LEAN MANUFACTURING IN THE PROCESS INDUSTRY An implementation strategy for Company X

LEAN MANUFACTURING IN THE PROCESS INDUSTRY

An implementation strategy for Company X

RUUD STEVENS

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-LEAN MANUFACTURING AT COMPANY X

Author: Ruud Stevens

Student number: 1389173

Study: MSc. Technology Management

Specialization: Process Technology

University: University of Groningen

Faculty: Economics and Business

Primary supervisor: Dr. Ir. I. Ten Have MBA Secondary supervisor: Dr. L. Zhang

Company: Company X

Supervisor: Production Manager

NOTE FROM THE AUTHOR:

MANAGEMENT SUMMARY

Company X is a processor of agriculture commodities. In the Western Europe, one their cocoa processing plants is located. Cocoa beans are first shipped from West-Africa to the Western Europe. At Company X the beans are broken in order to separate the shell from the useful kernel, denoted as nib. Nibs are subsequently roasted and ground into liquor. Liquor is pressed, which results in butter and cake. Butter is packed and transported to the customer. Cake is first milled and packed in various-sized bags. This way over numerous types of cocoa products can be produced.

The reason for this research was to improve the production process of Company X. Relative high stocks, dissimilarities in productivity between work shifts and urgency to cut costs asked for action according to the management. Since Lean Manufacturing can solve or improve on these issues, the applicability of Lean Manufacturing in the production processes of Company X is investigated. However Quality and Maintenance related concepts are familiar, Company X has minimal experience with and knowledge of Lean Manufacturing. Due to the time-constraints of this research, a focussed approach was justified. Where the focus of this research would be put depended on the both theoretical and practical issues.

A theoretical study concerning Lean Manufacturing was conducted. Five principles (value, value stream, flow, pull and perfection) were explored, as well as the four areas that Lean Manufacturing regards. Just-in-Time (JIT), Total Quality Management (TQM), Total Productive Maintenance (TPM) and Human Resource Management (HRM) were found to be four bundles of Lean Manufacturing. JIT and HRM were perceived to be the most important for Company X at the moment. Therefore of both JIT and HRM relevant tools were investigated.

In the conservative culture of Company X it seemed to be risky to change too much at once. Therefore the Powder Packaging Department was selected as being the pilot department. Furthermore, implementing JIT tools in the process industry requires a different approach and some creativity. Since Company X has neither experience nor knowledge of Lean Manufacturing the research goal of the research was formulated as:

‘Provide Company X of a structured overview of Lean Manufacturing and a customized plan for implementing Lean Manufacturing in its production processes, starting with Powder Packaging.’

The analysis of the Packaging Department resulted in a list of main problems and wastes:

• Powder is packed even though there is no customer demand, which results in overproduction and rework.

• Filling machines reject ...% of the supplied bags, which results in waste of material costs. Furthermore over ... hours of capacity is lost;

• Changeover times depend on the skills of and communication among operators and are therefore highly variable;

• Alternating congestion and starving in front of Packaging was found to be caused by insufficient communication;

• Housekeeping standards were subject for improvement.

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-Furthermore, it is determined that the filling machines are the bottleneck of the Packaging process.

Theoretically a maximal throughput of 1 unit/h is feasible. However, due to disorders and wastes an average throughput is measured of 0.7 units/h. The highest measured throughput in the last 90 days was 0.8 units/h.

Once detailed understanding of the entire production process, and especially the Powder Packaging Department was gained, an implementation plan is proposed. Before JIT tools can be implemented, setting organizational and cultural preconditions is advocated. A steering team, Lean coordinator and project team should be appointed. Subsequently cultural awareness should be created by applying HRM tools. These tools are assuring management support, setting and communicating goals and achieve employee commitment by strong leadership, empowerment, regular feedback and rewarding. Knowledge of Lean Manufacturing should be increased by several types of training for all employees.

The implementation of JIT tools at the Powder Packaging Department are divided over five phases: analyzing, structuring the work floor, standardizing work, redesigning production and ultimately implementing flow and pull. Each phase includes one or more tools and subsequently an order in which tools should be implemented is proposed. This sequence of implementation is as following:

• Analysis - Value Stream Mapping

• Structure - Five S

• Standardize - Standardized Work and SMED

• Redesign - Cellular Manufacturing

• Pull and flow - Takt time planning and ConWIP

Once these tools are implemented great emphasis should be put on the continuation of the new way of working. The fifth principle (perfection) is about continuous improvement by means of Kaizen Events, performance measurement, Visual Systems and furthermore continuous attention to the HRM tools.

The analysis revealed that there upstream operations (bean intake, breaking, roasting and pressing) are less flexible than downstream operations (batch making, milling and packaging). The consequence is that several JIT tools are not feasible or applicable in the upstream side of the process. Therefore a decoupling point is determined. Typical pull related tools like Cellular Manufacturing, Takt time production and ConWIP are only applicable in the downstream operations. The universally applicable JIT tools like Value Stream Mapping, Five S and Standardized Work are applicable at all processes. The implementation plan prescribes to steadily expand Lean Manufacturing from Packaging up the value stream to Bean Intake. The result is hybrid push-pull system, where the upstream operations are push-oriented and the downstream operations pull oriented.

At packaging alone overproduction can be reduced because production will be stopped when there is no customer order, changeover times can be reduced by 20 to 30%, WIP inventory levels can be reduced and controlled and the predictability of cycle and lead times can be increased. Benefits at other departments than Packaging are not addressed in this research. The biggest hurdle for Company X will be to keep working with the new standards and not revert back to old ways. Therefore, a robust foundation should be established and both management and employees should be convinced of the advantages of Lean Manufacturing.

PREFACE

With five months of hard work at Company X, I have finished the last part of the master program of Technology Management at the University of Groningen by means of this master thesis. This thesis concerns the

implementation of Lean Manufacturing in a cocoa processing plant.

Working at Company X has been very interesting. Moving away from study books and testing theories in practice is very rewarding. Introducing a relative new concept in a traditional production process gave me a thorough insight in the challenging technical and organizational aspects of Lean Manufacturing, as well as in the functioning of a real company.

This thesis could not be realized with the help of many people at Company X. I especially want to thank production manager and my company supervisor for sharing his experience and the insightful discussions we had. I also want to thank the plant manager for offering me the opportunity to conduct my graduation project at Company X and the freedom to find my own way in this. Furthermore, I want to express my gratitude to all colleagues at Company X who introduced me to the ins and outs of cocoa manufacturing and of course for the welcome relaxations and coffee breaks.

With regard to my university supervisors I want to thank Ingrid Ten Have for her support, critical view and helpful comments during the research. Thanks also to my second supervisor Linda Zhang for her time and useful remarks at the final stage of my research project.

I wish Company X a lot of progress and prosperity.

