HOW TO IMPROVE THE PREPARATION AND COORDINATION OF THE PRODUCTION OF HIGH-VARIETY/LOW-VOLUME FROM A LEAGILE PERSPECTIVE? A CASE STUDY

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HOW TO IMPROVE THE PREPARATION AND COORDINATION

OF THE PRODUCTION OF HIGH-VARIETY/LOW-VOLUME

FROM A LEAGILE PERSPECTIVE? A CASE STUDY

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Master thesis, Msc, Supply Chain Management

University of Groningen, Faculty of Economics and Business

June 21, 2013 (Final version)

M.G. Waardenburg

Student number: s2234637 E-mail: M.G.Waardenburg@student.rug.nl

Supervisor/ University Groningen

Prof.dr. J.A.A. van der Veen

Co-assessor/ University Groningen

Drs. Ing. J. Drupsteen

Supervisor/field of study

K. Bloemsma

Leenstra, Drachten

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ABSTRACT

The focus of this thesis can be summarized by the following problem statement: “How to improve the

preparation and the coordination of the production of high-variety/low-volume products from a Leagile perspective?” The Lean principles are applicable to reduce Mada, Mara and Muri. The Agile

principles are applicable to improve flexibility, teamwork and communication. A combination of both principles results into Leagile principles for faster response to changes and problems to a more efficient execution of activities.

These principles are: Leadership, Strong project manager, Multidisciplinary project team, ‘see the whole’, from cost to time focus, responsibility-based planning, face-to-face/visual communication and 5S, process standardization, use or reduce variability, knowledge/project database, Production preparation plan and flexible/involved suppliers.

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1. INTRODUCTION

This thesis investigates how the Lean and Agile principles can be applied to improve the preparation and the coordination of the production of high-variety/low-volume products at Leenstra. Preparation of the production is about the creation of a plan how to execute the production or planning of the activities needed for execution of projects. The coordination is about the management of the activities needed for execution of the projects. Because of the economic crisis, companies are forced to reduce the costs. To survive, companies decide to implement Lean to reduce Muda (reduction of waste), Mura (unevenness in production level) and Muri (overburden or resources) in their processes (Scherrer-Rathje et al., 2009). This result into that Lean becomes a hot item again. The goal of

implementing Lean is to create a Lean thinking organization which is focused on continuously improving processes that add value for the customer and where eliminating waste is essential (King, 2009). Lean is applicable in stable environments or to create stable environments (Naylor et al., 1999; Christopher, 2000). Stable environments are according these authors environments where the products are characterized by high-volume/low-variety. However, Lean has been applied in many other situations and industries, for example Lean Product Development and Lean Project

Management. Agile makes organizations more resilient and tolerant to changes in customer demands or environment (Poppendieck and Cusumano, 2012).

Non-repetitive products are characterized by high-variety/low-volume and produced through projects. Hans et al. (2007) defines a project as a ‘unique undertaking consisting of a complex set of

precedence-related activities that have to be executed using diverse and mostly limited company resources’. For the production of non-repetitive products, flexibility is needed to produce all kind of

products (Conforto and Amaral, 2010; Fernandez and Fernandez, 2009). Agile principles are applicable into complex and fast changing environments which are characterized by

high-variety/low-volumes (Cox and Chicksand, 2005; Fernandez and Fernandez, 2009; Koskela and Howell, 2002). Agility increases flexibility to changes or problems, by fast communication (Hole and Moe, 2008) and a strong focus on time management (Gerrese, 2010). The fast communication is enabled by a informal structure which is focused on leadership, participation and communication.

For the Lean execution of the production the Lean principles have to be applied, for the coordination of the projects the Agile principles have to be applied. For this reason, the Lean and Agile principles can be combined, what result into a Leagile approach for faster response to changed and reduction of waste (Naylor et al. 1999).

Literature makes a distinction between Lean from the philosophical perspective and Lean from an operational or practical perspective. The operational perspective is about the implementation of a set of tools or techniques to reduce the waste in the production process. This research is also focused on the operational perspective, because the Lean principles have to be applied during the preparation of the execution of the production of non-repetitive products to prevent waste and increase efficiency. Current literature appears to be mainly focused on the implementation of Lean in a production (manufacturing) (Haque and Moore, 2004) or service environment (Liker and Morgan, 2006).In addition, there is some literature on Lean Project Delivery System (LPDS) (Ballard and Howell, 2003), Lean Product Development (Leon and Farris, 2011; Pons, 2008), Lean Software Development (Poppendieck and Cusumano, 2012), Lean Project Management (Gabriel, 1997) and Lean Project Delivery (AGI-Goldratt Institute, 2009). The literature of Agile is focused on Agile Project Management (Fernandez and Fernandez, 2009; Koskela and Howell, 2002) for innovation of new products and software development.

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6 literature improves the efficiency by applying Lean, but do not improves the coordination or vice versa. Naim and Gosling (2011) executed a literature review and concluded that most of the literature is focused on the application of Lean, Agile or Leagile to the manufacturing department. This thesis intends to contribute to existing literature by filling a gap by developing an approach how the production of non-repetitive metal products or projects can be prepared and coordinated (controlled), from a Leagile perspective. This thesis also provides a detailed case study related to this situation and drawing lessons from that.

To determine an appropriate approach from a Lean and Agile perspective for preparation and control of non-repetitive products, a single case study is performed at Leenstra. A single case study is

performed because the nature and complexity of the problem. Leenstra is a machine- and steel construction company located in The Netherlands. Leenstra is a Small-Medium sized Enterprise (SME) which is operating in a for high-variety/low-volume environment. The number of employees within the company is around 80, with an annual turnover of € 12,500,000. The production of high-variety/low-volume products is executed by projects, from engineering to production and delivery of these projects. These projects are also challenging because the fact that variability within projects influence performance of other projects, because of the shared resources. The production is

customer demand driven (make-to-order or engineer-to-order), what results in the fact that products cannot be produced to stock. The products are characterized by a high variety of part types and routings, low volumes and small lot sizes.

