Lean Manufacturing Principles

Lean manufacturing or lean production, often simply "lean", is a systemic method for the elimination of waste ("Muda") within a manufacturing process. Lean also takes into account waste created through overburden ("Muri") and waste created through unevenness in work loads ("Mura"). Working from the perspective of the client who consumes a product or service, "value" is any action or process that a customer would be willing to pay for.

Essentially, lean is centered on making obvious what adds value by reducing everything else. Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS) (hence the term Toyotism is also prevalent) and identified as "lean" only in the 1990s.[1][2] TPS is renowned for its focus on reduction of the original Toyota seven wastes to improve overall customer value, but there are varying perspectives on how this is best achieved. The steady growth of Toyota, from a small company to the world's largest automaker,[3] has focused attention on how it has achieved this success.

Supply Chain Materials Management

The goal of materials management is to provide an unbroken chain of components for production to manufacture goods on time for the customer base. The materials department is charged with releasing materials to a supply base, ensuring that the materials are delivered on time to the company using the correct carrier. Materials is generally measured by accomplishing on time delivery to the customer, on time delivery from the supply base, attaining a freight budget, inventory shrink management, and inventory accuracy. The materials department is also charged with the responsibility of managing new launches.

In some companies materials management is also charged with the procurement of materials by establishing and managing a supply base. In other companies the procurement and management of the supply base is the responsibility of a separate purchasing department. The purchasing department is then responsible for the purchased price variances from the supply base.

In large companies with multitudes of customer changes to the final product over the course of a year, there may be a separate logistics department that is responsible for all new acquisition launches and customer changes. This logistics department ensures that the launch materials are procured for production and then transfers the responsibility to the plant materials management

Standards

There are no standards for materials management that are practiced from company to company. Most companies use ERP systems such as SAP, Oracle, BPCS, MAPICS, and other systems to manage materials control. Small concerns that do not have or cannot afford ERP systems use a form of spreadsheet application to manage materials. Some other construction projects use barcode and GPS materials management systems like Track'em.[1]

Materials management is not a science and depending upon the relevance and importance that company officials place upon controlling material flow, the level of expertise changes. Some companies place materials management on a level whereby there is a logistics director, other companies see the importance level as managing at the plant level by hiring an inventory manager or materials manager, and still other companies employ the concept that the supervisors in the plant are responsible accompanied by a planners.

Materials Management Challenges

The major challenge that materials managers face is maintaining a consistent flow of materials for production. There are many factors that inhibit the accuracy of inventory which results in production shortages, premium freight, and often inventory adjustments. The major issues that all materials managers face are incorrect bills of materials, inaccurate cycle counts, un-reported scrap, shipping errors, receiving errors, and production reporting errors. Materials managers have striven to determine how to manage these issues in the business sectors of manufacturing since the beginning of the industrial revolution. Although there are no known methods that eliminate the afore mentioned inventory accuracy inhibitors, there are best methods available to eliminate the impact upon maintaining an interrupted flow of materials for production.

One challenge for materials managers is to provide timely releases to the supply base. On the scale of worst to best practices, sending releases via facsimile or PDF file is the worst practice and transmitting releases to the supplier based web site is the best practice. Why? The flaw in transmitting releases via facsimile or email is that they can get lost or even interpreted incorrectly into the suppliers system resulting in a stock out. The problem with transmitting EDI releases is that not all suppliers have EDI systems capable of receiving the release information. The best practice is to transmit the releases to a common supplier web base site where the suppliers can view (for free) the releases. The other advantage is that the supplier is required to use the carrier listed in the web site, must transmit an ASN (advanced shipping notification), and review the accumulative balances of the order.

Improving circulation infrastructure[edit]

Redundancy can be reduced and effectiveness is increased when service points are clustered to reduce the amount of redundancy. An effective materials management program can also resolve “island” approaches to shipping, receiving, and vehicle movement. Solutions can include creating a new central loading location, as well consolidating service areas and docks from separate buildings into one. Developing better campus circulation infrastructure also means re-evaluating truck delivery and service vehicle routes. Vehicle type, size, and schedules are studied to make these more monument for other uses.

Lean manufacturing or lean production, often simply "lean", is a systemic method for the elimination of waste ("Muda") within a manufacturing process. Lean also takes into account waste created through overburden ("Muri") and waste created through unevenness in work loads ("Mura"). Working from the perspective of the client who consumes a product or service, "value" is any action or process that a customer would be willing to pay for.

Essentially, lean is centered on making obvious what adds value by reducing everything else. Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS) (hence the term Toyotism is also prevalent) and identified as "lean" only in the 1990s.[1][2] TPS is renowned for its focus on reduction of the original Toyota seven wastes to improve overall customer value, but there are varying perspectives on how this is best achieved. The steady growth of Toyota, from a small company to the world's largest automaker,[3] has focused attention on how it has achieved this success.

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Overview[edit]

Lean principles are derived from the Japanese manufacturing industry. The term was first coined by John Krafcik in his 1988 article, "Triumph of the Lean Production System," based on his master's thesis at the MIT Sloan School of Management.[4] Krafcik had been a quality engineer in the Toyota-GM NUMMI joint venture in California before coming to MIT for MBA studies. Krafcik's research was continued by the International Motor Vehicle Program (IMVP) at MIT, which produced the international best-selling book co-authored by Jim Womack, Daniel Jones, and Daniel Roos called The Machine That Changed the World.[1] A complete historical account of the IMVP and how the term "lean" was coined is given by Holweg (2007).[2]

For many, lean is the set of "tools" that assist in the identification and steady elimination of waste (muda). As waste is eliminated quality improves while production time and cost are reduced. A non exhaustive list of such tools would include: SMED, value stream mapping, Five S, Kanban (pull systems), poka-yoke (error-proofing), total productive maintenance, elimination of time batching, mixed model processing, rank order clustering, single point scheduling, redesigning working cells, multi-process handling and control charts (for checking mura).

There is a second approach to lean manufacturing, which is promoted by Toyota, called The Toyota Way, in which the focus is upon improving the "flow" or smoothness of work, thereby steadily eliminating mura ("unevenness") through the system and not upon 'waste reduction' per se. Techniques to improve flow include production leveling, "pull" production (by means of kanban) and the Heijunka box. This is a fundamentally different approach from most improvement methodologies, which may partially account for its lack of popularity.[citation needed]

The difference between these two approaches is not the goal itself, but rather the prime approach to achieving it. The implementation of smooth flow exposes quality problems that already existed, and thus waste reduction naturally happens as a consequence. The advantage claimed for this approach is that it naturally takes a system-wide perspective, whereas a waste focus sometimes wrongly assumes this perspective.

Both lean and TPS can be seen as a loosely connected set of potentially competing principles whose goal is cost reduction by the elimination of waste.[5] These principles include: pull processing, perfect first-time quality, waste minimization, continuous improvement, flexibility, building and maintaining a long term relationship with suppliers, autonomation, load leveling and production flow and visual control. The disconnected nature of some of these principles perhaps springs from the fact that the TPS has grown pragmatically since 1948 as it responded to the problems it saw within its own production facilities. Thus what one sees today is the result of a 'need' driven learning to improve where each step has built on previous ideas and not something based upon a theoretical framework.

Toyota's view is that the main method of lean is not the tools, but the reduction of three types of waste: muda ("non-value-adding work"), muri ("overburden"), and mura ("unevenness"), to expose problems systematically and to use the tools where the ideal cannot be achieved. From this perspective, the tools are workarounds adapted to different situations, which explains any apparent incoherence of the principles above.

Origins[edit]

Also known as the flexible mass production, the TPS has two pillar concepts: Just-in-time (JIT) or "flow", and "autonomation" (smart automation).[6] Adherents of the Toyota approach would say that the smooth flowing delivery of value achieves all the other improvements as side-effects. If production flows perfectly (meaning it is both "pull" and with no interruptions) then there is no inventory; if customer valued features are the only ones produced, then product design is simplified and effort is only expended on features the customer values. The other of the two TPS pillars is the very human aspect of autonomation, whereby automation is achieved with a human touch.[7] In this instance, the "human touch" means to automate so that the machines/systems are designed to aid humans in focusing on what the humans do best.

