, Except”)

o   Single Handle: Once an item is in the hands of an operator, try to do as many value-
    adding operations as make sense. Much time is wasted picking up, putting down, and
    conveying material. If practical, arrange operations that require different small pieces of
    equipment in a U shaped arrangement. The operator swivels his/her chair or “walks”
    the item through each operation before putting it down. (See “U-Shaped Cells”)

o   Situational Approach: Just Do It vs In-Depth Study: While we are advocates of
    the “Just Do It” philosophy, there are indeed situations that warrant a more studied
    approach to a Lean transition. If the area of concern is a bottleneck, if the intended
    action has a potential impact on personnel policies or could stimulate union organization
    efforts, if the intended action could cause a significant / life threatening impact on the
    company (i.e. “drilling below the water line”), if the action risks anyone’s safety, then a
    more cautious studied approach is justifiable.
o   Six Sigma: A powerful analytical method for quality or process problem discovery and
    resolution. Due to the amount of training required to become proficient, six sigma is
    often utilized by training a small elite group of internal experts (black belts). Six Sigma
    is a rigorous situation analysis process. It is quite powerful for determining and
    resolving a complex process / quality problem. It is not, however, a general overall
    business improvement methodology. Do NOT attempt to use as such. (See the article
    “Is Six Sigma Right For Your Company?” http://handsongroup.com/sixsigma.php3)

o   Slippery Floors: Here’s a rather radical idea. We worked with one company that made
    pillows. The product shipped in large, relatively light-weight (about 40 pounds) but
    cumbersome boxes. In discussing alternatives with a safety expert, the decision was
    made to try “slippery” floors and equip all operators with rubber soled “deck shoes”.
    The boxes were then slid to the shipping area. This was clearly seen as a superior
    alternative to lifting each box to put it on a conveyor or other conveyance device (risk of
    back injury). Another major advantage: there were no conveyors blocking routes; No
    wheeled vehicles to take up space, “deadheaded” back to where needed, or stored.

o   Small lot, JIT deliveries, to the point of use: Receiving transactions, incoming
    inspection, moving parts to a stockroom, recording transactions, picking parts, etc. are
    all non-value adding functions. One solution is to evolve to frequent vendor delivery
    directly to the point of use, bypassing receiving, incoming inspection, and the raw
    material stockroom. It is important to recall the many pre-requisites required to reach
    this objective. Vendor quality must be sufficient to bypass incoming inspection (see
    “vendor certification”). An alternate method must be put in place to assure vendor part
    count delivered (see “backflush”). A simple trigger must be put in place to notify the
    vendor when it is time to deliver (see “replenishment system”). And, you’ll need a
    simple means to get the vendor paid (backflush, line operator sign off, bar codes, fixed
    quantity parts containers, point of sale terminals, etc.)

o   Small, Flexible Machines, Multiple Copies: There are several advantages to having
    small machines vs. one large “mega-machine.” If the mega-machine is down, all
    production stops. If one of the small machines is down, partial production can
    continue. The mega-machine runs one product at a time. Several small machines can
    run several different products at the same time. Mega-machines generally have
    extensive set-up costs (change-over between products). Smaller machines are usually
    less complex and lend themselves to quick set-up. Plus, with several copies of the same
    small machine, it is often possible to leave one machine set-up on a key product all the
    time, i.e. eliminate change over all together! Small machines often are simpler than the
    mega-machine and therefore more reliable and easier to fix. Mega-machines generally
    have a fixed output rate and crewing requirements. It’s either on or off. Multiple small
    machines, in contrast, can be crewed to provide variable rates of output. Note that
    doing so also keeps the labor costs in line with the actual volume required.