Ruud Stevens

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-TABLE OF CONTENT

1 GENERAL INTRODUCTION ... - 10 -

2. RESEARCH APPROACH ... - 11 -

2.1 Problem Introduction ... - 11 -

2.2 Preliminary Problem Statement ... - 11 -

2.2.1 Management Question ... - 12 -

2.2.2 Preliminary Research Goal ... - 12 -

2.2.3 Scope ... - 12 -

2.2.4 Focussed Approach ... - 12 -

2.3 Structure of the Research ... - 13 -

2.4 Deliverables ... - 14 -

3 LEAN MANUFACTURING ... - 15 -

3.1 Introduction to Lean Manufacturing ... - 15 -

3.1.1 History of Lean Manufacturing... - 15 -

3.1.2 Context of Lean Manufacturing ... - 16 -

3.1.3 Philosophy of Lean Manufacturing ... - 17 -

3.1.4 Goals of Lean Manufacturing... - 17 -

3.2 Principles of Lean Manufacturing ... - 18 -

3.2.1 Principle 1: Value ... - 18 -

3.2.2 Principle 2: Value Stream ... - 19 -

3.2.3 Principle 3: Flow ... - 20 -

3.2.4 Principle 4: Pull ... - 20 -

3.2.5 Principle 5: Perfection ... - 21 -

3.3 Bundles of Lean Manufacturing ... - 21 -

3.3.1 Just-In-Time Bundle ... - 22 -

3.3.2 Total Quality Management Bundle ... - 22 -

3.3.3 Total Productive Maintenance Bundle ... - 22 -

3.3.4 Human Resource Management Bundle ... - 23 -

3.4 Tools of the JIT Bundle ... - 23 -

3.4.1 Value Stream Mapping ... - 24 -

3.4.2 Kaizen ... - 24 -

3.4.3 Five S ... - 25 -

3.4.4 Changeover Time Reduction ... - 25 -

3.4.5 Visual Systems ... - 26 -

3.4.6 Standardized Work ... - 26 -

3.4.7 Poka-Yoke ... - 27 -

3.4.8 Cellular Manufacturing... - 27 -

3.4.9 Line Balancing ... - 27 -

3.4.10 Pull systems: Kanban, POLCA and ConWIP ... - 27 -

3.4.11 Plant Layout ... - 29 -

3.5 Tools of the HRM Bundle ... - 29 -

3.5.1 Employee Involvement ... - 29 -

3.5.3 Training and Education ... - 30 -

3.6 Critical Success Factors to Implementation ... - 31 -

3.7 Performance Measurement ... - 31 -

3.8 Lean Manufacturing in Process Industries ... - 32 -

3.9 Related Business Improvement Concepts ... - 33 -

3.9.1 Six Sigma ... - 33 -

3.9.2 Theory of Constraints ... - 33 -

3.9.3 Lean Manufacturing and the ‘Others’ ... - 33 -

4. ANALYSIS ... - 34 -

4.1 Cocoa ... - 34 -

4.1.1 History ... - 34 -

4.1.2 Origin of Cocoa ... - 34 -

4.2 Production Process ... - 34 -

4.2.1 Breaking and Winnowing ... - 35 -

4.2.2 Alkalization ... - 35 -

4.2.3 Roasting ... - 35 -

4.2.4 Grinding ... - 35 -

4.2.4 Pressing ... - 36 -

4.2.5 Pulverization, Cooling and Tempering ... - 36 -

4.2.6 Packaging and Distribution ... - 36 -

4.3 Products ... - 36 - 4.4 Market ... - 37 - 4.5 Organization ... - 37 - 4.6 Production Planning ... - 38 - 4.6.1 Sales ... - 40 - 4.6.2 Customer Services ... - 40 - 4.6.3 Planning... - 40 - 4.6.4 Production ... - 40 -

4.7 Production Flow Analysis ... - 41 -

4.8 Changeovers ... - 42 -

4.9 Rework ... - 42 -

4.10 Quality and Safety ... - 42 -

4.10.1 Safety ... - 42 -

4.10.2 Quality ... - 43 -

4.11 Value Stream Mapping ... - 43 -

4.12 Conclusions Value Stream Map ... - 47 -

5 INTERMEDIATE CONCLUSIONS ... - 48 -

5.1 Product Volume ... - 48 -

5.2 Process Industry vs. Lean Manufacturing ... - 48 -

5.2.1 Point of Product Discretization... - 48 -

5.2.2 Product Characteristics ... - 49 -

5.2.3 Process Characteristics and Process Flexibility... - 49 -

5.3 Flow ... - 50 -

5.4 Bottleneck ... - 51 -

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-6 PROBLEM STATEMENT ... - 52 -

6.1 Problem Statement ... - 52 -

6.2 Conceptual Model ... - 52 -

6.3 Method of Research ... - 53 -

7 POWDER PACKAGING DEPARTMENT ... - 54 -

7.1 Types of Packages ... - 54 -

7.1.1 Bags ... - 54 -

7.1.2 FIBCs ... - 54 -

7.1.3 Pallets... - 54 -

7.1.4 Other Packaging Material... - 54 -

7.2 Operators ... - 55 -

7.3 Process Layout ... - 55 -

7.4 Value Stream Map of Powder Packaging Department... - 56 -

7.5 Changeovers ... - 58 -

7.5.1 Changeovers ... - 58 -

7.5.2 Flush Bags ... - 58 -

7.5.3 Replenishments ... - 60 -

7.6 Other Detected Waste ... - 60 -

7.6.1 Warehouse Inefficiencies ... - 60 - 7.6.2 Housekeeping ... - 61 - 7.6.3 Wasted Bags ... - 61 - 7.6.4 Metal Testing ... - 62 - 7.6.5 Outdated Powder... - 62 - 7.6.6 Uptime ... - 63 -

7.7 Conclusion Powder Packaging Department ... - 63 -

8 IMPLEMENTATION OF LEAN MANUFACTURING ... - 64 -

8.1 Organization of the Implementation Program ... - 64 -

8.1.1 Steering Committee ... - 64 -

8.1.2 Lean Coordinator ... - 65 -

8.1.3 Project Team ... - 65 -

8.2 Creating Cultural Awareness ... - 65 -

8.2.1 Top Management Support ... - 66 -

8.2.1 Setting and Communicating Goals ... - 66 -

8.2.2 Employee Commitment ... - 66 -

8.3 Training ... - 67 -

8.4 Implementation of Lean Tools... - 67 -

8.4.1 Analysis ... - 68 -

8.4.2 Structuring the Work Floor ... - 68 -

8.4.3 Standardized Work ... - 70 -

8.4.4 Redesign Production Organization ... - 71 -

8.4.5 Pull and Flow Production ... - 73 -

8.4.6 Irrelevant Tools ... - 75 -

8.5 Continuous Improvement ... - 75 -

8.5.1 Performance Indicators – Visual Systems ... - 75 -

8.5.3 Additional Points of Concern ... - 77 -

9 RECOMMENDATIONS FOR FURTHER IMPLEMENTATION OF LEAN MANUFACTURING AT COMPANY X ... - 78 -

9.1 Short-term Implementation ... - 78 -

9.2 Long-term Implementation ... - 79 -

10 CONCLUSIONS AND RECOMMENDATIONS ... - 80 -

10.1 Conclusions ... - 80 -

10.2 Recommendations ... - 81 -

REFERENCES ... - 82 -

APPENDIX A: Management Samenvatting ... - 84 -

APPENDIX B: Performance Indicators ... - 87 -

APPENDIX C: Production Flow Analysis ... - 88 -

APPENDIX D: Rework data ... - 89 -

APPENDIX E: Worksheets Changeover Activities ... - 90 -

APPENDIX F: Examples of Five S ... - 91 -

Used abbreviations

NVA = Non-Value Adding

BM = Batch Making PAF = Powder Packaging Facility

BMO = Roasting East PML = Powder Milling

BMW = Roasting West PRS = Pressing of cocoa liquor

BOS = Bean Intake Station RCM = Reliability Centred Maintenance

BRE = Breaking TOC = Theory of Constraints

ConWIP = Constant Work in Progress TPM = Total Productive Maintenance ERP = Enterprise Resource Planning TPS = Toyota Production System HRM = Human Resource Management TQM = Total Quality Management