Lean implementation is therefore focused on getting the right things to the right place at the right time in the right quantity to achieve perfect work flow, while minimizing waste and being flexible and able to change. These concepts of flexibility and change are principally required to allow production leveling (Heijunka), using tools like SMED, but have their analogues in other processes such as research and development (R&D). The flexibility and ability to change are within bounds and not open-ended, and therefore often not expensive capability requirements. More importantly, all of these concepts have to be understood, appreciated, and embraced by the actual employees who build the products and therefore own the processes that deliver the value. The cultural and managerial aspects of lean are possibly more important than the actual tools or methodologies of production itself. There are many examples of lean tool implementation without sustained benefit, and these are often blamed on weak understanding of lean throughout the whole organization.

Lean aims to make the work simple enough to understand, do and manage. To achieve these three goals at once there is a belief held by some that Toyota's mentoring process,(loosely called Senpai and Kohai, which is Japanese for senior and junior), is one of the best ways to foster lean thinking up and down the organizational structure. This is the process undertaken by Toyota as it helps its suppliers improve their own production. The closest equivalent to Toyota's mentoring process is the concept of "Lean Sensei," which encourages companies, organizations, and teams to seek outside, third-party experts, who can provide unbiased advice and coaching, (see Womack et al., Lean Thinking, 1998).

In 1999, Spear and Bowen[8] identified four rules which characterize the "Toyota DNA":

Rule 1: All work shall be highly specified as to content, sequence, timing, and outcome.

Rule 2: Every customer-supplier connection must be direct, and there must be an unambiguous yes or no way to send requests and receive responses.

Rule 3: The pathway for every product and service must be simple and direct.

Rule 4: Any improvement must be made in accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization.

There have been recent attempts to link lean to service management, perhaps one of the most recent and spectacular of which was London Heathrow Airport's Terminal 5. This particular case provides a graphic example of how care should be taken in translating successful practices from one context (production) to another (services), expecting the same results. In this case the public perception is more of a spectacular failure, than a spectacular success, resulting in potentially an unfair tainting of the lean manufacturing philosophies.[9][not in citation given]

A brief history of waste reduction thinking[edit]

The avoidance of waste has a long history. In fact many of the concepts now seen as key to lean have been discovered and rediscovered over the years by others in their search to reduce waste. Lean manufacturing builds on their experiences, including learning from their mistakes.

Pre-20th century[edit]

The printer Benjamin Franklin contributed greatly to waste reduction thinking

Most of the basic goals of lean manufacturing are common sense, and documented examples can be seen as early as Benjamin Franklin. Poor Richard's Almanack says of wasted time, "He that idly loses 5s. worth of time, loses 5s., and might as prudently throw 5s. into the river." He added that avoiding unnecessary costs could be more profitable than increasing sales: "A penny saved is two pence clear. A pin a-day is a groat a-year. Save and have."

Again Franklin's The Way to Wealth says the following about carrying unnecessary inventory. "You call them goods; but, if you do not take care, they will prove evils to some of you. You expect they will be sold cheap, and, perhaps, they may [be bought] for less than they cost; but, if you have no occasion for them, they must be dear to you. Remember what Poor Richard says, 'Buy what thou hast no need of, and ere long thou shalt sell thy necessaries.' In another place he says, 'Many have been ruined by buying good penny worths'." Henry Ford cited Franklin as a major influence on his own business practices, which included Just-in-time manufacturing.

The concept of waste being built into jobs and then taken for granted was noticed by motion efficiency expert Frank Gilbreth, who saw that masons bent over to pick up bricks from the ground. The bricklayer was therefore lowering and raising his entire upper body to pick up a 2.3 kg (5 lb.) brick, and this inefficiency had been built into the job through long practice. Introduction of a non-stooping scaffold, which delivered the bricks at waist level, allowed masons to work about three times as quickly, and with less effort.

20th century[edit]

Frederick Winslow Taylor, the father of scientific management, introduced what are now called standardization and best practice deployment. In his Principles of Scientific Management, (1911), Taylor said: "And whenever a workman proposes an improvement, it should be the policy of the management to make a careful analysis of the new method, and if necessary conduct a series of experiments to determine accurately the relative merit of the new suggestion and of the old standard. And whenever the new method is found to be markedly superior to the old, it should be adopted as the standard for the whole establishment."

Taylor also warned explicitly against cutting piece rates (or, by implication, cutting wages or discharging workers) when efficiency improvements reduce the need for raw labor: "...after a workman has had the price per piece of the work he is doing lowered two or three times as a result of his having worked harder and increased his output, he is likely entirely to lose sight of his employer's side of the case and become imbued with a grim determination to have no more cuts if soldiering [marking time, just doing what he is told] can prevent it."

Frank Bunker Gilbreth, Sr. established the fundamentals for predetermined motion time system, used in systems like Methods-time measurement or similar.

Shigeo Shingo, the best-known exponent of single minute exchange of die and error-proofing or poka-yoke, cites Principles of Scientific Management as his inspiration.[10]

American industrialists recognized the threat of cheap offshore labor to American workers during the 1910s, and explicitly stated the goal of what is now called lean manufacturing as a countermeasure. Henry Towne, past President of the American Society of Mechanical Engineers, wrote in the Foreword to Frederick Winslow Taylor's Shop Management (1911), "We are justly proud of the high wage rates which prevail throughout our country, and jealous of any interference with them by the products of the cheaper labor of other countries. To maintain this condition, to strengthen our control of home markets, and, above all, to broaden our opportunities in foreign markets where we must compete with the products of other industrial nations, we should welcome and encourage every influence tending to increase the efficiency of our productive processes."

Ford gets the ball rolling[edit]

Henry Ford continued this focus on waste while developing his mass assembly manufacturing system. Charles Buxton Going wrote in 1915:

Ford's success has startled the country, almost the world, financially, industrially, mechanically. It exhibits in higher degree than most persons would have thought possible the seemingly contradictory requirements of true efficiency, which are: constant increase of quality, great increase of pay to the workers, repeated reduction in cost to the consumer. And with these appears, as at once cause and effect, an absolutely incredible enlargement of output reaching something like one hundredfold in less than ten years, and an enormous profit to the manufacturer.[11]

Ford, in My Life and Work (1922),[12] provided a single-paragraph description that encompasses the entire concept of waste:

I believe that the average farmer puts to a really useful purpose only about 5% of the energy he expends.... Not only is everything done by hand, but seldom is a thought given to a logical arrangement. A farmer doing his chores will walk up and down a rickety ladder a dozen times. He will carry water for years instead of putting in a few lengths of pipe. His whole idea, when there is extra work to do, is to hire extra men. He thinks of putting money into improvements as an expense.... It is waste motion— waste effort— that makes farm prices high and profits low.

Poor arrangement of the workplace—a major focus of the modern kaizen—and doing a job inefficiently out of habit—are major forms of waste even in modern workplaces.

Ford also pointed out how easy it was to overlook material waste. A former employee, Harry Bennett, wrote:

One day when Mr. Ford and I were together he spotted some rust in the slag that ballasted the right of way of the D. T. & I [railroad]. This slag had been dumped there from our own furnaces. 'You know,' Mr. Ford said to me, 'there's iron in that slag. You make the crane crews who put it out there sort it over, and take it back to the plant.'[13]

In other words, Ford saw the rust and realized that the steel plant was not recovering all of the iron.