o   SMED, Single Minute Exchange of Dies: As we reduce inventory, the lot size “rock”
    will generally appear. In order to further reduce inventory, we will need to reduce
    production lot sizes and thereby increase the number of changeovers. This will cause
    changeover costs to increase. As a result, set-up / changeover costs must be reduced.
    SMED is a proven set of techniques that allow one to reduce changeover costs. There
    are entire books written on the subject.
    The typical process is to form a team involving the equipment operators, set-up people,
    maintenance, and an outsider or two. A typical changeover is then video taped. The
    team reviews the tape, identifying and challenging all elements. “Can it be done while
    the machine is running? Can it be done better, faster, cheaper? Do we need all off
    these screws/nuts? Can we use quick clamping devices?” Etc.
    In areas where no previous set-up reduction efforts have been taken, it is quite typical
    to reduce the changeover times by 50%-75% with little capital outlay. (See “Quick
    Change Tooling”)

o   “Solutions Looking For a Problem”… Beware: We see all too many “lean
    transitions” begin with this unfocused approach. “Let’s do a 5S”; “Let’s re-layout this
    area”; “Let’s blitz the stockroom”; etc.” All too often: 1) The considerable amount of
    activity and expense involved creates local excitement, but has little or no effect on
    bottom line results, and/or 2) The effort must be completely un-done when it is
    discovered that: the process blitzed should be eliminated, the area 5S’ed should be re-
    located, the re-laid out area must be moved to fit with the overall plan for product flow,
    The problem is not that these endeavors are necessarily wrong. And it is certainly
    correct that people will learn from the effort. The point is that there is a more efficient
    and effective way of focusing the efforts.
    If you wish to generate cash, reduce lead times, and prioritize your efforts in the most
    effective manor, use inventory / cycle time reduction to drive the process. Reducing
    inventory generates cash. It also highlights that next “rock” that must be attacked.
    The Hands-On Group’s “Rapid Impact” process utilizes an inventory reduction goal,
    along with an on-time delivery goal, to drive the improvement process. As you progress
    toward these simultaneous objectives, problems will appear. Kanban installation, SMED
    initiatives, 5S blitzes, NWT’s, Vendor workshops, Cross training, Manufacturing cells, etc.
    are used as & when needed to fix these problems. The process of driving inventory out
    of the system acts to prioritize your specific actions. The specific “tools” are used to
    achieve this inventory delta objective. And, the cash generated through the inventory
    reduction process will typically more than fund the cost of the transition.
    Lean is about eliminating waste. Doesn’t it make sense to use a “lean” transition
    process as well?

o   Source Inspection: Incoming inspection is a non-value adding activity. Doing source
    inspection is a stopgap measure, used until your supplier can install process controls
    that assure a quality product. Typical steps include: Eliminate incoming inspection by
    imposing source inspection (by your own people at the vendor’s site, by 3 rd party folks,
    or by “certifying one of the vendors people). Note that the additional expense of doing
    this inspection is best if it is incurred by the vendor. Doing so provides an additional;
    incentive for the supplier to implement adequate process controls so as to eliminate this
    additional expense. The final step is to move to process control verification, and thereby
    eliminate both the source inspection and incoming inspection requirements.

o   Standardize Parts, Equipment, and Processes. We worked with a well-respected
    company making a high volume electro-mechanical product. After forming a natural
    work team, one of the operators suggested standardizing the screws for this product.
    Further investigation showed that 16 different screw types and/or lengths were required
    for this one level of assembly! The natural work team worked with a design engineer,
    and in two weeks reduced the complexity down to 2 different screws.
    Standardizing reduces procurement costs, complexity, and opportunity for error.
    Standardizing equipment reduces spare parts requirements and improves maintenance
    know-how. Standardizing processes aids in employee rotation and cross
    training/flexibility. And, the impact on quality is obvious. (See “Value Engineering”)

o   Standard Work: Generally speaking, there IS a best way to do things. Involve the
    people in the evaluation process, document the “best” way, and then teach your people
    how to do it that way. Expect that their performance may fall off during the change
    process until the new method has been fully learned. (See “Let the Data Decide”)

o   Statistical Process Control (SPC): A powerful analytic technique for process control,
    involving the frequent measurement of various product attributes to detect if the
    production process is drifting out of control. It involves, as well, the analysis of process
    capability to verify that the current equipment is capable of holding the desired
    In our experience, a similar but much simpler procedure is often adequate: Divide the
    tolerance by 4. Consider the middle two bands around nominal as green. The outer
    bands are yellow. Outside of tolerance is red. Set up your SPC control charts and
    actions accordingly. (See “Six Sigma”)

