Lean Manufacturing That Works Bill Carreira

L EAN M ANUFACTURING

T HAT WORKS

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L EAN M ANUFACTURING

T HAT WORKS

Powerful Tools for

Dramatically Reducing Waste

and Maximizing Profits

Bill Carreira

American Management Association

New York • Atlanta • Brussels • Chicago • Mexico City • San Francisco

Shanghai • Tokyo • Toronto • Washington, D.C.

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Special discounts on bulk quantities of AMACOM books are

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AMACOM, a division of American Management Association,

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understanding that the publisher is not engaged in rendering legal,

accounting, or other professional service. If legal advice or other expert

assistance is required, the services of a competent professional person

should be sought.

Library of Congress Cataloging-in-Publication Data

Carreira, Bill.

Lean manufacturing that works : powerful tools for dramatically

reducing waste and maximizing profits / Bill Carreira.

p. cm.

Includes index.

ISBN 0-8144-7237-0

1. Manufacturing processes. 2. Production planning. 3. Process

control. I. Title.

TS183.C36 2004

658.5—dc22

2004018452

2005 Bill Carreira

All rights reserved.

Printed in the United States of America.

This publication may not be reproduced,

stored in a retrieval system,

or transmitted in whole or in part,

in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise,

without the prior written permission of AMACOM,

a division of American Management Association,

1601 Broadway, New York, NY 10019.

Printing number

10 9 8 7 6 5 4 3 2 1

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CONTENTS

Introduction: The Why 1

PART 1

The What

Chapter 1 Customer Satisfaction 7

Chapter 2 Cost and Profit 11

Chapter 3 Metrics 15

Chapter 4 Cash Flow 19

Chapter 5 Inventory and Carrying Cost 23

Chapter 6 Velocity, Throughput, and Lead Time 33

Chapter 7 Batch and Queue vs. Lean Flow 43

Chapter 8 Waste 49

Chapter 9 ValueAdded, Non-Value-Added, Required Non￾Value-Added 67

PART 2

The How

Chapter 10 Doing a Baseline 75

Chapter 11 Doing a Baseline, Day 1 89

Chapter 12 Doing a Baseline, Day 2 111

Chapter 13 Doing a Baseline, Day 3 127

Chapter 14 Doing a Baseline, Day 4 143

Chapter 15 Doing a Baseline, Day 5 181

Chapter 16 Lean-Engineering Analysis 197

Chapter 17 Seeking Balance 223

Chapter 18 The 5S System 235

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v

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vi CONTENTS

Chapter 19 Setup Reduction 257

Chapter 20 Total Productive Maintenance (TPM) 279

Conclusion The Why: The Psychology of Lean 285

Index 289

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L EAN M ANUFACTURING

T HAT WORKS

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INTRODUCTION

THE WHY

This is a book about lean manufacturing. More specifically,

this is a book about how to put lean manufacturing to work to im￾prove your particular business. There are many excellent books that

address the concepts of lean manufacturing, and I do not bring any

revolutionary new concepts to this body of knowledge. What I at￾tempt to bring to the party with this book is a more ‘‘everyday’’ ap￾proach to the topics under discussion, with enough detail and

illustration of some of the basic tools of lean to give the reader a clear

view of how to implement (do) what we are talking about.

That being said, the first questions that should come up are,

‘‘What is lean, and why should I consider changing the way I cur￾rently do business?’’ These are good questions.

If you boil lean down to its essence, it is a culture. It’s not so

much a discrete ‘‘thing’’ as it is a way of thinking, an overall philoso￾phy of running a business. I have observed companies that have an

annual operations plan in addition to a set of lean initiatives, treating

them as two different categories of activity. When I question manage￾ment about the distinction, the responses are usually along the lines

of: ‘‘We have a 5S initiative’’ or ‘‘We have a plan to reduce headcount

on line 4.’’ I then make the point that lean should not be separate

from your business plan; instead, it should be used to develop and

support your business plan. I am often surprised to see a fundamental

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2 THE WHY

disconnect in the interpretation and execution of this powerful opera￾ting mindset. My wife has suggested that my time would be better

spent writing a book entitled Why Companies Fail to Implement Lean.

This is probably a good suggestion; my wife is often a great deal

smarter than I am.

The Fundamental Principles of Lean

In attempting to define lean, we could discuss the guiding principles

of the lean mindset. One is the concept of value. In contrast to the

conventional business view, in lean, all value is defined from the van￾tage point of the customer. Does something add value for the cus￾tomer or not? When this question is asked, it takes you to a focus on

product deliverables. You could restate this question as, ‘‘Does this

activity directly contribute to my customer’s product’s becoming

more complete, and is the customer paying for this activity to occur?’’