Ford's early success, however, was not sustainable. As James P. Womack and Daniel Jones pointed out in "Lean Thinking", what Ford accomplished represented the "special case" rather than a robust lean solution.[14] The major challenge that Ford faced was that his methods were built for a steady-state environment, rather than for the dynamic conditions firms increasingly face today.[15] Although his rigid, top-down controls made it possible to hold variation in work activities down to very low levels, his approach did not respond well to uncertain, dynamic business conditions; they responded particularly badly to the need for new product innovation. This was made clear by Ford's precipitous decline when the company was forced to finally introduce a follow-on to the Model T (see Lean Dynamics).

Design for Manufacture (DFM) also is a Ford concept. Ford said in My Life and Work (the same reference describes just in time manufacturing very explicitly):

...entirely useless parts [may be]—a shoe, a dress, a house, a piece of machinery, a railroad, a steamship, an airplane. As we cut out useless parts and simplify necessary ones, we also cut down the cost of making. ... But also it is to be remembered that all the parts are designed so that they can be most easily made.

This standardization of parts was central to Ford's concept of mass production, and the manufacturing "tolerances", or upper and lower dimensional limits that ensured interchangeability of parts became widely applied across manufacturing. Decades later, the renowned Japanese quality guru, Genichi Taguchi, demonstrated that this "goal post" method of measuring was inadequate. He showed that "loss" in capabilities did not begin only after exceeding these tolerances, but increased as described by the Taguchi Loss Function at any condition exceeding the nominal condition. This became an important part of W. Edwards Deming's quality movement of the 1980s, later helping to develop improved understanding of key areas of focus such as cycle time variation in improving manufacturing quality and efficiencies in aerospace and other industries.

While Ford is renowned for his production line it is often not recognized how much effort he put into removing the fitters' work to make the production line possible. Until Ford, a car's components always had to be fitted or reshaped by a skilled engineer at the point of use, so that they would connect properly. By enforcing very strict specification and quality criteria on component manufacture, he eliminated this work almost entirely, reducing manufacturing effort by between 60-90%.[16] However, Ford's mass production system failed to incorporate the notion of "pull production" and thus often suffered from over-production.

Toyota develops TPS[edit]

Toyota's development of ideas that later became lean may have started at the turn of the 20th century with Sakichi Toyoda, in a textile factory with looms that stopped themselves when a thread broke. This became the seed of autonomation and Jidoka. Toyota's journey with just-in-time (JIT) may have started back in 1934 when it moved from textiles to produce its first car. Kiichiro Toyoda, founder of Toyota Motor Corporation, directed the engine casting work and discovered many problems in their manufacture. He decided he must stop the repairing of poor quality by intense study of each stage of the process. In 1936, when Toyota won its first truck contract with the Japanese government, his processes hit new problems and he developed the "Kaizen" improvement teams.

Levels of demand in the Post War economy of Japan were low and the focus of mass production on lowest cost per item via economies of scale therefore had little application. Having visited and seen supermarkets in the USA, Taiichi Ohno recognised the scheduling of work should not be driven by sales or production targets but by actual sales. Given the financial situation during this period, over-production had to be avoided and thus the notion of Pull (build to order rather than target driven Push) came to underpin production scheduling.

It was with Taiichi Ohno at Toyota that these themes came together. He built on the already existing internal schools of thought and spread their breadth and use into what has now become the Toyota Production System (TPS). It is principally from the TPS, but now including many other sources, that lean production is developing. Norman Bodek wrote the following in his foreword to a reprint of Ford's Today and Tomorrow:

I was first introduced to the concepts of just-in-time (JIT) and the Toyota production system in 1980. Subsequently I had the opportunity to witness its actual application at Toyota on one of our numerous Japanese study missions. There I met Mr. Taiichi Ohno, the system's creator. When bombarded with questions from our group on what inspired his thinking, he just laughed and said he learned it all from Henry Ford's book." The scale, rigor and continuous learning aspects of TPS have made it a core concept of lean.

Types of waste[edit]

Although the elimination of waste may seem like a simple and clear subject it is noticeable that waste is often very conservatively identified. This then hugely reduces the potential of such an aim. The elimination of waste is the goal of lean, and Toyota defined three broad types of waste: muda, muri and mura; it should be noted that for many lean implementations this list shrinks to the first waste type only with reduced corresponding benefits. To illustrate the state of this thinking Shigeo Shingo observed that only the last turn of a bolt tightens it—the rest is just movement. This ever finer clarification of waste is key to establishing distinctions between value-adding activity, waste and non-value-adding work.[17] Non-value adding work is waste that must be done under the present work conditions. One key is to measure, or estimate, the size of these wastes, to demonstrate the effect of the changes achieved and therefore the movement toward the goal.

The "flow" (or smoothness) based approach aims to achieve JIT, by removing the variation caused by work scheduling and thereby provide a driver, rationale or target and priorities for implementation, using a variety of techniques. The effort to achieve JIT exposes many quality problems that are hidden by buffer stocks; by forcing smooth flow of only value-adding steps, these problems become visible and must be dealt with explicitly.

Muri is all the unreasonable work that management imposes on workers and machines because of poor organization, such as carrying heavy weights, moving things around, dangerous tasks, even working significantly faster than usual. It is pushing a person or a machine beyond its natural limits. This may simply be asking a greater level of performance from a process than it can handle without taking shortcuts and informally modifying decision criteria. Unreasonable work is almost always a cause of multiple variations.

To link these three concepts is simple in TPS and thus lean. Firstly, muri focuses on the preparation and planning of the process, or what work can be avoided proactively by design. Next, mura then focuses on how the work design is implemented and the elimination of fluctuation at the scheduling or operations level, such as quality and volume. Muda is then discovered after the process is in place and is dealt with reactively. It is seen through variation in output. It is the role of management to examine the muda, in the processes and eliminate the deeper causes by considering the connections to the muri and mura of the system. The muda and mura inconsistencies must be fed back to the muri, or planning, stage for the next project.

A typical example of the interplay of these wastes is the corporate behaviour of "making the numbers" as the end of a reporting period approaches. Demand is raised to 'make plan,' increasing (mura), when the "numbers" are low, which causes production to try to squeeze extra capacity from the process, which causes routines and standards to be modified or stretched. This stretch and improvisation leads to muri-style waste, which leads to downtime, mistakes and back flows, and waiting, thus the muda of waiting, correction and movement.

The original seven muda are:

Transport (moving products that are not actually required to perform the processing)
Inventory (all components, work in process, and finished product not being processed)
Motion (people or equipment moving or walking more than is required to perform the processing)
Waiting (waiting for the next production step, interruptions of production during shift change)
Overproduction (production ahead of demand)
Over Processing (resulting from poor tool or product design creating activity)
Defects (the effort involved in inspecting for and fixing defects)[18]

Later an eighth waste was defined by Womack et al. (2003); it was described as manufacturing goods or services that do not meet customer demand or specifications. Many others have added the "waste of unused human talent" to the original seven wastes. For example, six sigma includes the waste of Skills, referred to as "under-utilizing capabilities and delegating tasks with inadequate training". Other additional wastes added were for example "space". These wastes were not originally a part of the seven deadly wastes defined by Taiichi Ohno in TPS, but were found to be useful additions in practice. In 1999 Geoffrey Mika in his book, "Kaizen Event Implementation Manual" added three more forms of waste that are now universally accepted; The waste associated with working to the wrong metrics or no metrics, the waste associated with not utilizing a complete worker by not allowing them to contribute ideas and suggestions and be part of Participative Management, and lastly the waste attributable to improper use of computers; not having the proper software, training on use and time spent surfing, playing games or just wasting time. For a complete listing of the "old" and "new" wastes see Bicheno and Holweg (2009)[19]

Some of these definitions may seem rather idealistic, but this tough definition is seen as important and they drove the success of TPS. The clear identification of non-value-adding work, as distinct from wasted work, is critical to identifying the assumptions behind the current work process and to challenging them in due course.[20] Breakthroughs in SMED and other process changing techniques rely upon clear identification of where untapped opportunities may lie if the processing assumptions are challenged.