o   Stockroom Location Systems: There are many methods for deciding where to put
    parts within a stockroom, and there are plusses & minuses for each. A few of the
    common methods are listed here: Stocking by Commodity Type will put all resisters in
    one location, heat sinks in another, etc. Stocking by Part Number places each part in
    the correct sequence based on it’s part number. And Random stocking assigns the
    location after the part has been put up (first available opening).
    The advantages of commodity and part number methods include ease of training and
    ease of finding lost parts. The disadvantages are the poor use of space, and the
    difficulty in adding new part numbers. Random location systems maximize the use of
    the “cube” (warehouse space) but have no logical pattern and depend heavily on correct
    input of location data into the system. Most effective warehouses use combinations of
    the above. As an example, small parts might be placed in standardized bins in part
    number order. A card is then inserted in the bin identifying the location of any “over
    stock” that would not fit in the bin. Large or awkward parts are stored in random

o   Stop the line. Fix the problem: If you truly seek a quality process, this technique is
    a must. The intent is to attempt to permanently fix the process. Stop the line, identify
    the root cause, and either fix it, or make certain that a clear responsibility and due date
    has been assigned (“Who?” “By When?”) to fix the problem, before continuing
    operation. Note that the schedule must still be completed on time. Therefore, a stop of
    the line will often require overtime. The company’s willingness to incur this short-term
    cost to assure a long-term fix sends a clear message to the workforce regarding the
    commitment to a quality process. Walk the talk.
    Caveat: As processes are linked to one-another via kanbans or other means, this task
    becomes considerably more difficult to enforce. Stopping one area, will soon lead to
    stopping upstream and downstream areas as well. There will be a temptation to exceed
    the kanbans and only work overtime in the affected area. Occasionally this may be
    justified. However, be very cautious as to the message being sent to the troops. Each
    exception makes the next exception a little easier, and can rapidly lead to a loss of
    discipline. (See “failsafe”) (See “One Perfect Unit Day”)

o   Supplier Development: Few companies can become truly become world class without
    the assistance of world-class suppliers. The typical process involves 1) Evaluate your
    current suppliers. 2) Eliminate the obvious poor performers. The typical goal is to have
    no more than 1 or 2 suppliers for each commodity type. 3) Hold a “supplier day” kickoff
    meeting. Explain what the company is trying to achieve, and your expectations of your
    suppliers. Establish key measurements and set goal curves for your key suppliers. 4)
    Assist in supplier training where necessary. 5) Measure all suppliers (lead time, on-time
    delivery, quality, etc.) and provide on-going feedback. 6) Take corrective actions as /
    when needed.
    Phase two: Work with all key suppliers to reduce or eliminate the non-value adding
    activities typically associated with procurement: Product packaging, freight costs,
    receiving transactions, incoming inspection, stocking, accounts payable, record keeping,
    One of our clients posted all vendor performance charts right in the lobby for all to see.

o   Takt Time: This concept is based on the idea of leveling production for efficient use of
    your resources. The sales requirement is divided by the planned work hours to arrive at
    a required rate of production, e.g. we need to produce one automobile every 60
    seconds. All operations are then targeted to achieve this production rate. This approach
    has considerable practical application in industries where demand is level (e.g.
    government contracts) or where the company is running at maximum capacity.
    However, it has been our experience that this concept, while a worthy objective, is not
    very practical in many industries. With very few exceptions, customers do NOT buy
    linearly, i.e. the “takt time” is constantly changing. This problem has been alleviated in
    some industries (automotive, etc.) by artificially flattening “demand.” They accomplish
    this by establishing a production schedule for some fixed period of time (a week, a
    month). Needless to say, if actual demand is varying, and our production schedule is
    fixed, we must depend on finished goods inventory to take up the difference. This
    clearly violates the “PULL” concept of making something only when the customer
    requests it. As we shorten lead times and become more responsive to actual customer
    demand, the concept of takt time becomes less relevant. Instead, the emphasis needs
    to be put on flexibility and agility. (See “Rubber factory”)

o   Teachable Moment: People learn best when they have a pressing need to know.
    Education and training is much more effective when done at a time when people can
    immediately use the information. The Lean transition, when correctly done, lends itself
    to this efficient form of training. By reducing the inventory throughout the system,
    problems that were previously hidden will now become painfully apparent. The ideal
    time to teach the applicable technique to overcome such a problem is when this problem
    has become the obstacle. This is the “teachable moment” when your training will be
    most effective. Teach the concepts and technique/s, then immediately go out and apply
    them. See and do.