Leenstra is forced by the board of directors to reduce the costs with 10%, what result in the need for improving the preparation and coordination of the projects to increase efficiency. For Leenstra, Lean is not a philosophy but applying a set of tools to improve processes. The company already

implemented Lean tools for their regular or repetitive products. The aim of this research regarding Leenstra, is to improve the preparation and coordination of the production of non-repetitive products (projects) what results into a more Lean execution of the production process. The Lean tools can be applied during the production preparation process to reduce waste during the production and increase efficiency. Better coordination result also into the on-time delivery of projects what increases customer satisfaction. The projects at Leenstra consist of several activities or phases which are for example: pre-calculations, order from customer, engineering, detailed

calculations, work preparation, purchasing/outsourcing, production, assembly, tests, delivery and evaluation of the project.

The focus of this thesis can be summarized by the following problem statement: “How to improve

the preparation and the coordination of the production of high-variety/low-volume products from a Leagile perspective?”

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2. METHODOLOGY

This section provides an overview how this research will be conducted and the questions that need to be answered. The first section is about the case selection and setting. In Section 2.2 the research process and the time frame is given after which, the research questions are described in Section 2.3. Subsequently, the data collection method used is highlighted in Section 2.4, followed by Section 2.5 describing the analysis of the gathered data. The last section discusses how quality of the research meets the four criteria for a case study research according to Yin (1994).

2.1 Case selection and setting

To answer the problem statement, detailed information is needed how to improve the preparation and coordination in a demand driven environment with high variety and low volumes within SMEs. This research uses a single case study to answer the research question. According to Yin (2003) a case study is the most appropriate method for exploring how and why questions. A single case study will be performed, because of the nature and the complexity of the problem.

2.2 Research questions

The research process model is schematically shown in figure 1; i.e., this figure shows the process of the research and how the research questions should be framed.

Figure 1: Research process model with research questions

To answer the problem statement it is first needed to analyze the current situation of Leenstra. It is important to find out how projects are managed and what the important issues or problems are. It is

Current situation at Leenstra

(RQ1)

Suitable approach for Leenstra (to be)

(RQ3)

Literature about Lean/Agile projects

(RQ2)

Expected improvements compared with the

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8 also important to analyze how the production of non-repetitive products is prepared and how

projects are executed and coordinated. Next, an analysis of the literature is needed to analyze what the literature describes about the Lean and Agile philosophy and about project management methods. What information can be found in the literature about approaches which are suitable to apply within the environment of Leenstra (high-variety/low-volume)? The input for the next step is from the current situation and aspects from the described literature, what results into an applicable approach for Leenstra. When an applicable approach is developed, a comparison has to be made to the current situation. This results into a description of the expected improvements. During the execution of this research, lots of observations are done. Important observations are input for further research. Issues regarding production preparation plan and project management are within the scope of this research, other issues are out of the scope of this research and also input for future research.

1. How are projects currently prepared, executed and managed and what are important issues or problems?

2. What insights can be found in the literature about the preparation, execution and control of Lean/Agile execution and coordination of projects?

3. What are suitable principles for preparation and coordination for Leenstra to apply? 4. What are the expected improvements of the developed principles for preparation and

coordination, compared to the current situation?

5. What are the conclusions and point for further research?

2.3 Data collection and measurement

To answer the research question different types of data are collected from multiple sources. Semi-structured face-to-face interviews are used to gather in-depth information about the company and processes (for example to answer research questions 1 and 3). These face-to-face interviewees can also provide information about problems that occur and their possible causes. The interviewees are persons that are involved in the processes of customized projects, for example: project leaders, work preparation, production unit manager, production manager and employees from the production. Possible questions that can be asked in the semi-structured interviews can be found in appendix A. For the interview a questionnaire is developed to enable the comparison of the answers between different interviewees. Also control questions are developed for the reason to control the opinions or answers at different employees. Every employee answers the questions from their own perspective. It is important to control the perspective to gather information about the actual situation. The ‘five times why tool’ is applied to find the root cause of problems. The interviews are recorded (if the interviewee gave permission) to increase the reliability of the data. Another source of data collection which is used are documents within the company (for example to answer research question 1), like procedures and process flows. Also data is collected through observations of the current process and attendance during project meetings. Observations can contribute to answer research questions 1, 3, 4 and 5. The literature is an important source of information to answer research questions 2, 3 and 5.

2.4 Data analysis

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9 literature to improve the current situation are checked at others to assess the suitability and the feasibility of these improvements.

A more thorough preparation can result into a decrease of waste, problems and production costs for the customized products. Coordination which is focused on efficiency of the execution of projects can result into more structured execution and more flexibility during the execution of the projects. The improvements which are delivered to the company describe how the case study company should organize, prepare and coordinate projects for the production of non-repetitive products.

2.5 Research quality

This study successfully meets the four criteria for a case study research according to Yin (1994) which are: construct validity, internal validity, external validity and reliability.

1. Construct validity was taken by using multiple sources or data triangulation (semi-structured interviews, documents or literature and observations). Also semi-structured interviews are conducted with interviewees from different levels of the organization (Project Leaders, Supervisors, operational employees. Each of these groups has their own perspective and ideas. The gathered data is discussed with experts within the company to identify discrepancies and guarantee correctness.

2. Internal validity is enhanced by using and combining already developed and proven models from other industries. For example the different models which are described in the literature section. Combining these models with the gathered data, discrepancies can be analyzed and discussed.

3. External validity is enhanced by the discussion of results to with experts of the company regarding Lean, Lean Product Development and project management. The reliability of the research is increased by the use of database for the case study where all the documents, notes of observations and during meetings, literature, reports of interviews, etc. are saved. 4. Reliability is enhanced by developing a case study database with the audio files of the

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10 2.6 Research process

The research is executed in within a period of 5 months, from February till June 2013. The period is divided into two phases. The first phase with duration of two months where the research proposal was developed and the second phase started after the two months and consisted of data collection, analysis and reporting the results. The figure below gives an overview of the activities and time frame during the second phase of this research.