Lean implementation develops from TPS[edit]

The discipline required to implement lean and the disciplines it seems to require are so often counter-cultural that they have made successful implementation of lean a major challenge. Some[21] would say that it was a major challenge in its manufacturing 'heartland' as well.

Lean is about more than just cutting costs in the factory.[22] One crucial insight is that most costs are assigned when a product is designed, (see Genichi Taguchi).

An example program[edit]

In summary, an example of a lean implementation program could be:

With a tools-based approach

· Senior management to agree and discuss their lean vision

· Management brainstorm to identify project leader and set objectives

· Communicate plan and vision to the workforce

· Ask for volunteers to form the lean implementation team (5-7 works best, all from different departments)

· Appoint members of the lean manufacturing implementation team

· Train the Implementation Team in the various lean tools - make a point of trying to visit other non competing businesses that have implemented lean

· Select a Pilot Project to implement – 5S is a good place to start

· Run the pilot for 2–3 months - evaluate, review and learn from your mistakes

· Roll out pilot to other factory areas

· Evaluate results, encourage feedback

· Stabilize the positive results by teaching supervisors how to train the new standards you've developed with TWI methodology (Training Within Industry)

· Once you are satisfied that you have a habitual program, consider introducing the next lean tool. Select the one that gives you the biggest return for your business.

With a muri or flow based approach (as used in the TPS with suppliers[23]).

· Sort out as many of the visible quality problems as you can, as well as downtime and other instability problems, and get the internal scrap acknowledged and its management started.

· Make the flow of parts through the system or process as continuous as possible using workcells and market locations where necessary and avoiding variations in the operators work cycle

· Introduce standard work and stabilize the work pace through the system

· Start pulling work through the system, look at the production scheduling and move toward daily orders with kanban cards

· Even out the production flow by reducing batch sizes, increase delivery frequency internally and if possible externally, level internal demand

· Improve exposed quality issues using the tools

· Remove some people (or increase quotas) and go through this work again (the Oh No !! moment)

Lean leadership[edit]

The role of the leaders within the organization is the fundamental element of sustaining the progress of lean thinking. Experienced kaizen members at Toyota, for example, often bring up the concepts of Senpai, Kohai, and Sensei, because they strongly feel that transferring of Toyota culture down and across Toyota can only happen when more experienced Toyota Sensei continuously coach and guide the less experienced lean champions.

One of the dislocative effects of lean is in the area of key performance indicators (KPI). The KPIs by which a plant/facility are judged will often be driving behaviour, because the KPIs themselves assume a particular approach to the work being done. This can be an issue where, for example a truly lean, Fixed Repeating Schedule (FRS) and JIT approach is adopted, because these KPIs will no longer reflect performance, as the assumptions on which they are based become invalid. It is a key leadership challenge to manage the impact of this KPI chaos within the organization.

Similarly, commonly used accounting systems developed to support mass production are no longer appropriate for companies pursuing lean. Lean accounting provides truly lean approaches to business management and financial reporting.

After formulating the guiding principles of its lean manufacturing approach in the Toyota Production System (TPS), Toyota formalized in 2001 the basis of its lean management: the key managerial values and attitudes needed to sustain continuous improvement in the long run. These core management principles are articulated around the twin pillars of Continuous Improvement (relentless elimination of waste) and Respect for People (engagement in long term relationships based on continuous improvement and mutual trust).

This formalization stems from problem solving. As Toyota expanded beyond its home base for the past 20 years, it hit the same problems in getting TPS properly applied that other western companies have had in copying TPS. Like any other problem, it has been working on trying a series of countermeasures to solve this particular concern. These countermeasures have focused on culture: how people behave, which is the most difficult challenge of all. Without the proper behavioral principles and values, TPS can be totally misapplied and fail to deliver results. As with TPS, the values had originally been passed down in a master-disciple manner, from boss to subordinate, without any written statement on the way. Just as with TPS, it was internally argued that formalizing the values would stifle them and lead to further misunderstanding. However, as Toyota veterans eventually wrote down the basic principles of TPS, Toyota set to put the Toyota Way into writing to educate new joiners.[24]

Continuous Improvement breaks down into three basic principles:

Challenge: Having a long term vision of the challenges one needs to face to realize one's ambition (what we need to learn rather than what we want to do and then having the spirit to face that challenge). To do so, we have to challenge ourselves every day to see if we are achieving our goals.
Kaizen: Good enough never is, no process can ever be thought perfect, so operations must be improved continuously, striving for innovation and evolution.
Genchi Genbutsu: Going to the source to see the facts for oneself and make the right decisions, create consensus, and make sure goals are attained at the best possible speed.

Respect For People is less known outside of Toyota, and essentially involves two defining principles:

Respect: Taking every stakeholders' problems seriously, and making every effort to build mutual trust. Taking responsibility for other people reaching their objectives.
Teamwork: This is about developing individuals through team problem-solving. The idea is to develop and engage people through their contribution to team performance. Shop floor teams, the whole site as team, and team Toyota at the outset.

Differences from TPS[edit]

While lean is seen by many as a generalization of the Toyota Production System into other industries and contexts there are some acknowledged differences that seem to have developed in implementation.

Seeking profit is a relentless focus for Toyota exemplified by the profit maximization principle (Price – Cost = Profit) and the need, therefore, to practice systematic cost reduction (through TPS or otherwise) to realize benefit. Lean implementations can tend to de-emphasise this key measure and thus become fixated with the implementation of improvement concepts of "flow" or "pull". However, the emergence of the "value curve analysis" promises to directly tie lean improvements to bottom-line performance measuments.20
Tool orientation is a tendency in many programs to elevate mere tools (standardized work, value stream mapping, visual control, etc.) to an unhealthy status beyond their pragmatic intent. The tools are just different ways to work around certain types of problems but they do not solve them for you or always highlight the underlying cause of many types of problems. The tools employed at Toyota are often used to expose particular problems that are then dealt with, as each tool's limitations or blindspots are perhaps better understood. So, for example, Value Stream Mapping focuses upon material and information flow problems (a title built into the Toyota title for this activity) but is not strong on Metrics, Man or Method. Internally they well know the limits of the tool and understood that it was never intended as the best way to see and analyze every waste or every problem related to quality, downtime, personnel development, cross training related issues, capacity bottlenecks, or anything to do with profits, safety, metrics or morale, etc. No one tool can do all of that. For surfacing these issues other tools are much more widely and effectively used.
Management technique rather than change agents has been a principle in Toyota from the early 1950s when they started emphasizing the development of the production manager's and supervisors' skills set in guiding natural work teams and did not rely upon staff-level change agents to drive improvements. This can manifest itself as a "Push" implementation of lean rather than "Pull" by the team itself. This area of skills development is not that of the change agent specialist, but that of the natural operations work team leader. Although less prestigious than the TPS specialists, development of work team supervisors in Toyota is considered an equally, if not more important, topic merely because there are tens of thousands of these individuals. Specifically, it is these manufacturing leaders that are the main focus of training efforts in Toyota since they lead the daily work areas, and they directly and dramatically affect quality, cost, productivity, safety, and morale of the team environment. In many companies implementing lean the reverse set of priorities is true. Emphasis is put on developing the specialist, while the supervisor skill level is expected to somehow develop over time on its own.
Lack of understanding is one of the key reasons that a large share of lean manufacturing projects in the west fail to bring any benefit. In Factory Physics, Hopp and Spearman describe this as romantic JIT, where the belief in the methods is more important than the actual understanding and results. In this aspect, lean manufacturing is more of a religion than a science. Others have compared it to cargo cult science.

Continual improvement process

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A continual improvement process, also often called a continuous improvement process (abbreviated as CIP or CI), is an ongoing effort to improve products, services, or processes. These efforts can seek "incremental" improvement over time or "breakthrough" improvement all at once.[1] Delivery (customer valued) processes are constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility.

