Manufacturing Trend

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Lean

The need for Lean? The New Reality.

Previous Business Scenario was to add profit margin to the cost of product and fix the price.

Selling price = Cost + Profit

Current Business Scenario

Now the selling price is fixed by the customer.

Selling Price - Cost = Profit

We have only one option – To control the cost to achieve required Profit Margins. Cost must be reduced year on year to protect profit and investments in business.

To survive, we need a minimum profit and hence the new equation:

Selling Price - Profit = Cost.

We are in a position to control only “cost” . The customers are willing to pay for only the Value added cost and not the non value added ones.

So we need eliminate the non value added components which is otherwise called as waste in our environment. Waste is anything that impacts our business operating cost. Waste or Non-Value Added activities are those activities that consume time, resources or space but do not add to the value of the product itself.

Lean definition

Lean is elimination of waste in any form, across the business process (value addition process).

After years of work to eliminate waste, Toyota, the Japanese automobile manufacturer, identified the following seven types of waste as the most prominent ones. Apart from these now one more waste have got added to the list. The so-called "eighth waste" has been identified as underutilized people (with respect to their minds/ideas).

	1. Overproduction Overproduction is producing more than what is actually required by the upstream process. In manufacturing, this is often done in an attempt to keep machines running and to avoid too many changeovers. Major Reasons . Low availability . Imbalance in cycle time . Low FTT . More throughput time
	2. Waiting The waste of waiting in manufacturing refers to operators waiting for machinery to finish cycling. In administrative processes, “system” downtime, paperwork/approval queues (waiting in someone's inbox), and waiting for information from outside sources (customer or supplier) are examples of the waste of waiting. Major Reasons . Man-machine cycle time imbalance . Imbalance between machines
	3. Transportation The things needed to do the job are not at hand so you either have to go get them or take them to where they're needed. Having to go and get them is delay by motion, both of which are waste themselves. Major Reasons . Unorganized Layout . Excess Inventory
	4. Over Processing In manufacturing, this often refers to the use of mass production equipment where leaner equipment may be used. It also refers to reworking products. In administrative processes, it may refer to re-entering/re-checking data, making extra copies distributing too many reports, making excessive transactions, management accounting activities, and adding unnecessary details in expense reports, budgets, etc. Major Reasons . Non standardized work Instruction . More time available per part
	5. Unnecessary Inventory In manufacturing, inventory has a clear cost, whether it be excessive raw materials, WIP (perhaps the greatest culprit), or excessive finished goods. For administrative processes, things like filled in-boxes (electronic and paper), too many office supplies, and batch processing of transactions/reports. The result of unnecessary inventory in administrative processes is increased lead time. Major Reasons . Over production
	6. Excess motion Excess motion in manufacturing refers to operators having to walk around to find tools, inventory, and people. Also, it refers to ergonomic concerns in manufacturing operations. In the administrative processes, excess motion primarily refers to people having to walk to office equipment or (even more importantly) having to walk to find people. Major Reasons . Non standardized work pattern . Unorganized shop floor
	7. Defects In manufacturing, the waste of defects is obvious. Defects cause parts to be either thrown away or re-worked. Defects in administrative processes are often mistakes on paperwork/data entry, which increase lead time or lead to unfilled orders and other potential manufacturing issues. Major Reasons . Low availability . Imbalance in cycle time . Low FTT . More throughput time
	8. Underutilization of Employees' Minds/Ideas. This waste applies to manufacturing and administrative processes in the same way. In order to be successful, a lean program must involve employees at all levels of the organization. Everyone must generate improvement ideas and be involved in implementation.

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