o   Teams for Teams Sake. A large transformer plant had spent a sizable amount of time
    and money training employees and forming teams. The teams worried about lots of
    important issues, like what radio station to pipe into the plant! When we asked the
    general manager, “what results have you attained?” Dead silence! They had spent a
    heap of money, and 18 months of time, forming teams and teaching their employees
    ‘teaming skills’. What they had NOT done, was create an environment where teaming
    skills were REQUIRED! A Lean transition process removes the inventory that hides
    waste. This inventory reduction process does two things: 1) It removes the buffer
    (inventory) that separates operations and thereby forces inter-dependence. And 2) It
    exposes meaningful problems that the natural work teams need to address. Employees
    are forced to communicate and coordinate like never before. Teaming efforts become
    focused on the problems that the inventory reduction process surfaces.
    The point is: Don’t form teams just to form teams. Drive out the inventory, and natural
    work teams will automatically occur. Teach the teaming skills as/when the need arises.
    Not before. (See “Teachable Moment”)

o   Test a New Layout By Removing Excess WIP: Rather than wait until the level of
    WIP can be worked down to the target levels, we have found it practical, in some
    applications, to remove the WIP, test out the new process, and then slowly feed back
    the WIP to remove it from the system.

o   Thank You Note in the Local Newspaper: A client of ours ran into a serious
    procurement problem. However, their key supplier was able to jump through some
    hoops and bail our client out of their jam. As a way to show their appreciation, our
    client placed a large ad in the local newspaper in the supplier’s hometown. Needless to
    say, it was warmly received by all.
    When a salesman from the supplier called our client to say thanks, he was told “Wait ‘til
    you see the ad we have if you screw up!” Remember: Companies don’t do things;
    people do. A little appreciation can go a long way in achieving sustainable world-class

o   Theory of Constraints: The idea is to focus all efforts on improving the output of the
    bottleneck. And as such, it is a simple, fundamental, and powerful concept. As an
    example, we were working with a steel mill client that had a true bottleneck at its cold
    mill. The first thing we did was to “optimize” the cold mill rolling schedule (the sequence
    in which the various coils of steel would be rolled). We then pushed that identical
    schedule, to the extent possible, upon all upstream and downstream operations. This
    schedule reduced the efficiency of some non-bottleneck operations, but increased overall
    efficiency of the mill, while still allowing steel to flow rapidly through the entire process.
    Like so many other good tools, this one is also subject to abuse. TOC becomes pretty
    trivial in environments that are not truly capacity constrained. The constraint, per the
    literature, is now lack of sales. Not much of a revelation! (See “Bottleneck”, “Optimize
    the Whole” and “Scheduling: Upstream & Downstream From a Bottleneck”).

o   Time Lapse Video: One of our clients had traffic flow problems in their facility. We
    mounted a video camera near the ceiling where it could see just about the entire shop
    floor, set it on time lapse, and let it run for a full shift. The next day, it took less than
    an hour of watch the tape to clearly identify the issues, and generate a list of solutions.

o   Top Management Advisory Council, TMAC: A Lean transition impacts all areas of the
    company, and as such, the effort is best led by top management. The TMAC is top
    management’s forum for monitoring and controlling the lean transition process. Team
    members typically include the CEO and his/her staff. The TMAC reviews the progress
    that has been made vs. the goals that they have set. We recommend that these review
    meeting be incorporated into the normal weekly staff meetings. This regular meeting,
    along with the appropriate presentation of the goal curves and “actuals” provides the
    control mechanism needed for top management to truly steer the lean transformation
    process. (See “Goal Curves” and “Cause and Corrective Action”)

o   Total Quality: Form, fit, and function are no longer sufficient criteria for “quality”. A
    quality product is just the beginning. It must be the right product, complete, and with
    all the requested options. It must also have reliability, cosmetic appeal, attractive
    packaging, ship with the correct paperwork, to the right location, to the attention of the
    appropriate person, at the right time. The order should ship complete. The billing
    should go to the correct address, and have the correct price and terms. Today, the term
    quality must be expanded to encompass all aspects of the procurement process that
    effect overall customer satisfaction. (See “Inventory & Quality”)

o   Total Productive Maintenance (TPM): AKA Preventative Maintenance. The concept
    of preventing equipment failure or downtime by doing all necessary lubrication, parts
    replacement, etc. as and when needed, i.e. prior to failure. There is an entire discipline
    related to this subject, and multiple excellent books that expand on the details.