Some see CIPs as a meta-process for most management systems (such as business process management, quality management, project management, and program management). W. Edwards Deming, a pioneer of the field, saw it as part of the 'system' whereby feedback from the process and customer were evaluated against organisational goals. The fact that it can be called a management process does not mean that it needs to be executed by 'management'; but rather merely that it makes decisions about the implementation of the delivery process and the design of the delivery process itself.

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Kaizen[edit]

Some successful implementations use the approach known as Kaizen (the translation of kai (“change”) zen (“good”) is “improvement”). This method became famous from Imai's 1986 book Kaizen: The Key to Japan's Competitive Success.[2]

The core principle of CIP is the (self) reflection of processes. (Feedback)
The purpose of CIP is the identification, reduction, and elimination of suboptimal processes. (Efficiency)
The emphasis of CIP is on incremental, continual steps rather than giant leaps. (Evolution)

Key features of Kaizen include:

Improvements are based on many small changes rather than the radical changes that might arise from Research and Development
As the ideas come from the workers themselves, they are less likely to be radically different, and therefore easier to implement
Small improvements are less likely to require major capital investment than major process changes
The ideas come from the talents of the existing workforce, as opposed to using research, consultants or equipment – any of which could be very expensive
All employees should continually be seeking ways to improve their own performance
It helps encourage workers to take ownership for their work, and can help reinforce team working, thereby improving worker motivation.

The elements above are the more tactical elements of CIP. The more strategic elements include deciding how to increase the value of the delivery process output to the customer (effectiveness) and how much flexibility is valuable in the process to meet changing needs.[2][3]

In environmental management[edit]

The CIP-concept is also used in Environmental Management Systems (EMS), such as ISO 14000 and EMAS. The term "continual improvement", not "continuous improvement", is used in ISO 14000, and is understood to refer to an ongoing series of small or large-scale improvements which are each done discretely, i.e. in a step-wise fashion. Several differences exist between the CIP concept as it is applied in quality management and environmental management. CIP in EMS aims to improve the natural consequences of products and activities, not the products and activities as such. Secondly, there is no client-orientation in EMS-related CIP. Also, CIP in EMS is not limited to small, incremental improvements as in Kaizen, it also includes innovations of any scale.[4]

"Continuous" versus "continual"[edit]

In English-language linguistic prescription there is a common piece of usage advice that the word "continuous" should be used for things that are continuous in a way literally or figuratively equal to the mathematical sense of the word, whereas the word "continual" should be used for things that continue in discrete jumps (that is, quantum-wise). When this distinction is enforced, it is more accurate to speak of "continual improvement" and "continual improvement processes" than of "continuous improvement" or "continuous improvement processes".

Meanwhile, for several decades it has been common usage in the linguistic corpus of business management to use the one set term, "continuous improvement", to cover both graph shapes in an umbrella fashion. It is merely the way the word has been conventionally used in this context, in a common understanding that existed regardless of prescriptive preferences. However, ISO has chosen the more careful usage for its standards including ISO 9000 and ISO 14000; so it may be reasonable to expect that usage among business managers will evolve in coming decades to conform to the preferred usage (and in some cases, already has).

Quality management ensures that an organization, product or service is consistent. It has four main components: quality planning, quality control, quality assurance and quality improvement.[1] Quality management is focused not only on product and service quality, but also the means to achieve it. Quality management therefore uses quality assurance and control of processes as well as products to achieve more consistent quality.

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Evolution[edit]

Quality management recently is an emerging phenomenon. Advanced civilizations that supported the arts and crafts allowed clients to choose goods meeting higher quality standards than normal goods. In societies where arts and crafts are the responsibility of a master craftsman or artist, they would lead their studio and train and supervise others. The importance of craftsmen diminished as mass production and repetitive work practices were instituted. The aim was to produce large numbers of the same goods. The first proponent in the US for this approach was Eli Whitney who proposed (interchangeable) parts manufacture for muskets, hence producing the identical components and creating a musket assembly line. The next step forward was promoted by several people including Frederick Winslow Taylor, a mechanical engineer who sought to improve industrial efficiency. He is sometimes called "the father of scientific management." He was one of the intellectual leaders of the Efficiency Movement and part of his approach laid a further foundation for quality management, including aspects like standardization and adopting improved practices. Henry Ford was also important in bringing process and quality management practices into operation in his assembly lines. In Germany, Karl Friedrich Benz, often called the inventor of the motor car, was pursuing similar assembly and production practices, although real mass production was properly initiated in Volkswagen after World War II. From this period onwards, North American companies focused predominantly upon production against lower cost with increased efficiency.

Walter A. Shewhart made a major step in the evolution towards quality management by creating a method for quality control for production, using statistical methods, first proposed in 1924. This became the foundation for his ongoing work on statistical quality control. W. Edwards Deming later applied statistical process control methods in the United States during World War II, thereby successfully improving quality in the manufacture of munitions and other strategically important products.

Quality leadership from a national perspective has changed over the past five to six decades. After the second world war, Japan decided to make quality improvement a national imperative as part of rebuilding their economy, and sought the help of Shewhart, Deming and Juran, amongst others. W. Edwards Deming championed Shewhart's ideas in Japan from 1950 onwards. He is probably best known for his management philosophy establishing quality, productivity, and competitive position. He has formulated 14 points of attention for managers, which are a high level abstraction of many of his deep insights. They should be interpreted by learning and understanding the deeper insights. These 14 points include key concepts such as:

Break down barriers between departments
Management should learn their responsibilities, and take on leadership
Supervision should be to help people and machines and gadgets to do a better job
Improve constantly and forever the system of production and service
Institute a vigorous program of education and self-improvement

In the 1950s and 1960s, Japanese goods were synonymous with cheapness and low quality, but over time their quality initiatives began to be successful, with Japan achieving very high levels of quality in products from the 1970s onward. For example, Japanese cars regularly top the J.D. Power customer satisfaction ratings. In the 1980s Deming was asked by Ford Motor Company to start a quality initiative after they realized that they were falling behind Japanese manufacturers. A number of highly successful quality initiatives have been invented by the Japanese (see for example on this page: Genichi Taguchi, QFD, Toyota Production System. Many of the methods not only provide techniques but also have associated quality culture (i.e. people factors). These methods are now adopted by the same western countries that decades earlier derided Japanese methods.

Customers recognize that quality is an important attribute in products and services. Suppliers recognize that quality can be an important differentiator between their own offerings and those of competitors (quality differentiation is also called the quality gap). In the past two decades this quality gap has been greatly reduced between competitive products and services. This is partly due to the contracting (also called outsourcing) of manufacture to countries like India and China, as well internationalization of trade and competition. These countries amongst many others have raised their own standards of quality in order to meet International standards and customer demands. The ISO 9000 series of standards are probably the best known International standards for quality management.

There are a huge number of books available on quality management. In recent times some themes have become more significant including quality culture, the importance of knowledge management, and the role of leadership in promoting and achieving high quality. Disciplines like systems thinking are bringing more holistic approaches to quality so that people, process and products are considered together rather than independent factors in quality management.

The influence of quality thinking has spread to non-traditional applications outside of walls of manufacturing, extending into service sectors and into areas such as sales, marketing and customer service.[2]

Principles[edit]

The International Standard for Quality management (ISO 9001:2008) adopts a number of management principles[3] that can be used by top management to guide their organizations towards improved performance.