Date Activity

15 April Introduction in the company

15 April - 17 April Gathering and analyzing documents and introduction in the company 17 April - 30 April Literature study about Lean/Agile project management and planning 30 April - 3 May Finalize proposal

6 May Develop overview of content of results

7 May - 9 May Plan and prepare interviews, prepare questions 8 May - 15 May Execute interviews with different employees 15 May - 17 May Analyze results from interviews

17 May - 21 May Describe current situation

21 May - 24 May Develop and report approach for project management 27 May - 3 June Construct report

27 May - 28 May Feedback from company

28 May - 31 May Improving and finalizing draft report 3 June First draft

3 June Presenting draft at university 3 June - 21 June Finalize report

21 June Final report

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3. CURRENT SITUATION

First an analysis of the current situation is needed to determine what the current issues and problems are and what characteristics, principles or aspects of the Lean and Agile approach are suitable for Leenstra. By doing so, this section answers the first research question; “how projects currently are prepared and coordinated at Leenstra and what are the important issues”. In Section 3.1 the organizational structure and the project team is described. Section 3.2 describes how the projects are prepared in the current situation, followed by a description how projects are executed in Section 3.3. Section 3.4 describes how projects are managed and controlled. The last section

describes the important issues or problems in the current situation.

A project consists of several general phases. These phases are for Leenstra shown in figure 2. The phases in parenthesis are phases which are not always needed. This research is focused on the coordination of the total process and the preparation processes of the production.

Figure 2: Process flow of execution of projects

3.1 Project team

As can be seen from the organizational chart of Leenstra in appendix B, there are no specific or specialized project teams for execution of the projects. For complex non-repetitive products, a

project leader will be assigned to coordinate the project. A project leader is responsible for taking

decisions, delegating the work, keep close contact with the external customer, deviate between major and minor issues, take the role of internal customer and keep the overview of the project. The project leader coordinates multiple projects simultaneously. The project leader has to report to the supervisor of the engineering department. There are regular (weekly) meetings with the Production Unit Manager, Operations Manager, production supervisor and Production Unit Manager. This structure makes it for the project leaders difficult to coordinate the projects and to make employees accountable or responsible for execution of their tasks. The employees needed for execution of the activities needed for the projects, give higher priorities to tasks their supervisor think are of more importance. The tasks of the project leader are of less importance according these employees. There are two project leaders at Leenstra. The need for coordination of a project by a project leader is determined by the costs and complexity of the project. Which project leader will coordinate the project, depends on the available time and experiences with previous projects. If a project looks like previous executed projects, the same project leader will coordinate the project. To conclude, the first problem is about the organizational structure what leads to prioritization of activities according the opinion of the department supervisors, instead of the project leader. The project leaders do not have the responsibilities needed to coordinate the projects efficiently.

3.2 Preparation of projects

Projects start with the pre-calculation for the customer where the costs, lead time and feasibility are calculated and assessed. Most projects are unique and have to be executed under time pressure to meet the delivery date set by the customer. Most of the time, there was no negotiation on the

Pre-calculations Order (engineering)

Detailed calculations

Work preparation

Purchasing /

Outsourcing Production (Coating)

Evaluation Delivery

(Tests)

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Figure 3: Impact of high utilization to queue time/lead time (Source: Johnson, 2003)

delivery date. This is caused by Leenstra’s own planning problems; Leenstra is not able to propose a delivery date of which they can guarantee to deliver the project. This results in a situation in which Leenstra simply accepts the date as set by the customer and then will try to arrange all activities to deliver the project on time. Appendix D shows that the delivery reliability of projects is low and that 69% of projects are delivered too late. To calculate or estimate a global lead-time of the total project for the customer, the pre-calculation tries to take some risks what delays the delivery date into account during the global estimation of the total duration of the project. The factor for risks is a rough estimated percentage of the total lead time, what depends on the occurrence, severity and type of risks. The factors are roughly estimated by the employee who conducts the pre-calculations. Most projects include many outsourced activities, which increases the risk that an

activity/organization need more time than planned and the overall planning will be delayed. If the request from customer becomes an actual order, a global planning is developed and discussed during the weekly meeting. The global planning described in general terms which steps have to be executed and in which sequence to produce the products. From the global planning, there also will be decided which materials need to be purchased and which processes need to be outsourced, because Leenstra is not able to execute or there is no capacity available. From the global planning, a more detailed production planning is made for assigning orders to the different operations. The production planning intends to maximize (100%) utilization of machines. Disturbances causes a lot of variability in the time needed to finish an operation, what also affects the planning of other projects. Examples of disturbances are variability in processing time, time needed for set-ups and searching for

products. The result of variability compared to the utilization is graphically shown in figure 3, which is a widely recognized consequence of

elementary queuing theory; see e.g. Hopp and Spearman (2004). When the utilization is high, the variability causes more queuing time. Orders are for example waiting for engineering, for drawings that need to be delivered by customers, for release for production, for parts from suppliers,

previous production steps, previous projects and so on. If the queuing time increases, the total lead time of the project increases. The influence of variability decreases when the utilization decreases. When Leenstra create a production schedule based on 100%

utilization, the consequence is that every delay in time result into a delay of the overall

planning and delivery times are not met. When previous projects are not finished, other projects cannot start and will also be delayed. So, the second problem is about the problems with planning, caused by a focus on optimization of resources. Variability causes delay in planning, the delays in planning influences also the planning of other projects. This emphasizes the need for a realistic and detailed planning.

Prioritization of projects and activities is based on the final delivery date of the projects set by the customers. The project with the earliest delivery date has the highest priority, the due date scheduling approach. The prioritization is not always known at the shop floor. The third problem is about the communication between the departments and to the production employees. During the execution of this research Leenstra was executing a complex project to produce parts for a ferris wheel. During the interviews it became clear that only for the project of the ferris wheel, an

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13 most of the activities during the preparation are executed sequential. Because of the time pressure, there is no time available to execute the production preparation process thoroughly to create a detailed production preparation plan to prevent problems or to analyze risks. Because of time pressure, only a production schedule is created, when to produce what products. This result into a fourth problem, no production preparation process how/who to produce the products takes place. Employees within the production have to think at the start of an operation in what sequence to produce the products, at the start there is already a delay.

3.3 Execution/production of projects

Production can be executed if order details such as pre-calculation, drawings, delivery time, bill of materials, details about outsourcing, transports, planning, purchased materials, etc. are known or delivered. The production consists of three phases, which are: pre-processing, machining and composition of products.