o   Training: Do a Chapter a Week: There is an incredible amount of Lean and related
    information available today in the public domain. The problem is no longer availability,
    it is getting the time and commitment to read and absorb such information. One simple,
    yet powerful technique is to ask people to “swallow the elephant” by reading one chapter
    each week. Select some good books / articles and schedule a regular weekly discussion
    session to talk about the week’s assignment. Use targeted questions, e.g. “How is this
    concept applicable to our environment?” A variation of this approach is to provide
    audiotapes / CD’s of the material. This allows employees to “read” the assignment while
    in the car during the commute to work.

o   Trial Kitting: A software routine, provided in most MRP / ERP systems. It is a very
    useful tool. The idea is for the computer to, on paper, “pull” the parts for all scheduled
    assemblies, to see what kits can be pulled “complete” and what parts shortages affect
    the other assemblies. Typically, the software will identify shortages, by assembly, and
    show the promise dates for each shortage. It allows management to see what can
    physically be build from the existing on-hand inventory without physically pulling parts.

o   Two-Bin System: A simple form of kanban control. Parts or assemblies are kept in
    two bins (or bags, or boxes, etc.) When one bin empties, it signals the need to buy or
    make more. The 2nd bin provides parts to cover demand during the replenishment
    cycle. (see “Replenishment System”)

o   Under-Capacity Planning: The general rule is to never book the plant to 100% of
    demonstrated capacity (24 x 7). Some reserve capacity is needed to assure delivery
    performance. On-time delivery must be considered an absolute requirement. Reserve
    some capacity for the unforeseen happenstance. Pull work forward if needed so that
    there is no capacity lost if things go well. (See “”Opportunity Capacity”)

o   U shaped cells: Removing the cues from between operations allows equipment to be
    located next to one another. Arranging such equipment in a U shaped cell provides
    several advantages. Product begins and ends on the same aisle. The shape enhances
    communication. And, a U shaped cell minimizes travel distance, i.e. one operator can
    “walk” the product through the cell if / when needed. (See “Single Piece Flow”)

o   Value Add: Those process steps that the customer would be willing to pay for. Most
    production steps are value adding. Non-value adding steps are things that do not alter
    the fit, form, or function of the product. Examples of non-value adding activities include
    receiving, inspections, transaction processing, transportation, de-trashing, product
    movement, storage, etc. One objective of Lean is the reduction / elimination of all non-
    value activities. (See “Waste”)

o   Value Engineering: An engineering effort focused on improving existing products. The
    term is generally used to denote a focus on cost take-out while retaining product

o   Value Engineering: Providing the Resources. We worked with several Engineer-to-
    Order clients. In each we heard a similar theme: “We don’t have time to do any value
    engineering” “We always keep a backlog of engineering work to assure are engineers
    are efficient”. Think of the engineering workload as a sine wave with peaks and valleys.
    Most companies staff the engineering department to handle the average workload.
    Backlog buffers the peaks and valleys so all engineers are pretty much constantly doing
    design engineering. If, however, you man at a level closer to the peak load, backlogs
    can be kept low (quicker turn around of designs) and the “idle time” can be used for
    value engineering, product enhancement, new product development, etc.

o   Value Stream: The entire chain of participants, from basic raw material to the ultimate
    consumer. It involves suppliers, customers, wholesalers/distributors, retailers, and
    transportation steps. Since the ultimate consumer price is a function of the cumulative
    costs of the entire value stream, streamlining it becomes critical. In many industries,
    the competitive environment has boiled down to one industry leader’s value stream vs.
    On a more narrow perspective, “value stream” is also used to denote the entire stream
    of activities required to move a product through the internal events within a company.