JIT = Just in Time VA = Value Adding

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-1 GENERAL INTRODUCTION

2. RESEARCH APPROACH

As Company X, its products and its processes are introduced in the previous chapter, this chapter will reveal the formulation of the preliminary research questions, goals and boundary constraints. First, a problem introduction is given. This is followed by a preliminary problem statement and methodological part to structure the research.

2.1 Problem Introduction

Since the early 1990’s the company have experienced several introductions of management concepts. First there was the introduction of Total Quality Management (see also section 3.2). The quality policy of Company X was defined as ‘the constant search of improvement on product, process, and service for the client through total committed involvement of all employees within the organization.’ Several years ago the company started a campaign to increase safety at the work floor. Company X has thus experienced several changes the last decades, minor and major projects, successful and less successful.

Company X is constantly looking for opportunities to improve its business processes. Recently Lean

Manufacturing drew the attention of the management of Company X. Relative high stocks, dissimilarities in productivity between work shifts and urgency to cut costs asked for action according to the management.

Lean Manufacturing is in this research seen as a business philosophy that helps companies to eliminate waste and thus improve its business processes. In chapter 5 this concept will be further elaborated. The potential that Lean Manufacturing can offer raised the interest of the operation managers of Company X. Due to time-constraints, the complexity and relative newness of Lean Manufacturing to the company, a good overview of the potential of that concept in the cocoa processing plant of Company X could not be formed yet.

Production, Quality & Assurance and Production Planning agreed that the implementation of Lean

Manufacturing could only succeed if a solid, robust and carefully developed implementation plan would be written. Implementing Lean Manufacturing could become one of the most far-reaching projects of the last decades and a false step in the beginning would increase the sceptics that change management always brings along, especially at a conservative industry like the cocoa business. In addition, Lean Manufacturing is a never-ending continuous improvement program. Therefore both short-term and long-term actions should be provided.

This all led to the formulation of a five month during master thesis research project concerning Lean Manufacturing.

2.2 Preliminary Problem Statement

De Leeuw (2002) states that in order to develop a robust research model, two problem statements should be formulated at different stages of the research. According to De Leeuw, the preliminary problem statement will be formulated in advance of the diagnosis of the problem situation and will deal with defining the problem. It serves as the starting point of the research.

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-A robust problem statement consists of three elements: a problem question, a research goal and the scope of the research (De Leeuw, 2002). These elements will be discussed in this section.

2.2.1 Management Question

Company X’s management question is:

‘How should Company X implement Lean Manufacturing in its production process?’

This management question results in a problem statement that can be summarized to the following points:

• Identify in what process(es) Lean Manufacturing principles should initially be implemented;

• Recommend how Company X should organize the implementation of the suggested principles of Lean Manufacturing at the entire production plant.

2.2.2 Preliminary Research Goal

Out of this management question the following research goal is derived:

‘Analyse and evaluate Company X’s production process of cocoa powder and provide a plan how Company X should implement Lean Manufacturing principles in its production process in order to produce more efficiently.’

Increasing the efficiency is here increasing the total throughput of cocoa powder with less waste and without making concessions on the current service level.

2.2.3 Scope

Several scope decisions direct the research:

• The research only considers Company X’s production plant;

• Any concession to safety, health or environmental aspects is not acceptable;

• The solution(s) should include incremental redesign of the plant layout for the short term.

2.2.4 Focussed Approach

The fundamental aims behind Lean Manufacturing system are cost reduction, quality improvements, and faster delivery via waste elimination and employee empowerment. Lean Manufacturing focuses on abolishing or reducing wastes and on maximizing or fully utilizing all activities that add value (Abdulmalek, Rajgopal and Needy, 2006). Improving the production processes of Company X and implementing Lean Manufacturing principles involves all departments and processes of the plant; consequently it is very probable to find a large number of influential factors on this measure. In addition, Lee (2007) states that Lean projects take on average three to five years. It took Toyota for example even more than 30 years to make its production process lean. This notion combined with the fact that this study is to be finished within five months, calls for a focussed approach.

projects do not bring the result what is hoped for. This has in the main to do with the conservative culture of both Company X and the cocoa industry, as well as with the way how projects were initiated.

This is recognized by the managers and employees of Company X. To overcome this problem Lee (2007) proposes a beachhead strategy. The beachhead strategy focuses on a small area or a department. Implementing Lean Manufacturing in this way involves less people and the implementation can happen relatively quickly. Others in the organization can observe and learn from the efforts and can, before the official plan calls for them, make their own changes. Company X could benefit from this strategy since operators work in shifts that rotate regularly among production departments. Consequently, every shift of operators will get involved with Lean Manufacturing principles when the implementation starts at one production area.

After the theoretical background of Lean Manufacturing in chapter 3 and the analysis in chapter 4 the focus of this research will be set in an intermediate conclusion in chapter 5.

2.3 Structure of the Research

For setting up a well-structured research a general method, proposed by De Leeuw (2002), is applied. Diagnosis, design and change are the three main phases of this research. Each phase consists of several sub phases that correspond to the chapters in this thesis. A graphic overview is given in Exhibit 2-1. Exhibit 2-1 can also be regarded as a table of content of this document.

The first phase, the diagnosis, consists of a theoretical framework of Lean Manufacturing including the principles and tools in chapter 3. This is followed by an analysis of the company characteristics, the current production processes and its current problems (chapter 4). Since it is neither desirable nor feasible to redesign the entire production plant at Company X at once, in chapter 5 a focus will be determined on a department that fits best according what is found in chapter 3 and 4. The diagnosis ends with the definition of a final (secondary) problem statement and a conceptual model (chapter 6).

The second phase, the design, begins with a close look at the department that is regarded as exemplary in implementing Lean Manufacturing (chapter 7). This information will serve as input for the redesign of this pilot department (chapter 8).