Customer focus[edit]

Since the organizations depend on their customers, they should understand current and future customer needs, should meet customer requirements and should try to exceed the expectations of customers.[4] An organization attains customer focus when all people in the organization know both the internal and external customers and also what customer requirements must be met to ensure that both the internal and external customers are satisfied.[5]

Leadership[edit]

Leaders of an organization establish unity of purpose and direction of it. They should go for creation and maintenance of such an internal environment, in which people can become fully involved in achieving the organization's quality objective.[4]

Involvement of people[edit]

People at all levels of an organization are the essence of it. Their complete involvement enables their abilities to be used for the benefit of the organization; however, the ultimate key decisions are made by the project manager.[4]

Process approach[edit]

The desired result can be achieved when activities and related resources are managed in an organization as a process.[4]

System approach to management[edit]

An organization's effectiveness and efficiency in achieving its quality objectives are contributed by identifying, understanding and managing all interrelated processes as a system. Quality Control involves checking transformed and transforming resources in all stages of production process.[4]

Continual improvement[edit]

One of the permanent quality objectives of an organization should be the continual improvement of its overall performance, leveraging clear and concise PPMs (Process Performance Measures).[4]

Factual approach to decision making[edit]

Effective decisions are always based on the data analysis and information.[4]

Mutually beneficial supplier relationships[edit]

Since an organization and its suppliers are interdependent, therefore a mutually beneficial relationship between them increases the ability of both to add value.[4]

These eight principles form the basis for the quality management system standard ISO 9001:2008.[4]

Quality improvement[edit]

The PDCA cycle[6]

There are many methods for quality improvement. These cover product improvement, process improvement and people based improvement. In the following list are methods of quality management and techniques that incorporate and drive quality improvement:

ISO 9004:2008 — guidelines for performance improvement.
ISO 15504-4: 2005 — information technology — process assessment — Part 4: Guidance on use for process improvement and process capability determination.
QFD — quality function deployment, also known as the house of quality approach.
Kaizen — 改善, Japanese for change for the better; the common English term is continuous improvement.
Zero Defect Program — created by NEC Corporation of Japan, based upon statistical process control and one of the inputs for the inventors of Six Sigma.
Six Sigma — 6σ, Six Sigma combines established methods such as statistical process control, design of experiments and failure mode and effects analysis (FMEA) in an overall framework.
PDCA — plan, do, check, act cycle for quality control purposes. (Six Sigma's DMAIC method (define, measure, analyze, improve, control) may be viewed as a particular implementation of this.)
Quality circle — a group (people oriented) approach to improvement.
Taguchi methods — statistical oriented methods including quality robustness, quality loss function, and target specifications.
The Toyota Production System — reworked in the west into lean manufacturing.
Kansei Engineering — an approach that focuses on capturing customer emotional feedback about products to drive improvement.
TQM — total quality management is a management strategy aimed at embedding awareness of quality in all organizational processes. First promoted in Japan with the Deming prize which was adopted and adapted in USA as the Malcolm Baldrige National Quality Award and in Europe as the European Foundation for Quality Management award (each with their own variations).
TRIZ — meaning "theory of inventive problem solving"
BPR — business process reengineering, a management approach aiming at optimizing the workflows and processes within an organisation.
OQRM — Object-oriented Quality and Risk Management, a model for quality and risk management.[7]

Proponents of each approach have sought to improve them as well as apply them for small, medium and large gains. Simple one is Process Approach, which forms the basis of ISO 9001:2008 Quality Management System standard, duly driven from the 'Eight principles of Quality management', process approach being one of them. Thareja[8] writes about the mechanism and benefits: "The process (proficiency) may be limited in words, but not in its applicability. While it fulfills the criteria of all-round gains: in terms of the competencies augmented by the participants; the organisation seeks newer directions to the business success, the individual brand image of both the people and the organisation, in turn, goes up. The competencies which were hitherto rated as being smaller, are better recognized and now acclaimed to be more potent and fruitful".[9] The more complex Quality improvement tools are tailored for enterprise types not originally targeted. For example, Six Sigma was designed for manufacturing but has spread to service enterprises. Each of these approaches and methods has met with success but also with failures.

Some of the common differentiators between success and failure include commitment, knowledge and expertise to guide improvement, scope of change/improvement desired (Big Bang type changes tend to fail more often compared to smaller changes) and adaption to enterprise cultures. For example, quality circles do not work well in every enterprise (and are even discouraged by some managers), and relatively few TQM-participating enterprises have won the national quality awards.

There have been well publicized failures of BPR, as well as Six Sigma. Enterprises therefore need to consider carefully which quality improvement methods to adopt, and certainly should not adopt all those listed here.

It is important not to underestimate the people factors, such as culture, in selecting a quality improvement approach. Any improvement (change) takes time to implement, gain acceptance and stabilize as accepted practice. Improvement must allow pauses between implementing new changes so that the change is stabilized and assessed as a real improvement, before the next improvement is made (hence continual improvement, not continuous improvement).

Improvements that change the culture take longer as they have to overcome greater resistance to change. It is easier and often more effective to work within the existing cultural boundaries and make small improvements (that is Kaizen) than to make major transformational changes. Use of Kaizen in Japan was a major reason for the creation of Japanese industrial and economic strength.

On the other hand, transformational change works best when an enterprise faces a crisis and needs to make major changes in order to survive. In Japan, the land of Kaizen, Carlos Ghosn led a transformational change at Nissan Motor Company which was in a financial and operational crisis. Well organized quality improvement programs take all these factors into account when selecting the quality improvement methods.

Quality standards[edit]

The International Organization for Standardization (ISO) created the Quality Management System (QMS)[10] standards in 1987. They were the ISO 9000:1987 series of standards comprising ISO 9001:1987, ISO 9002:1987 and ISO 9003:1987; which were applicable in different types of industries, based on the type of activity or process: designing, production or service delivery.

The standards are reviewed every few years by the International Organization for Standardization. The version in 1994 was called the ISO 9000:1994 series; consisting of the ISO 9001:1994, 9002:1994 and 9003:1994 versions.

The last major revision was in the year 2008 and the series was called ISO 9000:2000 series. The ISO 9002 and 9003 standards were integrated into one single certifiable standard: ISO 9001:2000. After December 2003, organizations holding ISO 9002 or 9003 standards had to complete a transition to the new standard.

ISO released a minor revision, ISO 9001:2008 on 14 October 2008. It contains no new requirements. Many of the changes were to improve consistency in grammar, facilitating translation of the standard into other languages for use by over 950,000 certified organization in the 175 countries (as at Dec 2007) that use the standard.

The ISO 9004:2009 document gives guidelines for performance improvement over and above the basic standard (ISO 9001:2000). This standard provides a measurement framework for improved quality management, similar to and based upon the measurement framework for process assessment.

The Quality Management System standards created by ISO are meant to certify the processes and the system of an organization, not the product or service itself. ISO 9000 standards do not certify the quality of the product or service.

In 2005 the International Organization for Standardization released a standard, ISO 22000, meant for the food industry. This standard covers the values and principles of ISO 9000 and the HACCP standards. It gives one single integrated standard for the food industry and is expected to become more popular in the coming years in such industry.

ISO has also released standards for other industries. For example Technical Standard TS 16949 defines requirements in addition to those in ISO 9001:2008 specifically for the automotive industry.

ISO has a number of standards that support quality management. One group describes processes (including ISO/IEC 12207 & ISO/IEC 15288) and another describes process assessment and improvement ISO 15504.

The Software Engineering Institute has its own process assessment and improvement methods, called CMMI (Capability Maturity Model Integration) and IDEAL respectively.

Capability Maturity Model Integration (CMMI) is a process improvement training and appraisal program and service administered and marketed by Carnegie Mellon University and required by many DOD and U.S. Government contracts, especially in software development. Carnegie Mellon University claims CMMI can be used to guide process improvement across a project, division, or an entire organization. Under the CMMI methodology, processes are rated according to their maturity levels, which are defined as: Initial, Managed, Defined, Quantitatively Managed, Optimizing. Currently supported is CMMI Version 1.3. CMMI is registered in the U.S. Patent and Trademark Office by Carnegie Mellon University.

Three constellations of CMMI are:

Product and service development (CMMI for Development) Service establishment, management, and delivery (CMMI for Services) Product and service acquisition (CMMI for Acquisition)

CMMI Version 1.3 was released on November 1, 2010. This release is noteworthy because it updates all three CMMI models (CMMI for Development, CMMI for Services, and CMMI for Acquisition) to make them consistent and to improve their high maturity practices. The CMMI Product Team has reviewed more than 1,150 change requests for the models and 850 for the appraisal method.