o   Value Stream Mapping: The process of flow-charting all activities required to move a
    product through the value stream. The focus is then on identifying and
    removing/reducing the non-value adding activities.

o   Vendor Certification: The process of validating that a supplier has put in place all
    necessary process controls required to assure that their products will arrive “fit for use”
    at the customer’s site. The purpose is two fold: verify quality so that incoming
    inspection can be eliminated, and assist your suppliers with process control thereby
    reducing costs. (See “Source Inspection”)

o   Vendor Stocking Programs: Have the suppliers provide components without the need
    of the customer to place an order. This powerful technique can effectively
    remove/reduce several categories of non-value adding activities: requirements
    planning, procurement, receiving, receiving inspection, stocking, etc. We have had
    several clients gain 100% of a new customer’s business while charging higher prices!
    They did this by eliminating many of the customers procurement costs, thereby reducing
    the “total cost of purchase” for their new customer.

o   Video Kanban: How do you get the replenishment signal to a distant supplying
    department? Using cheap TV cameras and monitors can greatly enhance a simple
    traditional kanban system. Position the camera and monitors such that your fork truck
    driver can see the kanbans as well as any comments/notes via flip chart or white board.

o   Visible Data: Keep all pertinent data clearly visible at the work area: schedule, quality
    criteria, inventory lever vs. goal, on-time completions vs. goal, cross training matrix,
    notes from the previous shift, tolerances, work instructions, sample boards, etc. (See
    “Problem / Idea Charts”)

o   Wall of Fame: Employee recognition is a powerful motivator. One of our clients posted
    photos of the various work teams, their names, and short story of their successes on a
    corkboard in the cafeteria where all could see it.

o   Walkie-Talkies for maintenance operators. On large pieces of equipment, it is often
    essential for the maintenance operators to communicate sight unseen (for both
    efficiency and safety). Hands-free walkie-talkie sets can be a helpful tool.

o   Walk the Talk: What you say will be of far less impact than what you do. Your people
    will watch you closely to see if you really are willing to do as you say. There will be
    incidents where making an exception to the principles may make good business sense.
    However, make sure you weigh the impact on perceptions when making any such
o   Walk to the Work Station: This technique works well for infrequently built
    assemblies. Workstations are set up with all parts needed to produce one or more
    various sub-assemblies. Kanban signals are used to indicate when a sub-assembly
    needs to be replaced. Then an operator walks to the station and produces it.

o   Waste: Anything that does not add value, from the customer’s perspective. Ask the
    questions: “Would the customer pay extra for us to do this?” “Would the customer care
    if we eliminated this activity?” Constantly push to minimize / eliminate all non-value
    adding activities from the entire value stream. Note that there are likely going to be
    certain activities that still must be done that do not add value. (See “Value Add”)

o   What Would You Do If You Were In Charge? I recall, early in my career,
    complaining to my boss about how this and that were screwed up. He asked this
    question. “What would you do if you were in charge?” I told him several things that I’d
    change. Then he said… “So why don’t you change them? Go see the appropriate people.
    Take the time to present your case.” All good advice. (See “90% of Authority is

o   Who, By When. Make this a mandatory meeting procedure. Try not to leave an item
    of discussion without attaining: Who? Is to do something, and: By When? Is it to be
    done. Record each commitment. Follow-up. Enforce Accountability. (see “Doneness

o   Workplace Layout. Utilize all 3 dimensions. Some companies have effectively used
    pallet racking over the workstation as a place to store point of use inventory. Take the
    time to look above and below work areas for needed storage.

o   World Class Manufacturing: A general term encompassing “lean” and all associated
    disciplines to describe “best in class” performance in all areas.

o   Zero Defects: A quality initiative based on fail-safeing all processes. The premise is
    that all defects are related to flaws in the process, and that it is theoretically possible to
    create processes robust enough to literally eliminate defects. (See “Fail Safe”)

o   Zero Inventory: An earlier name for “Lean.” See the excellent book “Zero Inventory”
    by Bob Hall.

"As a company, we need to be faster in all kinds of ways--faster to decide, faster to choose, faster to
    act....We need to take more risks, act on less perfect information."

                                                                               Worth Magazine 2000/02

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