14 -Exhibit 2-1: Research model

2.4 Deliverables

This research will provide the following deliverables:

• An explanation of the fundaments of Lean Manufacturing, including the tools and principles that are related to Lean Manufacturing;

• Recommendations on what department(s) of Company X is most suitable for starting with Lean Manufacturing;

• Identification of most prominent wastes in the pilot department;

• An action plan that is used for implementing Lean Manufacturing in a pilot department. This plan should serve as an example for other departments;

3 LEAN MANUFACTURING

Since it is important to have a good understanding of Lean Manufacturing, this chapter will introduce its fundaments. The interviews that were held for the purpose of this research already revealed that

misunderstandings of Lean Manufacturing are easily made. For example, that Lean Manufacturing does not tolerate inventory or that Lean Manufacturing is a structured way to shorten the payroll. To provide the management of Company X with knowledge of Lean Manufacturing, this chapter will discuss the following topics:

• Philosophy of Lean Manufacturing and its origin (section 3.1)

• The five principles of Lean Manufacturing (section 3.2)

• The four bundles of Lean Manufacturing (section 3.3)

• The tools of the relevant bundles (section 3.4 + 3.5)

• Critical success factors when implementing Lean Manufacturing (section 3.6 + 3.7)

• The applicability of Lean Manufacturing in process industries (section 3.8)

• The link between Lean Manufacturing and related concepts (section 3.9) 3.1 Introduction to Lean Manufacturing

Among the companies that have implemented Lean Manufacturing in their processes are world’s profitable and respected. For example Dell, General Electric, Toyota, Lockheed Martin and FedEx have proven to profit from Lean Manufacturing. Lean Manufacturing is a management concept that focuses the organization on constantly identifying and removing sources of waste so that processes are continuously improved. Among others, Bhasin and Burcher (2006) argue that Lean Manufacturing should be seen as ‘a philosophy that when implemented reduces the time from customer order to delivery by eliminating sources of waste in the production flow’. This first section of chapter 3 will introduce Lean Manufacturing, followed by its philosophy and goals.

3.1.1 History of Lean Manufacturing

After World War II Japanese manufacturers were faced with vast shortages of materials, financial, and human resources. These conditions resulted in the rise of the Lean Manufacturing concept. Automobile manufacturer Toyota recognized at that time that American automakers were out-producing their Japanese counterparts by a factor of about ten. Toyota responded by developing a new, disciplined, process-oriented system, which became known as the Toyota Production System (acronym: TPS). Later on Womack and Jones caused a breakthrough of TPS by naming it Lean Manufacturing and introducing a book titled The Machine That Changed The World (Abdulmalek, Rajgopal and Needy, 2006).

The main goal of Lean Manufacturing is to eliminate wastes in the production process. By doing this, products and services can be delivered to the customer at the right time, at the right place, in the right quantity and according to the right quality requirements. Companies that introduced Lean Manufacturing successfully developed, produced and distributed products and services with half or less human effort, capital investment, floor space, tools, materials, time and overall expense (Womack, Jones and Roos, 1990).

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-all manufacturing and business environments. Numerous case-studies have proven that Lean principles can be applied in all sectors, from banking to information technology and healthcare and in all business departments from research and development to finance and human resources.

3.1.2 Context of Lean Manufacturing

Manufacturing is, although often the most important, only a part of the activities that a company has to undertake in order to get the product at the customer. Also development, procurement and distribution should be considered. According to the interpretation of Lean Production principles should go through all functions. Karlsson and Åhlström (1996) state that a Lean enterprise is an organization which introduces Lean principles in its development, procurement, manufacturing and distribution activities. The conceptualization of Lean Production according to Karlsson and Åhlström (1996) is given in Exhibit 3-1. This thesis focuses on the manufacturing function of Company X as is depicted by the blue block in Exhibit 3-1. Nevertheless, it is essential for the expansion of Lean principles throughout the company to have an understanding of its context.

Exhibit 3-1: The conceptualization of Lean Production (Karlsson and Åhlström, 1996).

Ma rgin

Exhibit 3-2: Value chain framework (Porter, 1998; p11-p15)

3.1.3 Philosophy of Lean Manufacturing

Often organizations view Lean Manufacturing as a process, whereas they should see it as a philosophy. Introducing just a few tools in an ad hoc way only bewilders the work floor (Bhasin and Burcher, 2006). Furthermore, implementing Lean Manufacturing is not a cook book that explains each step of the

implementation process and exactly how to apply the tools. Instead, transforming an organization to a Lean enterprise is a dynamic process, different for each organization. This process is a journey of incremental changes and each approach builds on the previous approach. Lean implementation is actually a long and ongoing learning curve (Quartermain, 2007). For these reasons Lean Manufacturing should not be seen as some actions management should pursue, but a way of thinking (a philosophy) that should be included in the mindset of all employees.

3.1.4 Goals of Lean Manufacturing

Lean Manufacturing can improve on several performance objectives. Bhasin (2008) presents a sum up of the possible benefits of Lean Manufacturing:

• shorter cycle times;

• shorter lead times;

• lower in-process inventories;

• faster response time;

• lower costs;

• greater production flexibility;

• higher quality;

• better customer service;

• higher throughput.

18 -3.2 Principles of Lean Manufacturing

Womack and Jones (1990) present five principles of Lean Manufacturing: value, value stream, flow, pull and perfection. In this section these principles will be discussed. These principles denote what factors are important to Lean Manufacturing and what it tends to improve or achieve in production processes. The first principle is value since Lean Manufacturing argues that everything starts with creating customer value. This is followed by value stream. Thereafter flow and subsequently pull need to be achieved. The final principle is perfection. The order of these principles is rigid and it is strongly advised against to pass over principles.

3.2.1 Principle 1: Value

Adding value is defined as an activity that the consumer - or customer - pays for willingly because it seems to be truly necessary to solve his problem (Womack and Jones, 2005; p25). An activity is value adding if, and only if, these three conditions are met:

• The customer must be willing to pay for the activity;

• The activity must change the form, fit, or function of the product and make it closer to the end product that the customer wants and will pay for;

• The activity must be done right the first time.

Assessing all activities with these three conditions in mind results in two types of activities: value-adding and non-value adding. Non-value adding activities are regarded as waste and should be eventually be eliminated.

Waste can be defined as ‘any activity in a process which does not add value to the customer’ (Nicholas, 1998; p75) or ‘anything that does not add value to the end product from the customer’s perspective’ (Abdullah, 2003). There is a distinction between necessary and unnecessary waste. Sometimes waste is a necessary part of the process and thus adds value to the company. This cannot be eliminated, e.g. financial control, obliged quality checks, stagnation due to periodic maintenance, etcetera. Otherwise all waste should be eliminated. The seven sources of waste, identified by Taiichi Ohno, are universal in manufacturing and outlined in Exhibit 3-3. It is useful to classify wastes because it is easier in improvement programs to focus on particular wastes than to try to attack everything at once. When the sources of waste are identified, Lean Manufacturing tools can be selected in order to minimize those types of waste.

(1) Overproduction Product made for no specific customer.

(2) Waiting As people, equipment or product waits to be processed it is not adding value to the customer.

(3) Transport Moving the product to another location. Automatically it is not being processed and therefore not adding value to the customer.

(4) Inventory Storage of products, intermediates, raw materials, and so on, all cost money.