Simple issues or problems during production are solved by production employees themselves, who have high problem solving capabilities and creativity. When employees are unable to solve problems by themselves or more information is needed, they directly contact the person that can provide the information needed to solve the problem. Such other issues that occur at the execution of the projects are for example shortage of materials, late deliveries and estimations of operating time and failures in deliveries from suppliers. Failures in products from suppliers are, when the time is limited, repaired by Leenstra itself as it takes too much time (transport and repair time) to send the parts to the supplier for repairing. When the time is limited for suppliers, Leenstra should force the suppliers to control the delivery before transport. The delivery (quality, numbers of parts, etc.) should be correct to prevent delays. Also suppliers are not always forced to reduce the lead time. The purchasing department can negotiate about the delivery date from suppliers. If suppliers can not arrange the delivery date purchasing wants, delivery dates at other suppliers can be obtained. So, suppliers can be treated differently, what results into the fifth problem. Next, products are produced in different batch sizes; the complete batch will be produced and transported to the next work station, instead of creating a product flow and collecting the batch at the end of the flow. The delivery dates from suppliers for outsourced activities are not always known to the production supervisors. The communication from work preparation department to the production employees is done by technical drawings on printed paper and codes/notes on the production order which describes the next step in the process. No information to the production employees is provided digital, sometimes reprints are needed because of dirt on the printed drawing. Every operation receives a separate production order. The production department does not know the prioritization of products and the influences of changes or decisions to other departments. Changes in for example drawings are communicated by the replacement of the printed previous version and an

announcement to the supervisor of the specific department. This is an archaic way of communication what can result into many errors or miscommunications. The communication is the third problem, as already mentioned above. Within the production there is a board, where problems are written down which are discussed by the production supervisors on a regular basis. These problems and the solved problems by the employees themselves and are most of the time not communicated to the project leaders, because of time pressure.

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14 3.4 Management of projects

The management of projects is done by weekly planning meetings with project managers, Operations Manager, head work preparation, production supervisor and production unit manager. During this planning meeting, tasks that need to be executed are discussed and there is a lack of feedback about the performance of the executed tasks. This is caused by the time pressure of the next project that needs to be executed. The project managers coordinate the projects, the head production planning creates a global production planning and monitors the progress, the production unit manager creates a detailed production planning and controls the execution of the production steps needed to

produce the products.

After the execution of a project, a calculation is executed to calculate the actual cost and to determine the profit of the project. The pre-calculations and the calculations after execution of projects are saved in a project file. Drawings, changes, issues and other important information of projects are also stored in the project file, to create learning from previous projects. Learning is created by the re-use of information from the project file and experiences of the Project Leader. For recurring projects, the same Project Leader coordinates the project. The project file will be an important source of information if a repeat order is received or (parts of) projects can be re-used. Whether information will be re-used, depends on the Calculator or Head of Engineering. These persons have to recognize overlaps during departmental meetings with, other previous executed projects. This is an ad hoc method for learning from previous executed projects. The costs/profit and deviation from delivery date are the most important measurement criteria to assess the

performance of the specific projects. This result into the sixth problem, which is about learning from previous executed projects. There is no systematic or framework how to learn from previous

projects. The information as input for the project file, is delivered by the project leader. Kaizen emphasizes the need to involve multidisciplinary employees for delivery of input for the project file, to search for improvements and to stimulate learning.

3.5 Current issues

From the interviews, different problems are determined. These problems are caused by several causes. There are overlapping causes between these problems or issues. Most of the issues during the preparation, execution and coordination of the production are caused by the planning,

communication, lacking production preparation plan, organizational structure, sales activities and treatment of suppliers. These will be discussed below.

The first issue is about organizational structure. The project leaders are part of the engineering

department and have to report to the manager engineering. This leads to prioritization of activities according the opinion of the department supervisors, instead of the project leader. The project leaders do not have the responsibilities needed to coordinate the projects efficiently

The second issue is regarding the planning. The issues regarding the (production) planning are caused

by a bundle of causes. The (production) planning intends an utilization of 100%, durations of activities does not include transportation or setup time, there is no feedback loop about the performance of employees, planning is disturbed by accepting orders even if there is no capacity available, no internal delivery times, unclear prioritization of tasks, unclear influences of delays, etc. This results into an unreliable planning which causes delays and the delays causes a delayed start of the next project or delays in other projects, like a downward spiral or a chain reaction. The

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The third issue is about the communication between departments and to production employees.

Several problems occur because of lacking or inefficient communication. First problem is about forwarding information to different departments and employees. There is a lot of waste or disturbance during the transmission of information between the different departments and employees. For example, the information received from Project Leader during the project meeting has to be forwarded from the supervisor of the work preparation to the purchasing department. This is an inefficient way of communication sensitive for errors or miscommunications. One of these causes can be the fact that employees from the work preparation, purchasing and the project leaders are working in separated rooms, the communication between these departments will be improved if project leaders and work preparation employees are in the same room. Other cause can be the fact that purchasing employees do not attend the planning meetings. During these meetings the information can be explained directly to the purchasing employee.

Second, the information provision to the production has to be improved by explaining them in more detail how products can be produced. Information to the production employees how to produce products is only done by printed drawings. Production employees do not have the possibilities to think how to produce the products in an efficient way. No information how to execute the tasks in an efficient way, tools or molds are provided to the employees, what results into the fact that

employees have to find the method of execution by themselves during execution of the tasks. There are a lot of “creative solutions” to problems during the production. Most of these problems could be prevented by a (better) production preparation plan. The creativity of employees should be used for those issues where creativity is needed and not for problems that could be prevented.

Third, the prioritization of activities needs to be communicated within the production department. When priorities are communicated within the production, a flow can be created within the

production and the production can be executed more efficiently.

Fourth, the effect of decisions regarding rush orders/activities are scarily discussed with other departments that are involved. The effect of decisions affects downstream activities or activities of other projects. If these decisions are not communicated to the involved employees, problems occur. For example, problems like waiting for parts or spending time too much time to activities which are unimportant according the opinion of the customers.

Fifth, the suppliers do not always have the information needed to start their production. Also changes in drawings are not always communicated with suppliers.

The last problem is that minimized visual communication (by for example graphs, colours, 5S, etc.) to the employees takes place to increase the understanding about for example planning and

performance. Visual communication shows fast and easily for example the planning or performance of the employees within the production.

The fourth issue is about the production preparation plan which describes the way or how products

has to be produced, which tools are needed, which molds have to be developed, etc. Only the drawings and information about the sequence of activities are provided to the production employees. Creating a production preparation plan more often or a more detailed production preparation plan can result into more efficient production what save time during the production. How much time there will be saved differ per project and activity, what makes is not possible to quantify. The production preparation plan minimizes the Muda, Mura and Muri by applying the Lean principles or tools.