If the answer to either of these questions is no, you might ask, ‘‘Why

am I doing it?’’ This concept and this definition of value take us to

two of the key analytical terms of lean, value-added and non-value-added.

The term value added refers to activity that transforms the product or

deliverable, in the view of the customer, to a more complete state.

The product has been physically changed, and its value to the cus￾tomer has increased. Conversely, the term non-value-added refers to

activity that consumes time (people expense), material, and/or space

(facilities expense), yet does not physically advance the product or

increase its value. This is pretty straightforward logic, yet it’s pro￾foundly different from the operating definitions used by many con￾ventional companies.

Another foundation principle of lean is that of a systemwide view

when evaluating your business: the value stream. This is a critical

departure from the focus of a conventional (nonlean) business. A

value stream is the total cycle of activity, from initial customer con￾tact through receiving payment for a product that has been delivered.

I observe companies struggling to find ways to reduce their costs by

3 or 4 percent annually, yet the adoption of lean techniques has been

repeatedly demonstrated to provide double-digit improvements in

operational performance. I believe the disconnect here is the focus on

maximizing pieces of the business while failing to recognize the noise

at the intersections of the pieces. A value-stream approach to analyz-

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THE WHY 3

ing your business provides a very different view of where the oppor￾tunities are and what the priorities for leveraging these opportunities

should be.

Next come the principles of flow and pull. Flow, in the ideal state,

simply implies a seamless sequence of activity throughout the proc￾ess, with no stalls, no disruptions, and no disconnects or backtrack

loops. The concept of pull means that things are done when they are

required to be done, not before. It implies a consumption-driven or

customer demand–driven system, as opposed to a forecast-driven

system.

Perhaps the essential principle of a lean mindset is the ongoing

and continuous elimination of waste. The differing element here is in

the definition of what waste is. We want to eliminate wasteful activity

and free up time and resources to be devoted to additional value￾added activities. ‘‘More with less’’ does not mean a way to work peo￾ple harder or cut their jobs. It means more product produced with the

expenditure of less resources, which results in increased customer

satisfaction, growth through the taking of market share, greater

profitability for your company, and increased opportunity and stabil￾ity for your employee population.

In order for these principles to be implemented in any organiza￾tion, they must be driven from the top management level and em￾braced by all individuals within the company. It’s not a piecemeal

philosophy; it’s a way of being.

What This Book Will Do for You

This book is composed of two sections. The first section is the

‘‘what,’’ and the second section is the ‘‘how.’’ The ‘‘what’’ chapters

discuss and illustrate the ideas and logic of what we are trying to

accomplish by adopting a lean operating philosophy. The ‘‘how’’

chapters illustrate some of the tools of lean and how to put them to

good use. There are many possible variations for skinning the lean

cat. Slightly different formats can produce the same results. Time

frames can be longer or shorter, depending on the sense of urgency

and the resources available. This book illustrates some of lean’s fun￾damental tools in a specific, how-to manner, with the hope that you

will go to your production floor and make something happen.

In response to the second question, ‘‘Why should I consider

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4 THE WHY

changing the way I currently do business?’’ I would take you to the

fundamental concept of business in general: ‘‘Make money by being

the premier satisfier of customer demand.’’ We all have competition,

and our competition wants our business. If you are not continuously

and aggressively improving, you are stagnating. It is simply not possi￾ble to stand still in an aggressive global business economy. It will be

only a matter of time before your more forward-thinking competitors

surpass your performance and you begin to decline. Enough said

there; I’m probably preaching to the choir.

And so, back to the why. American industry has crashed and

burned over the last few decades. We manufacture very little of what

we consume—cars, appliances, clothing, you name it. There are some

people who tell us that this is the result of international competition,

with cultural differences being at the heart of more effective (compet￾itive) manufacturing techniques.

Over the last few decades, dozens of American auto plants have

closed, putting hundreds of thousands of autoworkers out of work.

At the same time, foreign automakers have come to America, opened

facilities in these same areas, hired the same people that were dis￾placed, and are operating profitably. So much for cultural differences.

When we look at technique, we begin to see fundamental differ￾ences. Production technique is pretty much a level playing field. Any￾one can purchase identical equipment and facilities, hire and train

qualified people, and purchase the raw materials required to make a

product. There are certain steps required to make a particular prod￾uct, and everyone does them the same way. The difference appears

to be in the manufacturing technique—how we manage and balance

people, materials, and machines.

It would appear that it is not so much the way people are doing

their jobs as the way management is directing overall resources that

leads to fundamental differences in competitive effectiveness.

And so we come to the essential why. We need to be more com￾petitive in order to survive. It’s time to look at the most effective

companies and pay attention to what they are doing. It’s time to look

at our own operating methodologies and ask some silly questions.

Let’s go.

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PART 1

THE WHAT

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