(5) Overprocessing When a particular process step does not change the form, fit or function of the product. (6) Motion The excessive movement of the people who operate in the manufacturing facility is

wasteful. Whilst they are in motion they cannot support the processing of the product. Excessive movement of data, decisions and information fall also under this category. (7) Defects Errors during the process – either requiring rework or additional work.

Often an eighth form of waste is included, which is the underutilization of employees. Operators have in general knowledge of the activities they do and the processes they work with. Not using this knowledge and experience is also considered as a form of waste. Another example of this eighth form of waste is the loss of knowledge and experience by dismissing employees because of efficiency reasons. Getting the right knowledge in-house is costly and takes time and should be managed carefully. Human Resource Management is thus closely linked with Lean Manufacturing.

From a maintenance perspective loss of uptime can also be considered as a form of waste. Nagajima (1991, p295) has categorized equipment wastes into what he terms the six big losses:

• downtime from equipment setup and adjustments;

• downtime from sporadic or chronic equipment breakdowns;

• idling and minor stoppages;

• reduced speed of operations;

• defects caused by variability in equipment performance;

• reduced yield caused by no optimal operations.

It can be concluded that also a well-developed maintenance strategy enhances the success of Lean Manufacturing implementation.

Excess of inbound inventory or Work-in-Progress (WIP) is generally seen as the most important waste to concern. In the metaphor of a river, WIP is the water that covers the rocks. Here the rocks are the other forms of waste. By lowering the water level the rocks become visible. In other words, by decreasing WIP other wastes appear as well as. In Exhibit 3-4 this metaphor is visualized. Here the several types of waste are depicted by the triangles under the WIP level.

Exhibit 3-4: WIP makes other wastes invisible

3.2.2 Principle 2: Value Stream

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-3.2.3 Principle 3: Flow

Flow is the uninterrupted movement of products or services through the value stream to the customer. Major inhibitors of flow are work in queue, batch processing and transportation. These buffers slow the time from product or service initiation to delivery (Nave, 2002). Creating flow at the production plant is to produce intermediate goods at a constant rate, to allow further processing to be carried out at a constant and predictable rate as well. Creating flow is also enhanced by an efficient physical plant layout where

transportation distances are minimal, communication is easy and a quick overview of the department is easily attained. This will lead to shorter lead times and throughput times and less inventory in between processes. Shorter throughput time is better because, assuming that price and quality remain constant, it enables the company to respond more quickly to changes in customer needs. In addition, the customer gets the product sooner and the company gets the payment sooner (Nicholas, 1998).

3.2.4 Principle 4: Pull

In a pull production system the production process is initiated at the downstream location by the customer. The downstream workstation withdraws whatever material is needed from stock, and when the amount in stock reaches a predetermined minimum level, a signal goes to the producer at the upstream location to replenish it (Nicholas, 1998; p257). The goal of pull is to reduce the WIP inventory of a process by constraining it. WIP includes all unfinished items for products in a production process. These items might be not yet completed, being processed or just waiting for further processing in a queue or a buffer stock. Less WIP results in shorter lead times. When companies can shorten the lead time of their production processes, they can make a shift from scheduling production by a sales forecast to simply make what the customers tells them to make.

Pull is about controlling production and aims to ensure that production output meets or closely conforms to demand (Nicholas, 1998; p255). Ideally, it ensures that products are made in the required quantities, at the right times and with the required quality. In order to achieve this, machines and workstations should produce at a takt time, which expresses the flow of a production process. Takt time refers to the rate at which customers are buying products from the production line; i.e. the unit production rate that is needed to match the customer requirements. It is calculated by dividing the total available production time by the customer demand (Abdulmalek et al., 2006). Implementing a pull system requires a very well disciplined production process and thus requires investment in training employees, setting clear working standards, reduce changeover times and level the production plans. This is generally one of the final steps of Lean implementation.

In a factory like Company X, with many kinds of products with different routings and demand rates, the wait can be unpredictable. This unpredictability combined with material shortages, machine breakdowns and other unexpected events make schedules outdated as soon as they are created, which means that they must be revised constantly. Furthermore, it leads to long and variable lead times and large in-process inventories. For these reasons Lean Manufacturing advocates pull production. In addition, setting a takt time could help Company X to control flow in its processes.

workstation, and then move (or push) downstream to the next workstation where they are processed according to another schedule (make-to-stock). Such a schedule is called a Material Planning Schedule (acronym: MPS). The materials must usually wait until the workstation completes earlier jobs, change over, and is ready to process them. Push production is regarded as the traditional way of how Western companies tend to work. The traditional Western philosophy is that machines are expensive investments and should therefore be running at all times. Pull is at right angle to this and will generally result in significant counter-pressure in a Western environment since it stops production when there is no demand.

Pull is not naturally better than push. Environmental conditions like a lot of waste, high failure rate and unbalanced production processes can be a reason for preferring push production. According to Nicholas (1998, p298) there are several reasons why pull production can be impossible or very difficult:

• Demand is so small or unstable that is impractical to carry buffer stocks for all parts (components) everywhere in the process.

• Products must be produced as integrated batches throughout the process for reasons of quality control or certification.

• The high defect level causes too many interruptions to permit continuous flow.

Push and pull do not exclude each other. It can be very complicated and requires persistence to work according to a pure pull system since it requires a very well controlled and disciplined process. Therefore, in the real world a mix of push (in the early stages of the process) and pull (at the final stages of the process) is often used. Such a system is called a hybrid pull/push system. Geraghty and Heavey (2004) even conclude from their research that a well established hybrid system outperforms pure push or pull systems

Kanban and ConWIP are both regarded as common pull systems (Hopp and Spearman, 2004), however also POLCA is a system that gains popularity. In paragraph 3.4.10 Kanban, POLCA and ConWIP will be briefly discussed.

3.2.5 Principle 5: Perfection

The fifth and final principle is perfection. Implementing Lean Manufacturing is rather a journey than a destination. It is an iterative process of continuously looking for improvements. Perfection completes the five principles of Lean Manufacturing and indicates that it is the goal to achieve a perfect production process. The first four principles (value, value stream, flow and pull) are the foundation of Lean Manufacturing, but once these principles are brought into practice there will still be a lot to improve. These improvements will be incremental and prohibit decline and support continuous improvement. Perfection in a process is reached when it provides pure value, as defined by the customer, without any waste of any sort. However, it is unattainable in reality, it should be the goal. In the philosophy of Lean Manufacturing it is more important to be on the way, than to achieve the ultimate goal.

3.3 Bundles of Lean Manufacturing

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-Total Preventive Maintenance, -Total Quality Management, and Human Resource Management are conceptually, theoretically, and empirically well established.’ This section summarizes these four bundles.

3.3.1 Just-In-Time Bundle

The Just-In-Time (acronym: JIT) bundle is about continuously seeking ways to make the production easily adaptable to whatever materials or flow rates are desired and to match the flow of materials as closely as possible to customer demand. The tools that are associated with JIT bundle will be discussed in section 3.4.