The fifth issue is about the treatment of suppliers or the purchasing department. The suppliers are

not always forced to reduce the lead time. Only if the time becomes highly critical and core suppliers cannot meet the delivery date, other suppliers will be found to outsource activities. Purchasing has to find a trade-off between flexibility of suppliers and costs of products.

The sixth issue is about learning from previous executed projects. Information about projects is stored

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16 because the Calculator or Head of Engineering have to recognize overlaps across projects. There is no systematic or framework how to learn from previous projects. The information as input for the project file is delivered by the project leader. Kaizen emphasizes the need to involve multidisciplinary employees for delivery of input for the project file, to search for improvements and to stimulate learning.

The seventh issue is about the sales activities. Only a single Commercial Director is present at

Leenstra which singlehandedly forms the sales department. From the interviews it can be concluded that more sales employees would result into more acquisition of customers. This is especially the case because in the industry Leenstra operates in it is important to visit (potential) customers to acquire new orders. Regular visits of (potential) customers will result into more suitable projects or the possibility to choose the most suitable projects for Leenstra to execute. The difference with the current situation is then that if there is no capacity to execute the project, Leenstra does not have to accept the project. The need to acquire orders or customers may sound contradicting to the current situation; after all currently a lot of temporary employees are hired to extend the capacity. However, the reason for hiring temporary employees in the current situation is due to the execution of a complex project (ferris wheel), under immense time pressure and due to the fact that Leenstra accepted to produce more parts in a small time frame. The argument of employees of Leenstra about accepting delivery times as set by the customers is that (almost) every order is needed to survive. Others argue that accepting delivery date as set by the customers for the reason that no reliable delivery date can be proposed. Leenstra deliver what the customer asks, even if it is almost impossible. This cannot be a sustainable strategy for the long term. Leenstra must take efforts to solve this important issue, by for example more active or smarter acquisition of customers.

Another conclusion from the interviews is that a customer-supplier-relationship has to be built with customers, what can result into better understanding, commitment, earlier/improved information provision and the possibility to negotiate about delivery times. Another important aspect is that the sales department has to search for customers with products that can be compared with previous executed projects. Leenstra gained experience with projects and can use that experience for other customers to produce similar products or to increase the chance for repetition of projects. The activities where sales have to focus on have to be described in the sales plan. Another issue

regarding the sales department is that the engineering department executes the pre-calculations and drawings for the sales department. The result of this is that less time is available for engineering products, what can influence the time needed for the delivery of drawings to the work preparation department.

The eight issue is about the tasks and responsibilities of employees. All the tasks and responsibilities

are centralized. Decentralization of activities increases flexibility to changes and decreases the time needed for decision making. For example, the purchasing department executes activities which can be executed by other employees. This can result into more flexibility in responding to changes, less time needed for consultation and more time available for the purchasing department to focus on their core tasks. The work preparation can purchase products needed for their activities by themselves, instead of “ordering” the products needed at the purchasing department. Or, the production department can purchase their tools needed for production by themselves. Better deviation or decentralisation of tasks results into more time to focus on core activities like, in case of the purchasing department, negotiation/assessment of suppliers, development of umbrella

contracts, execute complex purchasing activities, coordination of deliveries, etc.

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17 done by weekly project meetings with the Production Manager, Operations Manager, production supervisor and Production Unit Manager. During the analysis of the current situation, several problems or inefficiencies are discovered and observed.

The causes of the issues can be categorized into issues with regard to the organizational structure, planning, communication, production preparation plan, treatment of suppliers, learning from previous executed projects, sales activities and tasks and responsibilities. The issues and the consequences are summed in table 2.

Issue Result or waste

Organizational structure Lack of power and responsibilities of the project leaders, prioritization according the supervisors of the

departments instead of project leader

Planning Unreliable planning, time pressure on projects and people, high utilization, no feedback of performance, variability in duration of activities that need to be executed and a chain reaction of delays in planning or projects

Communication between departments and to production employees

Inefficient communication, “creative solutions” that could be prevented, unclear prioritization of activities, printed drawings, no information how to produce efficiently, unclear what the effects of decisions are and lack of visual communication.

Production preparation plan Wastes during the production (transportation, waiting, movement, inventory and waste of time)

Treatment of suppliers or the purchasing department

Cost focus, not focused on flexible suppliers, suppliers are not forced to reduce lead time and no negotiation about delivery date which is needed.

Learning from previous executed projects

Ad hoc learning from projects and no involvement of other employees to deliver input or to create learning. Sales activities No active acquisition of customers, no supplier-customer

relationships and no negotiation with customers about delivery date

Tasks and responsibilities of employees

Decision making speed, flexibility to respond quickly to changed and much time needed for consultation

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4. LITERATURE ABOUT LEAN/AGILE PROJECTS

The literature describes several methods for the execution and management of projects. Koskela and Howell (2002) state that traditional project management approach is not suitable for complex projects and for projects which are under increased time pressure. This because of all steps needs to be executed for every project. For example the description of the boundaries, scope, quality and communication per project is time consuming and suitable to apply for long term projects. This chapter surveys the literature on Lean and Agile execution of projects, how the Lean principles can be applied during the execution of projects. Projects can also be executed in an Agile way, in a Lean way or a combination of both. Lean and Agile project management, each has his own focus,

principles and characteristics. This chapter answers the second research question, namely:

“according to the literature, what is Lean and Agile execution and coordination of projects”. First the general concept of Lean is explained in order to understand how Lean can be applied in project environments. Next, Lean projects are discussed in section 4.2 and Agile projects are discussed in section 4.3. Section 4.4 discusses the components that are needed for the development of a project team. Section 4.5 discusses how projects can be planned and controlled with the different phases of a project. Last section describes the conclusions from the literature review. The consequences or conclusion of the findings from the literature to Leenstra’s situation is discussed in the next chapter.

4.1 Lean philosophy and tools to reduce waste

In the literature the concept of Lean is widely discussed. However there appears to be no uniform definition of what Lean is. Hopp and Spearman (2004) defined Lean as “the production of goods or

services that minimizes buffering costs associated with excess lead times, inventories, or capacity”.