As part of its mission to transition mature technology to the software community, the SEI has transferred CMMI-related products and activities to the CMMI Institute, a 100%-controlled subsidiary of Carnegie Innovations, Carnegie Mellon University’s technology commercialization enterprise.[11]

Other prominent quality models[edit]

VDA: quality management model developed for the German automobile industry VDA

AVSQ: quality management model developed for the Italian automobile industry AVSQ

EAQF: quality management model developed for the French automobile industry EAQF

QS-9000: quality management model developed for the US automobile industry QS9000

TS 16949: special requirements for the application of ISO 9000 for suppliers of the automobile industry TS 16949

European Quality-Award: European award for Total Quality Management which has been presented since 1991 by the European Federation of Quality Management EFQM. www.efqm.org

Deming-Award: Japanese award for Quality management since 1951. www.deming.org

Malcom Baldrige-Award: US-American Award for Total Quality Management created in 1987 www.quality.nist.org

28 Manufacturing Metrics that Actually Matter (The Ones We Rely On)

Posted by Mark Davidson on Wed, Oct 09, 2013 @ 05:00 AM

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When it comes to metrics, it’s often said that what gets measured gets done. Part of this is human nature. Everyone has more piled on their plate than ever, and many workers find themselves constantly re-prioritizing their work activities. Therefore, metrics that have the attention of business and manufacturing leaders tend to be those that get measured and improved upon by their employee teams.

Effectively measuring, analyzing, and improving manufacturing metrics is not as simple as it may appear. While there are certain metrics that work well for specific job roles, it’s often the case that there are multiple combinations of metric indicators needed to ensure that a larger business objective is being met.

For this reason, metrics need to be aligned to larger goals and objectives. Think “SMART” goals—Specific, Measurable, Actionable, Realistic, Time-Based. This mnemonic contains some key concepts.

It’s important to understand the interrelationships between high-level goals and objectives as well as what actions or methods are required for an organization to achieve them—this falls under Specific. Measurable and Actionable are when metrics come into play—any desired result must have a set of defined measurements, targets, and actions that can be taken in order to “move the needle” on the metrics that are leading or lagging indicators of results.

In manufacturing, each major goal typically requires multiple metrics. The list of 28 metrics that appear in this post are grouped together relating to specific higher-level goals and objectives (e.g. increase quality). The Realistic component of the acronym can present a significant area of challenge. Leaders want teams to stretch and achieve more than what is individually perceived as possible. However, if goals are too lofty, and workers don’t believe they can be achieved, they may give up and disengage. Since every goal needs to be driven by some type of deadline or period to achieve the target, a Time-Based aspect is important to keeping everyone focused.

Sustainable metrics improvements require a continuous improvement methodology—a cycle that is never fully complete. As can be seen, measurement and metrics is a central pillar of this continuous improvement cycle.

Which Metrics Matter Most?

The MESA (Manufacturing Enterprise Solutions Association) organization has sponsored research over the past years to help the manufacturing marketplace identify the most important metrics, and help decision makers understand metrics improvements and their relationships to metrics programs and the use of software solutions. As part of the most recent metrics survey, 28 manufacturing metrics were identified as being the most utilized by discrete, process, and hybrid/batch manufacturers.

Below, we’ve grouped these metrics with the associated top-level area of improvement/goal for each.

Improving Customer Experience & Responsiveness

1. On-Time Delivery to Commit – This metric is the percentage of time that manufacturing delivers a completed product on the schedule that was committed to customers.

2. Manufacturing Cycle Time – Measures the speed or time it takes for manufacturing to produce a given product from the time the order is released to production, to finished goods.

3. Time to Make Changeovers – Measures the speed or time it takes to switch a manufacturing line or plant from making one product over to making a different product.

Improving Quality

4. Yield – Indicates a percentage of products that are manufactured correctly and to specifications the first time through the manufacturing process without scrap or rework.

5. Customer Rejects/Return Material Authorizations/Returns – A measure of how many times customers reject products or request returns of products based on receipt of a bad or out of specification product.

6. Supplier’s Quality Incoming – A measure of the percentage of good quality materials coming into the manufacturing process from a given supplier.

Improving Efficiency

7. Throughput – Measures how much product is being produced on a machine, line, unit, or plant over a specified period of time.

8. Capacity Utilization – Indicates how much of the total manufacturing output capacity is being utilized at a given point in time.

9. Overall Equipment Effectiveness (OEE) – This multi-dimensional metric is a multiplier of Availability x Performance x Quality, and it can be used to indicate the overall effectiveness of a piece of production equipment, or an entire production line.

10. Schedule or Production Attainment – A measure of what percentage of time a target level of production is attained within a specified schedule of time.

Reducing Inventory

11. WIP Inventory/Turns – A commonly used ratio calculation to measure the efficient use of inventory materials. It is calculated by dividing the cost of goods sold by the average inventory used to produce those goods.

Ensuring Compliance

12. Reportable Health and Safety Incidents – A measure of the number of health and safety incidents that were either actual incidents or near misses that were recorded as occurring over a period of time.

13. Reportable Environmental Incidents – A measure of the number of health and safety incidents that were recorded as occurring over a period of time.

14. Number of Non-Compliance Events / Year – A measure of the number of times a plant or facility operated outside the guidelines of normal regulatory compliance rules over a one-year period. These non-compliances need to be fully documented as to the specific non-compliance time, reasons, and resolutions.

Reducing Maintenance

15. Percentage Planned vs. Emergency Maintenance Work Orders – This ratio metric is an indicator of how often scheduled maintenance takes place, versus more disruptive/un-planned maintenance.

16. Downtime in Proportion to Operating Time – This ratio of downtime to operating time is a direct indicator of asset availability for production.

Increasing Flexibility & Innovation

17. Rate of New Product Introduction – Indicates how rapidly new products can be introduced to the marketplace and typically includes a combination of design, development and manufacturing ramp up times.

18. Engineering Change Order Cycle Time – A measure of how rapidly design changes or modifications to existing products can be implemented all the way through documentation processes and volume production.

Reducing Costs & Increasing Profitability

19. Total Manufacturing Cost per Unit Excluding Materials – This is a measure of all potentially controllable manufacturing costs that go into the production of a given manufactured unit, item or volume.

20. Manufacturing Cost as a Percentage of Revenue – A ratio of total manufacturing costs to the overall revenues produced by a manufacturing plant or business unit.

21. Net Operating Profit – Measures the financial profitability for all investors/shareholders/debt holders, either before or after taxes, for a manufacturing plant or business unit.

22. Productivity in Revenue per Employee – This is a measure of how much revenue is generated by a plant, business unit or company, divided by the number of employees.

23. Average Unit Contribution Margin – This metric is calculated as a ratio of the profit margin that is generated by a manufacturing plant or business unit, divided into a given unit or volume of production.

24. Return on Assets/Return on Net Assets - A measure of financial performance calculated by dividing the net income from a manufacturing plant or business unit by the value of fixed assets and working capital deployed.

25. Energy Cost per Unit – A measure of the cost of energy (electricity, steam, oil, gas, etc.) required to produce a specific unit or volume of production.

26. Cash-to-Cash Cycle Time – This metric is the duration between the purchase of a manufacturing plant or business unit’s inventory, and the collection of payments/accounts receivable for the sale of products that utilize that inventory – typically measured in days.

27. EBITDA – This metric acronym stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a calculation of a business unit or company's earnings, prior to having any interest payments, tax, depreciation, and amortization subtracted for any final accounting of income and expenses. EBITDA is typically used as top-level indication of the current operational profitability of a business.

28. Customer Fill Rate/On-Time delivery/Perfect Order Percentage - This metric is the percentage of times that customers receive the entirety of their ordered manufactured goods, to the correct specifications, and delivered at the expected time.