3.3.2 Total Quality Management Bundle

Total Quality Management (acronym: TQM) is management that focuses the organization on knowing the needs and wants of customers and on being capable of fulfilling those needs and wants. TQM practices include the use of statistical process control, customer focus, and inter-functional design focus. Quality performance measures include customers’ perceptions of quality, defects in parts per million, and the percentage of units that pass final inspection without requiring rework (Flynn et al., 1995). TQM supports Lean Manufacturing by continuously seeking ways to make the materials that come out of the pipeline ever more acceptable to the customer, without losing the manufacturability of the demanded products out of sight (Nicholas, 1998; p6).

The TQM bundle includes:

• Competitive benchmarking

• Quality management programs

• Process capability measurements

• Formal continuous improvement program

A concept that is often related with (constant) quality is Six Sigma. Six Sigma will be briefly discussed in paragraph 3.9.1.

3.3.3 Total Productive Maintenance Bundle

The Total Productive Maintenance (acronym: TPM) bundle includes tools that are primarily designed to maximize equipment effectiveness through planned, predictive and preventive maintenance of the equipment and using maintenance optimization techniques (Cua et al., 2001). If one machine breaks down the entire department, or in the worst case scenario the whole plant, could go down. In almost any Lean Manufacturing environment setting a TPM program is therefore essential. TPM consists of three components: preventive maintenance, corrective maintenance and maintenance prevention (Abdulmalek, 2003). Preventive

maintenance is about regular, planned maintenance on equipment, rather than random check ups. Corrective maintenance concerns fix-or-buy decisions. When a machine is not performing as should be or has frequent breakdowns, it can be better to replace some components instead of fixing them again and again. Maintenance prevention is about buying the right machine, i.e. a machine that meets the production requirements and is easy to maintain.

(Nicholas, 1998; p214). Moubray (1997; p7) defines RCM as ‘a process used to determine what must be done to ensure that any physical asset continues to do what its users want to do in present operating context’. Although the mainstream literature about Lean Manufacturing advocates the use of TPM, RCM is also very well applicable in combination with JIT and TQM (Moubray, 1997; p28-35).

3.3.4 Human Resource Management Bundle

The Human Resource Management (acronym: HRM) bundle concerns the organization of work within a production environment. Human skills such as communication, problem solving, teamwork and leadership debates are vital for success of Lean Manufacturing. In addition, the success of the adoption of JIT tools depends highly on the willingness of operators to collaborate. A lack of skills, knowledge and willingness is predominant reason for failures in introducing Lean Manufacturing (Bhasin and Burcher, 2006). A Lean Manufacturing environment requires a different style of management, style of leadership, organizational structures, culture, and so on. These points are all considered by practices in the HRM bundle.

3.4 Tools of the JIT Bundle

The four bundles are inevitable linked with each other. If an organization wants to implement JIT tools successfully, the other three bundles cannot be neglected since they are strongly related. Implementing tools of only one bundle without paying attention to the other three is presumably futureless. Company X has made some progress in applying tools concerning quality and maintenance already. These bundles are still important to address in order to improve continuously, however the priority is set on the JIT bundle. Since the JIT bundle cannot be implemented without paying significant attention to the supportive HRM bundle, the focus of the thesis is on both the JIT and the HRM bundle.

The objective of this research is to increase the efficiency of Company X’s operations. The tools of the JIT bundle enhance this objective best and thus will be elaborated first. In the succeeding paragraph the tools of the HRM bundle will be described. The TQM and TPM bundle will receive less attention in this chapter, since the tools of these bundles do contribute relatively less to the objective of this research.

The JIT bundle is described in detail by Womack and Jones (2003) who listed and described several tools that fall in the JIT bundle. These tools are applied in a wide range of production environments in order to create value, eliminate waste and establish flow. Abdulmalek et al. (2006) did research on the applicability of JIT tools and found that only some tools are universally applicable. Most are process and product specific. In Exhibit 3-5 an overview is provided.

Universal applicable JIT tools Process and product dependant JIT tools

• Value Stream Mapping

• Kaizen

• Five S

• Changeover Time Reduction

• Visual Systems • Standardization of Work (paragraph 3.4.1) (paragraph 3.4.2) (paragraph 3.4.3) (paragraph 3.4.4) (paragraph 3.4.5) (paragraph 3.4.6) • Poka-Yoke • Cellular Manufacturing • Line Balancing • Pull Systems • Plant Layout (paragraph 3.4.7) (paragraph 3.4.8) (paragraph 3.4.9) (paragraph 3.4.10) (paragraph 3.4.11)

Note that this list does not contain all tools proposed by literature concerning Lean Manufacturing, though the most common and applied will be explained here.

3.4.1 Value Stream Mapping

Value Stream Mapping is an activity which results in a Value Stream Map (acronym: VSM) of the current state. Furthermore, it is an activity that can graphically present the future state as how the value stream should be afterwards.

A VSM is a visual representation of the current state of the value stream. Rother and Shook (1999) define a VSM as a ‘...collection of all actions (value-adding as well as non-value adding) that are taking place to bring a product (or a group of products that use the same resources) through the main flows, starting with raw material and ending with the customer’. These actions consider the flow of both information and materials within the overall supply chain. The ultimate goal of VSM is to identify all types of waste in the value stream and to take steps to eliminate these. Here the definition of waste is ‘anything that the customer is not willing to pay for’. Ideally a VSM concerns the immediate supply chain, including suppliers and customers (see the value stream principle in paragraph 3.2.2).

In order to create a VSM the following five steps need to be taken, according to Rother and Shook (1999): 1. Identify the target product, product family, or service.

2. Draw a current state value stream map, which shows the current steps, delays, and information flows required to deliver the target product or service. One should always start at the side of customer and work downstream. It is a more effective way to monitor the value stream.

3. Assess the current state value stream map in terms of creating flow by eliminating waste. 4. Draw a future state value stream map.

5. Implement the future state map.

In short, a VSM provides an overview of the value stream, helps to identify wastes (the ‘quick wins’) and can help to prioritize improvement activities.

3.4.2 Kaizen

Making something better through the accumulation of small, piecemeal improvements, one at a time is called Kaizen. A Kaizen event can be defined as a focused and structured improvement project, using a dedicated cross-functional team to improve a targeted work area, with specific goals, in an accelerated timeframe (Farris, Van Aken, Doolen and Worley, 2008). A team is supposed to apply low-cost problem solving tools and techniques to rapidly (generally between three to five days) plan and implement improvements in a target work area. The idea of this Japanese concept is that employees throughout the organization patiently work to continually improve processes in which they are engaged.

Cummulative effort

Exhibit 3-6: S-curve of improvement

The S-curve in Exhibit 3-6 illustrates how Kaizen improves the processes over time. In the beginning companies can profit from the ‘quick-wins’ and the ‘low-hanging fruits’. However, at a certain point in time improvement will slow down. Regardless of the effort, the gain in improvement will get smaller and smaller. According to innovation theories, if further improvement is necessary for the organization to survive, then something new and perhaps radically different is necessary (Nicholas, 1998). Kaizen is according to Abdulmalek et al. (2006) universally applicable.