Shah and Ward (2003) define Lean as a more widely applicable concept that can be used outside production environments: “a series of activities or solutions to minimize waste and non-value-added

operations, and improve the value added process”. Shah and Ward (2007) also include the social

system into their definition, and therefore describe Lean as “an integrated socio-technical system

whose main objective is to eliminate waste by concurrently reducing or minimizing supplier,

customer, and internal variability”. Fine et al. (2009) defines two sides, the ‘hard’ side which is about

tools and processes, and the ‘soft’ side, which focuses on the people dimension of work. Lean is more than the reduction of waste and consists also of social ‘soft’ aspects. However for this thesis it is of more importance to apply the Lean principles during the preparation of the production to a more efficient execution of the production. For this reason the Lean Management philosophy is not discussed, but there is focused on the reduction of waste and the application of tools.

4.1.1 Lean principles for reduction of waste

Womack and Jones (1996) enumerate five principles which form the basis for creating Lean processes and which can also be applied during the production preparation process. The first

principle is about the definition of value. Define all activities which add value from the perspective of the customer and for which the customer is willing to pay for. The next step is to create a ‘value flow’ which consists of all activities from raw materials to end-products that create value. The third step is to avoid interruptions and waste in the value flow and to optimize the value added activities. The fourth step is to let the customer pull the product through the value stream to avoid inventories and obsolete products. The customer demand drives the value stream. The last step is to start pursuing perfection. It is a continuous process to produce exactly what the customer wants and reducing effort, time, costs, space and mistakes.

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19 types which are: 1. Overproduction, 2. Waiting, 3. Transportation, 4. Movement, 5. (Over)Processing, 6. Inventory, 7. Defects, 8. Waste of time and 9. Inappropriate use of human creativity or skills. The last two are added by King (2009). Radenka and Sutton (2007) differentiate waste into unnecessary waste which should be eliminated and necessary waste. The unnecessary waste is for example rework or waiting for parts, necessary waste can be managerial activities such as the activities needed to keep control over projects.

4.1.2 Tools

The literature describes several tools which can be used for the identification, analysis and minimization of waste. King (2009) describes fourteen tools, which are summed below.

1. Value Stream Mapping (VSM) – Method for visually depicting the process that creates insight and opportunity for improvement;

2. Tact Time - Time interval to exactly meet customer demand;

3. Kaizen - Japanese term for continuous improvement using the engagement of all employees;. 4. 5S - Five-areas for workplace organization, housekeeping, cleanliness, visualization and

standardized work;

5. Jidoka - Build in quality, A philosophy that everything must stop at the first sign of quality problems so it can be improved;

6. Single Minute Exchange of Dies (SMED) – tool for systematically analyzing and improving product changeovers;

7. Poka-Yoke - Techniques for mistake proofing;

8. Five times why tool - Asking the question WHY five times to find root cause of a problem; 9. Standard Work - Defining the optimum way to perform tasks;

10. Total Productive Maintenance (TPM) - Set of practices to improve maintenance and equipment;

11. Cellular Manufacturing - Dividing product line up into families of products and dedicating specific equipment to each family;

12. Heijunka - Production leveling/Production smoothing;

13. Just-In-Time (Pull) - Produce only what is needed and when it is needed (according to customer preferences);

14. Kanban - Mechanism for visually signaling what is needed and controlling Work-In-Process. The applicability of these key tools can vary per industry or context (King, 2009; Radnor et al., 2006). After analysis of the current situation (in the previous section), there can be concluded that some of these tools can be applied in the preparation phase of the production of non-repetitive products. For this research the tools that can be applied are for example, to produce only what and when it is needed (JIT). Or, when determining the product flow, a value stream map can be created and tact times can be developed to level the workload of the employees (Heijunka). Another example of the application of one of the tools is to organize the working environment by the application of 5S or to engage employees to develop or improve the process flow by Kaizen and ‘five times why tool’. SMED can be used to improve time needed for changing to the production of the next projects. Tools that are less applicable are for example Kanban, because of the use of many different parts, TPM because not advanced equipment is used and cellular manufacturing because the production consist of a jobshop layout.

4.2 Lean projects

The objective of Lean Projects is adapted from the AGI-Goldratt Institute (2009) and can be described as ‘providing exactly what the customer wants, when needed, in the correct quality, quantity and

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20 projects are temporary production systems, which want to deliver products while maximizing value and minimizing waste. Each project has to be delivered and treated separately.

Ballard and Howell (2003) describe the Lean Project Delivery System with the different (overlapping) phases. The overlapping phases are needed to reduce the disturbances during the transfer of information to the next downstream phase of the project. The overlap improves the communication between phases, because upstream employees are involved in the downstream phases. A

conversation among the participants is needed to create understanding to the employees of the next phase. Ballard and Howell (2003) argue that the conversation is the best way to inform the next participants about the customer demands and to create understanding. The way of communicating emphasizes conversations among employees from different disciplines or phases for effective transfer of information. To improve the communication at Leenstra, it is important to stimulate conversations or meetings by employees from multiple disciplines or phases of the project (Liker and Morgan, 2006). However, the Lean Project Delivery system is less applicable to the situation of Leenstra, because the need of fast communication to all involved employees.

The AGI-Goldratt Institute (2009) describes that implementation of Lean to project environments starts with aligning the total capacity needed for the projects to the capacity of the system within a time frame. The capacity needed (including time needed for transportation, etc.) and the capacity available for execution of the projects needs to be taken into account. From the analysis of the current situation at Leenstra, it can be concluded that projects are accepted even if there is no capacity available. Next, the AGI-Goldratt Institute (2009) describe to apply Lean to a plan where tasks are defined into task priorities (right tasks assigned, right sequence, utilizing the correct

resources) and task management (ensuring that the right tasks are executed, at the right time, delivering the correct content with the correct quality, as quickly as possible).The emphasizes here is

on the efficient execution of the production to deliver Just-In-Time to the customer. To realize this, the production needs to be prepared to analyze for example the right sequence, correct resources, what the right time is to execute what operation, etc. (the key terms in italics mentioned above). If this need to be determined during the start of operations, the operation will take more time than planned and waste is build in.