LNS Research and MESA International Bring You the Biennial 'Metrics that Matter' Research Survey

In order to continue to uncover valuable industry trends of manufacturing metrics, in partnership with MESA International, LNS Research has launched the biennial ‘Metrics that Matter’ research survey. The 2013-2014 survey and research report is focusing on the trends and correlations between specific operational metric improvements, the use of Manufacturing Operations Management (MOM) software applications, role-based metrics reporting, and the effect of emerging technologies such as mobility, big data, and cloud-computing on metrics programs.

We invite you to take the survey by November 15, 2013 and receive access to LNS Research’s Performance Management Research Library for one year.

Today's business landscape has presented new and challenging demands for manufacturing organizations. Customer requirements for lower prices, higher quality and greater value are unprecedented and unyielding. Many companies look for quick fixes in the form of plant consolidations, expensive redesigns of operations, or relocations of their operations overseas. As most manufacturers continue to seek fractional reductions in cost, one of the most important drivers of improved business performance and profit margin is all but ignored -- the ongoing development of skills and effectiveness for all employees.

The world's most successful manufacturing organizations are able to build engaged, high performing workforces by investing in every employee. And the results are striking, as study after study has shown the clear link between employee engagement and organizational performance.

Unfortunately, employee engagement isn't a one-dimensional concept, something that can be increased simply by sending out a survey or instituting a program. Instead, organizations that are successful at increasing employee engagement realize that it requires culture change. Engagement is not accidental. There are actually three key elements that contribute to a highly engaged workforce, including having the right employees in the right jobs; leaders who are attuned to their direct reports; and systems and strategies for gaining and maintaining engagement in every organization.

Organizations must hire employees who fit the job requirements, develop leaders with the right skills and provide support through strong systems and strategies. Together, these three drivers lead to the formation of an engaging work environment. Once created, the engaging work environment has a positive impact on employee behaviors and attitudes. In particular, an engaging environment builds loyalty in employees by meeting their personal and practical needs, thus encouraging them to stay with the organization. In addition, an engaging work environment taps into employees' motivation to try harder and put forth the extra effort that differentiates organizations from their competitors.

Finally, when organizations have engaged employees, the long-term benefits translate to the bottom line. Organizations have more satisfied and loyal customers, increased profits, better-quality products or services and greater growth potential.

Today's manufacturing organizations can drive engagement by proactively leveraging these three sources of influence for change: employees, leaders, and organizational systems and strategies. These three drivers work in concert to build an engaging work environment. Manufacturing organizations hoping to drive engagement must tap into employees' passion, commitment and identification with the organization. This is accomplished by having the right employees working in the right jobs, i.e., individuals who have the skills to do the job and that their jobs tap into their personal motivators. High job fit is achieved by effectively deploying employees' talents when making selection, placement and promotion decisions. Research has repeatedly shown that when job fit is high, an employee performs better and is more likely to stay with the organization. For example, a large auto manufacturing plant in the U.S. invested in an employee selection system that measured not only whether or not individuals could do the job (i.e., had the skills and experience), but also whether or not there was a strong "motivational fit" with the job and the organization. Leaders at this manufacturing plant agree that selecting employees with stronger motivational fit for the job and the organization has led to high levels of productivity, quality, attendance and retention.

The second engagement driver is exceptional leadership. Many of the work environment factors of our model are directly affected by the quality of leadership. Leaders have the influence and power to serve as catalysts for higher levels of engagement, not only in one or two areas, but also in all aspects of leadership. Even more compelling, our own assessment and testing research shows that: (1) Higher-performing managers have direct reports who are more highly engaged and (2) The direct reports of engaged managers are less likely to leave the organization.

Changes in leader behaviors can have a real impact on employee engagement. For example, a study of pre- and post training engagement scores showed that when leaders improved their skills through training, employees became more engaged in their work. Engaged leaders understand that their role is not to take charge of all the decisions, but to be more like proactive coaches. It's about recognition for a job well done; it's about giving people the room and encouragement to grow. It's also about being tough when necessary, holding people accountable fo

The role of the leader is just as vital in the manufacturing industry. Leaders, especially those on the front line, play a crucial role in executing overall goals and strategies through build highly engaged teams. In a recently published report by the Manufacturing Performance institute (MPI) and Development Dimensions International (DDI), the human resource practices of successful facilities were examined, including leadership development. Four out of five of the plants that participated in the study had some kind of leadership development program, however 20% had no plans to develop their leaders at any level. This is particularly concerning, since leadership development could help them build a committed, engaged

Finally, organizations need strong systems and strategies that support and foster engagement. Examples of systems are hiring, promotion, performance management, recognition, compensation, training and career development.

Together, these systems provide a firm foundation upon which to accelerate engagement. A shaky or incomplete foundation will make your efforts to build engagement more difficult, if not impossible. It's also worth noting that the surest path to employee engagement begins with the organization's senior leaders understanding the strategic importance of developing a highly engaged workforce, and committing to make it happen.

Sections

The best organizations that Gallup has studied deeply integrate employee engagement into the following four areas: 1. Strategy and Leadership Philosophy. Although most organizations now recognize the central role employee engagement plays in driving profit and growth, leaders still fail to provide a clear vision to their people of how engagement connects to the company’s mission and growth strategy. If leaders portray employee engagement simply as a survey or a human resources initiative — or worse, aren’t involved at all — they will not realize the business results we’ve outlined in this report. The best leaders understand that there is an emotional undercurrent to everything they do, which affects how they conduct business every day. They take a strategic, top-down approach to engaging leadership teams and then cascade engagement through the ranks of managers to employees on the front lines. 2. Accountability and Performance. Highly engaged organizations hold managers accountable — not just for their team’s engagement, but also for how it relates to their team’s overall performance. They embed engagement into managers’ balanced scorecards and use it as performance evaluation criteria. What’s more, the most engaged organizations that Gallup works with infuse engagement into their culture through the tone their leadership sets 0% 10% 20%

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2013 Gallup Great Workplace Award Winners

Median of Gallup's Clients

U.S. Workforce

and through the way employees and managers do their work. Engagement permeates every conversation, whether a one-onone meeting, a team huddle, or a regional assessment. 3. Communication and Knowledge Management. Leaders in the best organizations take a strategic approach to aligning their employee engagement communication efforts. They find ways to communicate engagement’s impact throughout the year and share engagement tools and best practices within the organization. They use every opportunity, touchpoint, and available communication channel to reinforce and recognize the organization’s commitment to employee engagement. Employee engagement is fully integrated into the organization’s lexicon. 4. Development and Ongoing Learning Opportunities. The world’s top-performing organizations start engaging employees from the minute they show up on the first day. These organizations have well-defined and comprehensive leader and manager development programs, but they also go one step further — they fully integrate employee engagement into these programs. They take leaders’ and managers’ development seriously, and focus on the development of individuals and teams. Employee engagement is a fundamental consideration in their people strategy. The most highly engaged organizations do not get that way by accident; it takes proper execution, hard work, and perseverance to master the integration of each of these four critical components. These top-performing organizations are outcomes-focused. They define and rigorously measure success at every level in the organization in a way that focuses every person, team, department, and business unit on driving performance and results. Transformation is not easy — it takes a lot of energy and effort to initiate change and even more to build on that momentum — but it is possible. As our research shows, the benefits are tremendous for organizations that get it right. They are more productive and profitable. They are more likely to retain top talent and attract new talent because their engaged culture differentiates them from other workplaces. They get the most from their employees by tapping into their passion, potential, and discretionary efforts. And they get the most from their customers when employees become brand ambassadors for the company and learn to maximize each customer interaction. These organizations consistently outperform their competitors, and they consistently grow and thrive — even in challenging economic times. Right now, the bleak reality is that only about one-third of your employees are committed to your company’s success. And that’s clearly not enough to overcome the two-thirds of your workforce who are standing in their way. We hope this report will serve as a wake-up call to U.S. business leaders who are serious about putting their companies — and the country — back on the path to real, sustainable growth.