3.4.3 Five S

Five S is about good housekeeping and better workplace organization. The Japanese Management Association (1987) referred in their book to the five dimensions of workplace organization. Five S is a list of criteria that improve performance measures such as number of accidents, equipment breakdowns, and defect rates. Five S consists of the Japanese words Seiri, Seiton, Seiso, Seiketsu and Shitsuke. In time, these words have been translated in English. The English names are given in between brackets in the list below.

1. Proper arrangement and organization (Sort) – Do things in proper order, eliminate unnecessary things. 2. Orderliness (Set in order) – Specify a location for everything; designate location by number, colour

coding, name etc.; put things where they belong.

3. Cleanups (Shine) – Specify recommended procedures for cleanup; follow the procedures; check over all work.

4. Cleanliness (Standardize) – Dust, wash, and maintain equipment; keep equipment and the workplace in the best possible condition.

5. Discipline (Sustain) – analyse practices; expose the wrong ones; learn correct practices and be careful to use them.

Some practitioners even use Six S as they add ‘Safety’ to the list. In order to check the Five S (or six Ss) a scorecard is developed and can be personally adjusted. Five S is often used at the start of Lean Manufacturing introduction to break down barriers and get a team to own their workspace, since it is universally applicable, relatively easy and cheap to implement (Melton, 2005).

3.4.4 Changeover Time Reduction

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-Mileham and Owen (2000) suggest enriching this definition by including the run-up period: the time it takes to re-establish steady state manufacturing. This time is sometimes ten times as long as the actual changeover activity. In the run-up period adjustments will be prominent to establish correct, or optimum, machine parameters to enable requisite quality and volume manufacturing of the new product to occur. For example in process industries, the first part (of a batch) might not meet specifications and must be scrapped.

Consumers want a wide range of products and ask for smaller product batches with a shorter delivery time and a high reliability of delivery. Traditionally, companies responded to this demand by keeping large stocks, so one can keep producing in long runs (De Groote, 2006). This results often in high inventory costs, risk of product ageing and long lead times. Flexible processes make it possible to avoid these problems. Only those products are produced that will be sold, and the use of storage capacity in the value stream is reduced to a minimum. This implies that a company produces in small batches with short lead times. Short lead times are an essential condition, according to De Groote (2006). In order to achieve this, reduced changeovers times are needed.

Reducing changeover times enables companies to change production more quickly and frequently.

Furthermore, it increases production time, without the need to invest in more machines or lines. In traditional-minded companies, changeovers are reduced by increasing the skills of changeover personnel, minimizing product variety, combining different jobs with similar changeover requirements, and using large lots. However, these methods assume that changeover time and costs are immutable, inflexible and not improvable. If changeover times are considered as variable, flexible and improvable, one will find another way: optimize the changeover procedure.

In Lean Manufacturing SMED (Single-Minute Exchange of Dies) is a universally applied tool (Nicholas, 1998; p177-207). First, SMED identifies internal and external changeover steps. An internal changeover is a step that must be performed while the machine or operation is stopped, which results in downtime. An external changeover is a step that can be performed while the operation is running. SMED initially focuses on internal steps. Secondly, SMED tries to convert internal steps to external. The third step is to streamline all aspects of the changeover operation.

3.4.5 Visual Systems

Visual Systems is a collection of techniques that provide visual signal to the production process. These signals could regard the performance of a certain production step, dictate the production level, assign where to place a tool, or how to align a fixture (Abdulmalek et al., 2006). Three areas of visual management can be defined:

• it is a guide to inform each worker about the progress and other aspects of operations;

• it helps supervisors to assess whether the operations are being done according to standards;

• it serves as a tool to evaluate performance and improvement.

3.4.6 Standardized Work

• Producing according to a takt time (see also paragraph 3.2.4);

• A precise work sequence in which an operator performs tasks within that takt time;

• Standard inventory required to keep the process operating smoothly.

Standardized Work ensures that each job is organized and carried out in the most effective manner. No matter who is doing the job, the required level of quality is achieved. In addition, a high standardization of work results in a balanced production line, WIP is minimized and non-value adding activities are reduced (Abdullah, 2003). Time standards can be used for many purposes (Nicholas, 1998; p383):

• Computing the standard output rate

• Determining the number of workers or machines needed to meet production demand

• Distributing work among employees

• Setting production schedules

• Estimating production costs and setting selling prices

• Assessing employee performance

In the context of Lean Manufacturing the most important purpose of standard time is that if provides a baseline for improvement.

3.4.7 Poka-Yoke

Poka-Yoke is a Japanese term for mistake-proofing in an effort to prevent errors from occurring (Abdulmalek et al., 2007). A good example is the SIM-card in mobile phones. The card is designed so that there is only one position that fits in the case. This eliminates mistakes in handling and subsequently the need for rework and/or scrap.

3.4.8 Cellular Manufacturing

Cellular manufacturing refers to a manufacturing system wherein the machines and workstations are arranged in an efficient sequence that allows a continuous movement of inventories and materials to produce products from start to finish in a single process flow, while incurring minimal transport or waiting time, or any delay for that matter.All of the necessary operations to make a part, component, subassembly, or finished product at one place in one workstation is called cellular manufacturing. This way the flow of a product is less interrupted since there are no other products that need to be produced at that workstation and in addition machines are not waiting for products to process.

3.4.9 Line Balancing

Line balancing is a synchronization process to ensure that workstations are working neither faster nor slower than other workstations for which parts are supplied to or received from (Abdulmalek et al., 2006). This is beneficial since it reduces WIP and to create flow.

3.4.10 Pull systems: Kanban, POLCA and ConWIP

In paragraph 3.2.4 is explained that pull is one of the principles of Lean Manufacturing. In this paragraph the three most common examples of pull will be elaborated: Kanban, POLCA and ConWIP. These systems are by Hopp and Spearman (2004) identified as the most relevant pull systems in modern manufacturing

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-Kanban is a card signalling system which is considered as the classic pull system. In a -Kanban system a card signals the need for, and subsequent authorization to produce and move, a container (or batch) of materials, parts or subassemblies. The number of Kanban cards corresponds to the number of containers in each buffer. Since all workstation should be authorized by the downstream workstation before it can start production, the WIP is limited by the system (Nicholas, 1998: p266). The Kanban system is graphically presented in Exhibit 3-7.

Exhibit 3-7: Kanban

Product flow from station A to buffer 2 until it reached station C. Station A for example is only allowed to start with a new product (or order) when station B is finished with its operation. The buffers between the stations prevent waiting. By using Kanban, workstations that are not physically connected (e.g. conveyor belts) cooperate efficiently. The drawback of Kanban is that there should be a safety stock of every raw material (or semi-finished product). This can be very costly in a flexible process with a high variety of end products.

POLCA stands for Paired-cell Overlapping Loops of Cards with Authorization. Like Kanban, POLCA uses cards to authorize production. POLCA is different from Kanban in that cards are assigned to pairs of cells, rather than particular parts within a cell. The result is a more general construct than Kanban that can be applied to make-to-order situations. Because the initial authorization is from a MPS, but cards are used to limit WIP within pairs of cells, POLCA possesses both push and pull characteristics (Hopp and Spearman, 2004). Since POLCA is not product constrained, but cell-constrained it is not necessary to keep a safety stock of all intermediate products. It is therefore better suited for flexible process with a high variety of products (Pieffers and Riezebos, 2006).