This also affects the planning of the projects, because of delayed operations. The so-called ‘Last Planner Method’ of Koskela and Howell (2002) is an example of a Lean project planning method. In the Last Planner Method, the person who defines the final planning is also responsible for the coordination and control of the production (Koskela et al., 2010). This is in accordance with the Lean Project Delivery System, because the last planner creates the overlap between the planning phase and the execution phase. At Leenstra this should be the Production Unit Manager because this person is the overlap between the project team and the production. The method is focused on creating a detailed planning before the production or execution of the activities needed to achieve objectives. The Last Planner Method consists of a ‘look ahead planning’ where pre-processes are pulled and planned to enable the execution activities and align the plan to the specific situation. Koskela and Howell (2002) describe that secondary tasks can be used as buffer tasks or as slack in planning. When primary tasks need more time than planned, the secondary task can be deleted from planning. The deadline of the primary task will be met, the secondary task need to be rescheduled.

Primary tasks are tasks which are part of the critical path of project(s), where milestones need to be

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21 information, parts and other requirements are available. Completed tasks have to be reported to the other employees.

Poppendieck and Poppendieck (2003) identified several underlying principles for Lean execution of projects. These steps, which are also applicable for the case study company, are: 1. Eliminate waste to increase efficiency, 2. Amplify learning to execute repetitive projects more efficient, 3. Decide what and how to produce as late as possible to avoid rework, 4. Deliver products within the

production as fast as possible to minimize queuing and work-in-progress inventory, 5. Empower the team for fast decision making and increase flexibility, 6. Build integrity/openness in to increase transparency and reliability, and 7. See the whole to keep overview of the project and take the final solution into account. It is important that (some) employees of every phase during the project, for example the project manager or the project team, keep the overview over the total project and the final solution (Poppendieck and Poppendieck, 2003). Decisions need to be made at the bottom level or work floor level in order to allow the person with the best knowledge of the issue to make the decision (Womack et al., 1990; Gadde and Hakansson, 1994; Humphreys et al., 2000).

4.3 Agile projects

Agile Project Management is “a set of values, principles, and practices that assist project teams in

coming to grips with this challenging environment” (Highsmith, 2004, p. 16). Agile projects are

suitable to environments with an increased complexity where coordination becomes of more importance. Agile project principles are mostly applied to innovative product or software

development projects, cf. Conforto and Amaral (2010). The focus of Agile projects is on flexibility, teamwork and communication, because of the complexity of the products or activities (Kraut and Streeter, 1995; Agerfalk and Fitzgerald, 2006). Agile projects have the flexibility to respond quickly to changes in requirements and failures, and are suitable in case of complex, uncertain and time-limited projects (Fernandez and Fernandez, 2009). Gerrese (2010) argue that companies that intend to be flexible must focus on time management and less on costs management, because for example lower utilizations results into more flexibility. Agile (and Lean) projects has an increased focus on the process flow and value generation compared to the traditional project management and is focused on management as organizing for planning, execution and control (Fernandez and Fernandez, 2009). Hole (2008) describes that traditional projects are focused on command-and-control with formal (mechanistic) communication or structures. Agile projects are focused on leadership, participation and collaboration with informal (organic) communication or structures. Lean projects are focused on communication by overlapping phases where upstream employees transfer information to the downstream employee.

Conforto and Amaral (2010) describe focus on employee development, managed and self-disciplined project team, participatory decision making, customer focus and less bureaucracy as principles of Agile Project Management. The principle self-managed and self-disciplined project team can be compared with the multidisciplinary project team which is mentioned in Lean Project

Management. These project teams enhance the capabilities of the company and increases efficiency of the execution of projects (Clark and Wheelwright, 1992). Next, they improve the communication and to create specialized solutions for complex problems with the responsible experts (Womack et al., 1990). The team breaks down the boundaries between the different departments to form a team which is responsible for the delivery of the project and to keep the overview. All resources for execution and the employees with the decision power needed for the project need to be present in the project team (Karim and Arif-Uz-Zaman, 2013; Gerrese et al., 2012). If not all employees have the capabilities needed for execution of the project, training is needed. Also the tasks and responsibilities of the team members need to be clearly defined and described, for the reason that these persons are responsible for execution of their own tasks and report the results to the project manager.

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22 where negotiations take place about durations and internal delivery dates. Less bureaucracy is realized by the creation of a self-managed project team, by simultaneous planning, monitoring and control. Lean Manufacturing is also customer focused. The Agile (informal) structure is the most flexible communication structure regarding changes, because of the involvement of all employees needed for execution of the activities required for the project. The most important difference to Lean project management is about the continuous rescheduling or iterative planning and feedback about the progress. Agile project management encourages continuous control and adaption of the progress and planning. When changes occur, the team has the flexibility to respond to these changes. Lean project management intends to minimize risks and Agile project management intends to detect problems as soon as possible and respond fast when problems occur.

The Scrum method as described by Koskela and Howell (2002) is an example of an Agile project management method and starts with the requirements from the customer. Detailed information needed to develop a planning becomes sometimes available during the project, what causes

uncertainty (Hans et al., 2007). Because the lack of information it is often at the start not possible to create a work breakdown structure and a detailed planning, time and costs are estimated based on the requirements of the customer. Also at Leenstra, not always all the information is available at the start of the project or sometimes changes (in for example drawings) occur close to the start of the production. Because of the flexibility of the production employees, these changes will be realized, but this takes time and influences the rest of the schedule.

In the Scrum Method, the execution of projects is standardized and certain planning is executed in a standard framework. The management defines the activities needed to achieve the requirements, organize these activities, classify authorities and coordinate authorities and responsibilities

(Management Study Guide, 2008). Koskela and Howell (2002) describe that coordination is arranged through routine conversations and takes place between team members. All members announce in standardized daily Scrum meetings, the daily tasks on the project what creates transparency and visibility to other team members. Problems during the day will be announced the next Scrum meeting. These scrum meetings can be compared with the daily board meetings from the Lean philosophy. The difference is that in Scrum meetings, every team member announces and decides what to do, in collaboration or interaction with the other members/stakeholders. During daily board meetings the planning is discussed and there it is prescribed through the planning what activities need to execute. These meetings are present within the production department at Leenstra and these are meetings with the objective of sharing information regarding various problems. During these meetings, attention has to be given to the planning and feedback of performance, what creates transparency (Koskela and Howell, 2002). Koskela and Howell (2002) describes three levels of

control: (1) the reports of team members in daily Scrum meetings; (2) the control of achievements, adaption of requirements and estimation of costs and duration after each phase; and (3) the control about the whole project, whether objectives are achieved and performance of the project. The key difference with the Last Planner Method is that Scrum develops the planning in participation and collaboration, the planning is discussed on daily basis and decision making is done in multidisciplinary meetings. The planning in the Last Planner Method is developed by one employee and the daily board meetings are for sharing information and to manage orders through the production. Conforto and Amaral (2010) emphasize the use of planning boards for visual communication, for example the Iterative and Visual Project Management Method (IVPM2) based on Agile Project Management principles. The method is developed for innovative product development projects and described and shown in the figure in appendix C. Visualization and face-to-face meetings are