ConWIP stands for Constant Work-In-Process and is not a pure pull system; however it has most advantages of a pull system (Nicholas, 1998: p284-289). ConWIP is a tool that enables workload levelling across stations and prevents congestion and starving near bottlenecks by maximizing the amount of released work orders on the floor. In a ConWIP system the last operation in the line sends an authorization card to the first operation in the line. This card authorizes the first workstation in the line to start another with another order according to the First-In-First-Out principle. Simpler said, once a consumer removes a product from the finished goods

inventory, the first machine in the chain is authorized to load another part. The sequence of orders is provided by the MPS. The number of authorization cards in the system, which can also be a digital one, determines the maximum amount of WIP in the line. The ConWIP system is graphically presented in Exhibit 3-8.

Products flow from station A via a buffer to station B and subsequently to C where the final operation is performed. When a product (or order) is finished at station C, a (digital) card is send to station A that it is allowed to start with another product (or order). Consequently, there is always a constant amount of WIP.

3.4.11 Plant Layout

The route that a product needs to follow from raw material to end product can be long, complicated and full of waste. The main goal of this tool is to eliminate unnecessary transportation by efficient design the layout of the plant. Changing the layout radically is in processing plants often hard to realize. An efficient layout results in less transport, a better overview, improved communication between stations and calmness on the work floor.

3.5 Tools of the HRM Bundle

Implementing Lean Manufacturing does not only involve understanding of the techniques and tools of the concept. It is also about changing (corporate) culture (Bhasin and Burcher, 2006). The HRM bundle pays attention to the human factor in the transition to Lean Manufacturing.

In order to be successful with Lean Manufacturing there is a need to:

• make decisions at the lowest organization level;

• forward a definite clarity of vision about what the organization believes it will look like once the transformation is complete;

• have a strategy of change whereby the organization communicates how the goals will be achieved;

• assign responsibilities within the pilot programme initially and ultimately within the whole organization whereby it is also evident who is championing the programme;

• develop supplier relationships based on mutual trust and commitment;

• nurture a learning environment;

• systematically and continuously focus on the customer;

• promote Lean leadership at all levels;

• and have long-term commitment (a medium sized company would need a minimum of three to five years to implement Lean Manufacturing in all its processes);

The most significant changes that Lean Manufacturing creates in the work environment are performance evaluation, group interaction, job flexibility, mode of supervision and potential loss of job security.

3.5.1 Employee Involvement

As stated earlier, the success of the organization’s adoption of Lean Manufacturing depends highly on the willingness of workers to collaborate. Employee involvement manifests itself through:

• The right or duty of the workers to interrupt production flow whenever they notice defects;

• The exchange of positions within the work group and the habit of giving each other a hand in moments of difficulty, the HRM term for this is job rotation;

• The adaption of work teams to variations in job duties and in the production flow;

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-Commitment of employees to change can be achieved by considering four factors: management commitment, empowerment, rewards and feedback and review (Govindarajulu and Daily, 2004).

Management commitment - companies with rigid, top-heavy, and bureaucratic structures have a more difficult time implementing changes than a company that has a flexible and lean organizational structure. Management support for change is thus essential for the success of change. Management support can be brought in practice by:

• Clear and frequent communication of goals and priorities

• Provision of specific (on-the-job) training to all employees and continual educational efforts to achieve continual improvement.

• Designing a reward system than promotes employees to perform according to the change programme. Empowerment - the introduction of a new program will yield optimal results when employees are treated as major stakeholders in an organization. The traditional top-down organization inhibits employee empowerment. Instead, a flat, horizontal organization should be in place to encourage employee empowerment.

Rewards can be a reinforcement to continuously increase commitment from employees to work according to Lean Manufacturing principles. Recognition and praise for employees that come up with innovative waste reduction ideas appears to beat out monetary rewards. Furthermore, positive rewards are generally more effective motivators than their negative counterparts. Perhaps the most effective form of reward is offering job security to participative employees. Employees perceive changes in their day-to-day routine as

threatening. Job security takes away the worries employees might have.

Feedback - in order to achieve long-term success most managerial programs need some form of review and feedback for continue improvement. Frequent feedback improves employee relations, satisfaction and productivity.

3.5.2 Team Organization

Instead of top-down approach, Lean Manufacturing states that the self-directed work teams should be formed. A typical Lean Manufacturing team consists of four to six multi-skilled line-workers and a team supervisor. This team supervisor is not a leader in the general meaning of the word. Instead, Lean Manufacturing emphasises that the team supervisor is a part of the team (not of management) who actively participates in the jobs of the team. The supervisor is a member of the team with additional the role of a confidential advisor, coordinator and motivator. Furthermore, the team should be supported by an expert on Lean Manufacturing. Benefits of such teams include collective knowledge to develop solutions, avoiding duplication of efforts, accomplishing many tasks simultaneously and empowering employees.

3.5.3 Training and Education

certain skills that some workers might lack, or were never encouraged or allowed to develop. Typical skills are effective teamwork, communicative skills and a structured way of working.

3.6 Critical Success Factors to Implementation

At this stage of the thesis, a good overview of Lean Manufacturing is given. However, bringing these tools in practice is a challenging process, which should be done carefully. The implementation of Lean Manufacturing is a onetime chance. A failure will result in sceptics to the concept, decreased commitment and a loss of

credibility. Farris et al. (2008) found several critical factors that enable a successful implementation of a Kaizen event. The following factors are of high importance when implementing other tools of Lean Manufacturing.

• Goal clarity;

• Goal difficulty;

• Team functional heterogeneity (diversity of expertise within the team);

• Team autonomy (amount of control over event activities given to the team);

• Experience of the team;

• Experience and authority of the team leader;

• Amount of time spent on a proper project plan;

• Management support;

• Work area routine (complexity and stability of process, product flows and product mix); 3.7 Performance Measurement

It is the task of management to monitor the progress of projects. Measuring performance is critical in this. Firstly, performance indicators for Lean Manufacturing should stimulate wanted behaviour on the work floor and provide managers of information on which they can make decision (Rother and Shook, 2003). Secondly, performance indicators should be chosen to serve as milestones that can either reinforce that progress is being made or signal that problems need to be solved (Bhasin, 2008). Thirdly, workers can take pride in their accomplishments which can only be made visible by selecting proper performance indicators.

Bhasin (2008), as well as Sánchez and Pérez (2001), proposes a list of performance indicators to measure the progress of Lean Manufacturing implementation. The indicators are divided over five dimensions:

• Financial measures which symbolize the traditional approach to organizational success;

• Customer/ market measures that manifest the relationship between organization and its customers;

• Process measures that focus on efficiency and improvement;

• People development measures the process of recognizing the critical role of stakeholders in organizational success, e.g. level of employee skills, commitment to technological leadership and personnel development;

• Preparing for the future measures are expressions of foresight and would act as an important barometer of whether value is to be created in the future.