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23 and managers to see fast and easily what currently happens within the production. Andon boards, Gantt Charts or planning boards, Problem solving boards, activity display board, team

communication boards, are examples of visualizing activities and tasks that creates input for the face-to-face meetings. Morgan and Liker (2006) argue that a planning board is necessary for

communication and feedback to the employees. Conforto and Amaral (2010) describe the need for a planning board for the total projects with all deliverables and a project where the activities are planned per working day. The visualization of planning and performance enables employees to check their performance or to determine required efforts to achieve the milestones on time (Morgan and Liker, 2006; Ward et al., 2007). Gerrese et al. (2010) emphasize the need to create a (project) cell to place members of the project team into the same room, what increased the communication and collaboration. The cell consists of resources within one room to execute all activities needed for the project. The success of the projects depends on the possibilities and the quality of the feedback to employees (Conforto and Amaral, 2010).

4.4 Components for project team

Much attention or research is focused on the manufacturing process and that there is less understanding of or investigation to Lean projects (Hoppmann, 2011; Letens et al. 2011). Hoppmann et al. (2011) analyzed the literature and found eleven components of Lean Product Development (LPD) projects which contribute to an efficient and smooth product development project. These eleven components are summed and described below. Some of these principles are broader applicable than only for product development projects.

1. Strong project manager – also called in the approach of Morgan and Liker (2006) the “Heavyweight Project Manager” or the “Chief Engineer”. A project manager needs to coordinate the project and to ‘see the whole’. A project manager is responsible for the execution of the projects and controlling the schedule, costs, performance and targets. According to Hoppmann et al. (2011) the project manager translates the customer demands into several (aligned) project goals and activities. The project goals need to be aligned with the goals of the company. A strong project manager represents the “voice of the customer” within the organization, so acts as internal customer within the organization. A strong project manager sets milestones for planning and coordinates the project by continuously

monitoring performance criteria such as costs and schedule/lead time. A strong project manager must have strong interpersonal skills which include skills for good communication, listening and understanding, problem solving and decision making (Lee et al., 1995). For the success of projects it is important that project managers have the knowledge, power and resources (money, time, employees, etc.) needed for execution of the projects.

2. Specialist career path – also called the “career ladder” of Allen and Katz (1986). Development of technical expertise in the field of the employee with feedback loops and promotions to develop the required knowledge and continuous improvement activities.

3. Workload leveling – Generating smooth flow, take availability and capabilities of employees into account, avoid inefficiencies through multi-tasking, Prioritize and synchronize tasks. 4. Responsibility-based planning and control – Agile Project Management described

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24 plans which allows short lead-times of the overall project. Because of the involvement and negotiation of all internal stakeholders, the involved persons themselves feel responsible for the execution of the plan. The employees have to estimate the duration of their own tasks where they are responsible for, with taking the capacity into account. The PMBOK Guide (2008) describes that estimations of the duration of activities has to be done by the

employee who is most familiar with the nature and the execution of the specific activity. The accuracy of the estimated duration can be improved by considering uncertainty and risk factors during the estimations.

In case of a multi-project environment, each employee creates their own planning where they plan the activity needed for the project. When creating a planning, Koskela and Howell (2002) describe that tasks can be distinguished into primary and secondary tasks, as

explained earlier.

5. Cross-project knowledge transfer – or as mentioned by the second principle of Poppendieck and Poppendieck (2003); Amplify learning to execute repetitive projects more efficient. It is recommended to develop a clear and logic system or database that has low barriers to enter and that retrieve and update information easily. It is important to report good and bad practices, which results into lessons learned. Also pre-calculation and the calculation after completion of the project, schedule with actual processing times, pictures of finished

product, drawings, decision logs, etc. can be stored in the project file. Pictures of the finished products can help to recognize items. Mascitelli (2007) emphasizes the importance to review, reorganize and simplify the database regular to avoid an information overload, to keep the system clear and simple. This knowledge can be used instead of regenerating knowledge during future projects. Use blueprints for activities like planning, standardize projects or product families which occur frequently, develop procedures for frequent activities, etc. 6. Simultaneous execution – phases can be executed with some overlap. Different stakeholders

can be integrated in the projects at an early stage, for example the development of production process can be done in parallel.

7. Supplier integration or involvement – From a Lean perspective companies has to reduce the supply base and involve key suppliers in the beginning stages of the project to inform suppliers of the future products (Hoppmann et al., 2011). Purchasing have to search for the most suitable supplier for delivery of the products. According to Beamon (1999), flexibility is vital for the success of the supply chain, when it exists in an environment with a lot of uncertainty (Agile environments). If the time pressure is high, more flexible suppliers are necessary what results in higher costs. If the time pressure is low, suppliers with low costs are necessary what results into longer lead times. Which suppliers have to be selected depends on the performance of the suppliers and on the objectives of the organization. Suppliers can be assessed on lead time, quality and costs (Humphreys et al., 2000). This result into the fact that the suppliers needed, differs from situation to situation, because suppliers perform differently on the (three) performance criteria. It is important to have key suppliers per type of product/project. For example, key suppliers to increase flexibility of lead times (when time pressure is high) and key suppliers to focus on costs (when time pressure is low). Other suppliers can serve as back-up suppliers when the key suppliers cannot meet the delivery dates (Saghafian and Van Oyen, 2012).

Purchasing can has to focus on developing long-term supplier relationships, development of umbrella contracts, provision of information to suppliers about the parts needed,

coordination of suppliers, communication to project team, etc. The purchasing department is of importance to make sure that all parts needed for production are indeed present. One of the key activities of this department is to check if all suppliers have the information they need for execution of outsourced activities.

HOW TO IMPROVE THE PREPARATION AND COORDINATION OF THE PRODUCTION OF HIGH-VARIETY/LOW-VOLUME FROM A LEAGILE PERSPECTIVE? A CASE STUDY